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Home My WebLink AboutWater & Sewer Revenue Refunding Bond & Booklet - 2012CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 $9,190,000 Bonds Dated: December 7, 2012 Opinions Dated: December 7, 2012 PACIFICA LAW GROUP LLP 1191 2nd Avenue, Suite 2100 Seattle, Washington 98101-2945 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 $9,190,000 RECORD OF PROCEEDINGS ORGANIZATIONAL DOCUMENTS Certificate for Transcript. Certificate of the City Clerk stating the names and terms of office of the Mayor and City Council. Certificate of the Mayor setting forth the name of the City Clerk and Administrative Services Administrator. Certified copy of the proceedings of the City Council last fixing the time, date and place of regular meetings of the City Council. Certificate of the City Clerk stating the official newspaper of the City. AUTHORIZING DOCUMENTS 6.Certified copy of Ordinance No. 5672 passed on October 15, 2012 (the "Bond Ordinance"). Certified copy of the minutes of the meeting of the City Council held on October 8, 2012, showing the first reading of the Bond Ordinance. Certified copy of the minutes of the meeting of the City Council held on October 15, 2012, showing the second reading and passage of the Bond Ordinance. Affidavit of publishing a summary of the Bond Ordinance. Bond Purchase Agreement between the City and Seattle-Northwest Securities Corporation (the "Underwriter"). 11.Preliminary Official Statement. 12.Official Statement. 13.Rule 15c2-12 Certificate of the Administrative Services Administrator. 14.Rating letter. REFUNDING DOCUMENTS 15.Escrow Deposit Agreement between the City and U.S. Bank National Association (the "Escrow Agent") and copy of Notice of Redemption. 16.Copy of Notice of Redemption relating to the Water and Sewer Revenue Refunding Bonds, 1998. 17.Certificate of Receipt of Escrow Agent and Authorized Signatures of U.S. Bank National Association. 18.Verification Report of Grant Thornton LLP. 19.Subscriptions for Government Obligations. CLOSING DOCUMENTS 20.The Depository Trust Company Blanket Issuer Letter of Representations. 21.Ongoing Disclosure Certificate. 22.Closing Certificate. 23.Signature Identification Certificate. 24.Federal Tax Certificate, Certificate of Underwriter, Certificate of Financial Advisor and Financing Summary. 25.Certificates of Manual Signature with Certificate of Mailing. 26.Certificate of Authorization of Authorized Signer for The Bank of New York Mellon. 27.Certificate Regarding Authentication, Registration and Delivery of Bonds. 28.Internal Revenue Service Form 8038-G and Affidavit of Mailing. 29.Receipt for Bond Proceeds. 30.Receipt for Bonds. 31.Closing Memorandum. 32.Bond Form 101. 33.Specimen Bond. OPINIONS 34. Disclosure opinion of Pacifica Law Group LLP. -2-01/10/13 Defeasance opinion of Pacifica Law Group LLP. Final approving legal opinion of Pacifica Law Group LLP. -3-Ol/lO/13 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 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington CERTIFICATE I, Bonnie I. Walton, City Clerk of the City of Renton, do hereby certify that the present Renton City Councilmembers and the expiration dates of their terms are as follows: Mayor: Councilmember: Councilmember: Councilmember: Councilmember: Councilmember: Councilmember: Councilmember: Name Term Expires Denis W. Law Terri Briere Randy Corman Marcie Palmer Don Persson Ed Prince Greg Taylor Rich Zwicker December 31, 2015 December 31, 2013 December 31, 2013 December 31, 2015 December 31, 2015 December 31, 2015 December 31, 2015 December 31, 2013 Dated this 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington CERTIFICATE I, Denis W. Law, the duly elected Mayor of the City of Renton, Washington (the "City"), do hereby certify that Iwen Wang and Bonnie I. Walton are the duly appointed Administrative Services Administrator and City Clerk, respectively, of the City. Dated this 7th day of December, 2012. Denis W. 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 la’ue and correct copy of the proceedings setting the date, time and place for regular meetings of the City Council. Dated this 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington POLICY & PROCEDURE Subject: MEETINGS OF THE CITY COUNCIL Effective Date Supersedes 8/13/2007 1/27/1992 Page 1 of 3 Index: LEGISLATIVE Number: 800-02 Staff Contact Approved By Jay Covington 1.0 PURPOSE: To establish the time and location of the various City Council meetings. 2.0 ORGANIZATIONS AFFECTED: City Council 3.0 REFERENCES: RCW 42.30 (Open Public Meetings act); RCW 35A.12.100; RCW 35A.12.110 4.0 POLICY: 4.1 4.2 4.3 4.4 4.5 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. 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. At all meetings of the City Council, a majority of the Councilmembers shall constitute a quorum for the transaction of business, but a less number may adjourn from time to time and may compel the attendance of absent members as prescribed by ordinance. 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. 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. 800-02 Page 2 4.6 4.5.1 The Mayor shall have a vote only in the case of a tie 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. 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: N/A 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. 6.1.1 The notice shall specify the time and place of the special meeting and the business to be transacted. 6.2 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. The President or majority of the members of the City Council may hold executive sessions during a regular or special meeting to consider: matters affecting national security; 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 Pag~ 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. 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 7th day of December, 2012. 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. 5672 (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 15, 2012, 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 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITY’S WATER AND SEWER REVENUE REFUNDING BONDS, 1998. PASSED: OctoberlS_~_~~h 2012 PREPARED BY: PACIFICA LAW GROUP LLP Seattle, Washington ORDINANCE NO. 5672 TABLE OF CONTENTS* Section 1. Section 2. Section 3. Section 4. Section 5. Section Section Section Section Section Section Section Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20. Section 21. Section 22. Section 23. Definitions .....................................................................................................................3 Findings Regarding Parity Provisions ..........................................................................14 Authorization and Description of Bonds .....................................................................14 Registration of Bonds and Book-Entry System ...........................................................15 Redemption; Purchase of Bonds .................................................................................21 6. Priority and Payment from the Waterworks Utility Fund ...........................................25 7. Funds and Accounts ....................................................................................................27 8. Covenants ....................................................................................................................29 9. Tax Covenants .............................................................................................................33 10. Future Parity Bonds ...................................................................................................36 11. Form of Bonds ...........................................................................................................39 12. Execution of Bonds ....................................................................................................42 Lost, Stolen or Destroyed Bonds ......~ ........................................................................42 Sale of Bonds .............................................................................................................43 Application of Bond Proceeds; Plan of Refunding ....................................................45 Bond Insurance .........................................................................................................48 Undertaking to Provide Continuing Disclosure .........................................................48 Defeasance of the Bonds ..........................................................................................53 Amendments .............................................................................................................53 Call for Redemption of 1998 Bonds ..........................................................................56 Contract; Savings Clause ...........................................................................................56 General Authorization, Ratification of Prior Acts .....................................................57 Effective Date of Ordinance ......................................................................................57 This Table of Contents is provided for convenience only and is not a part of this ordinance. -i- CITY OF RENTON, WASHINGTON ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $;10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITY’S WATER AND SEWER REVENUE REFUNDING BONDS, 1998. WHEREAS, the City of Renton, Washington (the "City") has created and operates a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (the "Waterworks Utility"); and WHEREAS, the City issued and now has outstanding the following series of water and sewer revenue bonds, each being payable on parity from the revenues of the Waterworks Utility: Authorizing Original Series Ordinance Principal Amount Outstanding Principal Amount 1998 4709 ~; 6,120,000 $1,045,000 2002 4976 11,980,000 1,025,000 2003 5019 8,035,000 415,000 2004 5098 10,335,000 10,335,000 2007 5313 9,750,000 9,705,000 2008A 5313 9,975,000 9,975,000 2008B 5313 2,035,000 2,035,000 (collectively, the "Outstanding Parity Bonds"); and ORDINANCE NO. 5672 WHEREAS, the Outstanding Parity Bonds issued under date of November 1, 2004 mature in principal amounts and bear interest as follows: * Term Bond (the "2004 Bonds"); and Maturity Date Principal Interest (December 1)Amount Rate 2013 2014 2015 2024" 2025 2026. 2027 205,000 3.55% 235,000 3.65 250,000 3.75 4,605,000 5.00 1,600,000 5.00 1,680,000 5.00 1,760,000 5.00 WHEREAS, the 2004 Bonds maturing on and after December 1, 2015 (the "Refunding Candidates"), are subject to optional redemption, in whole or in part, on any date on and after December 1, 2014, at a price of par plus interest accrued to the date of redemption; and WHEREAS, after due consideration it appears to this Council that all or a portion of the Refunding Candidates (the "Refunded Bonds") may be defeased and refunded by proceeds of water and sewer revenue refunding bonds authorized herein (the "Bonds") at a substantial savings to the City and its ratepayers; and WHEREAS, the respective ordinances authorizing the issuance of the Outstanding Parity Bonds permit the issuance of additional bonds on a parity with the Outstanding Parity Bonds for refunding purposes if certain conditions are met; and WHEREAS, the City has received a proposal from Seattle-Northwest Securities Corporation, Seattle, Washington (the "Underwriter") and now desires to issue and sell the Bonds to the Underwriter as set forth herein; and -2- ORDINANCE NO. 5672 WHEREAS, the Outstanding Parity Bonds issued under date of March 1, 1998 (the "1998 Bonds") maturing on December 1, 2012 and December 1, 2013 are subject to optional redemption, in whole or in part, on any date on and after December 1, 2008, at a price of par plus interest accrued to the date of redemption; and WHEREAS, the City now desires to use available funds of the City refund in whole the outstanding 1998 Bonds on December 1, 2012; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES ORDAIN AS FOLLOWS: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: Acquired Obligations means the Government Obligations acquired by the City under the terms of this ordinance and the Escrow Agreement to effect the defeasance and refunding of the Refunded Bonds. Annuol Debt Service for any year means 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. Bose Period means any consecutive 12-month period selected by the City out of the 24-month period next preceding the date of issuance of an additional series of Future Parity Bonds. ORDINANCE NO. 5672 Beneficial Owner means 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 means that special fund of the City known as the Waterworks Revenue Bond Fund, 2012 created by this ordinance for the payment of the principal of and interest on the Bonds. Bond Insurance Policy means the municipal bond insurance policy, if any, issued by the Insurer insuring the payment when due of the principal of and interest on all or a portion of the Bonds as provided therein. Bond Purchase Contract means the contrac~ for the purchase of the Bonds between the Underwriter and City, executed pursuant to Section 14 of this ordinance. 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, initially, 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 interest on and principal of the Bonds. Bond Year means each one-year period that ends on the date selected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier of the final maturity date of the Bonds or the date that is five years after the date of issuance of the Bonds, Bond Years end on each anniversary of the date of issue and on the final maturity date of the Bonds. ORDINANCE NO. 5672 Bonds mean the City’s Water and Sewer Revenue Refunding Bonds, 2012, authorized to be issued by this ordinance. Call Date for the Refunded Bonds means December 1, 2014. City means the City of Renton, Washington, a municipal corporation duly organized and existing by virtue of the laws of the State of Washington Code means the Internal Revenue Code of 1986, as amended, and shall include all applicable regulations .and rulings relating thereto. Commission means the Securities and Exchange Commission. Council means the City Council as the general legislative authority of the City, as duly and regularly constituted from time to time. Coverage Requirement prior to the New Covenant Date means in any calendar year 1.25 times the Maximum Annual Debt Service. From and after the New Covenant Date, the term Coveroge Requirement means in any calendar year 1.25 times the Annual Debt Service for such year. Credit Focility means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee or other financial instrument or any combination of the foregoing, which obligates a third party to make payment or provide funds for the payment of financial obligations of the City. There may be one or more Credit Facilities outstanding at any time. Designated City Representative means the Mayor, the Chief Administrative Officer and the Finance Director of the City and any successor to the functions of such offices. The signature of one Designated City Representative shall be sufficient to bind the City. -5- ORDINANCE NO. 5672 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 between the City and the Escrow Agent to be dated as of the date of closing and delivery of the Bonds. Finonce Director means the City’s Finance and Information Services Administrator or the successor to such officer. 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 means 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 Outstanding Parity Bonds and the Bonds. Government Obligations means those obligations now or hereafter defined as such in chapter 39.53 RCW. Gross Revenue means 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 -6- ORDINANCE NO. 5672 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. Insurer means the municipal bond insurance company, .if any, selected and designated by the Designated City Representative, pursuant to Section 16 of this ordinance, as issuer of a Bond Insurance Policy for all or a portion of the Bonds. Letter of Representations means the Blanket Issuer Letter of Representations from the City to DTC. Maintenance and Operation Expense means 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. ORDINANCE NO. 5672 Moximum Annuol Debt Service means, at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future calendar year on the 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. MSRB means the Municipal Securities Rulemaking Board or any successors to its functions. 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 means Gross Revenue less Maintenance and Operation Expense. New Covenont Dote means from and after the date when all Outstanding Parity Bonds issued prior to 2007 are no longer Outstanding. 1998 Bond Ordinance means Ordinance No. 4709 adopted by the City Council on March 9, 1998 authorizing the issuance of the 1998 Bonds. 1998 Bonds mean the Outstanding City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 1998, with a dated date of March 1, 1998. 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 -8- ORDINANCE NO. 5672 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. Outstanding Parity Bond Ordinances mean the ordinances authorizing the issuance of the Outstanding Parity Bonds identified in the recitals to this ordinance. Outstonding Pority Bonds means the parity water and sewer revenue bonds of the City identified in the recitals to this ordinance. Parity Bonds means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. Bonds. Parity Bond Fund means any fund created for the payment and redemption of Parity Parity Requirement means Net Revenues equal to or greater than: (a) 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; and (b) 100% of Maximum Annual Debt Service for all subordinate lien evidences of indebtedness secured by Gross Revenue. Private Person means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. -9- ORDINANCE NO. 5672 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 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. Pro~essional Utility Consultant means 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. 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 -10- ORDINANCE NO. 5672 such policy or surety bond, are currently rated in the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. 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 the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. Rate Stabilization Fund means the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. Rating Agency means Moody’s, S&P or Fitch. Re~unded Bonds means the 2004 Bonds designated by the Designated City Representative pursuant to Section 15. Refunding Account means the account by that name established pursuant to Section 15. Refunding Candidates mean the outstanding 2004 Bonds maturing on and after December 1, 2015. 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 means that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709. Reserve Requirement prior to the New Covenant Date means Maximum Annual Debt Service. From and after the New Covenant Date, the term Reserve Requirement means with -11- ORDINANCE NO. 5672 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 means the SEC’s Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time. S&P means Standard & Poor’s rating Services, a Standard & Poor’s Financial Services LLC business, 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. State means the State of Washington. Term Bonds mean any Parity Bonds identified as such in the Bond Purchase Contract or 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 Parity Bonds in accordance with a mandatory sinking fund requirement. Term Bond Maturity Year means any calendar year in which Term Bonds are scheduled to mature. 2004 Bond Ordinance means Ordinance No. 5098 adopted by the City Council on November 1, 2004 authorizing the issuance of the 2004 Bonds. -12- ORDINANCE NO. 5672 2004 Bonds means the Water and Sewer Revenue Bonds, 2004, of the City issued under date of November 1, 2004, as more particularly described in the recitals of this ordinance. Underwriter means Seattle-Northwest Securities Corporation, Seattle, Washington. Waterworks Utility means 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 means 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 de posited. 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 ORDINANCE NO. 5672 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. Section 2. Findings RegardinR Parity Provisions. 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 the Parity Bond Ordinances for the Outstanding Parity Bonds, and that the issuance of the Bonds will result in a debt service savings for the Waterworks Utility and does not require an increase of more than $5,000 in any year for principal of and interest on the Bonds over and above the payments that were required to be made for the Refunded Bonds. The conditions contained in the Parity Bond Ordinances for the Outstanding Parity Bonds having been complied with or assured, the payments required herein to be made out of the Waterworks Utility Fund into the Bond Fund and the Reserve Fund to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in the Waterworks Utility Fund equal in rank with the lien and charge thereon for the payments required to be made for the Outstanding Parity Bonds. Section 3. Authorization and Description of Bonds. The City is hereby authorized to issue water and sewer revenue refunding bonds (the "Bonds") in an aggregate principal amount of not to exceed $10,000,000 for the purpose of providing the funds necessary to refund the -14- ORDINANCE NO. 5672 Refunded Bonds and pay all or a portion of the costs incidental to the foregoing and to the issuance of the Bonds. The Bonds shall be designated the "City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012" with any additional series designation, if necessary; shall be dated as of their initial date of delivery; shall be fully registered as to both principal and interest; shall be in the denomination of ~5,000 each, or any integral multiple thereof within a maturity, provided that no Bond shall represent more than one maturity; shall be numbered separately in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification; shall bear interest from their date, payable semiannually on the interest payment dates set forth in the Bond Purchase Contract; and shall mature on December I in the years and principal amounts set forth and approved in the Bond Purchase Contract executed by the Designated City Representative pursuant to Section 14 of this ordinance. The Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall not be general obligations of the City. Section 4. Registration of Bonds and Book-Entry System. (a) Bond 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 -]5- ORDINANCE NO. 5672 at the option of the Finance Director upon prior notice to the Bond Registrar and a successor Bond Registrar appointed by the Finance Director. No resignation or removal of the Bond Registrar shall be effective until a successor shall have been appointed and until the successor Bond Registrar shall have accepted the duties of the Bond Registrar hereunder. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar’s powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication of the Bonds. (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 17 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 4(h), but such Bond may be transferred as herein provided. All such payments made as described in Section 4(h) 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 o~: Representations. The Bonds initially shall be held’ 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 -16- ORDINANCE NO. 5672 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 theCity 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 by a depository, 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 o]~ Depository. (1) 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. R~egistered ownership of such 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 Finance Director pursuant to subsection (2) below -17- ORDINANCE NO. 5672 or such substitute depository’s successor; or (C)to any person as provided in subsection (4) below. (2) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the 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. (3) In the case of any transfer pursuant to clause (A) or (B) of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the 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 Finance Director. (4) 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 Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain physical 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 by a depository. The Finance Director shall deliver a written request to the Bond Registrar, together with a supply of physical 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 on behalf of the Finance Director to the ORDINANCE NO. 5672 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 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. (f) Bond 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 -19- ORDINANCE NO. 5672 officers or directors to act as a 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. (h) Place and Medium of Payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be calculated on the basis of a year of 360 days and twelve 30-day months. For so long as all Bonds are held by a depository, 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 held by a depository, 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 ~1,000,000 of Bonds (received by the Bond Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the 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. -20- ORDINANCE NO. 5672 Section 5. Redemption; Purchase of Bonds. (a) Mandatory Redemption of Term Bonds and Optional Redemption, i,f any. The Bonds shall be subject to optional redemption on the dates, at the prices and under the terms set forth in the Bond Purchase Contract approved by the Designated City Representative pursuant to Section 14. The Bonds shall be subject to mandatory redemption to the extent, if any, set forth in the Bond Purchase Contract and as approved by the Designated City Representative pursuant to Section 14. (b) Purchase of Bonds. The City further reserves the right to use at any time any surplus Net Revenue available after providing for the payments required by paragraphs (i) through (vi) of Section 6(b) of this ordinance, or other available funds, to purchase any of the Bonds that are offered to the City at any price deemed appropriate by the City. (c) Selection of Bonds for Redemption. 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 subsection (c). 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 the Bond 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 -21- ORDINANCE NO. 5672 such Bond by $5,0OO. In the event that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations herein authorized. (d)Notice of Redemption. (1) Official Notice. For so long as the Bonds are held in uncertificated form, notice of redemption (which notice may be conditional) 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 (if the Bonds are no longer held in uncertificated form), notice of redemption shall be given in the manner hereinafter provided. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. All official notices of redemption shall be dated and shall state: (A)the redemption date, (B)the redemption price, -22- ORDINANCE NO. 5672 (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)any conditions precedent to redemption; (E)that if all of the conditions to redemption are met, on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof calledfor 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. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. If the conditions to redemption have not been met prior to the date scheduled for redemption, then the City may revoke the redemption by giving notice in the same manner as set forth above. (2) Effect of Notice~ Bonds Due. If an unconditional notice of redemption has been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for. redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to -33- ORDINANCE NO. 5672 the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled by the Bond Registrar and shall not be reissued. (3) Additional Notice. In addition to the foregoing notice, 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 20 days before the redemption date to each party entitled to receive notice pursuant to Section :[7 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. (4) Amendment of Notice Provisions. The foregoing notice provisions of this Section S, including but not limited to the information to be included in redemption notices and the persons designated to receive notices, may be amended by additions, deletions and changes in order to maintain compliance with duly promulgated regulations and recommendations regarding notices of redemption of municipal securities. -24- ORDINANCE NO. 5672 Section 6. Priority and Payment from the Waterworks Utility Fund. (a) Waterworks Utility Fund. A special fund of the City known as the "Waterworks Utility Fund" has heretofore been established by the City, into which shall be deposited all Gross Revenues as collected. Moneys in the Waterworks Utility Fund shall be trust funds and shall be held separate and apart from all other funds and .accounts of the City. (b) Priority of Payments from the Waterworks Utility Fund. 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: (i)To pay Maintenance and Operation Expense; (ii)To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iii) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of principal on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iv) 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; -25- ORDINANCE NO. 5672 (v) To make all payments required to be made into the Reserve Fund, including any reimbursements required for Qualified Insurance or Qualified Letter of Credit; (vi) 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 (vii) To retire by optional redemption or purchase 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. (c) 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 subsection (b) of this section, 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 -26- ORDINANCE NO. 5672 the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 7. Funds and Accounts. (a) Bond Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund, 2012 (the "Bond Fund"), which shall be a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain 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. (b) Reserve Fund. 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 Parity Bonds. 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. Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the ~eserve Requirement at all times so long as any Parity Bonds are -27- ORDINANCE NO. 5672 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 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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 -28- ORDINANCE NO. 5672 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 Registered Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. (c) Pledge of Revenue and Lien Position. The Net Revenue is hereby 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. (d) Regarding Suj~iciency of Revenues. The Council hereby finds that in fixing the amounts to be paid into the Bond Fund out of the Gross Revenues, it has exercised due regard for the Maintenance and Operation Expense and has not obligated the City to set aside and pay into such Fund a greater amount of such Gross Revenues than in its judgment will be available over and above the Maintenance and Operation Expense. Section 8. Covenants. The City covenants and agrees with the Registered 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: -29- ORDINANCE NO. 5672 (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: -30- ORDINANCE NO. 5672 (1) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1) the City in its discretion may sell or otherwise dispose of any of the works, plant, properties or facilities of the Waterworks Utility or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2) the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior ORDINANCE NO. 5672 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. (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 -32- ORDINANCE NO. 5672 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 Registered Owners of the Parity Bonds against loss. (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 9. 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 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 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 Bonds or any other funds of the City which may be deemed to be proceeds of the 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 Bonds to the initial purchasers thereof, would have caused the Bonds as "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code. ORDINANCE NO. 5672 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 Bonds. (b) Private Person Use Limitation j:or Bonds. The City covenants that for as long as the Bonds are outstanding, it will not 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 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 (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 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 -34- ORDINANCE NO. 5672 (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 refinanced with the Bonds, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the 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 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 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 Bonds. (d) Quah’~ied Tax-Exempt Obligation. The City hereby designates the Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for investment by financial institutions. The City reasonably does not expect to issue more than ~10,000,000 in qualifying tax-exem pt debt during calendar year 2012. -35- ORDINANCE NO. 5672 Future Parity Bonds. The City reserves the right to issue Future Parity Bonds met and complied with at the time of issuance of those There shall be no deficiency in any Parity Bond Fund. The ordinance providing for the issuance of such Future Parity Bonds shall payment of the principal thereof and interest thereon out of a Parity Bond Section 10. if the following conditions are additional bonds: (a) (b) provide for the 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) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance 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. -36- ORDINANCE NO. 5672 (e)There shall be on file with the City either: (1) a certificate of the Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (2) prior to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the :~2 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; -37- ORDINANCE NO. 5672 ¯ (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. (f) Refunding Obligations. 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 -:38- ORDINANCE NO. 5672 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 Parity Bonds, money for the payment of which is not otherwise available. (g) Subordinate Lien Obligations. 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 11. Form of Bonds. The Bonds shall be in substantially the following form: [DTC LANGUAGE] UNITED STATES OF AMERICA NO. STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 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 prindpal 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 -39- ORDINANCE NO. 5672 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. of the City adopted on ,2012 (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 $ The bonds of this issue are being issued for the purpose of refunding certain outstanding water and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds, of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance and in the Bond Purchase Contract. The bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund. 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 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 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 Parity 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 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 ORDINANCE NO. 5672 performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. 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 ,2012. [SEAL] 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 Refunding Bonds, 2012 of the City of Renton, Washington, dated ,2012.. WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer ORDINANCE NO. 5672 Section 12. 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 im printed, or otherwise re produced 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. Only such Bonds as shall bear thereon a Certificate of Authentication manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 13. 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 Registered Owner thereof upon the Reg%tered Owner’s paying ORDINANCE NO. 5672 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 :14. Sale of Bonds. (a) Bond Sale. The Bonds shall be sold at negotiated sale to the Underwriter pursuant to the terms of the Bond Purchase Contract. The Underwriter has advised the Council that market conditions are fluctuating and, as a result, the most favorable market conditions may occur on a day other than a regular meeting date of the Council. The Council has determined that it would, be in the best interest of the City to delegate to the Designated City Representative for a limited time the authority to approve the final interest rates, aggregate principal amount, principal amounts of each maturity of the Bonds, selection of the Refunded Bonds, and redemption rights. The Designated City Representative is hereby authorized to approve the final interest rates, aggregate principal amount, principal maturities, selection of the Refunded Bonds, and redemption rights for the Bonds in the manner provided hereafter so long as (i) the aggregate principal amount of the Bonds does not exceed $10,000,000, (ii) the final maturity date for the Bonds is no later than December :1, 2027, (iii) the Bonds are sold (in the aggregate) at a price not less than 98% and not greater than 120%, (iv) the Bonds are sold for a price that results in a minimum net present value debt service savings over the Refunded Bonds of :10%, and (v) the true interest cost for the Bonds (in the aggregate) does not exceed 3.25%. ORDINANCE NO. 5672 In determining whether or not to acquire a Bond Insurance Policy and determining the final interest rates, aggregate I~rincipal amounts, principal maturities and redemption rights, the Designated City Representative shall take into account those factors that, in his or her judgment, will result in the lowest true interest cost on the Bonds to their maturity, including, but not limited to current financial market conditions and current interest rates for obligations comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in this section, the Designated City Representative is hereby authorized to execute the Bond Purchase Contract. The signature of one Designated City Representative shall be sufficient to bind the City. Following the execution of the Bond Purchase Contract, the Designated City Representative shall provide a report to the Council describing the final terms of the Bonds approved pursuant to the authority delegated in this section. The authority granted to the Designated City Representative by this Section 14 shall expire 120 days after the effective date of this ordinance. If a Bond Purchase Contract for the Bonds has not been executed within 120 days after the effective date of this ordinance, the authorization for the issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale approved unless such Bonds shall have been re-authorized by ordinance of the Council. The ordinance re-authorizing the issuance and sale of such Bonds may be in the form of a new ordinance repealing this ordinance in whole or in part or may be in the form of an amendatory ordinance al~proving a bond purchase contract or establishing terms and conditions for the authority delegated under this Section 14. ORDINANCE NO. 5672 (b) Delivery of Bonds; Documentation. Upon the passage and approval of this ordinance, the proper officials of the City including the Designated City Representative, are authorized and directed to undertake all action necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to execute all closing certificates and documents required to effect the closing and delivery of the Bonds in accordance with the terms of the Bond Purchase Contract. (c) Preliminary and Final Oj~icial Statements. The Finance Director is hereby authorized to ratify and to deem final the preliminary Official Statement relating to the Bonds for the purposes of the Rule. The Finance Director is further authorized to ratify and to approve for purposes of the Rule, on behalf of the City, the Official Statement relating to the issuance and sale of the Bonds and the distribution of the Official Statement pursuant thereto with such changes, if any, as may be deemed by her to be appropriate. Section 15. Application of Bond Proceeds~ Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings and benefiting the City’s ratepayers, the Council proposes to refund and defease the Refunded Bonds as set forth herein. The Refunded Bonds shall include those Refunding Candidates designated by the Designated City Representative when the Bonds are sold pursuant to the Bond Purchase Contract. Proceeds of the Bonds shall be deposited with the Escrow Agent pursuant to the Escrow Deposit Agreement to be used immediately upon receipt thereof to defease the Refunded Bonds as authorized by the 2004 Bond Ordinance and to pay costs of issuance of the Bonds. ORDINANCE NO. 5672 The net proceeds deposited with the Escrow Agent shall be used to defease the Refunded Bonds and discharge the obligations thereon by the purchase of 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: (1)interest on the Refunded Bonds due and payable on and prior to the Call Date; and (2) the redemption prices of the Refunded Bonds on the Call Date. 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. (b) Escrow Agent/Escrow Agreement. The City hereby appoints U.S. Bank National Association, Seattle, Washington, as the Escrow Agent for the Refunded Bonds (the "Escrow Agent"). A beginning cash balance, if any, and the Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining 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 Bonds. In order to carry out the purposes of this Section 15, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement. ORDINANCE NO. 5672 (e) Call for Redemption of Refunded Bonds. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the payments described in Section 15(d). The City hereby irrevocably calls the Refunded Bonds for redemption on their Call Date in accordance with the provisions of the 2004 Bond Ordinance authorizing the redemption and retirement of the 2004 Bonds prior to their fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be irrevocable after the issuance of the Bonds 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 the 2004 Bond Ordinance. 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 Finance Director, or, at the direction of the Finance Director, to the paying agent for the Refunded Bonds, sums sufficient to pay, when due, the payments specified in Section 15. All such sums shall be paid from the moneys and Acquired Obligations deposited with the Escrow Agent, and the income therefrom and proceeds thereof. credited to the Refunding Account. All such sums so paid to said Finance Director shall be All moneys and Acquired Obligations deposited with the Escrow Agent and any income therefrom shall be held, invested (but only at the direction of the 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. ORDINANCE NO. 5672 The City will take such actions as are found necessary to see that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. Section 16. Bond Insurance. The Finance Director is hereby further authorized to solicit proposals from municipal bond insurance companies for the issuance of a Bond Insurance Policy. In the event that the Finance Director receives multiple proposals in response to a solicitation, the Finance Director may select the proposal having the lowest cost and resulting in an overall lower interest cost with respect to the Bonds to be insured. The Finance Director may execute a commitment received from the Insurer selected by the Finance Director. The Council further authorizes all proper officers, agents, attorneys and employees of the City to cooperate with the 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. Section 17. Undertakinlg to Provide Continuing Disclosure. (a) Contract/Undertaking. This section constitutes the City’s written undertaking for the benefit of the Registered Owners and Beneficial Owners of the Bonds required by subsection (b)(5) of the Rule. (b) Financial Statements/Operating Data. The City hereby agrees to provide or cause to be provided to the Municipal Securities Rulemaking Board (UMSRB"), the following annual financial information and operating data for the prior fiscal year, commencing in 2013 with the calendar year ending December 31, 2012: -48- ORDINANCE NO. 5672 (1) Annual financial statements ~prepared in accordance with the generally acceptedaccounting 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"); (2) A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3)Debt service coverage ratios; and (4)General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds and identified in a closing certificate executed by the Designated City Representative and referencing this section. Items (2) through (4) shall be required only to the extent that such information is not included in (1). The information and data described above shall be provided on or before nine months after the end of the City’s 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 the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Commission. If not provided as part of the annual financial information discussed above, the City shall provide the City’s audited annual financial statement prepared in accordance with the ORDINANCE NO. 5672 Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the MSRB. (c) Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: ¯Principaland interest payment delinquencies; ¯Non-payment related defaults, if material; ¯Unscheduled draws on debt service reserves reflecting financial difficulties; ¯Unscheduled draws on credit enhancements reflecting financial difficulties; ¯Substitution of credit or liquidity providers, or their failure to perform; ¯Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; ¯Modifications to the rights of Bondholders, if material; ¯Bond calls, if material, and tender offers; ¯Defeasances; ¯Release, substitution, or sale of property securing repayment of the Bonds, if material; ¯Rating changes; ¯Bankruptcy, insolvency, receivership or similar event of the City; -50- ORDINANCE NO. 5672 ¯The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and ¯Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall promptly determine whether the events described above are material. (d) Format for Filings with the MSRB. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. (e) Notification Upon Failure to Provide Financial Data. The City agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annualfinancial information described in Subsection (b) above on or prior to the date set forth in Subsection (b) above. (f) Termination/Modification. The City’s obligations to provide annual financial information and notices of certain listed 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 (i) 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 -5]- ORDINANCE NO. 5672 otherwise does not apply to the Bonds and (ii)notifies the MSRB of such opinion and the cancellation of this section. The City may amend this section with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment of this section, the City shall describe such amendment in the next annual report, and shall include, a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (A) notice of such change shall be given in the same manner as for a listed event under Subsection (c), and (B) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. (g) Bond Owner’s Remedies Under This Section. The right of any bondowner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to a 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 an event of default with respect to the Bonds. (h) No Default. Except as otherwise disclosed in the City’s Official Statement relating to the Bonds, the City is not and has not been in default in the performance of its obligations of any prior undertaking for ongoing disclosure with respect to its obligations. -52- ORDINANCE NO. 5672 Section 18. Defeasance of the Bonds. In the event that money and/or Government Obligations maturing or having guaranteed redemption prices at the option of the holder at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to redeem and retire part or all of the Bonds in accordance with the their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Bond Fund or any account therein for the payment of the principal of and interest on the certain Bonds so provided for and such Bonds shall then cease to be entitled to any lien, benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds shall no longer be deemed to be Outstanding hereunder, or under any ordinance authorizing the issuance of bonds or other indebtedness of the City. Within 30 days of any defeasance of Bonds the Bond Registrar shall provide notice of defeasance of Bonds to Registered Owners of the Bonds being defeased and to each party entitled to receive notice in accordance with Section 17. Section 19. Amendments. (a) The City Council. from time to time and at any time may pass an ordinance or ordinances su pplemental 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. -53- ORDINANCE NO. 5672 (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 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: (:~) 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 Registered 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 ORDINANCE NO. 5672 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 ordinan ce 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. (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 -55- ORDINANCE NO. 5672 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 20. Call ~or Redemption of 1998 Bonds. For the purpose of realizing a debt service savings and benefiting the ratepayers of the City, the City Council hereby authorizes the refunding of the 1998 Bonds identified in the recitals to this ordinance. Available funds of the City in the amount necessary to refund the 1998 Bonds, in whole, shall be used on or before December 1, 2012 for the payment of interest on and the redemption price of the 1998 Bonds on such date. The City hereby irrevocably calls the 1998 Bonds for redemption on December 1, 2012 in accordance with the provisions of the 1998 Bond Ordinance authorizing the redemption and retirement of the 1998 Bonds prior to their fixed maturities. The City’s Finance and Administrative Services Administrator is hereby authorized and directed to provide for the giving of notice of the redemption of the 1998 Bonds in accordance with the applicable provisions of the 1998 Bond Ordinance. City. Section 21. The costs of such notice shall be an expense of the Contract~ Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Registered 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 -56- ORDINANCE NO. 5672 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 22. General Authorization; Ratification of Prior Acts. The Mayor, the Chief Administrative Officer, the 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 23. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval, and thirty (30) days after publication. PASSED by the City Council this 15th day of October, 2012. Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this 15th day of October, 2012. Dermis Law, ~ayor ~" Approved as to form: P~"~=c~’~W Group LLI~ Bond Counsel Date of Publication: 10/19/2012 (Summary) -57- ORDINANCE NO. 5672 CERTIFICATE I, the undersigned, City Clerk of the City Council of the City of Renton, Washington (the "City"), DO HEREBY CERTIFY: 1.The attached copy of Ordinance No. ~ (the "Ordinance") is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on October __, 2012, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect after publication in the City’s official newspaper as provided by law; and 2.A quorum of the members of the City Council was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this day of October, 2012. 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 October 8, 2012 regular meeting of the City Council which reflect the first reading of Ordinance No. 5672 (the "Bond Ordinance"). Dated this 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington October 8, 2012 Monday, 7 p.m. RENTON CITY COUNCIL Regular Meeting MINUTES Council Chambers Renton City Hall CALL TO ORDER ROLL CALL OF COUNCILMEMBERS CITY STAFF IN A’I-rENDANCE PROCLAMATION Fire Prevention Week - October 7 to 13, 2012 SPECIAL PRESENTATION Public Works: Employee Recognition Mayor Pro Tem Zwicker called the meeting of the Renton City Council to order and led the Pledge of Allegiance to the flag. RICH ZWlCKER, Mayor Pro Tern; TERRI BRIERE; ED PRINCE; DON PERSSON; MARCIE PALMER; RANDY CORMAN. MOVED BY BRIERE, SECONDED BY CORMAN, COUNCIL EXCUSE ABSENT COUNCILMEMBER GREG TAYLOR. CARRIED. JAY COVINGTON, Chief Administrative Officer; MARK BARBER, Senior Assistant City Attorney; BONNIE WALTON, City Clerk; CHIP VINCENT, Community and Economic Development Administrator; IWEN WANG, Administrative Services Administrator; GREGG ZIMMERMAN, Public Works Administrator; SUZANNE DALE ESTEY, Economic Development Director; MIKE STENHOUSE, Maintenance Services Director; LYS HORNSBY, Utility Systems Director; FIRE & EMERGENCY SERVICES ADMINISTRATOR MARK PETERSON, Fire & Emergency Services Department; DEBORAH NEEDHAM, Fire and Emergency Services Department; COMMANDER KATIE MCCLINCY, Police Department. A proclamation by Mayor Law was read declaring October 7 to 13, 2012 to be "Fire Prevention Week" in the City of Renton, and encouraging all citizens to join in this special observance. MOVED BY BRIERE, SECONDED BY CORMAN, COUNCIL CONCUR IN THE PROCLAMATION. CARRIED. Fire and Emergency Services Administrator Mark Peterson introduced Assistant Fire Marshal David Pargas and Lead Fire Inspector Ted Hickey, who have worked tirelessly in many fire prevention aspects to ensure that the community is safe from fire. Noting that a lot of fire incidents are preventable, Mr. Peterson reiterated the following fire safety tips: 1) Have a Home Escape Plan and practice the plan at home; 2) Maintain and test smoke detectors to make ¯ sure that they are working properly; and 3) Make fire safety a habit in daily routine. Public Works Administrator Gregg Zimmerman explained the nomination process for the Public Works Department employee awards, and thanked the Employee Recognition Committee members, Gary Del Rosario, Jayson Grant, Keith Woolley and Linda Moschetti for their assistance in arranging the awards and planning the annual Employee Recognition Picnic. Mr. Zimmerman recognized the 2012 Employees of the Year as follows: Oscar Cantu, Lift Station Technician - Maintenance Services Division, Juliana Fries, Transportation Program Coordinator-Transportation Systems Division, and Steve Lee, Civil Engineer- Utility Systems Division. Mr. Zimmerman also announced that the Good Teamwork Award was awarded to the Stormwater Facility Transfer Program: Hebe Bernardo, Gary Del Rosario, Gary Fink, Edward Mulhern, Rich Marshall, Arneta Henninger, Jan Illian, Kayren Kittrick, Bob MacOnie, Mark Barber and Stephanie Rary. October 8, 2012 Renton City Council Minutes Page 297 ADMINISTRATIVE REPORT CONSENT AGENDA Council: Meeting Minutes of 10/1/2012 Budget: Biennial, City of Renton Finance: Redeem General Obligation Bonds Executive: Councilmember Nominations for Suburban Cities Association Fire: Emergency Management Plan Transportation: SW 43rd St/SE Carr Road/SE 176th St./SE Petrovitsky Road Corridor Safety Project, WSDOT Grant UNFINISHED BUSINESS Finance Committee Budget: 2012 Third Quarter Amendment Chief Administrative Officer Covington presented an administrative report summarizing the City’s recent progress towards goals and work programs adopted as part of its business plan for 2012 and beyond. Items noted included: The design input received from the first library meeting has been posted on the City’s website along with the staff responses. All comments have been forwarded to the King County Library System (KCLS) to consider as the architects continue to work on the design of both libraries. The second downtown library meeting is scheduled for next Tuesday (10/16/2012), and the agenda will be available on the City’s website. More updates will be provided at the meeting, and KCLS personnel will be present to receive public feedback. Items listed on the consent agenda are adopted by one motion which follows the listing. Approval of Council meeting minutes of 10/1/2012. Council concur. Administrative Services Department recommended a public hearing be set on !1/5/2012 to consider the 2013/2014 Revenue Sources and Biennial Budget. Refer to Committee of the Whole; set public hearing. Administrative Services Department requested approval of an interfund loan for early redemption of remaining 2002 General Obligation Bonds in the amount of $2.315 million, saving $658,845 in interest over ten years. Refer to Finance Committee. Executive Department recommended confirmation of the nominations of Councilmembers for Suburban Cities Association (SCA) 2013 Regional Boards and Committees. Council concur. Fire and Emergency Services Department recommended setting a public hearing on 10/22/2012 to consider adopting the 2012 City of Renton Comprehensive Emergency Management Plan. Refer to Public Safety Committee; set public hearing. Transportation Systems Division recommended approval of an agreement with the Washington State Department of Transportation to accept 53.241 million in grant funds for the SW 43rd St./SE Carr Road/SE 176th St./SE Petrovitsky Road Corridor Safety Project. Council concur. MOVED BY BRIERE, SECONDED BY PALMER, COUNCIL APPROVE THE CONSENT AGENDA AS PRESENTED. CARRIED. Finance Committee Chair Briere presented a report recommending concurrence in the staff recommendation to approve an amendment in the 2012 Budget appropriations in the amount of 58,496,583 with the total amended budget to be $540,018,705 for the biennium. October 8, 2012 Finance: Bond Refinancing, 2004 Water & Sewer Revenue RESOLUTIONS & ORDINANCES Budget: 2012 Third Quarter Amendment Finance: Bond Refinancing, 2004 Water & Sewer Revenue ORDINANCE #5670 CED: Impact Fees Updates Renton City Council Minutes Page 298 The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY BRIERE, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITI"EE REPORT. CARRIED. (See later this page for ordinance.) Finance Committee Chair Briere presented a report recommending concurrence in the staff recommendation to approve the refinancing plan to issue around 59.35 million in new bonds to refinance approximately 59.015 million of the outstanding 2004 Water Sewer Revenue Bonds, and to accelerate the final payment of the 1998 bonds in the amount of 5360,000. The Committee further recommended that the ordinance with all the associated documents be presented for first reading. MOVED BY BRIERE, SECONDED BY PERSSON, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) The following ordinances were presented for first reading and referred to the 10/15/2012 Council meeting for second and final reading: An ordinance was read amending the City of Renton Fiscal Years 2011/2012 Biennial Budget as adopted by Ordinance No. 5583, and thereafter amended by Ordinance Nos. 5595, 5616, 5638, and 5656 in the amount of 58,496,583, with the total amended budget to be 5540,018,705 for the biennium. MOVED BY BRIERE, SECONDED BY CORMAN, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/15/2012. CARRIED. An ordinance was read authorizing the issuance of Water and Sewer Revenue Refunding Bonds in the aggregate principal amount of not to exceed 510,000,000 for the purpose of refunding a portion of the City’s Water and Sewer Revenue Bonds, 2004; providing the form, terms and covenants of the bonds; authorizing the appointment of an escrow agent and execution of an escrow agreement; delegating certain authority to approve the final terms of the bonds; and authorizing the cash redemption of the City’s Water and Sewer Revenue Refunding Bonds, 1998. MOVED BY BRIERE, SECONDED BY CORMAN, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/15/2012. CARRIED. The following ordinance was presented for second and final reading and adoption: An ordinance was read amending Section 4-1-190 of Chapter 1, Administration and Enforcement, of Title IV (Development Regulations), of City Code, by repealing Section 4-1-190 and replacing it with a new Section 4-1-190, entitled "Impact Fees," authorizing the collection of impact fees for Transportation, Parks, and Fire Protection; providing findings and definitions; providing for the time of payment; providing for exemptions and credits; providing for the establishment of impact fee accounts, refunds and the use of funds providing for reviews, and adjustments to impact fees; authorizing independent fee calculations; and setting a fee for appeals. MOVED BY PRINCE, SECONDED BY BRIERE, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. October 8, 2012 Renton City Council Minutes Page 299 NEW BUSINESS Community Event: Habitat for Humanity Home Dedication Community Event: Piazza Fall Festival & Chamber Business Expo ADJOURNMENT Li Li-Wong, Recorder October 8, 2012 Councilmember Palmer reported that she and Council President Zwicker participated in the dedication of the first Renton Habitat for Humanity project. She described the families who were accepted into the program. Ms. Palmer extended her appreciation for the opportunity to represent the City, and thanked the Council for their continuous support. CounCilmember Palmer invited the community to attend the Piazza Fall Festival in conjunction with the Chamber of Commerce Business Expo on Saturday, October 13, from 10 a.m. to 4 p.m. in downtown Renton. She stated that there will be free pumpkin decorating for children and a lot of businesses and organizations at the event. MOVED BY PERSSON, SECONDED BY BRIERE, COUNCIL ADJOURN. CARRIED. Time: 7:28 p.m. Bonnie Walton, CMC, City Clerk RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING October 8, 2012 I COMMITTEE/CHAIRMAN DATE/TIME AGENDA COMMITTEE OF THE WHOLE (Zwicker) MON., 10/15 6:00 p.m. 3rd Quarter Financial Review and 2013- 2014 Revenue Forecast COMMUNITY SERVICES (Palmer) FINANCE MON., 10/15 (Briere)3:45 p.m. Vouchers; Early Retirement of 2002 General Obligation Bonds; Emerging Issues in Revenue Streams PLANNING & DEVELOPMENT (Prince) THURS., 10/11 CANCELED PUBLIC SAFETY MON., 10/15 (Persson)4:30 p.m. King County Radio System Replacement Project (briefing only); City of Renton Comprehensive Emergency Management Plan; Emerging Issues in Public Safety TRANSPORTATION (AVIATION) (Corman) THURS., 10/11 3:45 p.m. Addendum to Accuwings Lease; Emerging Issues in Transportation UTILITIES (Taylor) NOTE: Committee ofthe Whole meetings are held in the Council Chambers unless otherwise noted. All other committee meetings are held in the 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, tree and correct copy of the minutes of the October 1.5, 2012 regular meeting of the City Council which reflect the second reading and passage of Ordinance No. 5672 (the "Bond Ordinance"). Dated this 7th day of December, 2012. Bonnie I. Walton, City Clerk City of Renton, Washington October 15, 2012 Monday, 7 p.m. RENTON CITY COUNCIL Regular Meeting MINUTES Council Chambers Renton City Hall CALL TO ORDER ROLL CALL OF COUNCILMEMBERS CITY STAFF IN ATI’ENDANCE PROCLAMATION National Business Women’s Week- October 17 to 21, 2012 SPECIAL PRESENTATION Executive: Mayor’s Presentation of 2013/2014 Biennial Budget Mayor Law called the meeting of the Renton City Council to order and led the Pledge of Allegiance to the flag. RICH ZWlCKER, Council President; TERRI BRIERE; ED PRINCE; DON PERSSON; MARCIE PALMER; GREG TAYLOR. MOVED BY TAYLOR, SECONDED BY PALMER, COUNCIL EXCUSE COUNCILMEMBER RANDY CORMAN. CARRIED. DENIS LAW, Mayor; JAY COVINGTON, Chief Administrative Officer; ZANE-I-FA FONTES, Senior Assistant City Attorney; BONNIE WALTON, City Clerk; CHIP VINCENT, Community and Economic Development Administrator; IWEN WANG, Administrative Services Administrator; GREGG ZIMMERMAN, Public Works Administrator; TERRY HIGASHIYAMA, Community Services Administrator; NANCY CARLSON, Human Resources and Risk Management Administrator; PREETI SHRIDHAR, Deputy Public Affairs Administrator; SUZANNE DALE ESTEY, Economic Development Director; TIM WILLIAMS, Recreation Director; KELLY BEYMER, Parks & Golf Course Director; LESLIE BETLACH, Parks Planning & Natural Resources Director; PETER RENNER, Facilities Director; Chief MARK PETERSON, Fire & Emergency Services Administrator; CHIEF KEVIN MILOSEVICH and COMMANDER CLARK WILCOX, Police Department. A proclamation by Mayo.r Law was read declaring October 17 to 2:1, 2012 to be "National Business Women’s Week" in the City of Renton, and encouraging all citizens to join in this special observance. MOVED BY BRIERE, SECONDED BY PALMER, COUNCIL CONCUR IN THE PROCLAMATION. CARRIED. Laurel Winston and Irene Roberts accepted the proclamation on behalf of Renton Business and Professional Women. Ms. Winston stated that the organization has been in Renton for almost nine years, and its goal is to support women politically, professionally, and personally. She invited everyone to attend their next meeting on October 19 when they will honor the Woman of the Year and Woman of Achievement. She noted that Councilmember Terri Briere was last year’s Woman of the Year. Ms. Roberts announced that this year’s Woman of the Year is Sabrina Mirante and Woman of Achievement is Mary Clymer. She thanked City officials for supporting the organization. Mayor Law expressed appreciation for the opportunity to present the biennial budget proposal for 2013-20:14. He stated that although the nation’s economy shows signs of improvement and Renton remains healthy, continued steps are necessary to protect the interests of Renton residents. Pointing out that government revenues lag behind the regular marketplace, Mayor Law explained that the budget proposal reflects the continued erosion of operating revenues due primarily to declining property values.. He stated that over the next two years the preliminary estimates project a ~5 million per year shortfall of revenues against the rising costs of doing business. October 15, 2012 Renton City Council Minutes Page 305 Mayor Law remarked that with the help of employees and unions, he is presenting a balanced budget that meets these revenue shortfalls with minimum employee layoffs and some proposed fee increases. He announced that the total proposed two-year budget for 2013 and 2014 is ~457 million, of which ~202 million is in the General Fund that is used for police, fire and emergency services, parks, street repair, and other City services. Mayor Law stated that because of the City’s strategic investments in economic development, commitment to reforms, and through fiscal disciplines, the City’s financial situation is stable and improvinl~. He announced that 200 new firms have located in Renton this year, and 6,000 new jobs have been created over the past two years. He remarked that commercial vacancy rates have remained significantly low compared with other cities in the Puget Sound region, and The Landing continues to add new businesses every month. Mayor Law also remarked that The Boeing Company’s announcement to build the 737 MAX in Renton and their increased production to 42 planes per month for the 737 Next Generation have led to over 1,000 new jobs a~ the Renton plant. Mayor Law explained that despite these positive factors, the City continues to face budget challenges. He explained that property tax constitutes nearly 30% of the General Fund and property tax assessments, which lag behind the market by approximately two years, have dropped significantly. He further explained that for 2013 the assessed valuation, based on 201:~ market value of homes, is projected to decline by four and a half percent. He stated that this reduces the City’s property tax level by ~1.9 million annually. Also, Mayor Law noted that $1.5 million in federal public safety grants that were available during the recession have expired and overhead costs have increased. Continuing, Mayor Law announced that once again the Community Budget Advisory Group met over a period of several weeks with department administrators and the Finance Department to examine city policies and programs, and provide valuable guidance for this proposed budget. He thanked the members and stated that the budget reflects several key priorities and suggestions for cost savings recommended by the group.- Mayor Law reported that the proposed budget reduces operating costs through additional reductions in staffing, reforms to reduce medical premium costs, and increased revenue options. He explained that the reduction in workforce by 25 positions over the biennium would be achieved mostly by attrition to avoid layoffs. Giving praise to the employee unions for their help and collaboration, Mayor Law stated that medical premium costs for the city would be reduced though increased employee premium contributions. Regarding revenue options, Mayor Law stated that Renton prides itself for having some of the lowest fees in the county for the services that are offered. He stated that most of the fees have remained unchanged for many years despite the increase in cost of doing business. He remarked that this budget proposes to increase the business license fee which has not been increased since :~988, to establish new impact fees that will be phased-in beginning in 2014 for new development that will be paid for by developers, and to implement a new medical transport fee. October 15, 2012 Renton City Council Minutes Page 306 ADMINISTRATIVE REPORT Mayor Law emphasized that it is imperative for the City to maintain its parks and facilities, roads and utility infrastructure. He announced that the City has begun a 542 million redevelopment project on Rainier Ave. S. funded largely by state and federal grants, and has broken ground on the SW 27th St./Strander Blvd. Connection that will provide access for Renton residents to the future Sound Transit Commuter Rail Station. Mayor Law also announced that to date nearly $41 million has been invested in the Sunset Area in the Renton Highlands. Continuing, Mayor Law stated that investing in safety has been his priority, and the crime rate as measured by.crimes per thousand in Renton has decreased by double digits over the last three years and is currently one of the lowest in South King County. He stated that the City is committed to finding creative ways to reduce crime, and has been effective at reducing negative impacts in several neighborhoods. He emphasized that despite reductions in staffinl~, police officers have successfully targeted repeat offenders and focused resources on areas experiencing high levels of criminal and dangerous activity. He noted that the City was successful in closing down a local restaurant and bar that was the site of many serious offenses and created fear for families living near it. Mayor Law also remarked that the Fire and Emergency Services Department has made sure that response time to residents has not been impacted despite reduced resources. Mayor Law explained that on November 6 residents in the West Hill area will have the opportunity to vote and choose whether they would like to annex to Renton. He remarked that the annexation poses both a challenge and an opportunity for the City. He explained that the challenge is to provide needed services with available resources, and the opportunity is to transform West Hill into a safe urban center where residents and businesses thrive. He noted that this budget proposal does not include revenues or expenditures for West Hill. Concluding, Mayor Law stated that Renton is defined by its excellent quality of life due to the great programs and services the City continues to provide despite significant personnel and budget cuts. He remarked that these services contribute to a safe, healthy, and vibrant community that offers opportunities for even/one. He thanked Council for their guidance and input, and asked for additional feedback and recommendations regarding the proposed budget. Chief Administrative Officer Jay 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 2012 and beyond. One item noted was: Hundreds of filmmakers were seen in action all over Renton October 5 to 7, competing in Renton FilmFrenzy V, the annual 50-hour filmmaking competition. A record 25 teams, including 13 student-led teams, registered to take the challenge to write, shoot, and edit a four-minute film, completely in Renton. The public may join in viewing all the films on October 22, at 7 p.m. at Renton Civic Theatre, and may attend the Curvee Awards Gala on October 23 at 7 p.m. at the Renton Ikea Performing Arts Center. Attendance is free for both events. October 15, 2012 CONSENT AGENDA Council: Meeting Minutes of 10/8/2012 CAG: 11-105, Rainier Ave - S Grady Way to S 2nd St, KBA Inc CAG: 09-170, Rainier Ave S - S Grady Way to S 2nd St, KBA Inc CAG: 12-011, NE 3rd/4th Corridor Improvement, Phase I, Parametrix Inc Utility: Stormwater Projects, WA DOE Grants UNFINISHED BUSINESS Committee of the Whole: Utility: 2013/2014 Utility Rates Finance Committee Finance: Vouchers Renton City Council Minutes Page 307 Items listed on the consent agenda are adopted I~y one motion which follows the listing. Mayor Law removed Item 7.b. consideration. Approval of Council meeting minutes of 10/8/2012. Council concur. Transportation Systems Division recommended approval of Supplemental Agreement #5 to CAG-11-105, with KBA, Inc., to remove the environmental services scope and budget and reduce the contract by $120,000 for the Rainier Ave. S. (SR 167) S. Grady Way to S. 2nd St. project. Council concur. Transportation Systems Division recommended approval of Supplemental Agreement #4 to CAG-09-170, with KBA, Inc., for additional construction support services in the amount of ~243,000.16 for the Rainier Ave. S. (SR 167) So Grady Way to S. 2nd St. project. Council concur. Transportation Systems Division recommended approval of Supplemental Agreement #2 to CAG-12-011, with Parametrix, Inc., for construction management services for the NE 3rd/4th Corridor Improvements, Phase I project. Council concur. Utility Systems Division recommended approval of grant agreements with the Washington State Department of Ecolosy to accept up to ~2,717,600 for design and construction of four projects: NE 10th St & Anacortes Ave NE Detention Pond Retrofit; SW 7th St Stormwater Retrofit; Sunset Terrace Regional Stormwater Facility; and Harrington Ave NE Green Connection. Council concur. MOVED BY ZWICKER, SECONDED BY PERSSON, COUNCIL APPROVE THE CONSENT AGENDA MINUS ITEM 7.b. CARRIED. Council President Zwicker presented a Committee of the Whole report recommending concurrence in the staff recommendation to approve the 2013/2014 revenue increases of 5% each year for water, wastewater, surface water, and solid waste, keep the King County rate stabilization charge at £1.16 per wastewater account, and raise the utility tax by 0.8% for water, surface water, and solid waste utilities. The Committee further directs staff to prepare an ordinance to amend Chapter 1, Garbage, Chapter 2, Storm and Surface Water, Chapter 4 Water, and Chapter 5, Sewer of Title VIII (Health and Sanitation) of City Code, and recommended that the ordinance be presented for first reading. MOVED BY ZWICKER, SECONDED BY BRIERE0 COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Finance Committee Chair Briere presented a report recommending approval of Claim Vouchers 315762 - 316164, two wire transfers and one payroll run with benefits withholding payments totaling £5,228,914.21, and payroll vouchers including 715 direct deposits and 64 payroll checks totaling ~;1,566,390. MOVED BY BRIERE, SECONDED BY TAYLOR, COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. October 15, 2012 Renton City Council Minutes Page 308 Transportation (Aviation) Committee Lease: Rate Increase, Acuwings, LLC, LAG-08-007 Citizen Comment: Parsons- Post Office Box at The Landing Human Resources: September 2012 WCIA Claims Community Event: Ron Nelson Memorial Service RESOLUTIONS AND ORDINANCES RESOLUTION #4162 Finance: Retirement of 2002 General Obligation Bonds ORDINANCE #5671 Budget: 3rd Quarter 2012 Budget Amendment ORDINANCE #5672 Finance: Refinancing 2004 Water and Sewer Revenue Bonds and Redeem 1998 Bonds NEW BUSINESS Council: Puget Sound Regional Council Luncheon Invitation Transportation (Aviation) Committee Vice-Chair Persson presented a report recommending concurrence in the staff recommendation to approve an addendum to the airport lease with Acuwings, LLC for the 756 building (pilot lounge), the 760 building and tiedown aircraft storage, to increase the total lease revenue by ~;2,203.86 per year plus leasehold excise tax. The Committee further recommended that the Mayor and City Clerk be authorized to sign the lease addendum. MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL CONCUR IN THE COMMI’I-FEE REPORT. CARRIED. MOVED BY PERSSON, SECONDED BY PALMER, COUNCIL REFER TO THE ADMINISTRATION CORRESPONDENCE FROM DOROTHY PARSONS REGARDING PLACING A POST OFFICE BOX ATTHE LANDING. CARRIED. MOVED BY PERSSON, SECONDED BY BRIERE, COUNCIL REFER THE (SEPTEMBER 2012) WCIA CLAIMS REPORT TO THE FINANCE COMMI~-i’EE. CARRIED. Councilmember Persson remarked that Ron Nelson, long-time City Building Director, had passed away. He announced that Mr. Nelson’s memorial service is being held at Greenwood Memorial on Friday, October 19, at 11 a.m. The following resolution was presented for reading and adoption: A resolution was read authorizing the redemption of the City’s Limited Tax General Obligation Bonds, 2002, and the transfer of interfund loans; and authorizing the execution of certain documents related thereto. MOVED BY BRIERE, SECONDED BY TAYLOR, COUNCIL ADOPT THE RESOLUTION AS READ. CARRIED. The following ordinances were presented for second and final reading: An ordinance was read amending the City of Renton Fiscal Years 2011/2012 Biennial Budget as adopted by Ordinance No. 5583, and thereafter amended by Ordinance Nos. 5595, 5616, 5638, and 5656 in the amount of ~>g,496,583, with the total amended budget to be $540,018,705 for the biennium. MOVED BY BRIERE, SECONDED BY TAYLOR, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. An ordinance was read authorizing the issuance of Water and Sewer Revenue Refunding Bonds in the aggregate principal amount of not to exceed ~;10,000,000 for the purpose of refunding a portion of the City’s Water and Sewer Revenue Bonds, 2004; providing the form, terms and covenants of the bonds; authorizing the appointment of an escrow agent and execution of an escrow agreement; delegating certain authority to approve the final terms of the bonds; and authorizing the cash redemption of the City’s Water and Sewer Revenue Refunding Bonds, 1998. MOVED BY BRIERE, SECONDED BY TAYLOR, COUNCIL ADOPTTHE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. Councilmember Taylor remarked that Council had received a letter from the Puget Sound Regional Council inviting them to a luncheon celebrating the career of Congressman Norm Dicks. He asked if Councilmembers were planning to attend the event. Mayor Law and Council President Zwicker each remarked that they were not currently aware of such plans. October 15, 2012 Renton City Council Minutes Page 309 Council: Request to Attend "Governing for Racial Equity" Conference Councilmember Taylor announced that he would like Council consent to attend the "Governing for Racial Equity" conference sponsored by Seattle’s Race and Social Justice Initiative. He explained that he had attended the conference last year and believes there is value in attending it again. He encouraged other Councilmembers to attend the event. Council discussion ensued. It was determined that the topic would be reviewed at the next Committee of the Whole meeting so Council has had time to read and review the conference information. Finance: Redemption of 2002 LTGO Bonds ADJOURNMENT Jason Seth, Recorder October 15, 2012 City Clerk Bonnie Walton remarked that although Council had earlier adopted the resolution regarding 2002 Limited Tax General Obligation {LTGO) Bonds, the Finance Committee had not presented a committee report. She asked if it was the intent to hold the referral in Committee or if the report had just been overlooked. She added that she had a draft of the report. Finance Committee Chair Briere stated that the Committee met on the topic and she would be willing to sign the report. Senior Assistant City Attorney Fontes clarified that signing the report would not be mandatory because Council had already adopted the resolution, but it could be signed to close the referral loop. MOVED BY PERSSON, SECONDED BY ZWlCKER, COUNCIL ADJOURN. CARRIED. Time: 7:43 p.m. Bonnie I. Walton, CMC, City Clerk RENTON CITY COUNCIL COMMITTEE MEETING CALENDAR Office of the City Clerk COUNCIL COMMITTEE MEETINGS SCHEDULED AT CITY COUNCIL MEETING October 15, 2012 I COMMITrEE/CHAIRMAN COMMIi-I-EE OF THE WHOLE (Zwicker) - DATE/TIME ¯MON., ~.0/22 5 p.m. AGENDA Councilmember Taylor’s "Governing For Racial Equity" Conference Request; Budget Deliberations COMMUNITY SERVICES (Palmer) MON., :10/22 CANCELED FINANCE (Briere) PLANNING & DEVELOPMENT (Prince) PUBLIC SAFETY (Persson) TRANSPORTATION (AVIATION) (Corman) UTILITIES MON., 10/22 (Taylor) CANCELED NOTE: Committee ofthe Whole meetings are held in the Council Chambers unless otherwise noted. All other committee meetings are held in the Council Conference Room unless otherwise 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 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 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 form) which was regularly distributed to its subscribers during the below stated period. The annexed notice, a: Public Notice was published on October 19, 2012. The full amount of the fee charged for said foregoing publication is the sum of $112.00. da M. Mills Legal Advertising Representative, Renton Reporter Subscribed and sworn to me this 19th day of October, 2012. Kathleen C. Sherman, Notary Public for the State of Washington, Residing in Buckley, Washington CITY OF RENTON NOTICE OF ORDINANCES ADOPTED BY THE RENTON CITY COUNCIL Following is a summary of the ordinances adopted by the Renton CiW Council on October 15, 2012: ORDINANCE NO. 5671 An Ordinance of the City of Rent(m, Washington, amending the City of Rent(m fiscal years 2011/2012 Biennial Budget as adopted by Ordinance No. 5583, and thereafter amended by Ordinanc Nos. 5595, 5616, 5638, and 5656 in the amount of $8,496,583, for an amended total of $540,018,705 over the bienni- um. Effective: 10/24/2012 ORDINANCE NO. 5671 An Ordinance of the City of Renton, Washington, authorizing the issnanc¢ of water and sewer revenue refunding bonds in the aggregate principal amount of not to exceed $10,000,000 for the purpose of refuadiag a por- tion of the CiW’s water and sewer revenue bonds, 2004; providing the form, terms and covenants of the bonds; authorizing-the appointment of an escrow agent and execution of an esorow agreement; delegating certain authority to approve the final terms of the bonds; and authoriz- ing the cash redemption of the City’s water and sewer revenue refunding bonds, 1998. Effective: I 1/18/2012 Complete text of these ordinanc- es is available at Renton City Hall, 1055 South Grady Way; and posted at the King County Libraries in R(mt(m, 100 Mill Avenue South and 2902 NE 12th Street. Upon request to the City Clerk’s office, (425) 430-6510, copies will also be mailed for a fee. Bonnie I. Walton, City Clerk Published in Renton Reporter: on October 19, 2012. #692182 ""SNW November 7, 2012 Ms. Iwen Wang Finance and Information Technology Administrator City of Renton 1055 South Grady Way Renton, Washington 98055 City of Renton, Washington $9,190,000 Water and Sewer Revenue Refunding Bonds, 2012 Dear Iwen: 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 Bond 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. 5672 (the "Bond Ordinance"), adopted by the City Council of the Issuer on October 15, 2012. 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 Bond Ordinance indudes an undertaking to provide certain information to the Municipal Securities Rulemaking Board or any successors to its functions (the "MSRB’). Until otherwise designated by the MSRB or the Securities and Exchange Commission ("SEC"), any information or notices submitted to the MSRB in compliance with Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule") are to be submitted through the MSRB’s Electronic Municipal Market Access system ("EMMA"), currently located at www.emma.msrb.org. The Bond Ordinance and this Purchase Agreement are collectively referred to herein as the "Documents." Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 2 2.Purchase and Sale o 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 $9,190,000 aggregate principal amount of Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds").. The Bonds shall be dated, shall mature, shall bear interest, shall be payable, and shall have redemption provisions and other terms, all as set forth in Exhibit C attached hereto, which by this reference is incorporated herein. The Underwriter’s purchase price for the Bonds also is set forth in Exhibit C. Fiscal Agent 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 Bond Ordinance and as described in the docttment entitled Preliminary Official Statement, which is dated October 31, 2012 and which describes the Issuer and the Bonds (the "POS’). 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) b) The Issuer has ratified and "deemed final" the POS for purposes of 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. 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 MSRB. 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 25m day after the End of the Underwriting Period (as defined below), any event shall occur, or information shall come to the attention of the Issuer, that would cause the Final Official Statement (whether or not previously supplemented or amended), as of its -2- Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 3 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 amendmentto 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 Bond 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 Bond Ordinance is in full force and effect and has not been superseded, rescinded or amended; 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 Bond Ordinance; 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 Bond Ordinance or other instrument or financing statement is required to be made to create, protect or preserve the pledge of revenues -3- Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 4 under the Bond Ordinance or is required for the validity and enforceability of the Bond 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 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 Bond Ordinance, or which would in any way adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes; (iv) contesting the completeness or accuracy of the POS or the Final Official Statement; or (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 dauses (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 Issuer, and since the date thereof, there has been no material adverse change in the financial position of the Issuer; 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 the Depository Trust Company ("DTC"), the book entry system, the Issuer’s Financial Advisor or the Underwriter; and Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 5 m)Except as otherwise disclosed in the POS, the Issuer has not failed to comply with any prior undertaking under the Rule. 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 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) c) d) e) 0 g) The United States shall have become engaged in hostilities or existing hostilities shall have escalated or other international calamity; or A general suspension of trading or other material restrictions for an extended period not in force as of the date of this Purchase Agreement on the New York Stock Exchange or other national securities exchange; or Declaration of a general banking moratorium by the United States, New York State or Washington State authorities; or An actual or imminent default or moratorium in respect of payment of any United States Treasury bills, bonds or notes; or Any downgrade of the credit rating of the United States of America; or 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 the Bonds shall be introduced or enacted 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 h)Legislation shall hereafter be enacted, or actively considered for enactment, or a decision by a court of the United States ~hall hereafter be rendered, or a ruling, stop order or regulation by the SEC or other governmental agency having jurisdiction of the subject -5- Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 6 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: 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 o~ 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 ~)The Bond 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 This Purchase Agreement is subject to the Investment Company Act or requires any registration under the Investment Company Act; or i)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 Bond 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 J)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 k)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 SEC, any other federal or state agency or the Congress of the United States, or by Executive Order; or 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 Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 7 reflected therein to make the statements and information contained therein under the circumstances in which made not misleading in any material respect; or m)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 Bond 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 the Issuer, at or prior to the 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 Finandal Advisor; bond registration and rating fees and expenses; the escrow agent fee; escrow verification 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 Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 8 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) b) All matters relating to the Purchase Agreement shall be governed by the laws of the State of Washington. The Issuer acknowledges and agrees that: i)The primary role of the Underwriter is to purchase securities, for resale to investors, in an arm’s-length commercial transaction between the Issuer and the Underwriter and that the Underwriter has financial and other interests that differ from those of the Issuer; ii)The Underwriter is not acting as a municipal advisor, financial advisor, or fiduciary to the Issuer and has not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto, irrespective of whether the Underwriter has provided or is currently providing other services to the Issuer on other matters; c) iii)The only obligations the Underwriter has to the Issuer with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement and shall also include those contractual duties implied under Washington law, e.g. a duty of good faith and fair dealing; and iv)To the extent it deems appropriate, the Issuer has consulted its own financial and/or municipal, legal, accounting, tax and other advisors, as applicable. 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 -8- Ms. Iwen Wang City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 November 7, 2012 Page 9 the 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. d) e) 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 and Information Technology Administrator or other authorized official of the Issuer at 1055 S. 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. 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. 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 Lindsay Accepted November 7, 2012 CITY OF RENTON, WASHINGTON By: ~ 1 AdministratorIwen Wang, Finance and Informa~Techno ogy Time Signed -9- EXHIBIT A FINAL PRICING NUMBERS Mat~ity Date BOND PRICING City of Renton Water & Sewer Revenu~ Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS 12/01/2013 12/01/2014 40,000 2.000%0.400% 3~,000 2.000%0,480% 35,000 2.000~I 0.620t~ 102.996 104.072 105.017 105A99 109.578 C 2.092~12/01/2022 108.442 C 2.2479~12/01/2022 107.133 C 2.429~12/01/2022 100.OOO 100.000 Pt~Mum (-Discount) 627.20 1,048.60 L924.63 22.310.20 33,306.00 143,106.70 131.695.20 9,190,0~809503.90 9599503.90 108.812904~b -42~T4.00 ~t.460(]00% Nov7,2012 9:29am Prepared by Seattle-Northwest Sec~rities Corp.(k:\...\RENTON:RENTON-I~04WS_BQ,R04WS_BQ) Page4 BOND DEBT SERVICE City of Renton Water & S~wer Rewnu~ R~fund~ng Bonds, 2012 (BQ) (Pm-~al Ref 04) FINAL NUMBERS Period l~noipal Coupon Interest Debt Service 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06/01/2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020 06/01/2021 12/01/2021 06/01/2022 12/01/2022 06/01/2023 12/01/2023 06/01/2024 12/01/2024 06/01/2025 12/01/2025 06/01/2026 12/01/2026 06/01/2027 12/01/2027 40,000 35,000 35,000 35,000 35,000 100,000 220,000 280,000 295,000 305,000 1,470,000 1,515,000 1,560,000 1,610,000 1,655,000 2.000% 2.000% 2.000% 2.000% 2.000% 3.000% 2.750% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 132,119.17 132,119.17 136,675.00 176,675.00 308,794.17 136,275.00 136,275.00 136,275.00 171,275.00 307,550.00 135,925.00 135,925.00 135,925.00 170,925.00 306,850.00 135,575.00 135,575.00 135,575.00 170,575.00 306,150.00 135,225.00 135,225.00 135,225.00 170,225.00 305,450.00 134,875.00 134,875.00 134,875.00 234,875.00 369,750.00 133,375.00 133,375.00 133,375.00 353,375.00 486,750.00 130,350.00 130,350.00 130,350.00 410,350.00 540,700.00 126,150.00 126,150.00 126,150.00 421,150.00 547,300.00 121,725.00 121,725.00 121,725.00 426,725.00 548,450.00 117,150.00 117,150.00 117,150.00 1,587,150.00 1,704,300.00 95,100.00 95,100.00 95,100.00 1,610,100.00 1,705,200.00 72,375.00 72,375.00 72,375.00 1,632~375.00 1,704,750.00 48,975.00 48,975.00 48,975.00 1,658,975.00 1,707,950.00 24,825.00 24,825.00 24,825.00 1,679,825.00 1,704,650.00 12,554,594.179,190,000 3,364,594.17 12,554,594.17 Nov7,2012 9:29am Pr~pa~edbySeattl~-Northw~stSe~tiesCorp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page5 SOURCES AND USES OF FUNDS CiV! of Rentun Wate~ & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Dated Date 12/07/2012 Delivery Date 12/07/2012 Bond Prueeeds: Par Amount 9,190,000.00 Premium g09D05.90 9,999,905.90 Refunding Escrow Deports: Cash Deposit SLGS Purclmses De.live~ Date Expenses: Cost of Issuance Underwriters Discount Other Uses of Funds: Addilional Proceeds 9~904~340.00 9,904,341.50 51,700.00 42~274.00 93,974.00 1,590.40 9,999,905.90 Nov7,2012 9:29am Prepared by Seattle-Northwest Seenrilies Corp.(k:\...LRENTON:RENTON-R04WS._BQ,R04WS_BQ) Page3 EXHIBIT B CLOSING DOCUMENTS Issuer’s Closing Documents At Closing, Issuer shall provide the following: a)Copies of the Bond Ordinance and the Blanket Issuer Letter of Representation; b)The approving opinion of Pacifica Law Group LLP, Bond Counsel, dated as of the Closing Date and addressed to the Issuer and the Underwriter, substantially in the form set forth in Appendix B to the Final Official Statement; c)Evidence of each of the following: i)That Standard & Poor’s ("S&P") has assigned its 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)Designation of the 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) e) 0 A report from Grant Thornton LLP (the "Verification Agent") verifying the accuracy of (a) the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the Government Obligations, together with other escrowed moneys, to be placed in the escrow account to pay when due, pursuant to stated maturity or call for redemption, as the case may be, the principal of, premium, if any, and interest on the Refunded Bonds and (b)the mathematical computations of the yield on the Bonds and the yield on the Government Obligations purchased with a portion of the proceeds of the sale of. the Bonds, together with a letter from the Verification Agent consenting to the inclusion in the POS and in the Final Official Statement under the heading "Verification of Mathematical Calculations" of references to the Verification Agent and to its report. A copy of completed IRS Form 8038-G; The following certifications, which may be combined, executed by an authorized officer of the Issuer and dated asof the Closing Date, to the effect that: i)The representations, warranties and covenants of the Issuer contained herein and in the Bond 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; 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 Bond 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 Bond 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; and 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; provided, however, that no representation or warranty is made with respect to information within the Final Official Statement relating to DTC, the book entry system, the Issuer’s Financial Advisor or the Underwriter; g)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 Bond 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 dosing 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: (b)Purchase Price: (c)Denominations: (d)Form: (e)Interest Payment Dates: (f)Maturity and Interest Rates: $9,190,000 $9,957,631.90 ($108.352904 per $100), representing a premium of $809,905.90 and an underwriter’s discount of $42,274.00. $5,000, or integral multiples thereof. Registered; Book-entry only. June I and December 1, commencing June 1, 2013. The Bonds shall mature on December I of each year and bear interest as follows: 2013 $40,000 2.00%0.40%101.568 UH7 2014 35,000 2.00 0.48 102.996 LrJ3 2015 35,000 2.00 0.62 104.072 UK0 2016 35,000 2.00 0.72 105.017 UL8 2017 35,000 2.00 0.87 105.499 UM6 2018 100,000 3.00 1.05 111~279 UN4 2019 220,000 2.75 1~3 110.141 uPg 2020 280,000 3.00 1.43 111.804 UQ7 2021 $295,000 3.00%1.62%111.493 UR5 2022 305,000 3.00 1.80 110.920 US3 2023 1,470,000 3.00 1.86 110.342"UT1 2024 1,515,000 3.00 1.94 109.578"UU8 2025 1,560,000 3.00 2.06 108.442"UV6 2026 1,610,000 3.00 2.15 107.600"UW4 2027 1,655,000 3.00 2~0 107.135"UX2 * Priced to the par call date of December 1, 2022. (g)Optional Redemption:The Bonds maturing on December1 in years 2013 through 2022, inclusive, are not subject to redemption prior to maturity. The Bonds maturing on or after December 1, 2023 are subject to redemption at the option of the Issuer, in whole or in part on any date on or after December 1, 2022 at a price of par plus accrued interest, if any, to the date of redemption. (h)Dated Date:Date of Delivery, expected to be December 7, 2012. (i)Offer Expires: (j)Bond Counsel: (k)Closing: 11:59 p.m. Pacific Time, November 7, 2012. Pacifica Law Group LLP. Via conference call initiated by Bond December 7, 2012, at 9:00 a.m. Pacific Time. Counsel on (1) Delive~]: (m) Rating: (n) Description of Refunded Bonds: (o)Minimum Savings: To the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer. S&P has assigned its rating of "AA+" to the Bonds. The Issuer partially refunded the term bond maturing in 2024 (the sinking fund payments occurring in 2016 and 2017 will remain outstanding) and the serial maturities in 2025 through 2027 in their entirety (the 2015 maturity will remain outstanding), in the aggregate principal amount of $9,045,000. The issuance of the Bonds produced an aggregate minimum net present value savings of $1,877,822.16 or 20.760886% (as a percentage of the Refunded Bonds). (p)True Interest Cost:2.204807%. NEW ISSUE BOOK-ENTRY ONLY Standard & Poor’s Rating: AA+ See "RATING" In the opinion of Pacifica Law Group LLP, Bond Counsel, assuming compliance with certain covenants of the City, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum 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. $8,720,000* CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 DATED: Date of Initial Delivery DUE: December 1, as shown herein The City of Renton, Washington (the "City"), Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"), will be issued as fully registered bonds in the name of Cede & Co., as Registered Owner and as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in denominations of $5,000 or any integral multiple thereof within a maturity. Purchasers will not receive certificates representing their interest in the Bonds. See "THE BONDS." The Bonds bear interest payable semiannually on each June 1 and December 1, beginning June 1, 2013, until maturity or prior redemption of the Bonds. The principal of and interest on the Bonds are payable by the fiscal agency of the State of Washington, currently The Bank of New York Mellon in New York, New York (the "Bond Registrar"). For so long as the Bonds remain in a "book-entry only" transfer system, the Bond Registrar will make such payments only to DTC, which, in turn, is obligated to remit such principal and interest to the DTC participants for subsequent disbursement to Beneficial Owners of the Bonds as described herein under Appendix E--"BOOK-ENTRY SYSTEM." The Bonds are subject to redemption prior to maturity as provided herein. See "THE BONDS---Redemption." The Bonds are being issued to refund certain maturities of the City’s Water and Sewer Revenue Improvement and Refunding Bonds, 2004, and to pay costs of issuance of the Bonds. See "USE OF PROCEEDS." Maturity Dates, Principal Amounts, Interest Rates, Yields, Prices and CUSIP Numbers on Inside Cover The Bonds are secured by a pledge of Gross Revenue of the City’s combined water, sewer, wastewater and storm drainage system (the "Waterworks Utility") after payment of Cost of Maintenance and Operation (the "Net Revenue"). The lien of the Bonds on Net Revenues is equal to the lien securing the Outstanding Parity Bonds (as defined herein) and superior to all other charges of any kind. The City reserves the right to issue Future Parity Bonds upon compliance with certain conditions. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY PAYABLE ONLY FROM THE BOND FUND AND RESERVE FUND. THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY OR THE STATE OF WASHINGTON (THE "STATE"), OR ANY POLITICAL SUBDMSION OF THE STATE, OR A CHARGE UPON ANY GENERAL FUND OR UPON ANY MONEY OR OTHER PROPERTY OF THE CITY OR OF THE STATE, OR OF ANY POLITICAL SUBDIVISION OF THE STATE, NOT SPECIFICALLY PLEDGED BY THE BOND ORDINANCE. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3)(B) of the Code. The Bonds are offered when, as and if issued, subject to the approving legal opinion of Pacifica Law Group LLP, Seattle, Washington, Bond Counsel, and certain other conditions. It is anticipated that the Bonds in definitive book-entry form will be available for delivery through the facilities of DTC in New York, New York, or to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about December 7, 2012. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. SNW * Preliminary, subject to change.Dated:., 2012 $8,720,000* CITY OF RENTON, WASHINGTON Water and Sewer Revenue Refunding Bonds, 2012 MATURITY SCHEDULE* Maturity Year Principal (December 1)Amount* 2018 $ 35,000 2019 185,000 2020 240,000 2021 255,000 2022 265,000 2023 1,430,000 2024 1,485,000 2025 1,545,000 2026 1,610,000 2027 1,670,000 Coupon Yield Price CUSIPT No. %% * Preliminary, subject to change. ~" Copyright 2012 CUSIP Global Services. CUSIP is a registered trademark of the American Bankers Association. These CUSIP numbers were provided by CUS~ Global Services and are not intended to create a database and do not serve in any way as a substitute for the CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. The City takes no responsibility for the accuracy of such CUSIP numbers. CITY OF RENTON, WASHINGTON 1055 S. Grady Way Renton, WA 98055 (425)430-6400 http://rentonwa.gov/* Member Denis Law Rich Zwicker Randy Corman Terri Briere Marcie Palmer Don Persson Greg Taylor Ed Prince MAYOR AND CITY COUNCIL Elected Officials Position Mayor Councilmember- President Councilmember- President Pro-Tern Councilmember Councilmember Councilmember Councilmember Councilmember Term Expires December 31 2015 December 31. 2013 December 31.2013 December 31. 2013 December 31.2015 December 31. 2015 December 31. 2015 December 31. 2015 Jay Covington Iwen Wang Jamie Thomas Gregg Zimmerman Bonnie Walton City Officials Chief Administrative Officer Administrative Services Administrator Fiscal Services Director Public Works Administrator City Clerk Bond Registrar The Bank of New York Mellon New York, New York (800) 438-5473 Bond Counsel Pacifica Law Group LLP Seattle, Washington Financial Advisor Piper Jaffray & Co. Seattle, Washington 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. No dealer, broker, sales representative or other person has been authorized by the City or Seattle-Northwest Securities Corporation (the "Underwriter") to give any information or to make any representations with respect to the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. No quotations from or summaries or explanations of the provisions of laws or documents herein purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Bonds. The cover page hereof and appendices attached hereto are part of this Official Statement. The information set forth or included in this Official Statement has been provided by the City and from other sources believed by the City to be reliable but is not guaranteed as to accuracy or completeness and it is not to be construed as a representation by the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall create any implication that there has been no change in the financial condition or operations of the City described herein since the date hereof. Certain statements contained in this Official Statement reflect not historical facts but are forecasts and "forward-looking statements." No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words "estimate," "forecast," "project," "anticipate," "expect," "intend," "believe" and other similar expressions are intended to identify forward-looking statements. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. All estimates, projections, forecasts, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. The City specifically disclaims any obligation to update any forward- looking statements to reflect occurrences or unanticipated events or, circumstances after the date of this Official Statement, except as otherwise expressly provided in "CONTINUING DISCLOSURE UNDERTAKING." The Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, in reliance upon a specific exemption contained in such act. The Bonds may, however, be subject to registration or qualification under the securities laws of various states, and may not be transferred in violation of such ~tate laws. The registration or qualification of the Bonds in accordance with applicable provisions of the securities laws of the states in which the Bonds have been registered or qualified, if any, and exemption from registration or qualification in other states, shall not be regarded as a recommendation thereof. No state nor any state or federal agency has passed upon the merits of these Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. The Underwriter has provided the following three sentences for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities 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. This Preliminary Official Statement has been "deemed final", by the City, pursuant to Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is permitted to be excluded from this Preliminary Official Statement under said Rule 15c2-12. The CUSIP numbers herein were obtained by the Underwriter from CUSIP Global Services. The City makes no representation as to the accuracy thereof. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are included in this Official Statement for convenience of the holders and potential holders of the Bonds. The CUSIP numbers were provided by CUSIP Global Services and are not intended to create a database and do not serve in any way as a substitute for the CUSIP Global Services. 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. TABLE OF CONTENTS Page Page INTRODUCTION ...............................................1 THE BONDS .......................................................2 General ........................................................2 Bond Registrar .............................................2Redemption ..................................................2 _Open IV’Iarket Purchase .................................3Defeasance ...................................................3 USE OF PROCEEDS ..........................................3 _Purpose ........................................................3 Sources and Uses of Funds ..........................4 Refunding Plan .............................................4 Verificataon of Mathematical Calculations.. 4 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ..............................................5Pledge of Revenues of the Waterworks Utility ...........................................................5Flow of Funds ..............................................5 Rate Covenant .............................................6 Funds and Accounts .....................................6 Additional Covenants ..................................7Future Parity Bonds .....................................8Junior Lien Obligations .............................10 No Acceleration .........................................10 DEBT INFORMATION .................................... 10 Description of Outstandin~ Par~_’ty Bonds .. I0 Schedfile of Parity Bond I~ebt Sdrvice ......11 Subordinate Lien Obligations ....................11 Debt Payment Record ................. ...............12 Future Financing ........................................12 THE WATERWORKS UTILITY .....................12The Water Utility .......................................12 The Wastewater "Utility ..............................! 6 _S_torm Dr .aina_ge.Utili_~ ..............................18 Waterworks Utility Capital Improvement Plan ............................................................21 Utility Billing and Delinquent Accounts ... 22 Penmtting anal Regulatory .........................22 Endangered Species Act ............................22 Financial Statements ..................................23 THE CITY .........................................................25 City Staff ...................................................25 Labor Relations .........................................25 Pension Funding ........................................26 Fireman s Pension .....................................27 Other Post-Employment Benefits ..............27 Authorized Investments .............................28 Bu .dg_et_ary Policies .....................................29 Risk-Management ......................................29 Auditing of City Finances ..........................30 BOND OWNERS’ RISKS .................................30 S_CPlltyecial Limited Revenue Obligations of the............................................................. 30 _Operating Results .......................................31 Enforceabilit~ of Remedies ........................31 No Acceleration ..........................................31 Loss of Exemption of Interest from Federal Income Taxes ............................................. 31 Loss of Premium from Early Redemption..31 Secondary Market and Prices .....................31 Ratings ........................................................32 Banlffuptcy .................................................32 Bond Audits ................................................32 INITIATIVE AND REFERENDUM .................32 FINANCIAL ADVIS OR ....................................32 TAX MATTERS ................................................32 Bank Qq.alified ...........................................33 Propos&t Tax Legislation; Miscellaneous..33 CONTINUING DISCLOSURE UNDERTAKING ............................................................................ 4 RATING .................................................~ ...........35 UNDERWRITING .............................................36 CERTAIN LEGAL MATTERS .........................36 POTENTIAL CONFLICTS OF INTEREST .....36 OTHER BOND INFORMATION .....................36 APPENDIX A---COPY OF THE BOND ORDINANCE APPENDIX B--FORM OF BOND COUNSEL OPINION APPENDIX C--FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31,2011 (AUD~) APPFNDIX D --ECONOMIC AND DEMOGRAPHIC INFORMATION APPL~,~,DIX E--BOOK-ENTRY SYSTEM (THIS PAGE INTENTIONALLY LEFT BLANK) OFFICIAL STATEMENT $8,720,000* CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 INTRODUCTION The City of Renton, Washington (the "City"), a municipal corporation duly organized and existing under the laws of the State of Washington (the "State"), furnishes this Official Statement in connection with the offering of $8,720,000* aggregate principal amount of Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"). The Bonds are issued pursuant to Ordinance No. 5672, passed by the Council on October 15, 2012 (the "Bond Ordinance"), and under and in accordance with the Renton Municipal Code and the laws and provisions of the State, including chapters 39.46, 35.92 and 39.53 of the Revised Code of Washington ("RCW"). Capitalized terms not otherwise defined herein shall have the meanings set forth in Appendix A--"COPY OF THE BOND ORDINANCE." This Official Statement provides information concerning the City, the Bonds and the City’s combined water, sewer, wastewater and storm drainage systems, as the same may be added to, improved and extended (the "Waterworks Utility"). The Bonds are issued on a parity of lien with the following obligations of the Waterworks Utility: ¯Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds") currently outstanding in the aggregate principal amount of $360,000, which are expected to be redeemed, in whole, on December 1, 2012 with available funds of the City; ¯Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds") currently outstanding in the aggregate principal amount of $1,025,000; ¯Water and Sewer Revenue Refunding Bonds, 2003 (the "2003 Bonds") currently outstanding in the aggregate principal amount of $415,000; ¯Water and Sewer Revenue Bonds, 2004 (the "2004 Bonds") currently outstanding in the aggregate principal amount of $10,335,000, of which $9,020,000 is expected to be refunded with proceeds of the Bonds; ¯Water and Sewer Revenue and Refunding Bonds, 2007 (the "2007 Bonds") currently outstanding in the aggregate principal amount of $9,705,000; ¯Water and Sewer Revenue Bonds, 2008 Series A (the "2008A Bonds") currently outstanding in the aggregate principal amount of $9,975,000; and ¯Water and Sewer Revenue Bonds, 2008 Series B (the "2008B Bonds") currently outstanding in the aggregate principal amount of $2,035,000. The 1998 Bonds, 2002 Bonds, 2003 Bonds, 2004 Bonds, 2007 Bonds, 2008A Bonds, and 2008B Bonds are collectively referred to as the "Outstanding Parity Bonds." See "DEBT INFORMATION" herein. The Bonds are being issued to refund a portion of the callable maturities of the 2004 Bonds, and to pay costs of issuance of the Bonds. See "USE OF PROCEEDS" herein. The City has reserved the fight in the Bond Ordinance to issue additional bonds (the "Future Parity Bonds") with a lien on Gross Revenue (as defined herein) of the Waterworks Utility on a parity with the lien of the Outstanding Parity Bonds and the Bonds upon satisfaction of certain conditions. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS--Future Parity Bonds." The Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are collectively referred to as the "Parity Bonds." The Bonds are revenue obligations of the Waterworks Utility. Neither the full faith and credit nor the taxing power of the City is pledged to the payment of the Bonds. The Bonds are not obligations of the State or any political subdivision thereof other than the City. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." Preliminary, subject to change. THE BONDS General The Bonds will be dated their date of delivery and will be issued in fully registered form in denominations of $5,000 each or integral multiples thereof within a maturity. The Bonds will mature on the dates and in the principal amounts and will bear interest from their date, payable on June 1, 2013, and semiannually thereafter on December 1 and June 1 of each year, at the rates set forth on the inside cover of this Official Statement. Interest on the Bonds will be calculated on the basis of a year of 360 days and twelve 30-day months. The Bonds will be issued in registered form, initially registered in the name Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). Individual purchases of the Bonds will be made initially in book-entry form only and purchasers will not receive certificates representing their interest in the Bonds purchased. So long as Cede & Co. is the Registered Owner of the Bonds, as nominee of DTC, references herein to the Registered Owners or bond owners will mean Cede & Co. and will not mean the "Beneficial Owners" of the Bonds. In this Official Statement, the term "Beneficial Owner" will mean the person for whom a DTC participant acquires an interest in the Bonds. See Appendix E--"BOOK-ENTRY SYSTEM." Bond Registrar The City has adopted the system of registration for the Bonds approved, from time to time, by the State Finance Committee of the State (the "Committee"). Pursuant to chapter 43.80 RCW, the Committee designates one or more fiscal agencies for bonds issued within the State. The State’s fiscal agent, currently The Bank of New York Mellon, New York, New York (the "Bond Registrar"), will authenticate the Bonds and act as the paying agent and registrar for the purpose of paying the principal of and interest on the Bonds, recording the purchase and registration, exchange or transfer, and payment of Bonds and performing the other respective obligations of the paying agent and registrar. No resignation or removal of the Bond Registrar shall become effective until a successor has been appointed and has accepted the duties of Bond Registrar. To meet payment requirements for the Bonds as the same becomes due and payable, the City will remit money from the Waterworks Revenue Bond Fund, 2012 held under the Bond Ordinance (the "Bond Fund") to the Bond Registrar. See "SECURXIT AND SOURCES OF PAYMENT FOR THE BONDS--Funds and Accounts" herein. The Bond Registrar will in turn remit such principal and interest to DTC participants for subsequent disbursement to the Beneficial Owners of the Bonds as described in Appendix E--"BOOK-ENTRY SYSTEM." In the event that the Bonds are no longer held by a depository, interest on the Bonds will 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 15th day of the month preceding the interest payment date, and 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; provided, however, that if so requested in writing by the Registered Owner of at least $1,000,000 principal amount of Bonds, interest will be paid by wire transfer on the date due to an account with a bank located within the United States. Redemption Optional Redemption. The Bonds maturing in years 2018 through 2022, inclusive, are not subject to optional redemption prior to maturity. The Bonds maturing on and after December 1, 2023 are subject to redemption at the option of the City, in whole or in part (and if in part, with maturities to be selected by the City) on any date on and after December 1, 2022 at the price equal to the principal amount to be redeemed, without premium, plus accrued interest, if any, to the date fixed for redemption. For as long as the Bonds are held by DTC, 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. If the Bonds are no longer held by a depository, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the Bond Ordinance. 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 the Bond 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 that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations authorized in the Bond Ordinance. Notice of Redemption. For so long as the Bonds are held by DTC, notice of redemption (which notice may be conditional) 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 (if the Bonds are no longer held by DTC), notice of redemption shall be given in the manner as provided in the Bond Ordinance. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. Open Market Purchase The City has reserved the right at any time to use any surplus Net Revenue of the Waterworks Utility available after providing for the payments required by paragraphs (1) through (6) described below under "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS-~Flow of Funds," or other available funds, to purchase for retirement any of the Bonds at any price deemed reasonable by the City. Defeasance In the event that money and/or "Government Obligations," as defined in chapter 39.53 RCW, as it may be amended, maturing at such time or times and beating 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. 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. As currently defined in chapter 39.53 RCW, the term "Government Obligations" means (a) direct obligations of or obligations the principal and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations; (b)bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-import Bank of the United States, federal land banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully ’secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation to the extent insured or guaranteed as permitted under any other provision of State law. USE OF PROCEEDS Purpose The proceeds from the sale of the Bonds will be used to refund certain maturities of the City’s outstanding 2004 Bonds for debt service savings, and to pay costs of issuance of the Bonds. See "Refunding Plan" below. Sources and Uses of Funds The table below sets forth the sources and uses of funds in connection with the issuance of the Bonds. Sources of Funds Principal Amount of the Bonds (1) Net Original Issue Premium/(Discount) Total Sources: $ 8,720,000 Uses of Funds Escrow Deposit Costs of Issuance (2) Total Uses: (1)Preliminary, subject to change. (2)Includes Bond Counsel fee, rating agency fees, printing costs, Financial Advisor fees, escrow fees, underwriter’s discount, and other costs associated with the issuance of the Bonds. Refunding Plan Depending on market conditions on the day of pricing, the City will use a portion of the proceeds of the Bonds to advance refund and defease a portion of the following callable maturities of the 2004 Bonds (as identified below, the "Refunding Candidates" and as selected on the date of pricing, the "Refunded Bonds"). The City currently expects to refund approximately $9,020,000 of the Refunding Candidates with proceeds of the Bonds, leaving approximately $1,315,000 in aggregate principal amount of the 2004 Bonds remaining outstanding. Refunded Bond Candidates Maturity Years Principal Interest Call Date CUSIP (December 1)Amounts Rates (100% of Par)Numbers 2015 $ 250,000 3.75%12/1/2014 760167SL1 2024 4,605,000 5.00 12/1/2014 760167SM9 2025 1,600,000 5.00 12/1/2014 760167SP2 2026 1,680,000 5.00 12/1/2014 760167SQ0 2027 1,760,000 5.00 12/1/2014 760167SN7 If the City determines to proceed with the refunding of Refunded Bonds, a portion of the proceeds of the Bonds will be escrowed to the redemption date for the Refunded Bonds on December 1, 2014, at which time the Refunded Bonds will be redeemed at a price of par plus accrued interest to the date of redemption. From a portion of the proceeds of the Bonds, the City will purchase certain direct non-callable United States Government Obligations ("Acquired Obligations"). These Acquired Obligations will be deposited in the custody of U.S. Bank, National Association, Seattle, Washington (the "Escrow Agent"). The maturing principal of the Acquired Obligations, interest earned thereon, and necessary cash balance, if any, will provide payment of: (a)interest and principal on the Refunded Bonds when due up to and including December 1, 2014; and (b)on December 1, 2014, the redemption price (100%) of the Refunded Bonds. The Acquired Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent, pursuant to an escrow deposit agreement to be executed by the City and the Escrow Agent. Verification of Mathematical Calculations Grant Thornton LLP will verify the accuracy of the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the Government Obligations, to be placed together with other escrowed money in the escrow account to pay when due, pursuant to the call for redemption, the principal of and interest on the Refunded Bonds. The verification will also confirm 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 "Code"). SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Pledge of Revenues of the Waterworks Utility The Bonds are special fund obligations of the City, payable from and secured by Gross Revenue of the Waterworks Utility subject only to the payment of Maintenance and Operation Expense ("Net Revenue") on a parity of lien with the City’s Outstanding Parity Bonds and any Future Parity Bonds. "Gross Revenue" is defined in the Bond Ordinance to 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. "Maintenance and Operation Expense". is defined in the Bond Ordinance to 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. The Bonds are not general obligations of the City, and neither the full faith and credit nor the taxing power of the City or of the State, nor any revenues of the City derived from sources other than the Waterworks Utility, are pledged to the payment thereof. Flow of Funds Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund (the "Waterworks Utility Fund"). 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 Credit Facility if the Credit Facility 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 Credit Facility if the Credit Facility secures the payment of principal 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 hereafter created 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 any reimbursements required for Qualified Insurance or Qualified Letter of Credit; (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 !ien 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 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. Rate Covenant The City has pledged in the Bond Ordinance 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: (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. Coverage Requirement prior to the New Covenant Date (defined in the Bond Ordinance to be at the time the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, which is currently expected to occur on December 1, 2014) is defined in the Bond Ordinance to mean in any calendar year 1.25 times the Maximum Annual Debt Service. From and aRer the New Covenant Date, the term Coverage Requirement is defined in the Bond Ordinance to mean in any calendar year 1.25 times the Annual Debt Service for such year. Funds and Accounts BondFund. The City has created the Bond Fund, which has been designated as a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund, for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain outstanding, the City has irrevocably obligated and bound 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 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 Waterworks Revenue Bond 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 def’med 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. After the New Covenant Date, 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 under the Code. ¯ As of October 1, 2012, the City had $3,648,589 in Qualified Insurance in the form of a surety policy (the "Surety Policy") from Financial Guaranty Insurance Company ("FGIC") delivered in connection with the issuance of the 2007 Bonds, 2008A Bonds, and 2008B Bonds. The Surety Policy originally issued by FGIC has been reinsured by National Public Finance Guaranty Corp. and will terminate on the earlier of the scheduled final maturity date of the 2007 Bonds, 2008A Bonds, and 2008B Bonds (December 1, 2027) or the date on which no 2007 Bonds, 2008A Bonds, and 2008B Bonds are deemed outstanding. The City intends to deposit $ from available funds of the City into the Reserve Fund at the time of issuance of the Bonds. Such amounts will be sufficient to satisfy the Reserve Requirement on the date of issuance of the Bonds ($ ). Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintaineod 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 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the "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 Party Bonds are defeased pursuant to the provisions of the Bond Ordinance. See Appendix A for certain requirements relating to disposal of all or a portion of the Waterworks Utility. 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 fmancial 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 ~to 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 infLrm, 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 carded 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. (3)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) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance on or prior to the date of issuance of such Future Parity Bonds. The ordinance authorizing the issuance of such Future Party 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. (5)There will be on file with the City either: (a)a certificate of the Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (b)prior to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, 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; Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or theroafter 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; 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; 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 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. Refunding Obligations. 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. Furthermore, nothing contained in the Bond Ordinance prevents the City from issuing Future Parity Bonds to refund maturing Parity Bonds, money for the payment of which is not otherwise available. Junior Lien Obligations The City has reserved the right to issue revenue bonds oi" other obligations which would be a charge upon Gross Revenue subordinate to that of any Outstanding Parity Bonds. As of October 1, 2012, the City had approximately $5,538,927 in outstanding subordinate lien debt. See "DEBT INFORMATION--Subordinate Lien Obligations." No Acceleration A Bondowner cannot require acceleration of debt service on the Bonds upon the occurrence of an event of default. See "BOND OWNERS’ RISKS--No Acceleration." DEBT INFORMATION Description of Outstanding Parity Bonds The following chart details the Outstanding Parity Bonds. Outstanding Parity Bonds°) As of October 1, 2012 Type of Debt 1998 Water/Sewer Refunding°) 2002 Water/Sewer 2003 Water/Sewer Refunding 2004 Water/Sewer~2) 2007 Water/Sewer & Refunding 2008A Water/Sewer Revenue 2008B Water/Sewer Revenue 2012 Water/Sewer Refunding(3) TOTAL REVENUE BONDS . Issued Maturity Outstanding Date Date Principal 3/1/1998 6/1/2013 $ 360,000 7/1/2002 12/1/2012 1,025,000 9/15/2003 6/1/2013 415,000 11/1/2004 12/1/2018 1,315,000 11/6/2007 12/1/2022 9,705,000 1/4/2008 12/1/2027 9,975,000 1/4/2008 12/1/2016 2,035,000 12/7/2012 12/1/2027 8,720,000 $ 33,550,000 (1) (2) (3) The City currently plans to redeem the 1998 Bonds, in whole, on December 1, 2012 with available funds of the City. Reflects the principal mount expected to remain outstanding after the refunding of the Refunded Bonds. See "USE OF PROCEEDS~Refunding Plan" herein. Preliminary, subject to change. The Bonds. Preliminary, subject to change. ~ 10 Schedule of Parity Bond Debt Service Outstanding Parity Bonds Year t3)Principal 2012 $ 2,115,000 2013 1,610,000 2014 1,660,000 2015 1,730,000 2016 1,810,000 2017 1,895,000 2018 1,945,000 2019 1,885,000 2020 1,905,000 2021 1,975,000 2022 2,055,000 2023 980,000 2024 1,020,000 2025 1,060,000 2026 1,105,000 2027 1,155,000 Total ~s)$ 25.905.000 Interest $ 1,078,260 994 633 941 028 870 350 794 845 708 658 620 858 536 458 461 058 384 g58 305 ~58 223 558 183 ~78 141 148 96 528 49 565 $ 8.391.435 The Bonds (2) Principal Interest (4)Total (s) ----$3,193,260 --$ 333,350 2,937,983 --339,000 2,940,028 --339,000 2,939,350 --339,000 2,943,845 --339,000 2,942,658 $35,000 339,000 2,939,858 185,000 337,950 2,944,408 240,000 332,400 2,938,458 255,000 325,200 2,940,058 265,000 317,550 2,943,408 1,430,000 309,600 2,943,258 1,485,000 252,400 2,940,878 1,545,000 193,000.2,939,148 1,610,000 131,200 2,942,828 1,670,000 66,800 2,941,465 $ 8.720.000 $ 4.294.450 $ 47.310.._~885 (1) (2) (3) (4) (5) Includes the 2004 Bonds expected to remain outstanding after the refunding of the other Outstanding Parity Bonds. Excludes the Refunded Bonds. See "USE OF Plan" herein. Preliminary, subject to change. Based on Fiscal Years ending December 31. Assumes interest rates ranging from 2.00% to 4.00%. Totals may not foot due to rounding. Refunded Bonds, and the PROCEEDS~Refunding Subordinate Lien Obligations The City retains the right to issue revenue obligations with a subordinate lien on Gross Revenue of the Waterworks Utility. As of October 1, 2012, the City had the following subordinate lien obligations outstanding: Outstanding Subordinate Lien Obligations As of October 1, 2012 Other Liabilities Public Works Trust Fund Loans: Central Renton Sewer Replacement 1.00% East Renton Interceptor 1.00 Dayton Avenue NE 2.00 NE 27th/Aberdeen Drainage Improvements 1.00 East Keunydale Interceptor 2.00 Honeycreek Interceptor 2.00 Corrosion Control Treatment Facilities 1.00 Maplewood Water Treatment Improvement 0.50 Construct CT Pipeline for Wells 0.50 Maplewood Water Treatment Improvement 0.50 Interest Issue Outstanding Rate Date Maturity Date Principal TOTAL PUBLIC WORKS TRUST FUND LOANS 5/4/1993 7/1/2015 6/7/1993 7/1/2013 5/12/1994 7/1/2014 5/15/1995 7/1/2015 1/24/1998 7/1/2016 12/4/1995 7/1/2016 1/6/1997 7/1/2017 1/22/2002 7/1/2021 11/5/2002 7/1/2022 6/3/2004 7/1/2024 $191,519 134,570 10,206 127 769 467 418 387 488 246 785 272 708 428 698 3,271,765 $ 5,538,927 11 Debt Pa~nent 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 Financing Other than the Bonds, the City has no authorized but unissued bonds secured by Gross Revenues outstanding. The City does not expect to issue bonds secured by Gross Revenues in the next 12 months. 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. The Water Utility Description. The Water Utility provides water service for fire protection and for domestic uses to an area of 17.11 square miles within the City limits. As of October 1, 2012, the Water Utility served approximately 17,728 customer accounts, and a population of 55,296. The City also supplies water on a wholesale basis to a portion of the Skyway Water and Sewer District through a single metered connection. Water service within certain areas of the City is also provided by the Soos Creek Water and Sewer District, the Coal Creek Utility District, the Cedar River Water and Sewer District, and King County Water District #90. The City’s water system consists of nine water supply sources, ten reservoirs with 22 million gallons of storage, 12 pump stations, two water treatment facilities, 305 miles of water mains, 3,644 fire hydrants and 17,370 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. The City’s own water supply sources include eight active 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 83 percent of the City’s water production. In addition, the City maintains ten metered water supply interties with Seattle Public Utilities, one emergency intertie with the City of Kent, one emergency intertie with the City of Tukwila and one emergency intertie with the Skyway Water and Sewer District. Together, active, standby and emergency wells provide 19,450 gallons per minute ("GPM") or 28 million gallons per day ("MGD"). Interties with Seattle Public Utilities and emergency interties with neighboring cities and water districts can provide 13,200 GPM or 19.1 MGD. In 2011, the maximum demand for water was 12.5 MGD and the average day demand was 6.8 MGD. Based on growth forecasts, the City believes that it has sufficient on-line supply capacity to meet demands through at least 2018, or to 2034 with the practice of water conservation efforts. In 2011, the City entered into a fifty year supply agreement with the City of Seattle that will allow the City access to the City of Seattle water supply sufficient to accommodate all projected growth through 2061. 12 The City’s historic water demands are shown in the following table: Water Utility Usage Average Daily Peak Day Usage (MGD)Usage (MGD) 2011 6.8 12.5 2010 6.8 12.8 2009 7.6 14.8 2008 7.4 12.7 2007 8.0 14.8 2006 8.0 15.3 Source: City of Renton. Water Utility Customers. As of January 1, 2012, the City provided water services to approximately 17,728 customers of which approximately 77 percent were 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 2011 2010 2009 2008 2007 Single Family 13,739 13,594 13,500 13,440 13,324 Multi-Family, Commercial, Industrial, Other 2,591 2,559 2,555 2,542 2,526 Irrigation 721 714 704 697 673 Fire Service 624 604 576 544 520 Other°)53 55 66 86 60 Total 17,728 17,526 17,401 17,309 17,103 (1)Includes wholesale water provided to the Skyway Water and Sewer District through a single metered connection. Source: City of Renton. Water Billing(1) 2011 2010 2009 2008(2)2007 Single Family $ 4,860,354 $ 4,215,608 $ 4,041,651 $ 3,636,201 $ 4,236,683 Multi-Family, Commercial, Industrial, other 5,607,114 4,677,977 4,292,709 4,149,933 3,911,598 Irrigation 1,521,050 1,227,485 1,592,628 1,218,571 1,037,900 Fire Service 225,247 184,261 163,921 144,703 134,162 Other(3)214,569 218,751 212,883 185,181 168,581 Total $12,428,335 $10,524,083 $10,303,792 $ 9,334,588 $ 9,488,932 O) (2) (3) Source: Data in table reflects billings for the Water Utility. Actual receipts may vary. See "Financial Statements" below. Totals may not foot due to rounding. The City modified its rate structure in 2008 in effort to more accurately reflect cost of services and encourage conservation. Irrigation use was reclassified and consumption became subject to the highest rate tier. Single family rates changed from a two-tiered system to a three-tiered system, with higher incremental rates for the third-tier and a lower base tier rate. As a result of this structural change, the average single family billing decreased by approximately 19% and the irrigation billing increased. Includes hydrants and wholesale water provided to the Skyway Water and Sewer District. City of Renton. 13 The following table shows the City’s ten major water customers. Major 2011 Water Customers Customer Boeing Commercial King County Dept. Metro Services City of Renton Renton School District Skyway Water and Sewer Department Service Linen Supply, Inc. The Arbors at Sunset Axis Grand Apartments Public Hospital District No. 1 of King County Copper Ridge Apartments Total Total Amount Percent of Total Billed for Water Water Billing°) $359,869 2.90% 316,647 2.55 293,080 2.36 135,928 1.09 103,910 0.84 100,697 0.81 89,664 0.72 89,172 0.72 85,924 0.69 83,469 0.67 $1,658,361 13.34 Based on 2011 water billings of $12,428,335. 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. The City updates its rate model every other year, in conjunction with its biennial budget process, to determine rate adjustments necessary to maintain the Waterworks Utility. The City adopted a set of financial policies for its Waterworks Utility in 2010 to reduce the reliance of debt financing of future system replacements. As a result, there was a water rate increase of 18 percent in 2011 and 16 percent in 2012. The City is proposing to raise rates an additional five percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and if approved, will take effect on January 1 in the respective years. The following table shows the historical rate increases for the Water Utility. Past Water Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 16%18%10%4%6% Source: City of Renton. 14 The City’s monthly water bills are calculated based on meter size and volume of water in hundreds of cubic feet ("ccf’) consumed. Current monthly water service charges are as follows: 2012 Monthly Water Service Charge (Effective January 1, 2012) Monthly Charge Meter Size Basic Meter Irrigation Meter Fire Meter 3/4"$15.96 $9.60 -- 1"33.06 17.16 $5.69 1 ½"61.07 29.29 6.36 2"95.71 44.86 8.17 3"196.65 94.94 21.58 4"300.00 141.18 26.55 6"585.24 267.40 38.15 8"1,145.52 585.15 51.38 10"1,707.60 752.43 66.29 12"2,485.13 1,086.53 -- Source: City of Renton. 2012 Commodity Rates: 100 cf = 748 gallons (Effective January 1, 2012) Single Family/Duplex Less than 500 cf/month 500 - 1,000 cf/month Over 1,000 cf/month Multi Family Non-residential Private Irrigation City Irrigation Monthly Charge $ 2.30/100 cf 3.09/100 cf 3.90/100 cf 2.98/100 cf 3.16/100 cf 5.06/100 cf 3.56/100 cf Source: City of Renton. Water rates for metered service outside of the City are 1.5 times the rate for metered service within the City. Rate Comparison of Neighboring Water Systems. Shown below are comparative water rate charges of other water utilities near the City: 2012 Single Family Monthly Water Rate Comparison Water System Monthly Rate°) City of Bellevue $ 51.81 Coal Creek Utility District 43.97 Skyway Water/Sewer District 39.53 City of Kent 38.45 Cedar River Water/Sewer District 37.79 City of Tukwila 37.05 The City 35.19 City of Issaquah 33.14 Soos Creek Water/Sewer District 30.46 City of Auburn 27.84 Rates are based on monthly consumption of 750 cubic feet of water. The Cities of Kent and Tukwila have different water rates during the summer months (June - September). The monthly rates shown above are an average of the summer and non-summer rates. Source: City of Renton. 15 System Development Charges. System development charges for the Water and Wastewater Utilities are payable at or prior to the time of permit issuance. In the absence of a construction permit, fees are payable prior to building permit issuance. Once the fees have been fully paid for a parcel, no further fees are due unless more land is paved or the building coverage is increased. 2012 Water and Wastewater Utility System Development Charges (Effective January 1, 2012) Fire Service Fee Amount Water Meter Water Service Fee Amount Wastewater Fee Amount (only required if separate or Fire Service Size per Meter per Sewer Connection fire service is needed) 5/8 and¾inch $ 2,236 $1,591 $ 292 1 inch 5,589 3,977 729 1 ½ inch 11,179 7,954 1,458 2 inch 17,886 12,726 2,332 3 inch 35,711 25,452 4,665 4 inch 55,893 39,768 7,288 6 inch 111,786 79,537 14,577 8 inch 178,857 127,258 23,323 Source: City of Renton. The Wastewater Utility Description. The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to 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 215 miles of wastewater pipelines, 20 lift stations and an additional 15 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 South Treatment Plant.’ Approximately 75 percent of the City is served by the Wastewater Utility system. Another 15 percent is served by other sewer districts with the remaining area within the City is served by septic tanks or is undeveloped. The City also serves customers outside of the City limits, which includes 106 residential accounts. Wastewater Utility Customers. As of January 1, 2012, the City provided wastewater service to approximately 17,132 customer accounts, 86 percent of which were residential. Customer data and usage by class for the last five years is presented below. Number of Wastewater Customers Single Family Multi-Family, Commercial, Industrial, Other Total 2011 2010 2009 2008 2007 14,675 14,452 14,121 13,904 13,628 2,457 2,451 2,453 2,446 2,401 17,132 16,903 16,574 16,350 16,029 Source: City of Renton. 16 Wastewater BillingO) 2011(2)2010 2009 2008 2007 Single Family $ 4,135,991 $ 2,856,996 $ 2,733,775 $ 2,554,429 $ 2,343,477 Multi-Family, Commercial, Industrial, Other 3,678,390 2,616,748 2,531,209 2,485,600 2,399,698 Total City Sewer 7,814,381 5,473,743 5,264,983 5,040,029 4,743,175 King County Metro Charges 13,306,642 11,989,977 11,372,148 10,115,432 10,135,862 Grand Total $21,121,023 $17,463,720 $16,637,131 $15,155,461 $14,879,037 o)Data in table reflects billings for the Wastewater Utility. Actual receipts may vary. See "Financial Statements" below. Totals may not foot due to rounding. (2)The City approved a 42% rate increase effective beginning in 2011. See "Wastewater Utility Rates and Charges" below. Source: City of Renton. The following table shows the City’s ten major wastewater customers. Does not include King County Metro charges. Major 2011 Wastewater Customers Customer Boeing Commercial Service Linen Supply, Inc. Public Hospital District No. 1 of King cotmty G&K Services Copper Ridge Apartments Axis Grand Apartments Maplewood LLC Holiday Inn Renton Royal Hills Preservation LP The Arbors at Sunset Total Total Amount Billed for Wastewater $181,042 84,786 72,113 69 315 58 662 56 583 50 679 47 751 47 012 45 214 $ 713 157 Percent of Total Wastewater Bfll~g°) 2.32% 1.08 0.92 0.89 0.75 0.72 0.65 0.61 0.60 0.58 9.13% Based on 2011 wastewater billings of $7,814,381. Source: City of Renton. Wastewater Utility Rates and Charges. As discussed under "The Water Utility" above, the City updates its rate model each year to determine rate adjustments to maintain the Waterworks Utility. The City adopted a set of financial policies for its utility system in 2010 to reduce the reliance of debt financing of future system replacements. As a result, rates increased 42 percent in 2011 and an additional five percent in 2012. The City is proposing to raise rates an additional five percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and, if approved, will take effect on January 1 of the respective years. The following table shows the historical rate increases for the Wastewater Utility. Past Wastewater Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 5%42%4%4%6.5% Source: City of Renton. 17 Current monthly wastewater service charges are as follows: 2012 Monthly Wastewater Utility Rates (Effective January 1, 2012) Customer Type City of Renton Metro Single Family $ 25.08 $ 37.26 Other Users: Base Charge 3.79 N/A Per 100 cf 2.83 N/A Per 750 cf N/A 37.26 Minimum Charge 25.08 37.26 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 City’s monthly rates above, a flat charge of $37.26 per month is payable to Metro for each single-family residence. For non-residential accounts, Metro charges a minimum flat rate of $37.26 for the first 7.5 eel of consumption plus an additional $4.97 per ccf for every unit over 7.5 ccf. 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: 2012 Single Family Monthly Sewer Base Rate Comparison Sewer System Monthly Rate{1~ City of Bellevue $56.09 Skyway Water/Sewer District 26.93 The City 25.08 City of Tukwila 19.26 Coal Creek Utility District 19.00 Cedar River Water/Sewer District 18.41 City of Issaquah 18.01 Soos Creek Water/Sewer District 16.85 City of Kent 16.61 City of Auburn 14.70 (1)Rates for the Cities of Bellevue and Issaquah were based on a volume of 750 cubic feet of water consumption per month. All other systems reflect a fixed monthly charge. Rates do not include a fiat charge of $37.26 per month payable to Metro where applicable. Source: City of Renton. System Development Charges. System development charges for the Wastewater Utility are shown above under "The Water Utility-System Development Charges." Storm Drainage Utility Description. The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 23.8 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 fight-of-ways, tracts, and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 276 miles of storm system pipe, includes 10,991 catch basins, 4,070 access manholes, 100 storm water retention!detention facilities and 24.7 miles of ditch systems and channels. PotentialAnnexation. On November 6, 2012, voters in the West Hill community will be asked to consider a proposition of whether the West Hill community should be annexed into the City or remain part of unincorporated King County. The West Hill community is a 1,857-acre or 2.9 square mile area bordering Lake Washington to the northeast, the City of Seattle to the north, the City of Tukwila to the south, and the City to the southeast. It has an estimated population of 18 15,853 in seven neighborhoods, including Bryn Mawr, Lakeridge, Skyway, Campbell Hill, Panorama, Skycrest, and Hill Top. If the annexation is approved, the area would receive general governmental services from the City, such as police, fire, permits, and street maintenance services upon a to be determined effective date. The City would also be responsible for providing storm drainage services to the area. Water and sewer services in the area are currently provided by Seattle Public Utilities and the Skyway Water and Sewer District and would likely continue after annexation. Storm Drainage Utility Customers. As of January 1, 2012, the City provided storm drainage service to approximately 22,827 customers of which approximately 92 percent were single family residential. Customer data by class for the last five years is presented below, as well as current revenues of the Storm Drainage Utility. Number of Storm Drainage Customers 2011 2010 2009 20080)2007 Single Family 20,980 20,747 20,329 19,900 14,651 High Intensity 880 887 914 880 834 Medium Intensity 588 540 553 534 470 Low Intensity 320 328 339 321 273 Other 59 58 67 64 63 Total 22,827 22,560 22,202 21,699 16,291 o)In November 2007, voters in the Benson Hill area approved an annexation of unincorporated land bordering the City which increased the geographic size of the City by approximately one-third. After the annexation, the City began providing storm drainage services to the annexed area, but water and sewer services continued to be provided by the Soos Creek Water and Sewer District. Source: City of Renton. Storm Drainage Billing°) 2011~2)2010 2009 2008°)2007 Single Family $ 2,547,466 $ 1,799,916 $ 1,767,503 $ 1,607,074 $971,378 High Intensity 1,678,503 1,228,059 1,272,382 1,126,578 816,886 Medium Intensity 1,283,784 884,389 918,548 856,605 594,128 Low Intensity 758,705 533,547 538,223 477,724 300,789 Other 585,049 417,872 435,877 416,645 323,097 Total $ 6,853,507 $ 4,863,782 $ 4,932,533 $ 4,484,628 $ 3,006,277 (I) (:) (3) Source: Data in table reflects billings for the Storm Drainage Utility. Actual receipts may vary. See "Financial Statements" below. Totals may not foot due to rounding. The City approved a 40 percent rate increase effective beginning in 2011. See "Storm Drainage Utility Rates" below. In November 2007, voters in the Benson Hill area approved an annexation of unincorporated land bordering the City which increased the geographic size of the City by approximately one-third. After the annexation, the City began providing storm drainage services to the annexed area, but water and sewer services continued to be provided by the Soos Creek Water and Sewer District. City of Renton. 19 The following table shows the City’s ten major storm drainage customers. Major 2011 Storm Drainage Customers Customer City of Renton Boeing Commercial Renton School District Washington Department of Transportation King County Department of Transportation Kenworth Truck Company King County Department of Metro Services Stoneway Rock and Recycling Liesure Estates Office The Landing Total Total Amount Percent of Total Billed for Storm Storm Billingv) $418,747 6.11% 282,947 4.13 192,593 2.81 61,709 0.90 60,632 0.88 58,841 0.86 49,386 0.72 47,347 0.69 45,947 0.67 44,556 0.65 $1,262,703 18.42% Based on 2011 storm drainage billings of $6,853,507. Source: City of Renton. Storm Drainage Utility Rates. Rates for the Storm Drainage Utility increased 40 percent in 2011 and an additional 11 percent in 2012. The City is proposing to raise rates an additional five percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and, if approved, will take effect on January 1 of the respective years. The following table shows the historical rate increases for the Storm Drainage Utility. Past Storm Drainage Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 11%40%0%0%29.5% Source: City of Renton. Current monthly rates for storm drainage service within and outside the City are as follows: 2012 Monthly Storm Drainage Utility Rates (Effective January 1, 2012) Type Single Family Low Intensity - less than 0.5 acres Low Intensity - greater than 0.5 acres Medium Intensity - less than 0.5 acres Medium Intensity - greater than 0.5 acres High Intensity - less than 0.5 acres High Intensity - greater than 0.5 acres Monthly Charge $11.51 28.50/acre 57.02/acre 41.23/acre 82.42/acre 53.16/acre 106.31/acre Source: City of Renton. 20 2012 Single Family Monthly Storm Base Rate Comparison Storm System Monthly Rate City of Bellevue $ 33.06 City of Auburn 15.75 City of Issaquah 14.08 The City 11.51 Skyway Water/Sewer District 11.08 Coal Creek Utility District 11.08 Cedar River Water/Sewer District 11.08 Soos Creek Water/Sewer District 11.08 City of Kent 10.56 City of Tukwila 8.50 Source: City of Renton. System Development Charges. System development charges for the Storm Drainage Utility are payable at or prior to the time of permit issuance. In the absence of a construction permit, fees are payable prior to building permit issuance. Once the fees have been fully paid for a parcel, no further fees are due unless more land is paved or the building coverage is increased. Type of Land Use New Single Family Residence (Including mobile/manufactured homes) Addition to existing single-family residence greater than 500 square feet (Including mobile/manufactured homes) All other uses Fee Amount $1,012.00 per dwelling unit $0.405 per square foot of new impervious surface area, but not more than $1,012.00 $0.405 per square foot of new impervious surface area, but not less than $1,012.00 Source: City of Renton. Waterworks Utility Capital Improvement Plan The City regularly identifies additional capital needs of the Waterworks Utility based on factors that may include expected growth and fmancial priority. Rapid residential and commercial growth has prompted the City to plan for expansion of its Waterworks Utility capacity. The plan also accounts for projects required to meet current regulatory requirements. The City updates its six-year Capital Improvement Plan ("CH’") every two years. The latest CIP outlines proposed enhancement and development for the Waterworks Utility for the years 2012-2017. Per City policy, all capital improvements to the existing system will be fully funded through utility rates and charges and will not be fmanced with debt. Additions to the Waterworks Utility may be funded with proceeds of Future Parity Bonds or subordinate lien obligations. 21 Capital Improvement Plan (in Thousands) Category By Project Type: Improvements Major Maintenance Regulatory Compliance Total by Type 2012 2013 2014 2015 2016 2017 4,755 $5,440 $5,050 $4,250 $5,950 $4,850 6,465 6,130 6,320 7,620 5,220 6,070 720 380 330 330 330 550 11,940 $11,950 $11,700 $12~00 $ 11,500 $ 11,470 By Utility: Water CIP $ 4,500 $5,200 $5,350 $5,250 $ 5,250 " $ 5,020 Wastewater CIP 3,790 3,250 3,250 3,250 3,250 3,250 Storm Drainage CIP 3,650 3,500 3,100 ,3,700 3,000 3,200 Total byUtility $ 11,940 $ 11,950 $ 11,700 $ 12,200 $ 11,500 $ 11,470 Source: City of Renton. Utility Billing and Delinquent Accounts The Utility Billing division under the direction of the Administrative Services Department provides customer service, billing and revenue collections for the Waterworks Utility. Utility bills are generated monthly and due 25 days later. If the charges billed are not paid within the 20 day period from the due date, such charges become delinquent. If an account is delinquent, the City will assess a penalty to the account and enforce collections. The City’s ability to collect on delinquent accounts is controlled by State law and the Renton Municipal. Code. Remedies include, but are not limited to, providing notice, charging fees and interest on unpaid charges for service, terminating water service, and placing a lien for unpaid charges against premises to which such service has been furnished or is available. Such lien is superior to all other liens or encumbrances, except those for general taxes and special assessments, and may be foreclosed by the City in the manner provided by law, in addition to all other available remedies. Permitting and Regulatory The City’s Waterworks Utility is in compliance with known regulations and applicable permits. The City’s existing National Pollution Discharge Elimination System ("N-PDES") Permit was issued on January 17, 2007, by the Washington State Department of Ecology under the provisions of the U.S. Enviroumentai Protection Agency’s Clean Water Act. The City’s NPDES permit regulates stormwater discharges from municipally owned or operated stormwater systems in the City. Federal and state water quality laws require a permit for the discharge of stormwater and requires public entities to control discharge of pollutants to protect surface water. The City meets this requirement through inspections and enforcement to prevent and control stormwater impacts, public education regarding good stormwater management practices, operation and maintenance of the municipal stormwater system, and stormwater monitoring and reporting, among others. The City’s Water Utility is subject to an annual operating permit issued by the Washington State Department of Health. The City’s permit is current and holds a "green" status (fully compliant). To maintain "green" status the City must remain fully compliant with all Safe Drinking Water Act requirements. The City currently does not have any concerns regarding the City’s ability to renew its annual permit or remain in "green" status. 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. 22 Financial Statements Waterworks Utility Fund Historical Operating Results - Debt Service Coverage (Years Ending December 31 - Based on Audited Financial Statements) Operating Revenues (1)(2)Charges for services Other operating revenue~2) Total Operating Revenue Operating Expenses(3) Operations and maintenance King County Metro(4) Administrative and general Taxes(5) Total Operating Expenses Net Income from Operations Non-Operating Revenue(6) Interest revenues Other non-operating revenues (expenses) Transfers in (out) Total Non-operating Income Net Income Adjustment to Revenues Connection/system development charges Available for Parity Bond Debt Service Parity Debt Service 1998 Bonds 2002 Bonds 2003 Bonds 2004 Bonds 2007 Bonds 2008A Bonds 2008B Bonds Padty Bond Debt Service 2011 2010 2009 2008 2007 $ 40,926,401 $ 33,944,143 $ 31,925,767 $ 29,400,724 $ 28,661,145 1,495,677 1,014,370 1,991,084 800,908 1,084,632 42,422,078 34,958,513 33,916,851 30,201,632 29,745,777 9,016,625 8,405,890 9,281,224 6,194,147 5,054,666 11,678,248 12,084,663 11,154,866 9,893,020 10,163,449 4,729,678 5,056,054 3,905,496 5,108,203 4,765,021 3,411,418 2,636,882 2,552,447 2,571,067 2,037,506 28,835,969 28,183,489 26,894,033 23,766,437 22,020,642 13,586,109 6,775,024 7,022,818 6,435,195 7,725,135 93,042 187,845 349,607 1,022,711 810,519 11,397 99,827 2,796 18,876 28,242 26,844 17,095 100,000 (110,000)- 77,595 304,767 452,403 931,587 838,761 13,663,704 7,079,791 7,475,221 7,366,782 8,563,896 631,038 644,512 529,156 928,070 2,330,976 14,294,742 7,724,303 8,004,377 8,294,852 10,894,872 718,535 724,460 723,443 725,678 726,329 1,092,425 736,995 578,830 237,680 175,765 390,430 737,425 900,141 1,238,085 1,233,260 507,480 507,480 507,480 507,480 507A80 421,850 422,450 423,050 436,387 415,508 415,508 415,508 377,419 100,138 100,138 100,138 90,958 3,646,366 3,644,456 3,648,590 3,613,687 2,642,834 AvailableforOtherPurposes Annual Debt Serviee Coverage Debt Service CoveragePer Bond Covenan~~ $10,648,376 $ 4,079,847 $4,355,787 $ 4,681,165 $ 8,252,038 3.92 2.12 2.19 200 4.12 3.92 2.12 2.19 2.27 3.46 .(1)Charges for services include amounts collected from residential and commercial customers on behalf of Metro. See "THE WATERWORKS UTILITY--The Wastewater Utility." (2)A change in financial reporting categorization in 2009 moved certain amounts from Administrative and General to Operations and Maintenance. An additional $1,066,493 was reported in special assessment deferred revenue in 2009 due to a change in accounting for special assessment deferred revenue.(3)Excludes depreciation.(4)See "THE WATERWORKS UTILITY--The Wastewater Utility."(5)Amounts include taxes payable to the City, which are not required to be included in the calculation of Operation and Maintenance Expense under the Bond Ordinance for purposes of calculating debt service coverage. See Appendix A.(6) Excludes Interest Expense and Amortization of Debt. (7) See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS---Rate Covenant." Source: City of Renton. 23 Waterworks Utility Fund Historical Statement of Net Assets (fiscal years ending December 31, 2007 through December 31, 2011 are based on audited financial statements) Audited 2011 2010 2009 2008 20O7 Assets Current Assets: Cash and Cash Equivalents $9,207,083 $5,982,067 $7,914,268 $2,300,930 $2,797,689 Investments at Fair Value 5,434,445 5,859,767 5,960,027 12,948,026 7,362,526 Receivables (Net)5,520,410 4,774,383 3,887,778 3,888,404 3,515,607 Due From Other Funds 1,394 - Interfund Loan Receivable 94,887 91,679 475,000 - Due from other governmental units 718,624 127,806 196,888 293,813 430,713 Inventories 263,07 266,783 495,303 408,805 351,393 Noneurrent Assets: Restricted Cash 3,145,309 Special assessments deferred 121,251 1,109,710 1,073,605 65,700 52,918 Advances to Other Funds 199,855 294,743 - Capital assets (net)237,130,860 236,393,969 235,200,082 234,518,291 211,899,961 Deferred charges and other assets 470,561 566,022 661,483 756,945 638,432 Total Assets $259,161,049 $255,466,929 $255,865,828 $255,180,914 $230,194,548 Liabilities Current Liabilities: Accounts payable $957,249 $1,843,744 $338,529 $278,638 $448,461 Retainage payable 191,867 142,563 39,764 130,463 95,847 Due to other funds 43,101 1,456 6,905 Due to other governmental units 904,289 904,291 904,291 Accrued interest payable 153,497 164,867 175,586 292,458 118,364 Accrued employee wages 380,449 368,025 268,574 247,496 35,225 Accrued taxes payable 32,183 54,909 46,359 37,229 46,727 Custodial accounts 18,640 27,239 39,379 32,159 44,430 Deferred revenue -149,554 134,788 195,269 Revenue bonds payable 2,115,000 2,030,000 1,955,000 1,890,000 1,810,000 Long-term Liabilities: Revenue bonds payable 32,810,000 34,925,000 36,955,000 38,910,000 28,790,000 Unamortized premium 541,878 570,588 623,125 675,662 659,170 Unamortized discount (540,297)(127,900)(567,998)(799,758)(330,837) Deferred amount on rev. bond refunding0)(478,049)(130,399)-(570,280) Deferred revenue 167,920 270,199 - Accrued employee wages 437,625 418,030 518,577 503,083 563,321 Public Works Trust Fund Loans (2)5,538,929 6,443,218 7,347,509 9,171,235 9,802,877 Total Liabilities $43,752,330 $47,558,180 $48,662,850 $51,503,453 $41,715,479 Net Assets Invested in capital assets 195,761,061 192,126,821 188,113,554 184,671,152 171,739,031 Restricted 3,588,179 3,730,167 3,145,309 Unrestricted 19,647,658 15,781,928 15,501,245 15,276,142 13,594,729 Total Net Assets $215,408,719 $207,908,749 $207,202,978 $203,677,461 $188,479,069 Total Liabilities and Net Assets $259,161,049 $255,466,929 $255,865,828 $255,180,914 $230,194,548 Reflects unamortized issuance costs and premiums/discounts on refandings. See "DEBT INFORMATION--Subordinate Lien Obligations." 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 Denis Law Rich Zwicker Randy Corman Terri Briere Marcie Palmer Don Persson Greg Taylor Ed Prince Position Mayor Councilmember- President Councilmember- President Pro-Tern Councilmember Councilmember Councilmember Councilmember Councilmember Term Expires December 31 2015 December 31 2013 December 31 2013 December 31 2013 December 31 2015 December 31 2015 December 31 2015 December 31 2015 The City provides a range of municipal services authorized by State law in addition to water, wastewater and storm drainage services, including police, fire, ambulance service, streets, sanitation, health, recreation, library, public improvements, planning and zoning. 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. 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. Iwen Wang, Administrative Services Administrator. Ms. Wang joined City staff as Finance and Information Technology Administrator in June of 2008. Prior to joining the City, Ms. Wang served over fourteen years at City of Federal Way as Finance Director and as Assistant City Manager overseeing f’mance, human resources, and information technology operations. Ms. Wang has previously served as board member of the Washington Finance Officers Association and a board member of Puget Sound Finance Officer Association. Ms. Wang has a MBA from the University of Houston, Texas, and received CPA and CMA designation in 1986 and 1987, respectively. Gregg Zimmerman, Public Works Administrator. Mr. Zimmerman joined City staff as Public Works Administrator in 1992. In addition to managing the Waterworks Utility whose respo~ibilities 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 meets and the City vehicle fleet), and the Transportation Systems Division (plans, designs, builds transportation projects; installs and maintains street signalization system; manages the Renton Municipal Airport). 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. Jamie Thomas, Fiscal Services Director. Ms. Thomas joined the City staff as the Fiscal Services Director in November 2011. Prior to joining the City Ms. Thomas served as the Finance Manager for over three years at Valley Communications Center. Prior to that, she was an Assistant Audit Manager for the Washington State Auditor’s Office. Ms. Thomas has an MBA from the University of Washington. Labor Relations The City currently has approximately 682 full-time equivalent 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 25 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. Bargaining Unit American Federation of State, County and Municipal Employees 287 Renton Police Officers’ Guild 107 Renton Police Officers’ Guild Non-Commissioned 28 Renton Firefighters Local 864 130 Renton Firefighters Local 864 Battalion Chiefs 6 Number of Employees Expiration Date December 31, 2012 December 31, 2012 December 31, 2012 December 31, 2012 December 31, 2012 Pension Funding Substantially all of these employees ar6 enrolled in the State of Washington Public Employees Retirement System ("PERS"), the Law Enforcement Officers and Fire Fighters Retirement System ("LEOFF") and the Public Safety Employees’ Retirement System ("PSERS"). Contributions by both employees and employers are based on gross wages. PERS and LEOFF participants who joined the system by September 30, 1977 are Plan 1 members. Those PERS participants who joined on or after October 1, 1977 are Plan 2 members, unless they choose the option to join Plan 3. PERS Plan 3 is a hybrid of a deferred contribution and defined benefit plan effective September 1, 2002. PSERS was created by the 2004 legislature and became effective July 1, 2006. The City contributed $1,802,877 to PERS, $1,334,543 to LEOFF and $21,518 to PSERS in 2011 for all of the City’s employees that are covered under PERS, LEOFF, and PSERS. The following tables outline the contribution rates of employees and employers under PERS, LEOFF and PSERS. (2) PERS Contribution Rates as of December 31~ 2011 Plan I Plan 2 Plan 3 Employer (1) 7.25%7.25%7.25% Employee 6.00%4.64%Variable Includes a .16% administration fee. Rates vary from 5% minimum to 15% maximum based on rate selected by the PERS 3 member. LEOFF Contribution Rates as of December 31~ 2011 Plan 1 Plan 2 Employer°) .16%5.24% Employee 0.00%8.46% Includes a .16% administration fee. PSERS Contribution Rates as of December 31~ 2011 Plan 2 Employer(1)8.86% Employee 6.36% Includes a .16% administration fee. According to the Office of the State Actuary, as of June 30, 2008, PERS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2009 the rates adopted by the State Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a large proportion of the retirees. According to a report issued by the Office of the State Actuary in September 2012, and subject to the assumptions therein, the total unfunded actuaxial accrued liability of PERS Plan 1 is $3.684 billion (71% funded on an actuarial basis) as of June 30, 2011. In 2005 and 2006, the State Legislature enacted and authorized the State Pension Funding Council to adopt changes in contribution rates to PERS intended to amortize the PERS Plan 1 unfunded actuarial accrued liability by 2024. The contribution rates effective July 1, 2011 and September 26 1, 2011, include a component of 2.16% and 2.34%, respectively, dedicated to amortizing the local government share of the PERS Plan 1 unfunded actuarial accrued liability, and a component of 0.16% for administrative expenses. These rates are subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. While the City’s contributions in 2011 represent its full current liability under the systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PERS 2 and 3 will increase. Information regarding all of these plans is presented in Washington State’s Department of Retirement Systems’ annual financial report. A copy of this report 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 (which is not incorporated herein by reference) Fireman’s Pension The Firefighter’s Pension Plan is a closed, single-employer, defined benefit pension plan established in accordance with chapter 41.18 RCW and the 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 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 for service. At December 31,2011, there were 34 members in this system. Under Washington State law, the Firefighter’s Pension Plan is provided an allocation of all moneys received by the State from taxes on ftre insurance premiums; interest earnings; member contributions made prior to the inception of LEOFF; and City contributions required to meet projected future pension obligations. An actuarial valuation is completed every two years, most recently as of January 1, 2011. As of December 31, 2011, the plan’s net pension obligation was overfunded by $1,934,381 and is recorded as a non-current asset on the City’s Government-wide Statement of net Assets. Information regarding all of the City pension plans is presented in the City’s annual fmancial report. See Appendix C. Other Post-Employment Benefits In accordance with chapter 41.26 RCW, the City provides lifetime medical care for members of LEOFF retirement system hired prior to October 1, 1977. The plan is a closed, single-employer def’med benefit healthcare plan administered by the City. As of December 31, 2011, there were 96 retirees and three active employees. The City’s annual other postemployment benefit ("OPEB") cost is calculated based on the annual required contribution ("ARC"), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation. 27 The following table shows the components of the City’s annual OPEB cost for 2011, the amount actually contributed to the plan and changes in the City’s net OPEB: 2011 OPEB Contributions, Changes, and End of Year Obligation Fiscal Year Ending 12/31/2011 Annual required contribution (ARC) Annual Normal Cost (BOY)" $54~262 Amortization of UAAL*1,704,544 ARC at end of year $1,758,806 Interest on Net OPEB Obligation Adjustment to ARC 78,799 (120,635) Annual OPEB cost 1,716,970 Employer Contr~utions Change in Net OPEB Obligation (875,699) 84L271 Net OPEB Obligation at BOY Net OPEB Obligation at EOY $ $ 2~284,223 3,125,494 *Unfunded Actuarial Accrued Liability (UAAL) The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the years 2009 through 2011 were as follows: Contribution as a Net Fiscal Year Annual Employer Percentage of Annual OPEB Ended OPEB Cost Contribution OPEB Cost Obligation 2011 $1,716,970 $875,699 51.00%$3,125,494 2010 1,702,419 983,868 57.79 2,284,223 2009 1,912,147 1,104,351 57.75 1,565,672 As of December 31,2011 the City had $5.3 million in net assets in a self-insurance fund set aside to fund the net OPEB obligation. Although this money is not held in trust, the fund has been created to accumulate resources to fulfill the City’s OPEB obligations. Authorized Investments General. Chapter 35.39 RCW limits the investment by a city of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations; in bankers’ acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). 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 28 with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool. The State Treasurer’s Office administers the Washington State Local Government Investment Pool (the "LGIP"), which invests money on behalf of more than 460 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 principles are, in order of priority, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) the attainment of the highest possible yield within the constraints of the first two goals. Historically, the LG~P 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, 2012, the City’s investments at cost totaled $40,589,122 of which 25 percent was invested in the LGIP, 63 percent was invested in certificates of deposit, and 12 percent was invested in US Federal Agency Securities. Authorized lnvestments 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. Budgetary Policies The City budgets it funds in accordance with chapter 35A.33 RCW. Biennial 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. Although not statutodly required, all proprietary funds are budgeted at the fund level as part of the biennial budget process. 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 adopts a biennial budget by ordinance establishing appropriations for City funds, and during the biennium they 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 is a member of the Washington Cities Insurance Authority ("WCIA"). Utilizing chapter 48.62 RCW (self- insurance regulation) and chapter 39.34 RCW (the 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 150 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, stop gap, and employee benefits liability. Limits are $4 million per occurrence self-insured layer, and $16 million per occurrence in the re-insured excess layer. The excess layer is insured 29 by the purchase of reinsurance and insurance. Total limits are $20 million per occurrence subject to aggregate sublimits in the excess layers. The WCIA Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members’ deductible to $500,000, for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage, and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the Interlocal Cooperation Act, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA’s assets in fmancial instruments which comply with all State guidelines. These revenues directly offset portions of the membership’s annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA. Auditing of City Finances Accounting systems and budgetary controls are prescribed by the Office of the State Audito~r 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 f’manee department of the City. The audited financial statements for the City for the year ended December 31,2011 is attached as Appendix C, and is incorporated by reference to this Official Statement. BOND OWNERS’ RISKS Prospective purchasers should consult their investment advisors before making any decision as to the purchase of the Bonds. The following discussion, while not setting forth all of the factors that should be considered, contains some of the factors which should be considered, in addition to the other information in this Official Statement, prior to purchasing the Bonds. This section is not meant to be comprehensive or definitive, and there may be other, risk factors which will become material in the future. The order in which this information is presented does not necessarily reflect the relative importance of various risks. Special Limited Revenue Obligations of the City The Bonds are special revenue obligations of the City, payable solely from the Gross Revenue of the City’s Waterworks Utility after payment of Cost of Maintenance and Operation. The lien of the Bonds on Net Revenues is equal to the lien securing the Outstanding Parity Bonds and any Future Parity Bonds that may be issued from time to time, and superior to all other charges of any kind. Neither the full faith and credit nor the taxing power of the City is pledged to the payment of the Bonds. The Bonds are not obligations of the State or any political subdivision thereof other than the City. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." 30 Operating Results A number of factors could impact the results of operations of the Waterworks Utility in the future, including a decrease in the number of customers of the Waterworks Utility, changes in regional and local economic conditions, regulatory and permit requirements, changes in population, increase in Costs of Maintenance and Operations, and changes in general market conditions. There can be no assurance that the Waterworks Utility will be able .to maintain the current number of existing users if there are changes in the resident and/or commercial population of the service area. Enforceability of Remedies Any remedies available to the owners of the Bonds upon the occurrence of an event of default under the Bond Ordinance are in many respects dependent upon judicial actions, which are in turn often subject to discretion and delay and could be both expensive and time-consuming to obtain. If the City fails to comply with its covenants under the Bond Ordinance or to pay principal of or interest on the Bonds, there can be no assurance that available remedies will be adequate to fully protect the interests of the owners of the Bonds. In addition to the limitations on remedies contained in the Bond Ordinance, the rights and obligations under the Bonds and the Bond Ordinance may be limited by and are subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and other laws relating to or affecting creditors’ rights, to the application of equitable principles, and to the exercise of judicial discretion in appropriate cases. The opinion to be delivered by Pacifica Law Group LLP, as Bond Counsel, concurrently with the issuance of the Bonds, will be subject to limitations regarding bankruptcy, insolvency and other laws relating to or affecting creditors’ tights. The various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. A copy of the form of legal opinion of Bond Counsel is set forth in Appendix B. No Acceleration A Bondowner cannot require acceleration of debt service on the Bonds upon the occurrence of an event of default. The City thus would be liable only for principal and interest payments as they became due, and the Bondowners would be required to seek a separate judgment for each payment, if any, not made. Any such action for monetary damages would be subject to any limitations on legal claims and remedies against public bodies under State law. Amounts recovered would be applied to unpaid installments of interest prior to being applied to unpaid principal and premium, if any, which had become due. Loss of Exemption of Interest from Federal Income Taxes The exemption of interest on the Bonds from federal income taxes is dependent upon continuing compliance by the City with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The City has covenanted in the Bond Ordinance to comply with the Code. See "TAX MATTERS." If the interest on the Bonds should be declared taxable by the Internal Revenue Service (the "IRS") or legislation or regulations are adopted or there is a final determination by a judicial or administrative authority requiring interest on the Bonds to be included in the recipient’s gross income for federal income tax purposes, the interest rate will remain unchanged. Neither the Bonds nor the Bond Ordinance provides for an adjustment of the interest rate or for mandatory redemption of the Bonds in the event that the interest on the Bonds is declared taxable. If interest on the Bonds should become subject to federal income taxation, the market value of the Bonds may be adversely affected. Loss of Premium from Early Redemption Any person who purchases a Bond at a price in excess of its principal amount should consider the fact that certain maturities of the Bonds are subject to early redemption at a redemption price equal to the principal amount of such Bonds plus accrued interest under certain circumstances. Secondary Market and Prices It has been the practice of the Underwriter to maintain a secondary market in municipal securities that it sells. The Underwriter presently intends to engage in secondary market trading of the Bonds, subject to applicable securities laws. However, the Underwriter is not obligated to engage in secondary trading or to repurchase any of the Bonds. No assurance can be given that a secondary market for the Bonds will be available and no assurance can be given that the initial offering prices for the Bonds will continue for any period of time. 31 Ratings There is no assurance that credit ratings assigned to the Bonds at the time of issuance will not be lowered or withdrawn, the effect of which could adversely affect the market price and the market for the Bonds. See "RATING" herein. Bankruptcy Under current Washington law, local governments, such as the City, may be able to file for bankruptcy under Chapter 9 of the United States Bankruptcy Code (the "Bankruptcy Code"). A creditor, however, cannot bring an invgluntarily bankruptcy proceeding against a municipality, including the City. The federal bankruptcy courts have broad discretionary powers under the Bankruptcy Code. Taxing districts in the State are expressly authorized to carry out a plan of readjustment if approved by the appropriate court. If the City were to become a debtor in a federal bankmptcy case, owners of the Bonds may not be able to exercise any of their remedies under the Bond Ordinance during the course of a proceeding. Legal proceedings to resolve issues could be time-consuming and expensive, and substantial delays and!or reductions in payments could result. Bond Audits The IlLS has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for the interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. The City cannot predict whether the IRS will commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and marketability of the Bonds until the audit is concluded, regardless of its ultimate outcome. INITIATIVE AND REFERENDUM 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. Under the Renton Municipal Code, Renton voters may initiate Municipal Code amendments and local legislation, including modifications to existing legislation and through referendum may prevent legislation passed by the City Council from becoming law. In recent years there has been an increase in the number of initiatives and referenda filed in Washington, including state initiatives targeting property taxes imposed by local jurisdictions. The City cannot predict whether this trend will continue, whether any filed initiatives will receive the requisite signatures to be certified to the ballot, and whether such initiatives will be approved by the voters and, if challenged, upheld by the courts. FINANCIAL ADVISOR The City has retained Piper Jaffray & Co, Seattle, Washington, as f’mancial 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. While under contract to the City, the Financial Advisor may not participate in the underwriting of any City debt. 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. 32 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 ref’manced 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 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 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 IlLS 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. Bank Qualified The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3)(B) of the Code. Proposed Tax Legislation; Miscellaneous Tax legislation, administrative actions taken by tax authorities, and court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent the beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future or enacted) could affect the market price or marketability of the Bonds. For example, proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income for federal tax purposes of interest on obligations such as the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and its impact on their individual situations, as to which Bond Counsel expresses no opinion. 33 CONTINUING DISCLOSURE UNDERTAKING In accordance with Section (b)(5) of Securities and Exchange Commission (the "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 owners of the Bonds to provide or cause to be provided to the Municipal Securities Rulemaking Board ("MSRB") the following annual financial information and operating data for the prior fiscal year (commencing in 2013 for the fiscal year ended December 31, 2012): (1) 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 f’mancial statements are otherwise prepared and available to the City, they will be provided (the "Annual Financial Statements"); (2) (3) A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; Debt service coverage ratios; and (4) General customer statistics for the Waterworks Utility contained in this Official Statement and provided in the tables "Water Utility Usage," "Number of Water Customers," ’’Number of Wastewater Customers," and ’’Number of Storm Drainage Customers" under the heading "THE WATERWORKS UTILITY." Items 2-4 shall be required only to the extent that such information is not included in the Annual Financial Statements. Such annual information and operating data described above will be so provided on or before the end of nine months after the end of the City’s fiscal year. The City’s current fiscal year ends on December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Commission. If not provided as part of the annual financial information discussed above, the City will provide the City’s audited annual financial statement prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the MSRB. Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: ¯principal and interest payment delinquencies; ¯non-payment related defaults, if material; ¯unscheduled draws on debt service reserves reflecting financial difficulties; ¯unscheduled draws on credit enhancements reflecting financial difficulties; ¯substitution of credit or liquidity providers, or their failure to perform; ¯adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; ¯modifications to the rights of Bondholders, if material; ¯optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856, if material, and tender offers; ¯defeasances; ¯release, substitution or sale of property securing repayment of the Bonds, if material; ¯rating changes; 34 bankruptcy, insolvency, receivership or similar event of the City; the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and ¯appointment of a successor or additional trustee or the change of name of a trustee, if material. Solely for purposes of disclosure, without any intent to modify the undertaking as set forth above, the City advises that no credit enhancement, credit or liquidity facilities, or property secures payment of the Bonds. The City shall promptly determine whether the events described above are material. Format for Filings with the MSRB. Until otherwise designated by the MSRB or the Commission, any information or notices submitted to the MSRB in compliance with the Rule are to be submitted through the MSRB’s Electronic Municipal Market Access system ("EMMA"), currently located at www.emma.msrb.org (which is not incorporated into this Official Statement by reference). All notices, fmancial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. Notification Upon Failure to Provide Financial Data. The City also agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described above on or prior to the date set forth above. Termination/Modification. The City’s obligations to provide annual financial information and notices of listed events will terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. This section, or any provision hereof, will be null and void if the City (i) 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 (ii) notifies the MSRB of such opinion and the cancellation of this section. Notwithstanding any other provision of the undertaking, the City may amend the provisions described in this section with an approving opinion of nationally recognized bond counsel and in accordance with the Rule. In the event of any amendment of its undertaking, the City will describe such amendment in the next annual report, and will include a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of f’mancial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing f’mancial statements, (i) notice of such change shall be given in the same manner as for a listed event, as described above, and (ii) the annual report for the year in which the change is made will present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Bond Owner’s Remedies Under This Section. A Bond Owner’s or Beneficial Owner’s right to enforce the provisions of the City’s undertaking described in this section will be limited to a right to obtain specific enforcement of the City’s obligations, and any failure by the City to comply with the provisions of this undertaking will not be an event of default with respect to the Bonds. 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. Other Ongoing Disclosure Undertakings of the City. The City has entered into written undertakings under the Rule with respect to its outstanding obligations (the "Prior Undertakings"). Although the City has been filing its annual financial information on an annual basis, the City recently discovered that ongoing disclosure filings made with respect to certain obligations were not connected on EMMA to all of the City’s outstanding obligations, including its Outstanding Parity Bonds. The City responded by submitting an event notice and connecting and!or refilling the required financial information and operating data for the last five fiscal years on EMMA. The City believes it is currently in compliance with its Prior Undertakings in all material respects. RATING As noted on the cover page of this Official Statement, Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, has assigned a rating of"AA+" to the Bonds. The rating reflects only the view of the 35 rating agency and an explanation of the significance of the rating may be obtained from the rating agency. There is no assurance that the rating will be retained for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating will be likely to have an adverse effect on the market price of the Bonds. The City does not have any obligation to take any action, other than file a material event notification, if the rating on the Bonds is changed, suspended or withdrawn. UNDERWRITING The Bonds are being purchased by Seattle-Northwest Securities Corporation (the "Underwriter") at an aggregate price of $ , which represents the principal amount of the Bonds plus a premium of $ and less an underwriter’s discount of $After the initial public offering, the public offering prices may be varied from time to time. CERTAIN LEGALMATTERS Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the approving legal opinion of Pacifica Law Group LLP, Seattle, Washington, Bond Counsel and Disclosure Counsel. A copy of the form of the opinion of Bond Counsel is attached hereto as Appendix B. POTENTIAL CONFLICTS OF INTEREST Some or all of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. From time to time, Bond Counsel serves as counsel to the Underwriter and the Financial Advisor in transactions unrelated to the issuance of the Bonds. OTHER BOND INFORMATION All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the City. 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. See Appendix A. At the time of delivery of the Bonds, one or more officials of the City will furnish a certificate stating that to the best of his or her knowledge, this Official Statement, as of its date and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, misleading. Statements in this Official Statement, including matters of opinion, whether or not expressly so stated, are intended as such and not as representation of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers of the Bonds. The preparation and distribution of this Official Statement has been authorized by the City. THE CITY OF RENTON, WASHINGTON Administrative Services Administrator 36 APPENDIX A COPY OF THE BOND ORDINANCE A-1 (THIS PAGE INTENTIONALLY LEFT BLANK) CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING "rilE CASH REDEMPTION OF THE CITY’S WATER AND SEWER REVENUE REFUNOING BONDS, 1998. PASSED: October 15, 2012 PREPARED BY: PACIFICA LAW GROUP LLP Seattle, Washington ORDINANCE NO. 5672 TABLE OF CONTENTS" Section 1. Definitions .....................................................................................................................3 Section 2. Findings Regarding Parity Provisions ..........................................................................14 Section 3. Authorization and Description of Bonds .....................................................................14 Section 4. Registration of Bonds and Book-Entry System ...........................................................15 Section S. Redemption; Purchase of Bonds .................................................................................21 Section 6. Priority and Payment from the Waterworks Utility Fund ...........................................25 Section 7. Funds and Accounts ....................................................................................................27 Section 8. Covenants ....................................................................................................................29 Section 9. Tax Covenants .............................................................................................................33 Section 10. Future Parity Bonds ...................................................................................................36 Section 11. Section 12. Section Section 14. Section 15. Section 16. Section 17. Section 18. Section :19. Section 20. Section 2:1. Section 22. Section 23. Form of Bonds ...........................................................................................................39 Execution of Bonds ....................................................................................................42 Lost, Stolen or Destroyed Bonds ...............................................................................42 Sale of Bonds .............................................................................................................43 Application of Bond Proceeds; Plan of Refunding ....................................................45 Bond Insurance .........................................................................................................48 Undertaking to Provide Continuing Disclosure .........................................................48 Defeasance of the Bonds ..........................................................................................53 Amendments .............................................................................................................53 Call for Redemption of 1998 Bonds ..........................................................................56 Contract; Savings Clause ...........................................................................................56 General Authorization, Ratification of Prior Acts .....................................................57 Effective Date of Ordinance ......................................................................................57 This Table of Contents is provided for convenience only and is not a part of this ordinance. -i- CITY OF RENTON, WASHINGTON ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SL~VER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITES WATER AND SEWER REVENUE REFUNDING BONDS, 1998. WHEREAS, the City of Renton, Washington (the "City") has created and operates a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (the ’~Vaterworks Utility"); and WHEREAS, the City issued and now has outstanding the following series of water and sewer revenue bonds, each being payable on parity from the revenues of the Waterworks Utility: Authorizing Original Outstanding Series Ordinance Principal Amount Principal Amount 1998 4709 ~ 6,120,000 $ 1,045,000 2002 4976 11,980,000 1,025,000 2003 5019 8,035,000 415,000 2004 5098 10,335,000 10,335,000 2007 5313 9,750,000 9,705,000 2008A 5313 9,975,000 9,975,000 2008B 5313 2,035,000 2,035,000 (collectively, the "Outstanding Parity Bonds"); and WHEREAS, the Outstanding Parity Bonds issued under date of November 1, 2004 mature in principal amounts and bear interest as follows: Maturity Date Principal Interest (December 1)Amount Rate 2013 $ 205,000 3.55% 2014 235,000 3.65 2015 250,000 3.75 2024"4,605,000 5.00 2025 1,600,000 5.00 2026 1,680,000 5.00 2027 1,760,000 S.O0 * Term Bond (the "2004Bonds");and WHERF..~, the 2004 Bonds maturing on and after December 1, 2015 (the "Refunding Candidates"), are subject to optional redemption, in whole or in part, on any date on and after December 1, 2014, at a pdce of par plus interest accrued to the date of redemption; and WHEREAS, after due consideration it appears to this Council that all or a portion of the Refunding Candidates (the "Refunded Bonds") may be defeased and refunded by proceeds of water and sewer revenue refunding bonds authorized herein (the "Bonds") at a substantial savings to the City and its ratepayers; and WHEREAS, the respective ordinances authorizing the issuance of the Outstanding Parity Bonds permit the issuance of additional bonds on a parity with the Outstanding Parity Bonds for refunding purposes if certain conditions are met; and WHEREAS, the City has received a proposal from Seattle-Northwest Securities Corporation, Seattle, Washington (the "Underwriter") and now desires to issue and sell the Bonds to the Underwriter as set forth herein; and -2- WHEREAS, the Outstanding Parity Bonds issued under date of March :l, 1998 (the "1998 Bonds") maturing on December 1, 2012 and December 1, 2013 are subject to optional redemption, in whole or in part, on any date on and after December 1, 2008, at a price of par plus interest accrued to the date of redemption; and WHEREAS, the City now desires to use available funds of the City refund in whole the outstanding 1998 Bonds on December 1, 2012; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES ORDAIN AS FOLLOWS: Section :1. Definitions. As used in this ordinance, the following words shall have the following meanings’. Ac~luired Obligations means the Government Obligations acquired by the City under the terms of this ordinance and the Escrow Agreement to effect the defeasance and refunding of the Refunded Bonds. Annuol Debt Selvice for any year means 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. Base Period means any consecutive 12-month period selected by the City out of the 24-month period next preceding the date of issuance of an additional series of Future Parity Bonds. -3- Benejgclal Owner means 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). Bend Fund means that special fund of the City known as the Waterworks Revenue Bond Fund, 20:12 created by this ordinance for the payment of the principal of and interest on the Bonds. Bond Insurance Policy means the municipal bond insurance policy, if any, issued by the insurer insudng the payment when due of the principal of and interest on all or a portion of the Bonds as provided therein. Bond Purchuse Controct means the contract for the purchase of the Bonds between the Underwriter and City, executed pursuant to Section 14 of this ordinance. Bend 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. Bend Registror means, initially, 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 interest on and principal of the Bonds. Bond Year means each one-year period that ends on the date selected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier of the final maturity date of the Bonds or the date that is five years after the date of issuance of the Bonds, Bond Years end on each anniversary of the date of issue and on the final maturity date oftbe Bonds. Bonds mean the City’s Water and Sewer Revenue Refunding Bonds, 2012, authorized to be issued by this ordinance. Coil D~te for the Refunded Bonds means December 1, 2014. City means the City of Renton, Washington, a municipal corporation duly organized and existing by virtue of the laws of the State of Washington Code means the Internal Revenue Code of 1986, as amended, and shall include all applicable regulations and rulings relating thereto. Commlsslorl means the Securities and Exchange Commission. Coundl means the City Council as the general legislative authority of the City, as duly and regularly constituted from time to time. Covernge Requirement prior to the New Covenant Date means in any calendar year 1.25 times the Maximum Annual Debt Service. From and after the New Covenant Date~ the term Coverege Requirement means in any calendar year 1.25 times the Annual Debt Service for such year. Credit Fodlity means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee or other financial instrument or any combination of the foregoing, which obligates a third party to make payment or provide funds for the payment of financial obligations of the City. There may be one or more Credit Facilities outstanding at any time. Designated City Representutive means the Mayor, the Chief Administrative Officer and the Finance Director of the City and any successor to the functions of such offices. The signature of one Designated City Representative shall be sufficient to bind the City. -5- 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. EscrewAgent means U.S. Bank National Association, Seattle, Washington. Escrow Agreement means the Escrow Deposit Agreement between the City and the Escrow Agent to be dated as of the date of closing and delivery of the Bonds. Finance Director means the City’s Finance and Information Services Administrator or the successor to such officer. 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 means 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 Outstanding Parity Bonds and the Bonds. Government Obligations means those obligations now or hereafter defined as such in chapter 39.53 RCW, Gross Revenue means 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. Insurer means the municipal bond insurance company, if any, selected and designated by the Designated City Representative, pursuant to Section 16 of this ordinance, as issuer of a Bond Insurance Policy for all or a portion of the Bonds. Letter of Representations means the Blanket Issuer Letter of Representations from the City to DTC. Maintenance and Operation Expense means 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. -7- Maximum Annual Debt Service means, at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future calendar year on the 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. MSRB means the Municipal Securities Rulemaking Board or any successors to its functions. 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 means Gross Revenue less Maintenance and Operation Expense. New Covenant D~te means from and after the date when all Outstanding Parity Bonds issued prior to 2007 are no longer Outstanding. 1998 Bond Ordinam:e means Ordinance No. 4709 adopted by the City Council on March 9,1998 authorizing the issuance of the 1998 Bonds. 1998 Bands mean the Outstanding City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 1998, with a dated date of March 1, 1998. 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) Par~r~’ Bonds for -8- 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. Outstondlng Pority Bond Ordinances mean the ordinances authorizing the issuance of the Outstanding Parity Bonds identified in the recitals to this ordinance. Outstonding Pority Bonds means the parity water and sewer revenue bonds of the City identified in the recitals to this ordinance. Pority Bonds means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. Porlty Bond Fund means any fund created for the payment and redemption of Parity Bonds. Parity Requirement means Net Revenues equal to or greater than: (a) 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; and (b) 100% of Maximum Annual Debt Service for all subordinate lien evidences of indebtedness secured by Gross Revenue. Private Person means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. -9- 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 use by all such community groups on an equal basis and such community groups are charged only a de minimls fee to cover custodial expenses. Pro.fesslanal Utility Consultant means 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. Quailed 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 -10- such policy or surety bond, are currently rated in the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. Quul~fled Letter ol 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 the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. Rote Stobilizotion Fund means the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. Rotlog Agency means Moody’s, S&P or Fitch. Refunded Bonds means the 2004 Bonds designated by the Designated City Representative pursuant to Section 1S. Refunding Account means the account by that name established pursuant to Section 15. Refunding ~_ondidotes mean the outstanding 2004 Bonds maturing on and after December 1, 2015. 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 means that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709. Reserve Requirement prior to the New Covenant Date means Maximum Annual Debt Service. From and after the New Covenant Date, the term Reserve Requirement means 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 means the SEC’s Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time. ~&P means Standard & Poor’s rating Services, a Standard & Poor’s Financial Services LLC business, 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. Stnte means the State of Washington. Term Bonds mean any Parity Bonds identified as such in the Bond Purchase Contract or 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 Parity Bonds in accordance with a mandatory sinking fund requirement. Term Bond Moturity Yeur means any calendar year in which Term Bonds are scheduled to mature. 2004 Bond Ordioonce means Ordinance No. 5098 adopted by the City Council on November 1, 2004 authorizing the issuance of the 2004 Bonds. -12- 2~ Bonds means the Water and Sewer Revenue Bonds, 2004, of the City issued under date of November 1, 2004, as more particularly described in the recitals of this ordinance. Under~er means Seattle-Northwest Securities Corporation, Seattle, Washington. I/ll~terworks Utlli~ means 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. W~terworks Uf.llity Fund means 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 -13- 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. Section 2. Findings Regarding Parity Provisions. 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 the Parity Bond Ordinances for the Outstanding Parity Bonds, and that the issuance of the Bonds will result in a debt service savings for the Waterworks Utility and does not require an increase of more than $5,000 in any year for principal of and interest on the Bonds over and above the payments that were required to be made for the Refunded Bonds. The conditions contained in the Parity Bond Ordinances for the Outstanding Parity Bonds having been~complied with or assured, the payments required herein to be made out of the Waterworks Utility Fund into the Bond Fund and the Reserve Fund to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in the Waterworks Utility Fund equal in rank with the lien and charge thereon for the payments required to be made for the Outstanding Parity Bonds. Section 3. Authorization and Description of Bonds. The City is hereby authorized to issue water and sewer revenue refunding bonds (the "Bonds") in an aggregate principal amount of not to exceed $10,000,000 for the purpose of providing the funds necessary to refund the Refunded Bonds and pay all or a portion of the costs incidental to the foregoing and to the issuance of the Bonds. The Bonds shall be designated the "City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012" with any additional series designation, if necessary; shall be dated as of their initial date of delivery; shall be fully registered as to both principal and interest; shall be in the denomination of ~;5,000 each, or any integral multiple thereof within a maturity, provided that no Bond shall represent more than one maturity; shall be numbered separately in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification; shall bear interest from their date, payable semiannually on the interest payment dates set forth in the Bond Purchase Contract; and shall mature on December 1 in the years and principal amounts set forth and approved in the Bond Purchase Contract executed by the Designated City Representative pursuant to Section 14 of this Ordinance. The Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall not be general obligations of the City. Section 4. Registration of Bonds and Book-Entry System. (a) Bond Registrar/Bond Register. The City hereby specifies and adopts the system of registration approve~ 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 -15- at the option of the Finance Director upon prior notice to the Bond Registrar and a successor Bond Registrar appointed by the Finance Director. No resignation or removal of the Bond Registrar shall be effective until a successor shall have been appointed and until the successor Bond Registrar shall have accepted the duties of the Bond Registrar hereunder. The Bond Registrar Is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar’s powers and duties under this ordinance. The Bond Registrar shall be responsible for its ~epresentations contained in the Certificate of Authentication of the Bonds. (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 17 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 4(h), but such Bond may be transferred as herein provided. All such payments made as described in Section 4(h) 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 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 depesitoty) as the Registered Owner. For so long as any Bonds are held in by a depository, 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 oJ; Depository. (1) 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 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 Finance Director pursuant to subsection (2) below -17- or such substitute depository’s successor; or (C) to any person as provided in subsection (4) below. (2) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the 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. (3) in the case of any transfer pursuant to clause (A) or (B) of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the 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 Finance Director. (4) 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 Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain physical 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 by a depository. The Finance Director shall deliver a written request to the Bond Registrar, together with a supply of physical 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 on behalf of the 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 oJ: Transfer of Ownership or Exchange; Change in Denominations. 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. (f) Bond Registrars 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 -19- officers or directors to act as a 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. ih) Place and Medium of Payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be calculated On the basis of a year of 360 days and twelve 30-day months. For so long as all Bonds are held by a depository, 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 held by a depository, 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 $1,000,000 of Bonds (received by the Bond Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the 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. Section 5. Redemption; Purchase of Bonds. (a) Mandatory Redemption of Term Bonds and Optional Redemption, iJ: any. The Bonds shall be subject to optional redemption on the dates, at the prices and under the terms set forth in the Bond Purchase Contract approved by the Designated City Representative pursuant to Section 14. The Bonds shall be subject to mandatory redemption to the extent, if any, set forth in the Bond Purchase Contract and as approved by the Designated City Representative pursuant to Section 14. (b) Purchase oJ~ Bonds. The City further reserves the right to use at any time any surplus Net Revenue available after providing for the payments required by paragraphs (i) through (vi) of Section 6(b) of this ordinance, or other available funds, to purchase any of the Bonds that are offered to the City at any price deemed appropriate by the City. (c) Selection oJ~ Bonds J:or Redemption. 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 uncertiflcated 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 subsection (c). 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 the Bond 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 -21- such Bond by $5,000. In the event that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations herein authorized. (d)Notice of Redemption. (1) Official Notice. For so long as the Bonds are held in uncertificated form, notice of redemption (which notice may be conditional) 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 (if the Bonds are no longer held in uncertificated form), notice of redemption shall be given in the manner hereinafter provided. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. All official notices of redemption shall be dated and shall state: (A)the redemption date, (B)the redemption price, -22- (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)any conditions precedent to redemption; (E)that if all of the conditions to redemption are met, 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. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. If the conditions to redemption have not been met prior to the date scheduled for redemption, then the City may revoke the redemption by giving notice in the same manner as set forth above. (2) Effect of Notice; Bonds Due. If an unconditional notice of redemption has been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled by the Bond Registrar and shall not be reissued. (3) Additional Notice. In addition to the foregoing notice, 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 tl~ereof 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 20 days before the redemption date to each party entitled to receive notice pursuant to Section 17 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. (4) Amendment of Notice Provisions. The foregoing notice provisions of this Section 5, including but not limited to the information to be included in redemption notices and the persons designated to receive notices, may be amended by additions, deletions and changes in order to maintain compliance with duly promulgated regulations and recommendations regarding notices of redemption of municipal securities. Section 6. Prior’~, and Payment from the Waterworks Utility Fund. (a) Waterworks Utility Fund. A special fund of the City known as the "Waterworks Utility Fund" has heretofore been established by the City, into which shall be deposited all Gross Revenues as collected. Moneys in the Waterworks Utility Fund shall be trust funds and shall be held separate and apart from all other funds and accounts of the City. (b) Priority of Payments from the Waterworks Utility Fund. 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 prior’Ky: (i)To pay Maintenance and Operation Expense; (ii)To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iii) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of principal on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iv) 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; -25- (v) To make all payments required to be made into the Reserve Fund, including any reimbursements required for Qualified Insurance or Qualified Letter of Credit; (vi) 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 (vii) To retire by optional redemption or purchase 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. (c) Rote Stobilization 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 subsection (b) of this section, 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. S__ection 7. Funds and Accounts. {a) Bond Fund. There is hereby created In the City Treasury the Waterworks Revenue Bond Fund, 2012 (the "Bond Fund"), which shall be a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain 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 fails due on the Bonds equal to the installment of interest or principal and interest. (b) Reserve Fund. 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 Parity Bonds. 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. Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the Reserve Requirement at all times so long as any ParRy 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 ParRy 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 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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 ParRy Bond Fund and spent for the purpose of retiring ParRy Bonds or may be deposited in any other fund and spent for any other lawful Waterworks Utility purpose. The CRy may provide for the purchase, redemption or defeasance of ParRy 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 CRY funds. Interest on any of those investments or on that bank account shall -28- 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 Registered Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. (c) Pledge of Revenue and Uen Position. The Net Revenue is hereby 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. (d) Regarding Suj~iciency of Revenues. The Council hereby finds that in fixing the amounts to be paid into the Bond Fund out of the Gross Revenues, it has exercised due regard for the Maintenance and Operation Expense and has not obligated the City to set aside and pay into such Fund a greater amount of such Gross Revenues than in its judgment will be available over and above the Maintenance and Operation Expense. Section 8. Covenants. The City covenants and agrees with the Registered 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: -29- (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: -30- (1) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1) the City in its discretion may sell or otherwise dispose of any of the works, plant, properties or facilities of the Waterworks Utility or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2) the City may transfer the Waterworks Utility to another municipal corporation so long as Net Revenue of the portion of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior -31- 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. (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 -:32- insurers and with policies payable to or on behalf of the City and an~ 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 Registered Owners of the Parity Bonds against loss. (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 9. 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 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 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 Bonds or any other funds of the City which may be deemed to be proceeds of the 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 Bonds to the initial purchasers thereof, would have caused the Bonds as "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code. -33- 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 Bonds. (b) Private Person Use Limitation for Bonds. The City covenants that for as long as the Bonds are outstanding, it will not 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 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 (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 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 (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 Pflvate 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 refinanced with the Bonds, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the 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 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 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 Bonds. (d) Quali~ed Tax-Exempt Obligation. The City hereby designates the Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for investment by financial institutions. The City reasonably does not expect to issue more than $10,000,000 in qualifying tax-exempt debt during calendar year 2012. -35- Section 10. 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) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance 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 Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (2) prior to the New Covenant Date~ 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the :12 consecutive month period or thereafter adjusted to reflect one year’s Net Revenue from those customers; (C) Income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; -37- (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. (f) Refunding Obligations. 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 -38- 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 Parity Bonds, money for the payment of which is not otherwise available. (g) Subordinate Lien Obligations. 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 11. Form of Bonds. The Bonds shall be in substantially the following form: [DTC LANGUAGE] UNITED STATES OF AMERICA NO. STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 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 delivew, 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 -39- Representations (the "Letter of Representations") by the City to The Depository Trust Company ("DTC"). The FBcal 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. 5672 of the City adopted on October 15, 2012 (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 $. . The bonds of this issue are being issued for the purpose of refunding certain outstanding water and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance and in the Bond Purchase Contract. The bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund. 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 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 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 Parity 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 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. 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 ,2012. CITY.OF RENTON, WASHINGTON By /s/ facsimile or manual Mayor ATTEST: 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 Refunding Bonds, 2012 of the City of Renton, Washington, dated ,2012. WASHINGTON STATE FISCAL AGENCY, Registrar By, Authorized Signer Section 12. 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, or otherwise reproduced 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. Only such Bonds as shall bear thereon a Certificate of Authentication manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section :t3. 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 Registered Owner thereof upon the Registered 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 14. Sale of Bonds. (a) Bond Sale. The Bonds shall be sold at negotiated sale to the Underwriter pursuant to the terms of the Bond Purchase Contract. The Underwriter has advised the Council that market conditions are fluctuating and, as a result, the most favorable market conditions may occur on a day other than a regular meeting date of the Council. The Council has determined that it would be in the best interest of the City to delegate to the Designated City Representative for a limited time the authority to approve the final interest rates, aggregate principal amount, principal amounts of each maturity of the Bonds, selection of the Refunded Bonds, and redemption rights. The Designated City Representative is hereby authorized to approve the final interest rates, aggregate principal amount, principal maturities, selection of the Refunded Bonds, and redemption rights for the Bonds in the manner provided hereafter so long as (i) the aggregate principal amount of the Bonds does not exceed $10,000,000, (ii) the final maturity date for the Bonds is no later than December 1, 2027, (iii) the Bonds are sold (in the aggregate) at a price not less than 98% and not greater than 120%, (iv) the Bonds are sold for a price that results in a minimum net present value debt service savings over the Refunded Bonds of 10%, and (v) the true interest cost for the Bonds (in the aggregate) does not exceed 3.25%. In determining whether or not to acquire a Bond Insurance Policy and determining the final interest rates, aggregate principal amounts, principal maturities and redemption rights, the Designated City Representative shall take into account those factors that, in his or her judgment, will result in the lowest true interest cost on the Bonds to their maturity, including, but not limited to current financial market conditions and current interest rates for obligations comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in this section, the Designated City Representative is hereby authorized to execute the Bond Purchase Contract. The signature of one Designated City Representative shall be sufficient to bind the City. Following the execution of the Bond Purchase Contract, the Designated City Representative shall provide a report to the Council describing the final terms of the Bonds approved pursuant to the authority delegated in this section. The author’S, granted to the Designated City Representative by this Section 14 shall expire 120 days after the effective date of this ordinance. If a Bond Purchase Contract for the Bonds has not been executed within 120 days after the effective date of this ordinance, the authorization for the issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale approved unless such Bonds shall have been re-authorized by ordinance of the Council. The ordinance rewauthorizing the issuance and sale of such Bonds may be in the form of a new ordinance repealing this ordinance in whole or in part or may be in the form of an amendatory ordinance approving a bond purchase contract or establishing terms and conditions for the authority delegated under this Section 14. (b) Deliver~ of Bonds; Documentation. Upon the passage and approval of this ordinance, the proper officials of the City including the Designated City Representative, are authorized and directed to undertake all action necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to execute all closing certificates and documents required to effect the closing and delivery of the Bonds in accordance with the terms of the Bond Purchase Contract. (c) Preliminary and Final Official Statements. The Finance Director is hereby authorized to ratify and to deem final the preliminary Official Statement relating to the Bonds for the purposes of the Rule. The Finance Director is further authorized to ratifi/and to approve for purposes of the Rule, on behalf of the City, the Official Statement relating to the issuance and sale of the Bonds and the distribution of the Official Statement pursuant thereto with such changes, if any, as may be deemed by her to be appropriate. Section 15. Application of Bond Proceeds; Plan of Refunding. (a) Refunding Plan. For the purpose of realizing a debt service savings and benef~ing the City’s ratepaye~s, the Council proposes to refund and defease the Refunded Bonds as set forth herein. The Refunded Bonds shall include those Refunding Candidates designated by the Designated City Representative when the Bonds are sold pursuant to the Bond Purchase Contract. Proceeds of the Bonds shall be deposited with the Escrow Agent pursuant to the Escrow Deposit Agreement to be used immediately upon receipt thereof to defease the Refunded Bonds as authorized by the 2004 Bond Ordinance and to pay costs of issuance of the Bonds. T~he net proceeds deposited with the Escrow Agent shall be used to defease the Refunded Bonds and discharge the obligations thereon by the purchase of 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: (1)interest on the Refunded Bonds due and payable on and prior to the Call Date; and (2) the redemption prices of the Refunded Bonds on the Call Date. 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. (b) Escrow Agent/Escrow Agreement. The City hereby appoints U.S. Bank National Association, Seattle, Washington, as the Escrow Agent for the Refunded Bonds (the "Escrow Agent"). A beginning cash balance, if any, and the Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining 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 Bonds. in order to carry out the purposes of this Section 1S, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement. (e) Call.for Redemption o.f Refunded Bonds. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the payments described in Section 15(d). The City hereby irrevocably calls the Refunded Bonds for redemption on their Call Date in accordance with the provisions of the 2004 Bond Ordinance authorizing the redemption and retirement of the 2004 Bonds prior to their fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be irrevocable after the issuance of the Bonds and delivew 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 applicab|e provisions of the 2004 Bond Ordinance. 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 Finance Director, or, at the direction of the Finance Director, to the paying agent for the Refunded Bonds, sums sufficient to pay, when due, the payments specified in Section 15. Aii such sums shall be paid from the moneys and Acquired Obligations deposited with the Escrow Agent, and the income therefrom and proceeds thereof. All such sums so paid to said Finance Director shall be credited to the Refunding Account. All moneys and Acquired Obligations deposited with the Escrow Agent and any income therefrom shall be held, invested (but only at the direction of the 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. -4?- The City will take such actions as are found necessary to see that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. Section 16. Bond Insurance. The Finance Director is hereby further authorized to solicit proposals from municipal bond insurance companies for the issuance of a Bond Insurance Policy. In the event that the Finance Director receives multiple proposals in response to a solicitation, the Finance Director may select the proposal having the lowest cost and resulting in an overall lower interest cost with respect to the Bonds to be insured. The Finance Director may execute a commitment received from the Insurer selected by the Finance Director. The Council further authorizes all proper officers, agents, attorneys and employees of the City to cooperate with the 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. Sect.ion 17. Undertakin~ to Provide Continuin~ Disclosure. (a) Contract/Undertaking. This section constitutes the City’s written undertaking for the benefit of the Registered Owners and Beneficial Owners of the Bonds required by subsection (b)(5) of the Rule. (b) Financial Statements/Operating Data. The City hereby agrees to provide or cause to be provided to the Municipal Securities Rulemaking Board ("MSRB’), the following annual financial information and operating data for the prior fiscal year, commencing in 2013 with the calendar year ending December 31, 2012: (1) 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"); (2) A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3)Debt service coverage ratios; and (4)General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds and identified in a closing certificate executed by the Designated City Representative and referencing this section. Items (2) through (4) shall be required only to the extent that such information is not included in The information and data described above shall be provided on or before nine months after the end of the City’s 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 the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Commission. If not provided as part of the annual financial information discussed above, the City shall provide the City’s audited annual financial statement prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the MSRB. (c) Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess often business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: ¯Principal and interest payment delinquencies; ¯Non-payment related defaults, if material; ¯Unscheduled draws on debt service reserves reflecting financial difficulties; ¯Unscheduled draws on credit enhancements reflecting financial difficulties; ¯Substitution of credit or liquidity providers, or their failure to perform; ¯Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; ¯Modifications to the rights of Bondholders, if material; ¯Bond calls, if material, and tender offers; ¯Defeasances; ¯Release, substitution, or sale of property securing repayment of the Bonds, if material; ¯Rating changes; ¯Bankruptcy, insolvency, receivership or similar event of the City; -50- ¯The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and ¯Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall promptly determine whether the events described above are material. (d) Format for Filings with the MSRB. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. (e) Notification Upon Failure to Provide Financial Data. The City agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described in Subsection (b) above on or prior to the date set forth in Subsection (b) above. (f) Termination/Modification. The City’s obligations to provide annual financial information and notices of certain listed 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 (i) 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 -51- otherwise does not apply to the Bonds and (ii) notifies the MSRB of such opinion and the cancellation of this section. The City may amend this section with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment of this section, the City shall describe such amendment in the next annual report, and shall include, a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (A) notice of such change shall be given in the same manner as for a listed event under Subsection {c), and (B) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting pfincip]es. (g) Bond Owner’s Remedies Under This Section. The fight of any bondowner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to a 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 an event of default with respect to the Bonds. (h) No Default. Except as otherwise disclosed in the City’s Official Statement relating to the Bonds, the City is not and has not been in default in the performance of its obligations of any prior undertaking for ongoing disclosure with respect to its obligations. -52- Section 18. Defeasance of the Bonds. In the event that money and/or Government Obligations maturing or having guaranteed redemption prices at the option of the holder at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to redeem and retire part or all of the Bonds in accordance with the their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Bond Fund or any account therein for the payment of the principal of and interest on the certain Bonds so provided for and such Bonds shall then cease to be entitled to any lien, benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds shall no longer be deemed to be Outstanding hereunder, or under any ordinance authorizing the issuance of bonds or other indebtedness of the City. Within 30 days of any defeasance of Bonds the Bond Registrar shall provide notice of defeasance of Bonds to Registered Owners of the Bonds being defeased and to each party entitled to receive notice in accordance with Section 17. Section 19. 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: (:].) 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 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 Registered 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 oapprove 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 o~dinance 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. (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 -55- 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 20. Call for Redemption of 1998 Bonds. For the purpose of realizing a debt service savings and benefrdng the ratepayers of the City, the City Council hereby authorizes the refunding of the 1998 Bonds identified in the recitals to this ordinance. Available funds of the City in the amount necessary to refund the 1998 Bonds, in whole, shall be used on or before December 1, 2012 for the payment of interest on and the redemption price of the 1998 Bonds on such date. The City hereby Irrevocably calls the 1998 Bonds for redemption on December 1, 2012 in accordance with the provisions of the 1998 Bond Ordinance authorizing the redemption and retirement of the 1998 Bonds prior to their fixed maturities. The City’s Finance and Administrative Services Administrator is hereby authorized and directed to provide for the giving of notice of the redemption of the 1998 Bonds in accordance with the applicable provisions of the 1998 Bond Ordinance. The costs of such notice shall be an expense of the C~W. Section 21. Contract; Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Registered 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 22. General Authorization; Ratification of Prior Acts. The Mayor, the Chief Administrative Officer, the 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 23. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval, and thirty {30) days after publication. PASSED by the City Council this 15th day of October, 2012. Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this 15th day of October, 2012. Approved as to form: Pacifica Law Group ~P Bond Counsel Date of Publication: Denis Law, Mayor -57- CERTIFICATE 1, the undersigned, City Clerk of the City Council of the City of Renton, Washington (the "City"), DO HEREBY CERTIFY: 1.The attached copy of Ordinance No. 5672 (the "Ordinance") is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on October 15, 2012, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect after publication in the City’s official newspaper as provided by law; and 2. A quorum of the members of the City Council was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of October, 2012. Bonnie I. Walton, City Clerk APPENDIX B FORM OF BOND COUNSEL OPINION ,2012 City of Renton, Washington Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re."City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $ Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City"), and have examined a certified transcript of all of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Refunding Bonds, 2012, in the principal amount of $ (the "Bonds") issued pursuant to Ordinance No. 5672, passed by the Council on October 15, 2012 (the "Bond Ordinance"), to refund certain water and sewer revenue bonds and to pay costs of issuance of the Bonds. Capitalized terms used in this opinion 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 and the Bond Purchase Contract. 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. 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 payable solely out of special funds of the City known as the Bond Fund and the Reserve Fund, except to the extent that the enforcement of the rights and remedies of the holders of the Bonds may be limited by laws relating to bankruptcy, reorganization, insolvency, moratorium or other similar laws of general application affecting the rights of creditors, 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 said Bond Fund out of Gross Revenue of the Waterworks Utility certain fixed amounts necessary to pay and secure the payment of the principal of and interest on the Bonds as the same become due. The City has further pledged that the payments to be made into the Bond Fund out of Gross Revenue of the Waterworks Utility shall constitute a lien and charge upon such Gross Revenue superior to all other charges of any kind or nature whatsoever, except for Maintenance and Operation Expense of the Waterworks Utility, and equal in rank to the lien and charge on such Gross Revenue to pay and secure the payment of the principal of and interest on the City’s Outstanding Parity Bonds and any Future B-1 Parity Bonds that may be issued after this date on a parity with such bonds and the Bonds. The City has reserved the fight to issue Future Parity Bonds on the terms and conditions set forth in the Bond Ordinance. 4. Interest on the Bonds is excludable from gross income for federal income tax purposes under existing law 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. The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. 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. 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, PACIFICA LAW GROUP LLP APPENDIX C FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2011 (AUDITED) C-1 (THIS PAGE INTENTIONALLY LEFT BLANK) Washington State Auditor Brian Sonntag INDEPENDENT AUDITOR’S REPORT June 29, 2012 Council City of Renton Renton, Washington We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Renton, King Cotmty, Washington, as of and for the year ended December 31, 2011, which collectively comprise the City’s basic fmancial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Renton, King County, Washington, as of December 31, 2011, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In~uran~ Building, P.O. Box 40021 ¯ Olympia, Washington g8504,-0021 * (3~0) 902-0370 ¯ TDD R~ay (800) 833-6388 FAX (360) 753.0646 ¯ htt p YAv,~.s~o.w~.go v As described in Note 1, during the year ended December 3 I, 2011, the City has implemented the Governmental Accounting Standards Board Statement No. 54 - Fund Balance Reporting and Governmental Fund Type Definitions. In accordance with Government Auditing Standards, we will also issue our report dated June 29, 2012, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. That report will be issued under separate cover in the City’s Single Audit Report. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-1 through 3-14, budgetary comparison information on page 5-1, pension trust fund on pages 5-2 and information on pestemployment benefits other than pensions on pages 5-3 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Oar audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying information listed as combining financial statements on pages 6-1 through 6-40 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated,.in all material respects, in relation to the basic financial statements taken as a whole. 2011 Comptehensh/e Annual Financial Report ~ o,~ aento., Washington The in~brmation identified in the table of contents as the Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR This page intentionally left blank. 2011 Comprehensive Annual Financial Report City o,f Renton, Washington MANAGEMENT’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, 2011. 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 20:11 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 The City’s 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 full accrual basis of accounting in conformity with GAAP. 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 Auditor’s Office (SAO). 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; 3. accountability for control of assets and obligations; and 4. 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. SAO reviews the City’s internal controls, and the City receives and takes action on all the recommendations made. The 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. 2011 Comprehensive Annual Financial Report City oJ~ Renton, Washington Financial Highlights ¯The City’s total assets as of December 31, 2011, exceeded liabilities by $453.3 million. ¯As of December 31, 2011, the City’s Governmental Activities reported net assets of $453.3 million. Of this total, $53.2 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. ¯Investment in capital assets (net of related debt) comprises $373.6 million of the $453.3 million in Governmental Activities net assets. ¯The business type activities have total net assets of $240.4 million. 90.3% of this total, $217.1 million, represents the City’s investments in capital assets (net of related debt). An unrestricted balance of $23.3 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, 2011, was $141.5 million. Of this amount, $41.4 million are revenue bonds and PWTF loans dedicated to the waterworks projects. Employee leave balances and other post-employment benefits total $9.1 million. The balance of $91.0 million of City debt is dedicated for general governmental purposes, including the purchase of City Hall, the construction of the downtown parking garage, construction of two libraries, replacement of a fire station, purchase of a fire station, the construction of a regional communications center and construction of a regional jail facility. 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 2011. 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. Moncegement’s Discussion gjld Anolysis, 3-2 2011 Comprehensive Annual Financia! Report City o.f Renton, Washington Figure 1 REQUIRED 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 waterworks (water, sewer, and surface water), solid waste management and services, golf course, and airport. 2011 Comprehensive Annual Financial Report City oJ= Ren~n, Wclshfngton The 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, and 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, Judicial, 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 the 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 and revenue even though some amount of these taxes will not be available to the City for several years. 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 Managements Discussion and An~ztysis, 3-4 2011 Comprehensive Annual Financial Report ~ of Renton, Washington ¯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 of 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 Fund, Municipal Facilities CIP Fund and Capital Improvement Fund. 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 financial 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 specifically addressed 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 pdvate 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 Management’s Discussion and Analysis, 2011 Comprehensive Annual Financial Report City of Renton, Washington departments and to accumulate and allocate the associated costs of providing these services to the vadous 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. The 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 Enterpflse 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. Fidudary 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 F|nandal 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. 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 20:10 to 2011 shows an increase in total net assets of $2:1.4 million. Management’s Discussion andAnaly~is, 3-6 2011 Comprehensive Annual Financial Report City o/ Renton, w~shington Table I is a condensed version of the Government-wide Statement of Net Assets. ~~ ~ 17743 107 76 7 ~ The majority of the City’s net assets (85%) 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 decreased from 2010 to 2011 by S6.3 million. Investments in capital assets decreased by $9.4 million in the Governmental activities, which is due to the issuance of $16.7 million of new debt to build two new libraries. Very little capital work had taken place in 2011; therefore no significant assets have been recorded related to the new debt. Business-type activities increased $3.1 million primarily due to capital activity as opposed to significant reductions in debt although revenue bond debt in the Golf Course fund (a business-type activity) was replaced by an interfund loan from the General Fund in 2010. Interfund loan debt is not included in the calculation of Investments in capital assets net of related debt. Restricted assets, representing resources that are subject to external restrictions on how they may be used, equate to 3.8% of total net assets, up from 1.7% in 2010. This increase is related to the $16.7 million of new debt issued in 2011 which is restricted for capital construction related to the new libraries. The remaining balance (unrestricted net assets) of $76.6 million will be used to meet the City’s ongoing commitments and plans. As of December 31, 2011, 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) increased in 2011 by $22.4 million. Governmental activities generated 57% of this total or $12.7 million, while business-type activities generated $9.7 million of this total. Monagement’s Discussion and An~lysis, 3-7 2011 Comprehensive Annual Financial Report City o.f Renton, Woshington Table 2 is a condensed version of the Statement of Activities for the City. TOta~ 1,9~O2 Sixty-six percent (66%) of the City’s total activities are for governmental activities such as providing police, fire, parks, libraries, recreation, building safety, and planning services. The remaining activities relate to business-type services provided by the City. The largest business-type activities include water, sewer, surface water and solid waste activities. Governmental Activities Analysis Governmental activities cost a total of $108.4 million in 2011, up 2% from 2010. Of this amount, $43.2 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 and contributions. The net expense (total expenses less program revenues) of $65.2 million was the cost of governmental services City taxpayers primarily paid through various taxes. Man~lgement~s Discussion and Anal~sis, 3-8 2011 Comprehensive Annual Financial Report City of Renton~ Washington2011 Comprehensive Annual Financial Report City of Renton, Washington Chart 1 portrays the cost of each of the City’s governmental programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program). Chart 2 depicts the sources of revenues that fund governmental activities, Approximately sixty- three percent (63%) is from various taxes. Charges for services, grants, and interest earnings generate thirty-three percent (37%) of total revenue for general governmental activities, Business~Type Activities Analysis Charts 3 and 4 present the same information on business-type activities as illustrated for governmental activities. Chart 3 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). Manegement% Discussion and Analysis, 3-9 The City’s largest business-type activity, the Waterworks Utility, had a positive net change (~8.4 million) at the end of 2011 compared to ~21,000 change in 2010. This large increase is primarily due to rate increases, which are necessary to replace failing systems and provide on-going capital infrastructure replacements. The City generated ~45.6 million in various fees for services and other sources from waterworks activities and had ~37.1 million in expenses. The Airport’s total expenses were $2.0 million. Total revenues for 2011 were $2.0 million, which is consistent with 2010 revenues. The Solid Waste Utility’s revenues were $15.0 million generated from fees for services and $111,488 in grants and contributions. The total expenses were ~14.4 million. The Golf Course generated a total of $2~0 million in green fees, driving range charges, and other user fees. The total expenses for the Golf Course were $2.1 million. The Golf Course had a loss of £85,000 for the year. Management’$ Discussion and Analysis, 3-I0 2011 Comprehensive Annual Financial Report City of Renton, Washington Business-type activities are supported primarily from charges for services. In the City of Renton, $62.3 million was generated from charges for services in the business-type activities. These comprise ninety-eight percent (95%) of the total financial support for these activities. Grant revenues increased $1.8 million from 2010 to 2011 largely due to a surface and storm water improvement grant for approximately $1.0 million and US Department of Transportation grant for approximately $500,000 for the airport taxiway improvements. FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds Analysis The 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 govemmental funds reported combined ending fund balances of $49.2 million, an increase of $17.2 million in comparison to last year. This large increase is attributed to a $16.7 million in general obligation bonds issue in 2011. Approximately fifty-nine percent (59%) constitutes unrestricted fund balance, which has been either committed or assigned to reflect the City Council and management’s plans and commitments to be expended in future periods. 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 or capital reserves. The large increase in fund balances resulted from the issuance of general obligation debt, mentioned above, and is restricted for the capital construction of two new libraries. The General Fund is the chief operating fund of the City. At the end of the current year, unrestricted fund balance of the general fund was $13.8 million, while total fund balance ended at $15.7 million. Although unrestricted, this balance has assigned designation for specific functions and plans approved by the City Council. The fund balance increased by $1.3 million as the City was able to realize expenditure savings in excess of revenue received. The Municipal Facilities CIP fund has been included as a major fund of the City due to the importance of municipal projects that may be accounted for in this fund in any given year. The fund balance increased by $17.1 million in 2011 and is directly related the general obligation debt noted earlier. The Capital Improvement fund is the last major governmental fund. This fund accounts for the many transportation-related projects in the City. The fund balance increased $129,200. Propdetary 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. Net assets in the Waterworks Utility Fund and the Solid Waste Fund were $215.4 million and $2.9 million respectively. This represents an increase in the Management’s Discussion and Analysis, 3-11 2011 Comprehensive Annual Financial Report City of Renton, Washington Waterworks Utility Fund of $7.5 million and an increase in the Solid Waste Fund of $0.7 million. The factors concernlng the finances of these two funds have been addressed In the discussion of business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS During the year there was a $4.2 million increase in appropriations between the original and final amended budget. This increase was mainly due to 2010’s LEOFF1 medical contribution to fully fund actuarially determined annual obligations for 2010 ($700,000) and to fund the gap for banking service fees ($197,000). Other increases were department carryfoward requests which were offset by an increase of 52.7 million to budgeted revenues. In addition, the General Fund did not spend $6.1 million of the legally appropriated expenditures. As a result, the General Fund fund balance increased by ~768,000 in 2011. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City of Renton’s investment in capital assets, including construction in progress, for its governmental and business-type activities as of December 31, 2011, amounts to 5691.3 million as presented on the following table. (Net of D~on,/AmorlfmztiOn| The increase of $6.6 million in 2011 is made up of large capital projects such as Rainier Ave., Strander Blvd., Lake Washington Trail, Rainer Ave. storm water improvements, and Stonegate/Summerwind wastewater improvements. More detail about the City’s Capital Assets can be found in Note 5 to the financial statements. Debt Administration As shown in Table 4, the City’s total outstanding debt at December 31, 2011, was 5129.7 million. This was a net increase (new issues less principal payments and refunding) of $10.5 million. Management’s Discussion and Analysis, 3-12 2011 Comprehensive Annual Financial Report City o/ Renton, Washington The City was able to reduce aggregate debt service payments and realize present value gains by refunding 2001 General Obligation Refunding Bonds. More detailed information about the City’s long-term debt can be found in Note 13 to the financial statements. FUTURE YEAR’S BUDGETARY IMPACTS The 2011-2012 adopted budget is the first biennial budget for the City of Renton. After the mid- biennial budget adjustment, total adopted revenue is ~487 million against total expenditures of $532 million. The adjusted revenue shows an increase of 6.9% from the combined 2009-2010 adopted budget level and the expenditures reflect an increase of 14.9% from the adopted 2009- 2010 budgeted expenditures. In addition to implementing a biennial budget, the City also formed a Community Budget Advisory Group comprised of local residents, business owners, and community leaders. This group was asked several questions in order to solicit their suggestions on opportunities for greater efficiencles and costs savings. They were able to provide the City with a number of valuable recommendations, some of which have been included in the 2Oll-2012 adopted budget. We initially saw a promising start in early 2010, but the recovery slowed to a crawl during the second quarter of 2010. Our modest growth projections for 2011 were barely met. Housing starts and permits slowly began increasing in 2011 and continue with upward growth into the first quarter of 2012. During budget preparation in 2010, our preliminary projections indicated that maintaining current levels of services in General Government Operations would result in a deficit of $2 million in this budget period. We made the necessary adjustments to bring our expenditures in line with our revenue projections through the next biennium. Every department made difficult choices, reducing or reorganizing services while minimizing adverse impacts to our citizens. In addition, the 2011-2012 adopted budget does not restore any of the service reductions made during 2010 even though some of these cuts and reductions cannot be sustained in the long run. It is likely these service reductions will remain for the 2013-2014 biennial budget. The City is committed to continuing efforts to evaluate the way we do business. We will continue to right-size the structure of government. We will continue to engage our employees to help find innovative and effective ways of serving our citizens. We will continue to practice fiscal responsibility and reduce our debt. And we will continue to work with our labor groups to find sustainable ways of managing our labor costs in order for us to continue to provide quality services to our citizens with fewer dollars. 2011 Comprehensive Annual Financial Report City o.f Renron, Washington The City continues to benefit from progressive economic development activities even as the country continues to struggle through the worst economic recession in history. ¯The Landing is a master planning development area on land previously owned by Boeing. The development has added more than 900 residential units and 600,000 square feet of retail, including a major entertainment district to the city’s core. Restaurants and stores at the Landing have enjoyed double-digit sales growth over the previous year. Several new tenants have come in including Dick’s Sporting Goods, Marshalls and Panera Bread. ¯Harrington Square, a very impressive apartment complex celebrated its grand opening in the Highlands/Sunset area. ¯A number of new companies located in Renton this year that resulted in over 500 new local jobs for our communiW and new businesses opened in the Downtown, Cascade Village, Renton Village, Southport and Highlands areas of the City. Downtown Renton continues to attract new businesses including several new restaurants, Pike Place Bakery, a new children’s clothing store and a book store. ¯The Farmers Market continues to enjoy record attendance - over 4,000 people every week and 58 registered vendors. The market has also expanded to Valley Medical Center on Sundays. ¯The Seahawks Training Camp brought over 22,000 people to Renton during the summer, many who shopped and dined in our community. ¯Private investors purchased the 21 acres south of the Landing and we are looking forward to a significant redevelopment of this area. ¯The City signed a historic agreement with Boeing for a 20-year renewed lease for the Renton Municipal Airport, Boeing continues to have over 2,000 orders worth more than 5157 billion, and announced that their increased production of the 737 MAX will take place in Renton, increasing production rates to 42 airplanes per month by 2014. $ Waterways Cruises has been successfully operating their unique sightseeing and dining cruises from Southport in Renton, bringing over 7,000 visitors to our community in its first year of operation. ¯The Compass Regional Veteran’s Center opened in downtown Renton. This attractive four- story building occupies nearly 60,000 square feet and offers 58 units of affordable housing for veterans and their families and 8,500 square feet of retail space. For more information regarding future year’s budgetary impacts, please refer to the Transmittal Letter within this document under: Factors A~ect/ng Financial Condition - Economic Condition. REQUESTS 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 Iwen Wang, Finance and Information Technology Administrator, 1055 South Gr.ady Way, Renton, WA 98057 or visit our web site at www.rentonwa.Rov. 201i Comprehensive Annual Finandal Report ASSETS Cash and cash equWalents Cash whh fiscal agent Deposit with fiscal agent Investments at fair value Receivables (net of allowance for uncollectlbies) Internal balancea Inventories Prepayments Other non-current assets Intangible assets (net} Land Construction in progTess Capital assets (net of accumulated depredation) Total assets UABIUTIES Accounts payable and other ]iabilities Interest payable Unearned revenue Non-current liabilities: Due w~lin one year Due in more than one year Restricted for OPEB Investment In c~pital assets, net of related debt Restricted for: Judged Pub~ safe,/ Cutum and recrea~n Debt sense OPEB liability Unrestricted Total net assets City of Renton, Washington STATEMENT OF NET ASSETS December 31, 2011 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTWZTIES TOTAL 45,475,533 $12,606,868 $58,082,401 /25,/34 125,134 1,329,607 1~329,607 26,826,729 7,441,156 34,267,885 14,496,078 8,124,483 22,620,561 1,514,117 (1,514,117) 322,500 322,500 238,401 238,401 42,915,627 591,812 43,507,439 647,589 827"827 1,475,416 182,417,081 6,165,321 188,582,402 32,803,660 8,992,098 41,795.758 216,927,958 242,488,276 459,416,234 565,717,514 286,046,224 851,763,738 10,713,999 3,056,935 13,770,934 209,084 158,9~5 367,999 2,026,320 315,279 2,342,599 7,120,581 3,180,123 lO,3G0,70A 92,329,264 38,889,340 131,218,604 373,641,842 217,103,722 59~,745,564 31,600 31,600 577,252 577,252 19o448o219 19,448,219 1,032,361 1,032,361 5,342,695 5,342,695 53,244,297 23,340,910 76,585,207 453,3J8,266 ~240,444,632 $693°762"898 The notes to the ~inondaf stetements are an Integral l~rt of this stetement.Basic Rnancial Stetemeots, 4-3. 2013. Comprehensive A~nual Ffnandal Report FUNCTIONS/PROGRAMS Pdmaw government: Governmental activft~s: General government Judidal Public safety Physical environment Transportation Economic environment Heahh and human services Culture and re~eation Interest on long-term debt Total governmental activities Business-type activities: Waterworks etiiity ~drport Solid waste utility Golf course Total business-type activit~es Total primary 8ovemment STATEMENT OF ACTIVITIES For the Year Ended December 31, 2011 Page I of 2 PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND CAPITAL GRANTS EXPENSES SERVICES CO NTRIBUT[O NS & CONTRIBUTIONS 4,268,321 $2,756,63~3 $1,3.85,986 $32,661 2,563,989 3,565,216 35,034 52,627,849 641,483 7,936,188 2,151,322 1,0/5,323 83,192 25,376,308 3,275,596 5,938,820 11,7~4,87:] 6,491,:L~1 2,486,396 334,896 819,138 11,955,737 1,793,863 108,973 295,258 2,165,960 108,419,775 15,534,490 15,540,897 12,135,982 37,148,813 43,003,494 159,585 2,424,982 2,026,804 2,294,383 194,395 48,327 2,099,936 2,014,983 55,709,754 62,328,294 465,468 2,473,309 i64,129,529 77,862,784 16,006,365 14,609,291 General revenues: Taxes: Proper~ taxes Rntail sales taxes Business taxes Exdse taxes Penalties and interest Interest and investment earninRs Miscellaneous Transfers Total general revenues and transfers Net assets - beginning Prior Peded Adjustment Net assets - ending Basic Ftnanciat Stotements, 62 2011 Comprehensive Annual Financial Report NET (EXPENSE) REVENUE AND CHANGES iN NET A~SETS PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-~fPE ACTIVITIES ACTWIT]ES TOTAL {292,061)$(292,061) (44,050,178){44,O50,178) (1,052,807)(1,052,807) (4,437,021)(4,437,021) (3,669,859)(3,669,859) (83.9,t38)(83.9,~9) (9,757,643)(9,737,643) 12,3.65,9~o)1z,3.65,~ooI (65,208,406)(65,208,406) 8,439,248 8,459,248 53.0,301 510,301 692,721 692,721 (84,953)(84,953) 9,557,33.7 9,557,317 !65,208,406)9,557,317 (55,651,089) 33,909,975 33,309,975 22,008,777 22,008,777 16,870,284 16,870,284 4,13.3,705 4,113,705 380 380 602,516 3.17,090 719,606 991,772 73,235 1,063,007 37,4~4 (37,454) 77,934,863 150,871 78.085,734 12,726,457 9.708,188 22,434,645 440,591,809 231,802,937 672,394,746 453,318,266 $240,444,632 $693,762,898 Gty o~ ReJ~tOn. Washington GENERAL BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2011 Page 1 of 2 Gt~ o~ Renton, Washington MUNICIPAL FACILITIES CIP CAPITAL IMPROVEMENT OTHER GOVERNMENTAL FUNDS ASSETS Cash&cash equivalents $7,873,281 $14,572,304 $2,306,585 $3,832,436 Cash with fiscal agent 125,3.34 Deposit with fiscal agent 3..329,607 Investments 4,632,3.4~8.601o129 1,361,453 2~262,082 Receivables (net of allowances) Taxes 2,880,657 Customer accounts 3,753,123 1500 ~crued interest & penalt7 45,678 38,480 3.2,3.3.0 29,207 Special assessments 19,279 Interfund loans receivable 500,43.6 Due from other f~nds 44,063 10,822 747 Due from other governmental units 4,842~807 85,168 561,63.6 2,079,696 Advances to other funds 1,716,067 TOTALASSETS S 26,4~3,372 $ 23,307.703$5,571,371 $8,224,947 TOTAL GOVERNMENTAL FUNDS 28,584,406 125,134 1,329,607 16,856,810 3,754,623 125,475 19,279 900,416 55,632 7,569,287 63,517,393 Basic Finanda/ Statements, A~counts payable $2,656,549 ~34,7~ Speda] ~evenue funds Operating reserves and ¢arryfo~vard~/3,8~2,258 380,132 18,120,553 1,~32,360 19,939,524 15,748,7/6 22,927,571 4,306,3~6,215,855 49,198,590 S 26,4~3,372 $ 23,307,703 $~ $,~, S ~ 2011 Comprehensive A~nual Finonda/ Report RECONCIUATION OFTHE BALANCE SHEET TO THE STATEMENT OF NET ASSETS December 31, 2011 FUND BALANCES - TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net assets are diffe~ent because: Capital assets and other non-current assets used in governmental actMtles are not flnandal resources and therefore are not reported in the governmental funds. Other" non-current assets intangible assets (net of accumulated amortization) Capffa] assets (net of accumulated depredation) The focus of governmental funds Is on short-term flnandng, assets are offset by deferred revenue and are not Included in fund balances. Deferred ~evenue Certain liabilities {such as bonds payable and accrued ex~oenses) are not due and payable in the current perfod and therefore are not reported in the governmental funds interest payable Long-term liabilities Internal sen/Ice funds are used by management to charge the costs of certain activities to individual funds. Total assets and liabilities of the Internal sendce funds that are reported w~th governmental activities, less amounts reported above, NET ASSETS OF GOVERN M ENTAL ACTIVITIES Gty of Re, ton, Washington (z99,89~) (.~9,449,844) 23,979,698 453,318,266 QW of Newton, Washington STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Page 1of I REVENUES Taxes Ucenses and permits Intergovemmental revenues Charges fur services Fines and forfeits lnterfund revenues Contributions investment earnings Miscellaneous revenues TOTAL REVENUES GENERAL MUNICIPAL OTHER TOTAL FACiLiTiES CAPITAL GOVERNMENTAL GOVERNMENTAL CIP iMPROVEMENT FUNDS FUNDS 71,443,862 S 575,234 S - $4,247,592 ~76,266,68~ 2,665,983 1,696,116 48,763 4,410,863 10,534~331 389,757 7,706,388 811,481 19,d41,957 3~60,290 658 330,076 4,191,024 3,150,326 3,150,326 3,057,642 3,057,642 192,699 (3,692)4~034,441 65,900 4,288,448 366,332 51,568 16,429 40,949 475,278 646,868 114 42 1,584 648,608 95,918,333 1,013,639 13,453,416 5,545,445 115,930,833 EXPEN DF~U RES Current: Genera] government Judldal Public safety Physical environment Transportation Economic environment Health and human services Cuffure and recreation Capital outlay Debt service: Ptindpal payments Interest and fiscal charges TOTAL EXPENDITURES 10,598,389 339,122 295 10,937,806 2,563,989 2,563,989 52,986,589 52,986,589 2,048,971 2,048,971 8,018,267 2,019,343 734 10,038,344 5,876,231 325,731 245,201 6,447,163 511,934 511,934 2,783,237 2,783,237 116,744 9,188 2,376,944 2,502,876 92,897,688 3,973,123 14,594,216 5,503,821 116,968,848 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 3,020,645 (2,959,d84)(1,140,800)41,624 OTHER FINANCING SOURCES (USES) Transfer in 15,420 2,010,822 1,270,000 590,408 Transfer {ont}(2,268,329)(76,772)(1,799,056) Restricted for OPEB 9,425,000 GO bonds ISSUed 16,715,000 premium on general obliRation debt 1,405,553 862,616 Sale of capital assets 500 Payment to refunded bond escrow agent (9,950,000) TOTAL OTHER FINANCE SOURCES (USES)(2,252,409}20,054,603 1,270,000 (871,032) 3,886,650 9,425,000 2,268,169 500!9,~o,00o! NET CHANGE iN FUND BALANCE 768,236 17,095,119 129,200 {829,408) 17,163,147 FUND BALANCE JANUARY 1 14,980,540 5,832,452 4,177,18~7,045,263 32,035,~3 FUND BALANCE DECEMBER31 $15,748,776 $22,927,571 $4,306,388 $6,215,855 $49,198,590 Bosic Flnandof 5totement~, ~7 2011 Comprehensive Annual Financial Repor~ RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVIT]ES For the Year Ended December 31, 2011 NET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS Governmental funds report capita] outlays as expenditures. However, in the statement of actMtles the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense In the current period. Revenues in the statement of actlvffies that do not provide cun’ent financial resources are not reported as revenue in the funds. The issuance of long-term debt (e.8, bonds, ~eases) provides current flnandal resources to governmental funds, whila the repayment of the prindpal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long*term debt and related items. increase {decrease) in other non-curteot assets which Include the Net Pension As.~t and I~vestments in Joint Ventures which are not reported in governmental funds. Internal service fends are used by management to charge the costs of certain actMties to individual funds. The net revenue (expense} of the internal service fends are reported w~th governmental activities, CHANGES IN NET ASSETS OF GOVERNMENTAL ACTNWIES City of Renton, Washington 17,163,147 5,651,389 405,096 (16,444,986) 2,479,608 3,472,203 12,726,457 Cash & cash equivalents Receivables (net of allowances): Spedal assess~nents Due f~om uther funds Interiund loan receivab~ inventory of materials and supplies Special assessments deferred Advances to uther funds Capita] assets (net) intangible assets {net) Deferred charges and other assets Oty of Renton, Washingto~ STATEMENT OF NET ASSETS PROPRIETARY FUNDS D~cem bet 31, 2011 page lo~2 BUSIN ESS-TfPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACTIVITIES WATERWORKS SOLID ENTERPRISE ENTERPRISE INTERNAL SERVICE UTIUTY WASTE FUNDS FUNDS FUNDS 9,207,083 $1,482,310 $1,917,477 $12,606o870 $16,891,126 5,434,445 874,928 1,/31,784 7,441,157 9,969,921 5,376,766 1,563,827 100,804 7,041,397 33,425 93,298 93,298 50,346 6,942 10,062 67,350 90,495 38,025 7,441 45,466 56,301 94,887 94,887 718,624 107,838 95,978 922,438 42,117 263,073 59,425 322,498 238,40O 21,238,522 4,073,870 3,322,9~9 28,635,361 27,321,785 121,251 121,251 199,855 199,855 236,303,033 21,342,661 257,645,694 827,827 827,827 470,561 470,561 237,922,527 21,342,661 259,265,188 259,161,Q49 ~4,073,870 $ 24,665,630 $ 287,900,549 8,376,720 343,328 36,041,833 Basic Flnandal Stotements, 4-9 Current liabilities: Accounts payable Claims incurred but not reported Ret ainaRe payablo Due to other funds Interfund loans payable Due to other Rovernments Accrued interest payable Accrued employee wares and benefits payable Accrued taxes payable NET ASSETS Investment in caphe] assets, net of related debt City os Renton, Wclshington STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2011 Page2 of 2 BUSINESS-TYPE ACTW~TIES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACTIVITIES WATERWORKS SOUD ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILITY WASTE FUNDS FUNDS FUNDS 987,249 $ 1,061,638 $ /33,703 $ 2,i72,590 191,867 191,867 43,101 43,101 461,463 461,463 904,289 904,289 153,497 5,419 158,916 380,449 20,248 99,095 499,792 32,183 62,2/3 73,714 168,112 18,640 166,767 185,407 2,135,000 2,115,000 4,79~,275 1,144,101 960,161 6,900537 32,810,000 32,810,000 541,878 541,878 (540,297}(5d0,297) 1,349~762 1,349,782 167,920 I48,358 316,278 437,625 16,166 85,039 538,8~0 5,$38,929 5,538,929 564,877 2,442,195 333,027 1,988 3,342,0~7 345,239 345~39 3,687,326 /35,761,061 21,342,661 217,103,722 Z9,647,658 2,9/3,603 779,649 23,340,910 8,720,048 5,342,695 18,291,764 32,354,507 B~sic Finando! 5tutements, 4~I0 OPERATING EXPENSES: operations and malntenan<~ Benefit payments Administrative and ~ener~ Taxes NON-OPERATING REVENUES(EXPENSES): ~ntergovernmental revenues Investment earnings Gain (loss) on sale of capital assets Other non-operaUng revenues (expenses) Irderest expense Amortization of debt d~scount and expense NON-OPERATING RL~VENUE NET OF EXPENSE IN.ME (LOSS) BEFORE CONTRIBUT~NS AND TRANSFERS NET ASSETS, JANUARY 1 Prior Year Adjustment NET ASSETS, JANUARY 1 RESTATED NET ASSETS, DECEMBER 31 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS BUSINESS-TYPE ACTWITIES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACI’IVITIES WATERWORKS SOLID ENTERPRISE ENTERPRISE INTERNAL SERVICE UTIL~Y WASTE FUNDS FUNDS FUNDS 41,557,439 $14,942,041 ~4.309,366 S 60,808,846 $15o378,279 930,553 1,396 93~949 5650124 72.0~0 637,124 12,750,617 43,053,116 15,015A37 4,309.366 62~77091B 28,128,896 20,694,873 11,956..271 2,618,424 35,269,568 23,290,849 1,857 1,857 11,397 4.670 5.546 21,613 887,058 (1~S7,713)(54,247)(1.441.980} 75,450 125,884 208,342 409,676 1,255,375 1,~3B,198 ~,~3B.198 8~566o463 706,016 435,709 9,708,188 3,472,202 207,~os,74e 2o207,s~7 21,~,~0~~31,30~,~37 (1,DSE,4s3!11,0~,493) 215,408,719 $ 2,9~3,603$ 22,122,310 $ 240,444,632 $32,354,507 CASH FLOWS FROM INVESTING ACTIVITIES: City of Renton, Washington STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2011 P~ge 1of 2 BUSINESS~TYPE ACTIVI]IES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACTIVITIES WATERWORKS SOUD ENTERPRISE ENTERPRISE INTERNAL SERVICE UTIUTY WASTE FUNDS FUNDS FUNDS 42,399.593 $15,028,494 $4,525,347 $61,953,434 .~ (/,,02S,2t7)(38,025)(1,0~3,26Z)2B.103,444 (29,803,054)(~3,635,918)(3,34~,060){46,787,032)(21,19~,380} 1,498,295 1,498,295 32,019 (7,941)23,8~3 47,891 73,409 (589~858)158,874 (430,984)11,926,180) 11,397 --~{24,581! 13f 113,013 756 752 1 323 99~15t193,761 5,057~293 (26,844)~(9.504)(37,454)17~907 (26e844) $(1,1~~(37,454)179,907 (7,502,674}(308,475}(7,811,149)(2,601,853) 425,322 47,074 472~396 3,225,016 5,982,067 9"207,083 Check FIRures 425,322 4.240 (6,57~z!4,744 59,559 363,635 625,675 576,359 4,427,DS0 3,930,947 856,635 1,341,118 8,179,820 12,960,179 2D2I Comprehensive Annum Fin~ndol Report STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 2013. Page 2 of 2 City of Renton, W~shlngton RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITISS: Operating income (loss) Adjustments to recondle operating income (loss) to net cash provided (used) by operating activities: Depreciation & amortlzaUon of deferred charges 6,8~5,480 Other non-operating revenue 11,397 (increase) decrease In accounts revivable 277,030 (Increase} decrease in due from other far~ds/~overnrnental un~{1,958,998) (Increase) decrease in inventory & prepaid items 3,710 I~crease (decrease) in vouchers retalnage payable 49,304 Ino’ease (decrease) in due to other fands/gover nmentai units 1,501,503 Increase (decrease} in payables & other short-torm liablllt~es (917,820) Increase (de~rease) in customer deposits Increase (decrease) In deferred revenues (102,279) Increase (decrease) in accrued employee leave benefits 32,019 Total adjustments 5,731,346 NET CASH PROVIDED (USED) BY BUSINESS-TYPE ACTIVITIES GOVERNMENTAL ENTERPRISE FUNDS ACTIVITIES OTHER TOTAL INTERNAL WATERWORKS SOLID ENTERPRISE ENTERPRISE SERVICE UTILITY WASTE FUNDS FUNDS FUNDS 7,381,667 $581,238 $ 236,871 $ 8,199,776 $2,036,920 840,076 7,675,556 1,887,334 116,158 206,744 334,299 1,12g,642 13,057 94,B75 384,962 11,465 (23,256){83,848)(2,0~6,102)857,140 (9,670)(5,960)~19,791 (91~381|(42,077)253,946 1,50:L503 75,639 (14,657)(856,838)(1,09L563} 9,597 9~597 111,376 9297 ~6,084}23,813 49,748 53,618 175,$14 1,087,125 6,993,985 3,020,373 $ 13,113,013 $ 756,752 $ 1,323,996 $ 25,193,761 $ 5,057,293~ ~ ============== ================= ~ (i,0~,493} $- S - S (L0~6,,,93} 1.136,190 1,~36,190 89,653 89,633 6,835,480 840,076 7,675,556 1,887,334 The no~s to the JlnanctM staternents are an in~gral part o~ this statement.Basic Flnancia! Statements, 4~23 2021 Comprehensive Annum Financial Report City of Renton, Washington STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31, 2011 ASSETS Cash & c~sh equivalents Investments at fair value: Federal National Mortgage Assodatlon US Treasury Strips Re~eivab]es (net of aflowanc~s} UABILITIES Voud~ers & contracts payable Deposits payable TOTAL UABILITIES NET ASSETS Held in trust for pension benefits & other purposes PENSION TRUST AGENCY FIREF1GHTER’S SPECIAL PENSION DEPOSITS 1,173,234 S 591,487 ~54,634 4,252,115 692,497 3,048,843 9,321,323 591,487 7,200 384,287 591,487 $"9,321,323 $ B~sic Rnenctal Statements, 4~14 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIREMEN’S PENSION FUND For the Year Ended December 31, 201:1 ADDITIONS: Other contributions: Fire insurance premiums t~ansferred in Investment income Invest merit Interest Net ina’ease / (decrease} in the fair value of investments TOTAL ADDmONS DEDUCTIONS: Benefit payments Administrative and seneral TOTAL DEDUCTIONS NET INCREASE (DECREASE) NET ASSETS - JAN UARY :I NET ASSETS - DECEMBER 31 PENSION TRUST FIREMEN’S PENSION 115,054 355,380 654,354 :1,1240788 284,626 8,762 293,588 831,200 8,490,123 9,321,323 Gty o~ ReJ~ton, W~shington Qty oI Rento~, Washington NOTES TO THE FINANCIAL STATEMENTS January 1, 2011 through December 31, 2011 NOTE 1. SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES The 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 polldes 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. Effective for Fiscal Year 2011 reporting, the City implemented the following new accounting and reporting standards issued by the Governmental Accounting Standards Board (GASB): GASB Statement No. 54 - Fund Balance Reporting and Governmental Fund Types- This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The statement further provides clarified definitions of the general fund, special revenue fund type, capital projects fund type, debt service fund type, and permanent fund type. 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. 2011 Comprehet~sive Annual Flnuncta! Report City of Renton, Washington 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, public safety, physical environment, transportation, economic environment, health and human services, 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. 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. 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 a~counting. Since governmental fund 2011 Comprehensive Annual Financial Report Oty o,f Re, ton, Washington statements are presented on a different measurement focus and basis of accounting than the Government-wide statements’ governmental column, reconciliation is presented at the end of the statement, which bdefly 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 ofthe 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, public safety, physical environment, transportation, economic environment, health and human services, 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 utilities. Elimination of these charges would distort the direct cost and program revenues for these functions. 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 legislative and executive departments, court services, finance and legal departments, development services, police and fire departments, human resources and technical services, community services, parks, economic development, streets, property management for City owned leased facilities, library and museum, fire memorial, and fire department’s health and wellness programs. 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. Community development block grant activities are accounted for within this fund, which is federally funded. MUNICIPAL FACIUTIES CIP FUND The Municipal Facilities Construction Fund accounts for the acquisition and development of municipal facilities. Resources include general and special revenue taxes, grants, and Council- approved general obligation bonds. C~y of Re, totL Washington CAPITAL IMPROVEMENT FUND This fund supports the City of Renton transportation projects and projects linked with various State and Federal funding programs. Many of the projects depend on grants, LIDs, and mitigation revenue. ENTERPRISE FUNDS WATERWORKS UTILITY FUND 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 connection charges. SOUD WASTE FUND 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 SPECIAL REVENUE 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. 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. 1% FOR ART FUND The City of Renton established this fund to account for one pement of construction project actual costs to be used for the selection, acquisition and/or installation of works of art to be placed in, on, or about City public facilities. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. Basic Financial Statements, 4-19 2011 Co~nprehenslve Annual Ftnondal Report ~ty oJ~ Rento~, Washington SPRINGBROOK WETLANDS BANK FUND The City of Renton established this fund in 2007 for the purpose of providing accounting for the Springbrook Creek Wetland and Habitat Mitigation Bank project. The fund will receive revenue by selling Wetlands Credits to third parties and to the City’s internal departments. DEBT SERVICE FUNDS GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND This debt service fund accounts for the following outstanding debt issues: ¯2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. ¯2002 limited tax general obligation bonds which provided funding for the construction of a new fire station. ¯2006 limited tax general obligation bonds which provided funding for the construction of South Lake Washington infrastructure improvements. ¯2009 intergovernmental debt related to the Fire District #40 asset transfer as a result of the Benson Hill annexation. ¯2010 intergovernmental refunding debt which refunded a portion of the 2000 intergovernmental debt for the construction of a new facility for Valley Communications Center. ¯2010 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation bonds for the construction of a downtown parking facility, ¯2011 limited tax general obligation bonds which funded the development and construction of 2 new libraries. 1997 LIMITED GO BONDS - CITY HALL This debt service fund accounts for the following outstanding debt issue: 2011 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. 2011 Comprehensive Annual Flnanda/ Report City of Renton, Washington CAPITAL PROJECT FUNDS COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. FIRE IMPACT MmGATION 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 fadlities SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUND The 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 which provide for the design, construction, labor wages and benefits, and equipment required to implement the project. ENTERPRISE FUNDS 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. The fund 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 and auxiliary equipment, except for fire apparatus and replacement of police patrol vehicles. In addition, this fund accounts for the City’s information technology, facilities and communications costs. All costs, including depreciation, are factors in calculating the rates that are charged to each user department. 2011 Comprehensive Annual Finandal Report at7 o/ Renton, Washington 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. 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. Accrual Both 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 governmental 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 Basic Financial Stotements, 4-22 2011 Comprehensive A~nua! Finonda/ Report City of Renton, Washington 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 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, LIABIUTIES, AND FUND EQUITY 1. Cash and Cash Equivalents The City has defined cash and cash equivalents as cash on hand, demand deposits, and 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. 20~1 Comprehensive Annum FinonOal Report CRy of Renton, Washington Receivables have been reported net of estimated uncollectible accounts. Because property taxes, special assessments, and utility billings are considered liens on pPoperty, 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 fundsn (i.e., the current portion of interfund loans) or ~advances to/from Other~unds" (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). 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 pdce. 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. All inventories are carried at cost on the first in, first out- FIFO basis, with the exception of the Public Works Maintenance shops inventory. The value of this inventory is calculated using the average cost method. 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 include~ 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. 2011 C~mprehensive Annual Flnancfo! ReporZ CJty o/ Renton, Washington 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 Fund balances presented in the governmental fund financial statements represent the difference between assets and liabilities reported within the governmental fund. Fund Balance is classified into the following categories: Nonspendable - items that cannot be spent due to form; inventories, prepaid amounts, long- term loan receivables, or amounts that must be maintained intact legally. Restricted- amounts constrained for specific purposes imposed by external parties. Committed - amounts constrained by the City Council, either though formal budget adoption, contract approvals, or for other purposes formally approved by the Council. Assigned - all amounts remaining in governmental funds, other than the general fund, not classified as nonspendable, restricted or committed. Amounts reported as committed also include year-end encumbrances that have received approval from the City Council and re- appropriated in the following year’s carry forward budget. Also, the City’s financial policies require a maximum amount of 12% and minimum of 8% fund balance to remain in the general fund for cash flow purposes. Unassigned - any remaining fund balance in the general fund not classified as nonspendable, restricted, committed or assigned. 10. Net Assets (refer to Note 11). 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. City o/ Renton, Washington 3. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For purposes ofthe Government-wide Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. 4. Expenditures/Expenses Expenses in the Government-wide Statement of Activities are reported by function as a governmental activity (general government, judicial, public safety, physical environment, transportation, economic environment, health and human services, culture and recreation, or interest on long-term debt) or business-type actMty (waterworks utility, airport, solid waste utility, or golf course). In the fund financial statements, expenditures of governmental funds are classified by: function, debt service principal and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating. In 2010, operating expenses were consolidated to Operations and maintenance, Administrative and general, Taxes and Depreciation. The other categories reported previously (Benefit payments, Professional services, and Insurance were assigned to Operations and maintenance and Administrative and general as appropriate. 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. COMPUANCE AND ACCOUNTABILITY The City of Renton budgets its funds under Generally Accepted Accounting Principles (GAAP) at the fund level. Annual appropriated budgets are adopted for governmental funds on a biennial basis. 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 GAAP Basis verses Actual GAAP Basis of Accounti.ng 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. Basic Financial Stotements~ 4~26 2011 Comprehensive Annual Rnandal Report City o~ Renton, washington 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. AMENDINGTHE BUDGET The budget, as adopted, constitutes the legal authority for expenditures. Budgets are adopted on the GAAP basis of accounting. Any comparisons between budget and actual revenues and expenditures are reported under the GAAP basis. The biennial 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 three times during 2011. Odginal budgeted inflows as compared to the final budgeted inflows are as follows: audgete~ B~ Equipment Repair and Replacement / Info~ation Bo$1c Finandol Statemen~s, 4-27 2011 Comprehensive Annual Finenc~al Report City of Renton, Washington Original budgeted outflows as compared to the final budgeted outflows are as follows: Sudseted audgeted Budgeted Equl pment Repair and Repla~ment / IT/Fadiities / For the year 2011 and on, the City will operate and adopt a biennial budget. At year-end 2011, the City of Renton noted the Leased City Properties Fund, exceeded its final adopted budget by 3119,892. For financial reporting purposes, this fund is reported within the General Fund, but is reported separately for budget purposes. NOTE 3. DEPOSITS AND INVESTMENTS A. Deposits The 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 (last updated and approved on February 23, 2009), which complies with the guidelines within Chapter 35A.40.050 RCW. This allows for investment of excess cash and inactive cash, directs that the 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. Oty of Renton, Washington 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 2aT-pools recognized by the Securities and Exchange Commission. A 2aT-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-reglstered mutual funds to use amortized cost rather than fair 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 2a7-1ike 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, 2011, the City of Renton had the following investments: Se~flW Type cost Fair Va~ue Cash Equivalents Local Government Investment Pool (LGIP)$9,890,519 $9,890,519 Investments CeFdflcates of DepGslt (within WPDFC)~4,~,3~2 34,960,382 FNMA ZERO COUPON 99,556 154,634 US TREASURY ZERO COUPON 2,406,901 4,252,115 TOTN. INVF_STMENTS $87,468,839 $3g,3b*7~131 weighted 0.89 0.83 O.01 Cash $48,191,ss2 S 1,764,721 $49,956,603 Restricted Cash Cash Equtva{ents (LGIP)9,890,5:~9 9,890,S~.9 Total Cash & In,aestments $g2~50,286 $6,863,987 $99,214,253 Credit risk. Credit Risk is the risk that an issuer or other counter party to an investment will not ful.fill 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. BoM¢ FinancMI Statements, 4-29 City of Renton, Washington Certificates of Deposit are insured by the FDIC up to $250,000 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 2aT-like-p’ool and is operated in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 2940. ISecurlty Cost Fair Value Moody’s S&P Cash Equivalents Local Government Investment Pool (LGIP)~;9,890,519 $9,890,519 unrated unrated Certificates of Deposit {within WPDPCi 34,960,382 34,960,382 unrated unrated FNMA ZERO COUPON 99,556 154,634 N/A N/A US TREASURY ZERO COUPON 2,406,901 4,262,115 AAA AAA 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 o.f the .failure o.f the counter party to a transaction, a government will not be able to recover the value o.f investment or collateral securities that are in the possession o.f 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 o.f Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude o.f a government’s investment in a single issuer. The City diversifies its investment instruments to avoid incurring unreasonable risk inherent with the over-investment of instruments and issuers as follows: Maximum’s per Policy Maximum Maximum U.S. Treasudes 100./0 100"/= U.S. Agendes 75%50./0 Certificates of Deposit (within WPDPC)75%20"/o Local Governmental Investment Pool (LGIP)75%75% Commercial Paper 25%5% Interest Rate Risk. Interest rate risk is the risk that changes in interest rotes over time, adversely a)~ecting the.fair value o.fon investment. The City’s portfolio is managed within the parameters Basic Financial Statemeats~ 4-30 City o~ Re, ton, Woshlngt~n established by the Investment Policy, which limits the weighted average maturity of the portfolio to five years. NOTE 4. PROPERTY TAXES The 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 evew 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 $3.60 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 lew 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 which restricted 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 was overturned by the courts. However dudng 2007, the state legislature reinstated this limit Comprehensive Annuol Financial Report City o~ Re.ton, Woshlngton with the passage of HB2416. 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. The One Percent Constitution Umit: 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. There is currently no excess levy for General Obligation Bond debt. The City’s regular lew per the King County Assessor’s 2011 Annual Report is 2.83207. NOTE 5, CAPITAL ASSETS AND DEPRECIATION A. GENERAL POUCIES 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 original historical cost when transferred between proprietary and governmental funds.) Intangible assets, either purchased or internally developed, with a cost of $5,000 or more that are identifiable by meeting one of the following conditions: ¯The asset is capable of being separate or divided and sold, transferred, licensed, rented, exchanged; or ¯The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable 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. 2011 Comprehensive Annuol Finrinda/ Report oty of Renton, washington 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. The infrastructure component of GASB 34 for assets acquired after January 1, 1980 was implemented retroactively in 2004. Any gain on the sale of capital assets is recorded in the Statement of Activities as General revenues, Miscellaneous. Donated capital assets are capitalized at estimated fair value of the item at the date of its donation. C. PROPRIETARY FUND CAPITAL ASSETS Capital assets of proprietary funds are capitalized in their respective statement of net assets, net of depreciation. Any gain on the sale of capital assets is recorded in the Statement of Activities as General revenues, Miscellaneous. D. DEPRECIATION AND AMORTIZATION Depreciation on all depraciable assets is provided on the straight-line basis over the following useful lives: Buildings and structures, except utility plant 10-50 years Other Improvements 10-80 years Utility plant 25-75 years Machinery and equipment 3-40 years Amortization on all intangible assets is provided on the straight-line basis over the following useful lives: Eatlmate~ Type of Asset Service Life Computer Software 3-15 years Land Use Rights 3-12 years Patents, Trademarks, Copyright s 3-50 years Other Intangibles with definite useful lives 3-12 years 2011 Comprehensive Annual FlnancJal Repor~Gty of Re,ton, Washington Depreciation and Amortization Expense was charged to functions/programs of the primary government as follows: Govermnenta! A~htFdes Depredatiolt Amortization Total General Government $3,032,791 $158,289 $3,191,080 Public Sefety 974,972 116,690 1,091,662 physical Environment 48,420 48,420 Transportation 3,271,662 3~141 3,274,803 Economic Development 43,989 43,989 Culture and Recreation 1,367,024 5,183 1,372,207 Health and Human Services 307,204 307,204 Internal Sen/ice Funds (Genera{ Governmental)1,682,660 204,674 1,887~334 Fo~|-Governmental Activities $ 10,680~02 $ 536~g7 $11~2,1.6,6g~ TutaI-Buslttess-TypeAd:lvlttes $ 7,671,260 $ 4~296 $ 7,67S,5.~ Basic Financial Statements, 4-34 2011 Comprehensive Annual FinandM Report City o~ Renton, Wo~htng~on E. SUMMARY OF CHANGES apital asset activity for the year ended December 31, 2011 was as follows: 2011 Comprehensive Annual Financial Report City of Re.ton, W~shington At the end of 2011, a total of 47 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 as of December 31, 2011, are as follows: 2011 Comprehensive Annual Rnandal Report C~y of Renton, Washington NOTE 6. PENSION PLANS With 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, P.O. 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 Firefigbter 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 Statements No. 27, Accounting for Pensions by State and Local Government Employers and No. 50, Pension Disclosures, an Amendment of GASB Statements No. 25 and No. 27. Public Emolovees" Retirement System |PERS) Plans 1, 2, and 3 Plan Description PERS 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, 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 2011ComprehenstveAnnuatFinon~olReport City o~ Re~ton, Washington 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. Notwithstandin& PERS Plan 2 and Plan 3 members may opt out of plan membership if terminally ill, with less than five years to live. 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. PERS Plan 1 members are vested after the completion of 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 two percent of the average final compensation (AFC) per year of service, capped at 60 percent. (The AFC is based on the greatest compensation during any 24 eligible consecutive compensation months.) Plan 1 members who retire from inactive status prior to the age of 6S may receive actuarially reduced benefits. The benefit is actuarlally reduced to reflect the choice of a survivor option. A cost-of-living allowance (COLA) is granted at age 66 based on years of service credit times the COLA amount, increased by three percent annually. Plan 1 members may also elect to receive an additional COLA amount that provides an automatic annual adjustment based on the Consumer Price index. To offset the cost of this annual adjustment, the benefit is reduced. PERS Plan 2 members are vested after completion of five years of eligible service. Plan 2 members may retire at age 65 with five years of service with an allowance of two percent of the AFC per year of service. (The AFC is based on the greatest compensation during any eligible consecutive 60-month period.) Plan 2 members who retire prior to the age of 65 receive reduced benefits. If retirement is at 55 or older with at least 30 years of service, a three 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 a cost-of-living allowance is granted (based on the Consumer Price Index), capped at three percent annually. PERS 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 one percent of the AFC per year of service. (The AFC ls based on the greatest compensation during any eligible consecutive 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 were earned after age 44; or after five service credit years earned in PERS 2 prior to June 1, 2003. Plan 3 members are immediateF/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. Plan 3 members who retire prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a three percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the 2011 Comprehensive Annual Financial Report City oJ Renton, Washington 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. Judicial Benefit Multiplier Beginning January 1, 2007 through December 31, 2007 judicial members of PERS were given the choice to participate in the Judicial Benefit Program (JBM). Justices and judges in PERS 1 and 2 may make a one-time irrevocable election to pay increased contributions that would fund a retirement benefit with a 3.5% multiplier. The benefit would be capped at 75% of AFC. Judges in PERS Plan 3 can elect a 1.6% of pay per year of service benefit, capped at 37.5% of average compensation. Members who choose to participate In JBM will accrue service credit at a higher multiplier beginning with the date of their election, be subject to the benefit cap of 75% of AFC, pay higher contributions, stop contributing to the Judicial Retirement Account (JRA), and be given the option to increase the multiplier on past judicial service. Members who do not choose to participate will: continue to accrue service credit at the regular multiplier; continue to participate io JRA, if applicable; never be a participant in the JBM Program; and continue to pay contributions at the regular PERS rate. Newly elected or appointed justices and judges who chose to become PERS members on or after January 1, 2007, or who have not previously opted into PERS membership, were required to participate in the JBM Program. Members required into the JBM program would: return to prior PERS Plan if membership had previously been established; be mandated into Plan 2 and not have a Plan 3 transfer choice, if a new PERS member; accrue the higher multiplier for all judicial service; not contribute to JRA; and not have the option to increase the multiplier for past judicial service. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of June 30, 2010: Retirees and benefldades receiving benefits 76,899 Terminated pla n members entitled to but not yet receiving benefits 28,860 Active plan members vested 105,521 Active plan members non-vested SleO~5 Tota I 262~285 2011 ~omprehensi~e Annual Finoncial Report Gty of Renton, Washington Following is a summary of the number of government employers participating in PERS as of June 30, 2010. Number of Parfictpati~ Emldoyers State Schoo~ Counties/ Other Political Total Plan A~endes Districts Munidpallties Subdivisions Members PERS 1 144 227 158 180 709 PERS 2 179 271 494 944 PERS 3 166 205 302 673 Tota I 489 227 634 976 2~326 Funding Policy Each 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 six percent for state agencies and local government unit employees, and 7.5 percent for state government elected officials. The employer and employee contribution rates for Plan 2 and the employer contribution rate 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. As a result of the implementation of the Judicial Benefit Multiplier Program in January 2007, a second tier of employer and employee rates was developed to fund, along with investment earnings, the increased retirement benefits of those justices and judges that participate in the program. 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, 2011, were as follows: Members not participating in JBM: Contributor PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer*7.25%7.25%7.25% Employee 6.00%4,64%*** * The employer rates include the employer administrative expense fee currently set at 0.16%. ** Plan 3 defined benefit portion only. **= Vadable from 5%to 15% based on rate selected bythe member, 2011 Comprehensive Annual Flnoncta/ Report Oty o~ Renton, Washington Members participating in JBM: Contributor PERS Plan 1 PERS Plan 2 PERS Pian 3 Employer-State Agency=9.75%9.75%9.75%** Employe r-L~cal Govt.*7.25%7.25%7.25%** Employee-State Agency 9.76=/o 9.10%7.50%*** Employee-Lo~t Govt.12.26%11.60%7.50%*** * The employer rates tndude the employer administrative expense fee currently set at 0.16%. ** Plan 3 defined benefit portion only. *** Minimum rate. 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 2011 ~44,457 ~1,496~g92 $261,528 2010 47,133 1,318,045 225,748 2009 71,860 1,826,401 3/2,631 Law Enfor~;ement Officers’ and Ftrefi~hters’ Retirement System |LEOFF| Plans I and 2 Plan Descdptlon LEOFF 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, flrefighters and as of July 24, 2005, those emergency medical technicians who were given the option and chose LEOFF Plan 2 membership. LEOFF membership is comprised primarily of non-state employees, with the Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 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 benefit retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. LEOFF Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of S0. The benefit per year of service calculated as a percent of final average salary (FAS) is as follows: 2011 Comprehensive Annuol Flnoncfal Report Qt7 of Re, ton, Washington percent of Fina~ Term of Sertd=e AveraEe Sala~ 20 or more years 2.0% 10 but less than 20 years 1.5% 5 but tess than 10 years 1.~/o The FAS 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 ten years of service. A cost-of-living allowance is granted (~ndexed to the Consumer Price Index). LEOFF Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members may retire at the age of S0 with 20 years of service, or at age 53 with five years of service, with an allowance of two percent of the FAS per year of service. The FAS is based on the highest consecutive 60 months. Plan 2 members who retire prior to age 53 receive reduced benefits. Benefits are actuarially reduced for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. If the member has at least 20 years of service credit and is age 50, the reduction is three percent for each year prior to age 53. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the Consumer Price Index), capped at three percent annually. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of June 30, 2010: Retirees and benefidarles recei~ng benefits 9,647 Terminated plan members entitled to but not yet receiv~ng benefits 782 Active pla n members vested 13,420 Active ptan members non-vested 3,656 Total 27,505 Following is a summary of the number of government employers participating in LEOFF as of June 30, 2010. State School Coun~es/ ~er Politl~l Total LEOFF 2 8 214 152 374 Funding Policy Starting on July 1, 2000, LEOFF Plan I employers and employees will contribute zero percent as long as the plan remains fully funded, Employer and employee contribution rates are developed by the C}ffice of the State Actuary to fully fund the plan. LEOFF Plan 2 employer and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. All employers are required to contribute at the level required by state law. The Legislature, by means of a special funding arrangement, appropriated money from the state General Fund to 20Ii Comprehensive Annual Flnondol Report City of Renton, Washington supplement the current service liability and fund the prior service cost of LEOFF Plan 2 in accordance w~th the requirements of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. 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, 2011, were as follows: Contributor LEOFF Plan 1 LEOFF P~an 2 Employer=0.16%5,24% Employee 0.00%8.46% The employer rates Indude the employer admln* Istratlve expense fee currently set at 0.16%. Both the City and the employees made the ~equired contributions. The City’s required contributions for years ended December 31, were as follows: Year LEOFF Plan I LEOFF Plan 2 2011 $494 $1,334,049 2010 394 1~278,378 2009 487 1,258,217 Public Safety Employee’s Retirement System (PSERS) Plan 2 Plan Description PSERS is a cost-sharing multiple-employer retirement system comprised of a single defined benefit plan, PSERS Plan 2. PSERS was created by the 2004 legislature and became effective July 1, 2006. PSERS Plan 2 membership includes full-time employees of a covered employer on or before July 1, 2006, who met at least one of the PSERS eligibility criteria, and elected membership during the election period of July 1, 2006 to September 30, 2006; and those full-time employees, hired on or after July 1, 2006 by a covered employer, that meet at least one of the PSERS eligibility crlteda. A "covered employer" is one that participates in PSERS. Covered employers include: State of Washington agencies: Department of Corrections, Department of Natural Resources, Parks and Recreation Commission, Gambling Commission, Washington State Patrol, Liquor Control Board; Washington state counties; and Washington state cities except for Seattle, Tacoma and Spokane. To be eligible for PSERS, an employee must work on a full-time basis and: ¯ have completed a certified criminal justice training course with authority to arrest, conduct criminal investigations, enforce that criminal laws of Washington, and carry a firearm as part of the job; or 2011 Comprehensive Annual Financto/ Report ~ of Re, ton, Washington ¯have primary responsibility to ensure the custody and security of incarcerated or probationary individuals; or ¯function as a limited authority Washington peace officer, as defined in RCW 10.93.020; or ¯have primary responsibility to supervise eligible members who meet the above criteria. PSERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PSERS retirement benefit provisions are established in state statue and may be amended only by the State Legislature. PSERS Plan 2 members are vested after the completion of five years of eligible sdrvice. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 60 with at least ten years of PSERS service credit, with an allowance of two percent of the average final compensation (AFC) per year of service. The AFC is the monthly average of the member’s 60 consecutive highest-paid service credit months, excluding any severance pay such as lump-sum payments for deferred sick leave, vacation or annual leave. Plan 2 retirees who retire prior to the age of 60 receive reduced benefits. If retirement Is at age 53 or older with at least 20 years of service, a three percent per year reduction for each year between the age at retirement and age 60 applies. There is no cap on years of service credit; and a cost-of-living allowance is granted (based on the Consumer Price Index), capped at three percent annually. Membership is PSERS consisted of the following as of the latest actuarial valuation date for the plan of June 30, 2010: Retirees and benefldades receiving benefits 7 Terminated plan members entitled to but not yet receiving benefits Active plan members vested Active plan members non-vested 4,210 Tota I 4f217 Following is a summary of the number of government employers participating in PSERS as of June 30, 2010. Number of Partldpatin~ Employe~ State School Counties/ Other Political Total Plan A~endes Districts Muntdpalities Subdivisions Members PSERS 1:1 65 1 77 Funding Policy Each biennium, the state Pension Funding Council adopts PSERS Plan 2 employer and employee contribution rates. The employer and employee contribution rates for Plan 2 are developed by the Office of the State Actuary to fully fund Plan 2. All employers are required to contribute at the level established by the Legislature. The methods used to determine the contribution requirements are established under state statute in accordance with Chapters 41.37 and 41.45 RCW. Oty o~ Rentan, washington The required contribution rates expressed as a percentage of current year covered payroll, as of December 33., 2011 were as follows: Contributor PSERS Plan 2 Employer* EmpIo’/ee 6.36% The employer rates include the employer administrative expense fee currently set at 0.16°/=. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Year PSERS P]an 2 2011 $21,518 2010 64,909 2O09 73,255 Flreflehter’s Pension Plan Description The 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 benef’~s 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, 2011, there were 34 members in the System: Retirees and beneficiaries receiving benefits 31 Retirees and beneficiaries currentiyreceivlng ful~ retirement through LEOFF 3 Active plan members vested Active plan members non-vested Total 34 Fundin~ Policy Under 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 Fireflghter’s Pension Plan are paid by the Plan. For 2011, this cost was $8,762. An actuarial valuation is done every two years and was completed as of January 1, 2011. The Actuarial Valuation of Firefighters’ Pension Fund table is reported in the Required Supplemental B~sic Financial Statements, 4~45 201.t Comprehensive Annual Financial Report ~ o/Renton, Washington Information section, and a recap of the Schedule of Funding Progress for the last five valuations is as follows: (rounded to thousandsl Valuation Unfunded Actuafl al Date Actuarial Value Actuarial AccruedAcc~ed Uabillttes Funded Janua~ 1 of Assets LJa bilities ( UAAL~Ratio 2001 $7,067 $6,780 $(2871 104% 2003 9,189 6,472 (2,717}142% 2005 7,777 6,254 (1,523)*124% 2007 7,847 6,364 (1,483)123% 2009 8,941 6,517 (2,424)137% 2011 8,940 3,914 (4,576)217% UAAL as a Covered Percentage of Payroll Covered Payroll e/a n/a n/a n/a n/a * A $29 decrease in the actuarial accrued IIab]Hties was made after the Otis financial report was published and before the valuation was released. Significant actuarial assumptions used in the January 1, 2011, valuation include: Valuation date: January 1, 2011 Actuarial cost method: entry age normal Amortization method: 30-year, closed as of January 1, 2000 Remaining amortization period: 20 years Asset valuation method: fair value Actuarial assumptions: 1) investment rate of return - 4%; 2) projected salary increases - 3.75%; 3) inflation - 2.75%; and, 4) cost-of-living adjustments - based upon salary increase assumption for FPF benefits, inflation assumption for LEOFF benefits. 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 Uability 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, 2011, assuming the UAAL is amortized over a closed 30-year period beginning January 1, 2000. 2011 Comprehensive Annual Financial Report City o/ Renton, Washington Annual required contribution (ARC) !.Annual Nomla] CostBeginningofYear 2.Amortization of UAAL Beginning of Yea r 3.Interestto End of Year* 4, ARCatEnd of Year 5.Interest on Net Pension Obligation 6.Adjustment to ARC 7.Annual pension cost(APc) [4+5~] Employer Contributions=* Change In Net Pension Obligation [7-8] Net Pension Obligation at Beginning of Year Net Pension Obligation at End of Year [9+101 Fiscal Year Endin~ (166,142)(166,142){335,034) Assumed interest rate: 4.0% in 2009, 4.0% in 2010, and 4.0% in 2011. Employer contributions for pensions are total contributions to the fund net of disbursements for medical and administrative expenses. The Annual Development of Pension Cost is recapped as follows: Annual Total Fiscal Year Interest ARC Pension Employer Change In EndlnB ARCat EOY on NPO Adjustment Cost . Contributions NPO 12/31/2007 {:109,9~)(~,6ss)(s4,s91)(~4,03B)59,777 (ZS3,Bn} 12/31/2008 (:109,958)(46,349)(67,070)(89,247)66,055 (155,30Z) 12/31/2009 (172,788)(43,291)(74,1781 (141,901)70,327 (212,228) Fiscal Year NPO Amort.Amort, Of Endlng Endinl~Balance (Gatn)(’Loss Factor**lGaln)/Loss Balance [7=6+pW~7][8=1-5]{9][10=pw11/9][1:1=71 12/31/2006 $ {773,166)S (172,609)13.87500 $(44,035)$ (773,166) 12/31/2007 (926,978)(169,74S)54.16300 (54,591)(926,978) :12/31/2008 (1,082,280)(576,023)13.82120 (67,069)(1,082,280) 12/31/2009 (3.,294,508)(243,125):14.59030 (74,578)(I~94,508) 3.2/31/2010 (I,534,555){279,g56)54.13390 (91,589)(1,534,555) 52/31/201:1 (1,934,381)(450,789}:13,65930 (I12,345}(1,934,381} Three year trend information is recapped as follows: Annual Contribution as a Net Pension Fiscal Year EndInl~Pension Cost {APC)Percentage of AFC Oblll~ation (NPO~ December 31, 2009 $(141,901)N/A $(i,294,508) December 31, 2010 (132,979)NiA (1,534,539) December 33, 2015 (297,472]N/A {1,934,381) Basic Finondal Stoternents, 2011 Comprehensive Annual Flnendal Report City of Renton, Washington Employees are not required to make contributions. The contributions to the System for 2011 include $115,054 from fire insurance premiums and $355,380 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 2011, $280,888 was paid for benefit payments and $3,938 for medical payments. The Net Pension Obligation decreased :~399,826 to ($1,934,381) and is included as a non- current asset, in the City of Renton’s Governmental-wide Statement of Net Assets. NOTE 7. OTHER POST EMPLOYMENT BENEFITS Plan Description In accordance with the Revised Code of Washington (RCW) 41.26, the City provides lifetime medical care for members of the Law Enforcement Officers and Firefighters (LEOFF) retirement system hired prior to October 1, 1977. The plan is a closed, single-employer defined benefit healthcare plan administered by the City. Under authorization of the LEOFF Disability Board, direct payment is made for other retiree medical expenses not covered by standard benef’K plan provisions. Financial reporting for the LEOFF retiree healthcare plan is included in the City’s Comprehensive Annual Financial Report. The plan does not issue stand-alone financial statements. An actuarial valuation financial report is prepared by Nicolay Consulting, and may be obtained by contacting the City of Renton, Finance Division, 1055 South Grady Way, Renton, WA 98057. As of December 31, 2011, there were 96 retirees and 3 active employees. Funding Policy Funding for LEOFF retiree healthcare costs is provided entirely by the City as required by RCW. The City’s funding policy is based upon pay-as-you-go financing requirements. The plan member is not required to contribute to the cost of the plan. Annual OPEB Cost and Net OPEB Obli£ation The City’s annual other postemployment benefit (OPEB) cost is calculated based on the annual required contribution (ARC), an amount actuarially determined In accordance with the parameters of GASB Statement 45, The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities over a pedod not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation. Bogie Flnonciol Statements, 4-48 202I Comprehensive Annual Finonda/ Report Oty o.f Renton, Woshingten Fiscal Year Endin!~ Annual required contribution (ARC) Annual Normal Cost (BOY)$20,000 $54,262 ~54,262 Amortlzat~on of UAAL (BOY)*1,905,621 1,679,491 1,704,54~ Interest to End of Year ARCat end of year $1,923,621 $1,733,753 interest on Net OPEB Obltgatlon $24,31I $62,627 Adjustment to ARC 135r78Sl 193e961) Annual OPEB cost 1,9120147 1,702,419 Employer Contributions {1,104,351}(983,868) {~ta nge in Net OPEB Obligation 807~796 7181551 Net OPEB Obligation at BOY $757e876 $lr565e672 Net OPEB Obligation at EOY $ 1,565,672 $ 2,284,223 1,758,806 78,799 (!2o,63sl 1,716,97o (875,699) 841,271 2,284,223 3,125,494 *Unfunded Actuarial Accrued Uability (UAAL) The Net OPEB Obligation of $3,125,494 is included as a noecurrent liability on the City of Renton’s Governmental-wide Statement of Net Assets. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2011 and the two preceding years were as follows: Percentage of Annual Employer OPEB Cost Net OPEB Year OPEB Cost Contribution Contributed Obligation 2009 ~;1,912,147 S 1,104351 57.75%$1,565,672 2010 1,702,419 983,868 57.79%2,284,223 2011 1,716~970 875,699 51.001 3,125,494 Funded Status and Funding Progress As of January 1, 2011, the most recent actuarial valuation date, the plan was 0% funded. The accrued liability for benefits was $27,835,211 and the actuarial value of the assets was $0 resulting in an unfunded actuarial accrued liability (UAAL) of $27,835,211. The covered payroll was $434,132, and the ratio of the UAAL to the covered payroll was 6411.70 percent. Net assets of $5,342,695 restricted in the insurance Fund for the purpose of funding a portion of the UAAL. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. B~slc Finclnd~l Statements, 4=49 2011 Comprehensive Annual Flnenczol Report Ctty of Renten, Washington The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents mufti-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term voietility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. The January 1, 2011 actuarial valuation report was prepared using the projected unit credit method. The actuarial assumptions used included a 4.00% discount rate, which is based upon the long-term investment yield on the investments that are expected to be used to finance the payment of benefits. The following health care trend rate assumptions were used: I~pe~ed Almual Ir~ease In Heal61 Care ~J~st Medicare Nursing Dental and Year Medical Part B Home Vision 2012 7.6%7.6%4.0°/o 2.0% 2013 7.3%7.3%4,0%2.0% 2014 7.0°/o 7.0%4.0%2.0% 2015 6.7%6.7%4.0%2.0% 2016 6.4%6.4%4.0%2 2017 6.11 6.11 4.0%2.0% 2018 5.8%5.8%4.0%2.0% 2019 +5.5%5.5%4.0%2.01 The UAAL is being amortized based on a level dollar amortization over a closed 30 year-period that began in 2008 at the assumed discount rate. NOTE 8. CONTINGENCIES The 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 Provisions The 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. Bosic Fleoeciol $tGternents, 4-50 City of Renton, Washington Bond Indentures The City is in compliance with all significant bond indentures and restrictions. Leases The City also leases office facilities for the City Attorney’s office. Total cost for this lease was $90,000 for the year ended December 31, 2010. The lease term ends December 31, 2011. The City has extended the lease for one (1) additional year. The future minimum lease payments for 2012 are $90,000. Construction Commitments Refer to Note S. NOTE 9. RISK MANAGEMENT The City of Renton is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; lnjudes to employees; and natural disasters. The City of Renton protects itself against unforeseen losses by utilizing a thr:ee-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: City ol Re~ton, Washington T~fpe of Cover~e Propel~y - Expiresolio1/z01z R~k Retention OcoJ~ence sub-limits) Uability- Expires $250,000 $20,000,000 WA Cities Ins O1/01/2012 (per occurrence)Authority Expires 1/01/2012 1/01/2012 Casualty There is a 4-hour utility interrup~ion clause, prior to the deductJble becoming applicable. For policy term January 1, 2012 to January 1, 2013, there were no reductions in insurance coverage and an increase in premiums; however, 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 cries 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 150 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, stop gap, and employee benefits liability. Limits are ~4 million per occurrence self insured layer, and ~>16 million per occurrence in the re-insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits are $20 million per Basic Financial Statements, 4~52 2011 Comprehensive Annuol FInanclo! Report City of Renton, Washington 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 ~;500,000 for all perils other than flood and earthquake, and insured above that amount by the purchase of insurance. 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, WClA 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 WClA, 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 WClA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WClA. 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, 2011, the City had accrued the following amounts for outstanding claims: Total Gaims Payalde Coveralp 12/31/2011 PmperW & liabIlIW $641,640 Worker’s compensation 613,65S Employee health 1~186r900 BOSI¢ Fingncial Statements, ~I-53 City o~ Renton, Washington Propel~f &Worker’s Em p~o~ee 2010 IJaldllt~Compensat~o~Health Totals ]BNR claims at beginningofthe year ~332,713 $830,652 ~;1,895,494 $2,998,859 Cur~entyearand changes In estimates 1,961,920 738,167 10,166,~.74 12,866,261 C~aims payments 1i~597~10Z)(871,939~(10~102,589)(12~571,630) IBNR claims at eltd of the year ~697~gl $6~6~880 $1~,079 $3~9S,490 NOTE 10. INTERFUND TRANSACTIONS lnterfund 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 - Troansactions 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. Bosic FInoncJ~l Statements, 201~ Comprehensive Annual Financia! Report CJty of Renton, Washington The following is a recap of interfund balances for 2011 at the fund level for the purpose of reclassifying revenue/expenditures between funds: General Fund ~44,0~9 $73,545 General Debt Service Fund - Tranportation Impact Fund 747 Munldpal Facilities Fund 10,822 1,01! Capita{ improvement Fund 39,73E Airport 7,441 Solid Waste 38,025 Waterworks Utility Fund 43,10( subtotal Enterprise Funds $45,4~6 $43,10( information Tech nolo~y 17,500 At the government wide level, the following interfund balances occurred for the purpose of reclassifying revenue/expenditures between activities: D~ From Due To Fund Other Flmds Other Funds General Fund S 4,328 $7,44~ Transportation Mitigation Fund 747 Airport 7,441 Waterworks Utility Fund 5,07E TOT~$~StS $tZarS The following is a recap of interfund loans for 2011 at the fund level for capital improvement purposes: General Fund $2,216,48~ $ Basic Finandal Statements, 4-55 City of Ronton, Washington At the government wide level, only one interfund loan occurred for capital improvement: General Fund TOTAL The following is a recap of interfund transfers for 2011 at the fund level: Fund General Fund Arterta I Street Fund One Perfcent for Art Fund General Debt Service Fund CommunltySer~lces Impact Mitigation Fund Fire Impact Mitigation Fund Transportation impact Mitigation Fund Municipal Facilities Fund Capital improvement Fund Subtotal Governmental Funds Airport Golf Course Solid Waste Waterworks Utility Fund Tranfers $15,42C 529,056 61,352 Transfers oat 2,268,329 620,000 529,056 650,000 76,7722,010,822 1,270,00C 8,848 656 26,844 $lSO,4~ $sz3 ~0~ Comprehensive Annual Finandal Report C~ty o~ Renton, washington At the government wide level, the following transfers occurred: Fund Airport Golf Course Solid Waste Waterworks Utility Fund Equipment Rental Information Settees TOTAL Tranfers Tramfe~ 656 26,844 23,526 13,928 sT,~s4 ~ 37,~4 NOTE 11. NETASSETS The 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. Restricted net 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 net 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 governmental activity net assets are as follows: Unrestricted net assets represent unrestricted liquid assets. Unrestricted Governmental Activities have committed and assigned designations that reflect the City Council and management’s plans and commitments to expend resources for certain purposes in future periods. Funds with committed designations reflect amounts constrained by the City Council, either through formal budget adoption or other purposes formally approved by the 2011 Complehenslve Annual FinanQal Report Council. Amounts with assigned designations reflect all amounts remaining in governmental funds, other than the general fund, not classified as nonspendable, restricted or committed. Assigned amounts also include year-end encumbrances that have received approval from the City Council and re-appropriated in the following year’s carry forward budget. The City’s financial policies require a maximum amount of 12% and minimum of 8% fund balance to remain in the general fund for cash flow purposes. Unrestricted governmental net assets are classified as follows: NOTE 12. PRIOR PERIOD ADJUSTMENTS Business-Type Activities A prior period adjustment of $1,066,493 was made to reduce revenue and receivable balances for Special Assessment District principal. This amount is for outstanding principal not due to the City until the effected property owners take action to connect to the wastewater system. In prior years this outstanding amount was recorded as a revenue and receivable. NOTE 13. LONG TERM DEBT The City of Renton’s long-term debt consists of General Obligation Debt, repaid mainly from general governmental revenue sources, Proprietary Debt, repaid from proprietary revenues and compensated absences/other post employment benefits. 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. Compensated absences and other post employment benefits are generally liquidated mainly from the general fund and to a lesser extent, the internal service funds. Oty of Renton, Washington Outstanding debt issues as of December 31, 2011 are as follows: Type of Debt GOVERNMENTAL DEBT: Eennral ObligaUon Bonds: Limited: 2002 GO Bonds 2006 GO Bonds 2010 GO Refunding Bonds 2011 GO Library Bonds 2011 GO Refunding Bonds SUBTOTAL UMITED GO Other Miscellaneous debt - Intergovemmerltal, Backed by fall faith and credit of the Gty: 2009 FD 40 Loan for acquisition of FS13 2009 (A) SCORE Tax Exempt 2009 (B) SCORE gABS 2010 GO Valley Comm Refunding Bonds SUBTOTAL MISCELLANEOUS TOTAL GOVERNMENTAL-TYPE DEBT ISSUANCE BUSINESS-TYPE DEBT: Revenue Bonds: 1998 Water/Sewer Refundi ng 1999 Golf System Refunding 2002 Water/Sewer 2003 Water/Sewer Refunding 2004 Wa te r/Sewn r 2007 Water/Sewer 2007 Water/Sewer Refunding 2008 Water/Sewer Revenue {a) 2008 Water/Sewn r Revenue {b) I’OTAL REVENUE BONDS Public Works Trust Fund Lo~ns: Sierra Heights Sewer Improvements Central Renton Sewer Replacement East Renton Interceptor Dayton Avenue NE NE 27th/Aberdee~ Drainage Improvements East Kennyda[e ~nterceptor Honeycreek Interceptor Corrosion Control Treatment Fadiittes Maplewood Water Treatment Improvement Construct CT Pipeline for Wells Map]ewood Water Treatment Improvement TOTAL PUBMC WORKS TRUST FUND LOANS TOTAL BUSINESS-TYPE DEBT ISSUAN(~E Issued Matur;ty Original Issuedinterest Rates Date Date Amount 2.50%-5.00%07/15/2002 12/01/2022 5 3,895,000 4.25%-5.00%08/08/2006 12/01/2028 17,980,000 3.00%-4.50%O5/11/2010 12/01/2021 6,170,000 2.00%-5.00%08/02/2011 12/01/2022 16,715,000 2.00%-5.00%09/21/2011 12/01/2017 9,425,000 54,185,000 3.75%03/01/20~9 09/01/2028 6,798,085 4.00%-5.00%11/04/2009 01/01/2022 2,953,800 3.00%-6.62%11/04/2009 01/01/2039 28,090,800 3.00%-4.*00%04/05/2010 11/01/2015 99,092,68S 4.46%03/01/1998 06/01/2013 6,120,000 4.96%O4/01/1999 12/01/2015 5,040,000 4.80%07/01/2602 12/01/2022 11,980,000 3.20%O911512OO3 06101/2013 8,035,000 4.33%21/O1/2004 12/01/2027 10,335,000 4.00%-5.00%11/06/2007 12/01/2022 2,430,000 4.00%-5.00%11/06/2007 12/01/2022 8,320,000 4.17%O1/04/2008 12/01/2027 9,975,000 4.17%01/04/2008 22/01/2016 2,03S,000 83,270,000 2.00%01/20/1992 07/01/2012 888,462 1.00%05/04/1993 07/01/2015 1,631,800 1.00%06/O7/1993 07/01/2013 2,542,704 2.00%0S/12/1994 07/01/2014 96,958 1.00%O5/15/1995 07/01/2015 731,000 2.00%01/24/1998 07/01/2016 2,093,740 2.00%12/04/1995 07/01/2016 1,B40,568 1.00%01/06/1997 07/03/2017 1,106,000 0.~0%01/22/2002 07/01/2021 567,831 0.56°/0 11/65/2002 07/01/2022 814,527 0.50%06/03/2004 07/01/2024 5,150,000 17,463590 80,733,590 173,826o275TOTAL AMOUNT iSSUED ON OUTSTANDING DEBT AS OF D ECEMBER 31, 2011 B~sic Financial Stetements, 4-59 2011 Comprehensive Annual Financial Report City of Re~Iton, Washington Outstanding debt additions and retirements are summarized as follows: Ge~r~m"a I 6oventmental Debt 01/01/2011 Add~ons Dedsdfm~ 12/31/2011 Yem" Umited Genend Ob~igmJ~m Debt 2001GO Refunding Bonds $11,350,000 ~$11,350,000 2002 GO Bonds 2,690,000 175,0~0 2,515,000 200,000 Unamortized (discount)/premium 565r612 2/268r269 130374 2~70~407 - T~I Limited 60 Bonds 36~990~B12 28,408~169 12.405pT/4 S2.q93,407 e~d w~ fd~ faith and ~e~t of Vne (~y 2009 (B) SCORE BAgS 28,090,800 28,090,800 Total Miscellaneous 38~11e875 4581236 38t0~]fE~9 47~17 "ola] General Obfl~a~on Debt 7~p~,48"/2~,408~169 12~63,610 R1,047,046 4,112,517 Employee Leaw Benefits (Comp. Absences}5,248,382 3,020502 2,991578 5,277,306 3,008,0~4 Gther post-employment benefits payable 2,284~223 1,716,970 875,699 3,125,494 Total~’emmentalDebt $83~O~g, OgZ $=ra~145,640 $1B,730~887 $ 99f449,846 S 7~120r5~i 20ti comprehensive A~nua! FInandal Report Q’ty o~ Renton, Washington Outstanding debt additions and retirements are summarized as follows (continued): DEEP DISCOUNT DEBT As of December 31, 2011, the City of Renton has no deep discount debt outstanding. SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT As of December 31, 2011, 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 I 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 BoSlc Finonct~l Statements, 2011 ComprehenshR Annuof Financial Report Oty o~ Rentofl, Washington 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. ARBITRAGE The City engages an outside agency to calculate its’ arbitrage rebate liability on outstanding tax- exempt bonds and certificates of participation under Section 148(f) of the Internal Revenue Code. No additional rebate was found due for any revenue or general obligation bonds for 2011. ISSUED/REFUNDED DEBT On August 2, 2011, the City issued ~16,715,000 in Limited Tax General Obligation (LTGO) Bonds with an average interest rate of 3.72%. The proceeds were used to finance all or a portion of the costs of acquiring land for and constructing, improving, and equipping two new public library facilities and repairing, renovating and improving existing library facilities; providing the form and terms oftbe bond. On September 21, 2011, the City issued ~9,425,000 in Umited Tax General Obligation Refunding Bonds with an average interest rate of 3% to advance refund $9,950,000 of outstanding 2001 Limited Tax General Obligation Bonds. The net proceeds were used to purchase U.S. government securities which were deposited with an escrow agent to provide for all future debt service payments on the refunded bonds. AS a result, these bonds are considered defeesed. The advance refunding resulted in a reduction in the aggregate debt service payments of ~;1,402,171 and a present value gain of ~1,348,396. On May 30, 2011, the City issued $700,000 in an interfund loan (from General Fund to Capital Improvement Fund) with an average interest rate of 2.25% to help finance a portion of the remaining costs for the Southwest 27th Street/Strander Boulevard Connection Project. The interfund loan will be fully repaid on May 30, 2016. In prior years the City defeased certain bond issues by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City’s financial statements. The schedules of assets, liabilities, and net assets of the City’s escrow accounts as of December 31, 2011 are provided in the following table. BClSlC Flnonciol Stotements, 4~62 City of Renton, Washington ANNUAL DEBT SERVICE REQUIREMENTS The annual debt service requirements to maturity, including principal and interest, for long- term debt as of December 31, 2011, are as follows: Goverm~ental Ac~vitles amlness-Type Year Pdndpal Interest Fdndpal InteRst AMOUNT AVAILABLE FOR DEBT SERVICE Fund balances that have been reserved for debt repayment are ~1,032,361 in the general governmental funds. OPERATING LEASES The City has Golf Course Operating Lease agreement for the amount of ~87,800 and dated June 2007. This lease is for the purchase of 50 Club Car Golf Carts. The lease qualifies as an operating lease for accounting purposes because the individual cost of each golf cart is below the City’s capitalization threshold of $5,000. Payments are made monthly at an interest rate of 5.25%. The debt service for this lease is accounted for In the Municipal Golf Course System Fund (404). As of December 31, 2011, the City made its final payment and has a remaining balance of zero dollars. NOTE 14 - DEFERRED CHARGES IN PROPRIETARY FUNDS As of December 31, 2011, the total amount of deferred charges and other assets reported in the proprietary funds is $470,561. 100% of this amount is reported in the Waterworks Utility Fund and is for debt issuance costs related to the 2002-2008 Revenue Bonds. This amount will be fully amortized by 2027. NOTE !5. SEGMENT INFORMATION An 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 2010. Boslc Financial Statements, City oJ’ Re~ton. Woshlngton NOTE 16. JOINTVENTURES A 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 two joint ventures. VAU.EY COMMUNICATIONS CENTER The Valley Communications Center (Valley Comm) 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 bythe provisions and terms ofthe 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 pedods. 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 financial information as of December 31, 2011 related to Valley Comm: Completed Financial Statements for Valley Comm can be obtained from the Valley Communications Center, 23807 -98th Avenue South, Kent, WA 98031. 2011 Comprehensive Annual Financial Report Qty of Renton, Washington ~OUTH CORRECTIONAL ENTITY (SCORE) The South Correctional Entity (SCORE) consolidated correctional facility was established February 25, 2009, when an Interlocal Agreement (the "Original Intedocal Agreement") was entered into by seven participating municipal governments, the "Member Cities" of Auburn, Burien, Des Moines, Federal Way, Renton, SeaTac and Tukwila, under the authority of the "lnterlocal Cooperation Act" (RCW 39.34). This "Original Interlocal Agreement" was amended and restated October 1, 2009 and named the City of Des Moines as the "Host City" and the remaining Mer~ber Cities as "Owner Cities". This interlocal agreement is known as the "Formation Intedocal Agreement". Pursuant to a separate "Host City Agreement" dated October 1, 2009, the Host City will not enjoy the same equ~/position as the Owner Cities until all debts issued are paid and the Host City fulfills all of its obligations as outlined in the Agreement. SCORE, an governmental administrative agency pursuant to RCW 39.34.030 (3), has the power to acquire, construct, own, operate, maintain, equip, and improve a correctional facility known as the "SCORE Facility" and to provide correctional services and functions incidental thereto, for the purpose of detaining arrestees and sentenced offenders in the furtherance of public safety and emergencies within the jurisdiction of the Member Cities. The SCORE Facility may serve the Member Cities and Subscribing Agencies which are in need of correctional facilities. Any agreement with a Subscribing Agency shall be in writing and approved by SCORE as provided within the SCORE Formation Interlocal Agreement. Financing for the acquisition, construction, equipping, and improvement of the SCORE Facility will be provided by bonds Issued by the South Correctional EntRy Facility Public Development Authority (the "SCORE PDA"), a public development authority chartered by the City of Renton pursuant to RCW 35.21.730 through 35.21.755 and secured by the full faith and credit of the Cities of Auburn, Buden Federal Way, Renton, SeaTac, and Tukwila (the "Owner Cities"). The SCORE PDA issued $86 million In special obligation bonds in 2009 to carry out the facility development project. The following is a summary of the debt service requirements for the bond issue: 2011 Comprehensive Annual Ftnondal Report Q~Y o1Rento~, Washington The City of Renton reports its share of equity interest in the Governmental Activities column within the Government-wide financial statements under non-curreet assets. The following is condensed financial information as of December 31, 2011 related to SCORE: South co~e~onal ~nt~ (SCO~E) Completed financial statements for SCORE and SCORE PDA can be obtained from the SCORE office, City of Renton, 1055 South Grady Way, Renton, WA 98057. NOTE 17. SUBSEQUENT EVENTS . There were no significant subsequent events that occurred after the end of the reporting period and before the issuance of the financial statements. 2011 Comprehensive Annua/ Flnancial Report City of Renton, Woshington REQUIRED SUPPLEMENTARY IN FORMATON SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - GENERAL FUND For the Year Ended December 31, 2011 REVENUES Taxes General 8overnment Judicial Public safeW Physical e~mnment Economic en~ronment BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 2,642,987 2,400,645 2,665,983 265,338 8,901,802 11,558,406 10,534o331 (1,024,075) 3,912,697 3,934,697 3,860,290 (74,407) 3,168,351 3,168,351 3,150,326 (18,025) 3,314,653 3,673,171 3,057,642 (615,529) i00,000 168,875 192,699 23,824 477,730 237,543 366,332 128,789 676,329 676,329 646,868 (29,461) 94,251,824 96,956,358 95,918,333 (i,038,035) 10,228,422 11,129,091 10,598,389 (530,702) 2,466,177 2,495,676 2,563,989 68,313 52,110,67i 53,388,852 52,986,589 (402,263) 2,453,387 2,435,235 2,048,971 (386,264) 8,282,944 8,250,976 8,018,267 (232,709) 5,977,163 7,198,248 5,876,231 (1,322,017) 528,610 539,236 511,934 (27,302) 10,510,896 10,572,271 10,215,229 (357,042) 267,559 89,882 " 78,089 (11,793) 700,000 (700,000! 92,825,829 96,799,467 92,897,~88 (3,901,779) 1,42s,~5 156,~01 3.020,~5 2,8~,74~ 15,420 15,420 (2,008,000)(2,243,707){2,268,329)24,622 5OO 5OO (2,OO8,000)(2,228,287)(2,252,409}25,122 EXCESS (DERC~ENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer In Transfer (out) Sale of capital assets TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 Pdor Fried Adjustment FUND BALANCES JANUARY i RESTATED FUND BALANCE DECEMBER 31 (582,005}(2,071,386)768t236 2,888,866 10,895,379 14,980,540 (14,980,~40) 14,980,540 14,980,540 10,895,379 $14,980,540 ~14,980,540 $ 10,313,374 ~12,909,154 $15,748,776 $2,839,622 NOTE TO THE REQUIRED SUPPt FMENTARY INFORMATION NOTE 1: Budget and actual information is presented on a GAAp basis of accounting. Required ~Jpplementary Information, 2011 Comprehensive Annual Financial Repot Gty of Ret~ton, Washing’ton FISCAL YEAR ENDING REQUIRED SUPPLEMENTARY INFORMATION ACTUARIAL VALUATION OF FIREFIGHTERS’ PENSION FUND EMPLOYER CONTRIBUTIONS December 31, 2Oll ANNUAL FIRE TOTAL REQUIRED PERCENTAGE EMPLOYER INSURANCE EMPLOYER CONTRIBUTION OF ARC CONTRIBUT]ONS*PREMIUMS CONTRIBUTIONS (ARC)CONTRIBUTED December 31, 2006 $(18,753)$77,821 ~59,068 $(113,541}N/A December 31, 2007 (25,285)85,062 59,777 (109,968)N/A December 31, 2008 (19,894)85,949 66,055 (lOO,968)N/A December 31, 2009 (36,296)106,623 70,327 (172,788)N/A December 31, 2010 (5,618}112,686 107,068 (172,788)N/A December 31, 2011 (12,7OO)115,064 102,354 (348,435)N/A Employer contributions for pension are total contributions to the Fund net of disbursements f~om the Fund for medical expenses under RCW 41.26.150 and administrative expenses. Required Supplementary Information, 5-2 2011 ~mprehensive Annua/ Flnancial Report VALUATION DATE Januaw 1, 20~3 Januray 1, 20~.0 Januray 1o 201:[ REQUIRED SUPPLEMENTARY IN FORMATION LEOFF 1 RETIREE MEDK~AL BENEFITS SCHEDU LE OF FUNDING PROGRESS December 31, 2011 UNFUNDED UAAL AS A ACTUARIAL ACTUARIAL ACTUARIAL PERCENTAGE VALUE OF ACCRUED ACCRUED FUNDED COVERED OF COVERED ASSETS LIABIUTES UABILITIES RATIO PAYROLL PAYROLL $32,331,107 32,331,107 0%$ 411,952 7848.27% 27,985,358 27,985,358 0%414,264 6755.45% 27,835,211 27,835,211 0%434,132 6411.70% Required Supplementary Informotion, 20II Comprehensive Annuo! Financial Report This page intentionally left blank. Qty of Renton, Woshlngto~ Required Supp}ementary InformotJon, 5-4 2011 Comprehensive Annu~! Rnancial Report City o~ Renton, Washington Non-Major Governmental Funds Special Revenue 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. HOTEL/MOTEL TAX FUND Accounts for monies collected through an increase of 1% 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. 1% FOR ART FUND The City of Renton established this fund to account for one percent of construction project actual costs to be used for the selection, acquisition and/or installation of works of art to be placed in, on, or about City public facilities. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. SPRINGBROOK WETLANDS BANK FUND The City of Renton established this fund in 2007 for the purpose of providing accounting for the Springbrook Creek Wetland and Habitat Mitigation Bank project. The fund will receive revenue by selling Wetlands Credits to third parties and to the City’s internal departments. Combining Statements & Schedules, 2011 Comprehensh~e Annual Rnancial Report Qty o~ R~ton, Washington Debt Service Funds GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND This debt service fund accounts for the following outstanding debt issues: 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. ¯2002 limited tax general obligation bonds which provided funding for the construction of a new fire station. ¯2006 limited tax general obligation bonds which provided funding for the construction of South Lake Washington infrastructure improvements. 2009 intergovernmental debt related to the Fire District #40 asset transfer as a result of the Benson Hill annexation. 2010 intergovernmental refunding debt which refunded a portion of the 2000 intergbvernmental debt for the construction of a new facility for Valley Communications Center. ¯2010 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation bonds for the construction of a downtown parking facility. ¯2011 limited tax general obligation bonds which, funded the development and construction of 2 new libraries. 1997 UMrl~D GO BONDS - CiTY HALL This debt service fund accounts for the following outstanding debt issue: 2011 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. 201i Comprehensive Annuo! Financial Report Oty o.f Renton, Woshington Capital Project Funds COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. FIRE IMPACT MmGATION 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. SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUND The 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 which provide for the design, construction, labor wages and beneftts, and equipment required to implement the project. 2011ComprehensNeAnnualRnanciolRepoR City of Renton, Washlngto~ Non-Major Proprietary Funds Enterprise Funds AIRPORT FUND The Airport Fund accounts for revenues and expenses for 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. The fund accounts for the operation, maintenance, debt service, and capital improvements of the facility. Internal Service Funds EQUIPMENT RENTAL The Equipment Rental Fund accounts for the costs of maintaining and replacing all City vehicles and auxiliary equipment, except for fire apparatus and replacement of police patrol vehicles. In addition, this fund accounts for the City’s information technology, facilities and communications costs. All costs, including depreciation, are factors in calculating the rates that 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, worke.r’s compensation, unemployment compensation, and the health care program. Expenses are paid from the insurance Fund and rates are charged to departments based on use and/or coverage requirements. 2011 Comprehensive Annual Flnoncial Report ASSETS Cash & cash equivalents Investments Customer accounts Ioterfund loans receivable Due from other 8overnmenta~ units TOTAL ASSETS UABILiTIES AND FUND BALANCES Accounts payable Total liabilities Fund balances Committed Assigned TOTAL UABILITIES AND FUND BALANCES Or,/oJRenton, Washfngtan COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Page 1 of 6 SPECIAL REVENUE FUNDS ARTERIAL HOTEL ETREET MOTEL T~X PATHS & TRAILS 99.099 $152,628 $2,077 58,493 90,088 1,226 841 30,473 274,030 12 3,315 254t974 99,030 3~15 254,974 274,030 3~315 254,974 $274,030 $3,315 2011 Comprehensive Annual Rnondol Report ASSETS Cash & cash equivalents Investments Customer accounts Inteffund loans receivable Due from other governmental units TOTAL ASS ETS U~ILErIES AND FUND BALANCES Accounts payable Retalnage payable Total liabilities Fund balances Total fund balances TOTAL LIA81LITIES AND FUND BALANCES ~t~ of Re.ton, Washington COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Page 2 of 6 SPECIAL REVENUE FUNDS 1% FOR CABLE COMM. ART & DEVELOPMENT SPRINGBROOK TOTAL WETLANDS SRF 76,554 $136,075 $415,814 $882,247 45,186 80,318 245,433 520,744 1,5~0 1,500 447 728 2,311 5,721 126,473 122,187 218,621 663,558 1,536,685 100,000 275,000 121,687 87,470 663,558 1,230,034 121,687 187,470 653s558 1,505,034 122,187 $218,621 ~663,558 $1,536,685 2011 Comprehensive A~nuo{ Fin(zncf~l Report Gty o~ Renton, Washington COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Page 3 of 6 GENERAL TOTAL DEBT DSF ASSETS Cash & cash equivalents ~647,210 $647,210 Investments 382,013 382,013 Receivables (net of allowances): Special a~sessments 8,076 8,076 Due from other gnvemmental units 1,953,223 1,953,223 TOTAL ASSETS 2,990,522 2,990,522 LIABILITIES AND FUND BALANCES Uabi[ities Accounts payabte $5,454 $5,454 Deferred revenue 1,952,708 1,952,708 Total liabiiffie$1,958,162 1,958,162 Fund balances Nonspendabie Restricted 1,032,360 1,032,360 Committed Unassigned Total fund halances 1,032,360 1,032,360 TOTAL UABILITIES AND FUND BALANCES ~2,990,52;2 $2,990,52~2 2011 Comprehensive Annual Rnonc~el Repor~ ASSETS Cash & cash equivalents Investments Receivables (net of allowances): Accrued Interest & penalty Interfund loans receivable Due f~om other governmental units TOTAL ASSETS UABILIT~ES AND FUND BALANCES Uabllities Deferred revenue Total liabilities Fund balances Restricted Committed Assigned Unassigned Total fund balances TOTAL UABILITIES AND FUND BALANCES Gty o~ Re, ton, Washington COMBINING BAU~CE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Page 4 of 6 C.D. IMPACT FIRE IMPACT TRANS. IMPACT SO LK WA INFRA- MITIGATION MITIGATION MITIGATiO N STRUCTURE 924,548 $934,59~~410,756 $33,076 545,711 551,6~4 242,447 19,523 19,279 4,796 6,435 3,986 193 747 1,475,055 1,492,678 677,215 52,792 19,279 400,000 280,000 52,024 1,075,055 1,492,678 377,935 768 1,475,055 1,492,678 657,936 52,792 ~or~blning Stotements & Schedules, 6-8 2011 Comp~eher~lve Annum Financial Report COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31,~011 Page 5of 6 ASSETS Cash & cash equivalents Investments Receivables (net of allowances): Accrued interest & penalty lnterfund loans receivable Due from other governmental units TOTAL ASSETS LIABILITIES AND FUND BALANCES Deferred revenue Fund balances Committed Unasdgned Total fund balances TOTAL LIABIUT~ES AND FUND BALANCES TOTAL CPF 2,302,979 1,359,325 19,279 15,410 747 3,697,740 19, 279 732,024 2°946,437 3,678,461 3,697,740 Oty of Renton, Washington ASSETS Cash & cash equivalents Receivables (net of allowances): [nterrund loans receivable Liabilities Accounts payable Fund balances Restricted Total fund balances Gty of Renton, woshington COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Page 6 of 6 TOTAL TOTAL SRF DSF TOTAL OTHER TOTAL GOVERNMENTAL CPF FUNDS 882,247 ~647,210 ~2,302,979 ~3,832,436 520,744 382,013 1,3S9,325 2,262,082 ~,500 8,076 1,500 19,279 19,279 8,076 15,410 21,131 747 2,080,443 3,697,740 $8,224,947 31,151 500 5,454 1,958,162 -$36o00S 50O 19,279 1,971,987 1,505,034 1,032,360 1,032,360 2,990,522 1,032,360 732,024 1,007,024 2,946,437 4,176,471 3,678,461 6,215,855 3,697,740 $8,224,947 Combining ste~ements & Schedules, 6-10 2011 Comprehensive Annual Financial Report Gty of Renton, Woshington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES REVENUES Taxes Ucenses and permits Int er6ovemmental revenues Contflbut~ons Interest Miscellaneous revenues TOTAL REVENUES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Page i of 6 SPECIAL REVENUE FUNDS ARTERIAL HOTEL,/ STREET MOTEL TAX PATHS & TRAILS 502,347 65,000 2,034 1,199 17 504,381 277,949 27 245,201 245,201 504,381 32,748 17 (62oo~0) 1620,000) EXPENDrrURES Current: General government Economic environment Culture & recreation CapRal outlay TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES} Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 370,593 241,282 3,298 370,593 $241,282 ~3,298 254,974 $274,030 $3,315 Combining Stoternents & schedules, 6-11 2022 Comprehensive Annual Finanrdal Report City of Remton, Washingtot~ COMBINING STATEMENT OF RE.V. ENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended December 3/, 2011 Pa6e 2 of 6 REVENUES Taxes Ucenses and permits Intergovemmental revenues Contrlbutlons Interest Miscellaneous revenues TOTAL REVENUES 1% FOR CABLE COMM.SPRINGBROOK ART & DEVELOPMENT WETLANDS TOTAL SRF -$4o,ooo $-~ 48,763 623 1,050 3,231 1,584 623 91,397 3,231 S02,347 65,000 8,154 1,584 877,598 EXPENDITURES Cun-ent: General government Economic environment Culture & recreation Capital outlay TOTAL EXPEND~JRES 295 76,744 15,425 15,720 76,744 295 245,201 76,744 15,425 337,665 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) 115,097)14,653 3,231 539,933 (62o,ooo1 (62o,ooo} NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 (15,0971 14,653 3,231 (80,067) 136,784 172,817 660,327 2,585,101 121,687 $187,470 $663,558 ~1,505,034 Combining Statements & Schedules, 6-12 OtyofRenton, Wachtngton COMBINING STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES tN FUND BALANCE OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Page 3 of 6 REVENUES Taxes Int er~overnmental revenues Interest TOTAL REVENUES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer In Refunding bonds issued Premium on ~neral obligat~on debt Paymellt to refunded bond escrow agent TOTAL OTHER FINANCE SOURCES (USES) GENERAL 1989 UGO BOND TOTAL DEBT REDEMPTION DSF 30~134 309,134 2,783,237 2,783,237 2~376,944 2,376,944 5,160,181 5,160,181 (843,867)(849,867) 529,056 529,056 9,425,000 9,425,000 862,616 862,616 (9,9S0,000)(9,950,000I 866,672 866,672 NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY I FUND BALANCE JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 22,805 22,805 1,009,555 1,009,555 1,009,555 $-$1,009,555 1,032,360 ~-$1,032,360 20ii Comprehensive Annual Finanda/ Report COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended Decemher 31, 2011 Page 4 of 6 IMPACT FIRE IMPACT TRANS. IMPACT MITiGATiON MITIGATION MITIGATION REVENUES Charges for services 63,560 83,803 182,713 Interest 6,697 9,117 5~374 TOTAL REVENUES 70,257 92,920 188,087 EXPENDITURES CuTrent: Transportation Culture & reo’eation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in Transfer Ir~Ut) TOTAL OTHER FINANCE SOURCES (USES) 70,257 92,920 1~8,087 61,352 (529,056) (650,000) ~1,~S2 (529,056)(~SO, O00) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 131,609 (430,136)(461,913) 1,343,446 1,928,814 1,119,849 1,475o055 $1,492,678 $657,936 Combintt~g Stgternents & Schedules, 6~14 2011 Comprehensive Annual Ftnoncia! Report COMBiNiNG STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31. 2011 page5 of 6 ~O LK WA INFRA-TOTAL STRUCTURE CPF 330,076 269 21,457 269 351,533 734 734 5,241 5,24:1 5,975 5,975 REVENUES Charges for services Interest TOTAL REVENUES EXPENDITURES Cunrent: Transportation Culture & recreation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURFS OTHER FINANCING SOURCES (USES) Transfer In Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) (5,706)345~558 NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE JANUARY :1 RESTATED FUND BALANCE DECEMBER 31 58,498 4,450,607 58,498 ~4,450,607 52,792 $3,678,461 2011 Comprehensive Annual Financial Repo~Cit7 o/ Re.ton. Washington COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES iN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Page 6 of 6 REVENUES Taxes Ucenses and permits Intergovemmentai revenues Charges for services Contributions Interest Miscellaneous revenues TOTAL REVENUES TOTAL OTHER TOTAL TOTAL TOTAL GOVERNMENTAL SRF DSF CPF FUNDS 251,750 $3,995,842 $- $4,247,592 48,763 48,763 502,347 309,134 811,481 330,076 330,076 65,000 65,000 8,154 11,338 21,457 40,949 1,584 :1,584 877,598 4,316,314 351~533 5,545,445 EXPENDITURES Current: General government Physical environment Transportation Economic environment Mental & physical health Culture & rec~eation Debt service: Prindpa[ payments Interest and fiscal charges TOTAL EXPENDITURES 295 245,201 76,744 15,425 295 245,201 734 734 76,744 2,783,237 2.783,237 2,376,944 2,376,944 337,665 5,160,:181 5,975 5,503,821 539,933 (843,867)345,558 41,624 529,o50 g~,~52 5~o,4o8 (620,000)(1,179.056)( 1,7~9,056| 9.425,000 9,425.000 862,616 862,616 (9,~o,ooo)(B,95o,ooo) (620,00Q)866,672 (/,117,704)(871,032) EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in Transfer (out) Refunding bonds Issued Premium on general obligatlon debt Pavment to refunded bond escrow agent TOTAL OTHER FINANCE 5OURCES IUSES) NET CHANGE iN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 !80,067).22,805 (772,:146)(829,408) 1,585,101 1,009,555 4,450,607 7,045,263 Combining Statements & Schedule~, 6-16 201~ Comprehensive Annual Flnandol Report City oJ Renton, Washington SCHEDULE OF REVEN UES~ EXPENDFFURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - ARTERIAL STREET FUND For the Year Ended December 31, 2011 REVENUES Intergovemmental revenues Interest TOTAL REVENUES EXPENDWURES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL RNAL ACTUAL VARIANCE 617,000 S 617,000 $502~47 3,000 3,000 2,034 620,000 620,000 504,381 (114,653) (115,619) (620,000)(620,000)!620,000) (620,0O0)(620,000)(620o000) (115,619) NET CHANGE IN FUND I~LANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 200,687 370,595 200,687 $370,595 (11s,~19) (1~61R) 370,593 (21 254,974 $ (115~62:1) Combining St~ltemen~s & Schedule~, 617 City o.f Renton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - HOTEIJMOTEL TAX FUND For the Year Ended December 31, 2011 REVENUES Taxes Contributions l~terest TOTAL REVENUES EXPENDITURES Current: Economic envIronmenl TOTAL EXPENDITURES EXCESS (DERClENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES} TOTAL OTHER FINANCE SOURCES (USES} BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 180,0OO S 180,000 $211,750 $3~,750 65,O00 65,0OO 65,000 1,199 1,199 245,000 245,000 277,949 32~949 245,000 450,0OO 245,201 (204,799) 245,000 450,000 245,201 (204,799) !20s,ooo)32,748 237,748 NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 3I (205,000)32,748 237,748 247,828 241,282 241,282 0 247,82~85 36,28~25 274.03~0$237,74~ ~ty of Ren~on, Washington SCHEDULE OF REVENUES, EXPEN D~TU RES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - PATHS AND TRAILS FUNO For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 3,264 3,299 3,264 $3,299 ~ 3,298 Combining Statements & Schedules, 6~19 202I Comprehensive Annual Financial Report City of R~J~ton, WQshlng~on SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL ~ 1% FOR ART FUND For the Year Ended December 31, 201:1 REVENUES Interest TOTAL REVENUES EXPENDITURES Current: General govemment Capital outlay TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDR’URES OTHER FINANCING SOURCES (USES) Transfer in TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VAR~NCE 623 S 623 623 623 50,000 68,257 15,425 (52,832) 50,0C~68,257 15,720 (52,537) (50,000)168,2S7)(1S,O97}53,160 15,000 32,000 (32,000) 15,000 32,000 (32,000) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY :~ FUND BALANCE DECEMBER 31 (35,000)(36,257)(15,097)21,160 128,796 136,784 136,784 0 93,796 $100,527 $/21,687 $21,16~ Combining Statements & Schedules, 6-20 ~ty o! Re~ton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - CABLE COM MUNICAT~ONS DEVELOPMENT FUND For the Year Elided December 31, 2011 REVENUES Taxes Licenses and perm Rs Interest M~scellaneous revenues TOTAL REVENUES EXPENDITURES Current: Culture and rec~eatlon Cap~al outlay TOTAL EXPEND]TURFS EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES} NETCHANGE iN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 40,0O0 $40,000 S 40,000 $ 45,000 45,000 48,763 3,763 1,050 1,050 1,584 1,584 85,000 85~000 91,397 6,397 45,674 45,674 76,744 31,070 4010OO 175,627 (175,627) 85,674 221,301 76,744 (144,557} !674)(136,301}14,653 150,954 (674) (~36,301) 14,653 150,954 88,718 172,817 172,817 0 88,044 ~36,516 $=187,470 $150,95~ Combining 5t~l:ements & schedules, 6-2i City o~ Re~t~n, Weshlngton SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - SPRINGBROOK WETLANDS BANK FUND For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES} TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 3,231 3,231 3,231 3,231 3,231 3,231 459,528 660~327 650,327 (0) 459,528 $660,327 S 663,558 $3,231 NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BA~ICE DECEMBER 3a 2011 Comprehensive Annual Fin~nda/ Report SCHEDULE OF REVENUES. EXPEN DITU RES. AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - G ENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND For the Year Ended December 31. 2011 REVENUES Taxes lnt ergovernmental revenues Interest TOTAL REVENUES EXPENDITURES Debt service: Prindpal payments Interest and fiscal charges TOTAL EXPEN D~i~J RES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Refunding bonds issued Premium on general obllgation debt Payment to refunded bond escrow agent TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 3.91L5.056 $3.819.288 $3.995.842 ~176.554 270.923 270.923 309.134 38.211 11,338 11,338 4,185,979 40090,211 4,316,314 226,103 2,620,238 2,881,423 2,783,237 (98,186) 2.094.799 2.347.681 2.376.944 29.263 4,715,035 5,229,104 5~160,181 (68,923} {529.056){1.138.893)(843.867)295.026 529.056 692.123 529.056 (163.067) 10.287.616 9.425.000 (862.616) 862,616 862,616 (9,9B0,001)(g,gso,000)1 529.056 1~029,738 866.672 (163,0661 NETCHANGE IN FUND BALANCE FUND gALttNCE JANUARY 1 FUND BALANCE DECEMBER 31 (lO~,135)22,R05 ~I,~0 131,448 1,009,555 1,009,555 Washington SCHEDULE OF REVENUES. EXPEN DFEU RES. AND CHANGES IN FUND BALANCES BUDGETTO ACTUAL - COMMUNITY DEVELOPMENT IMPACT MFI~GATIO N FUND For the Year Ended December 31. 2011 REVENUES Charges for services Irttez~=st TOTAL REVENUES EXPENDitURES TOTAL EXPEN DF~-U RE5 EXCESS (DEFICIENCY) OF REVENUES OVER EXPEN D]TU RES OTHER FINANCING SOURCES (USES) Proceeds of long-term debt Transfer in Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 60,000 6~,000 63,560 3.560 6.697 6~697 60,000 60,000 70,257 10,257 60.000 60.000 70,257 10,257 61,352 61.352 61,352 (61,352) (~00,000}(400,000~(400,000) (400,000)(338,648)6E,352 (340,0OO)(278,648)131,609 410.257 1,126,594 1,343,446 1,343,446 0 Combinit~g Statements & Schedules. 6-24 2011 Comprehensive Annual Finond~l Report City of Renton, Washington SCHEDULE OF REVENUES, EXPENDWURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - FIRE IMPACT MITIGATION FUND For the Year Ended December 31, 2011 REVENUES Charges for services Int e~’est TOTAL REVENUES EXPENDITURES TOTAL EXPEND~TU RES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDFFURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 100,000 S 100,000 $83,803 $(16,197) 9,117 9,117 100,000 100,000 92,920 [7,080} 100,000 100,OQO 92,920 (7,080) (529,096)!529,096)(529,056) 1,903,522 1,928,814 1,928,814 0 Combining StcJtements & Schedules, 6-25 ~ o.f R~nton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BAlaNCES BUDGETTO ACTUAL - TRANSPORTATION IMPACT M FRGAT]ON FUND For the Year E~ded December 31, 20~L1 REVENUES Charges for services Interest TOTAL REVENUES EXPENDWURES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (oUt) TOTAL OTHER FINANCE SOURCES IUSES) NETCHANGE iN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 240,000 $240,O00 $182,713 $ (57,287) 10,0~O ¯10,000 5,374 (4,626) 260,000 250,000 188,087 250,0OO 250,000 188,087 {61,913) (499,494)!999,494)(650,000)(349,494) ,(499,494){999,494)(6SO,O00)B49,494 307,640 $370,356 $657,936 $287,580 2011 Comprehensive Annua! Finonc~a/ Report SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - MUNICIPAL FACILFRES CAPFFAL IMPROVEMENT FUND For the Year Ended December 3L 20Ii REVENUES Taxes lntergovernmental revenues Charges for services Contributions interest Miscellaneous revenues TOTAL REVENUES EXPENDtTURES Current: General govemrnent Physical environment Economic environment Culture & recreation Capita] outlay Debt service: lnte~st payment TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds of k~ng-term debt Premiums on bends sold Transfer in Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 560,000 S 560,000 $575,234 $15,234 586,272 389,757 {196,515) 658 658 350,000 465,786 (3,692)(469,478) 51,568 51,968 114 114 910,0OO 1,612,058 1,013,639 (598,419) 339,122 339,122 160,0OO (160,OO0) 325,731 325,731 70,000 70,000 868,867 798,867 14,892,0OO 19,198,227 2,322,659 (16,875,568) 160,0OO .116,744 (43,256) 14,9~2,000 19,988,227 3,973,123 (I5,615,104) (14,ES2,0OO)(17,976,169)(2,959,484)15,016,685 10,00o,000 18,160,000 16,7/5,0~(1,445,000) 1,405,553 1,405,553 2,400,000 2,400,0~0 2,O10,822 {389,178) (76,772){76,772} 12,400,000 20,483,228 20,054,603 !428,625) (1,652,000!2,507,059 17,095,119 14,58~,060 3,457,170 5,832,452 5,832,452 1,805,170 $8,339,511 $22,927,571 S 14,588,060 Combining Statements & Schedules, 6~27 2011 ComprehensNe Annual Finandal Report ~ of R~ton, Wesh~ngto~ SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES ]N FUND BALANCES BUDGET TO ACTUAL - GENERAL GOVERNMENT CAPITAL IMPROVEMENT FUND For the Year Ended December 31, 2011 REVENUES Ucenses and permffs Int ergovernmental revenues Interfund revenues Contributions Interest Mlscol]aneous revenues TOTAL REVENUES EXPENDITURES Current: Transportation Capital outJay Debt service: Interest payment TOTAL EXPENDF~URES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDFrURES OTHER FINANCING SOURCES (USES) Transfer in Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 7,633,325 12,020,549 7,706,388 (4,314,I61) 700,000 (700,000) 4,034,441 4.034,441 16,429 16,429 42 42 9,263,325 14,350,549 13,453,416 (897,:]33) 2,019,343 2,019,343 11,632,819 19,512,542 12,565,685 (6,946,857) 9,188 9,188 11,632,819 19,512,542 14,594,216 14,918,3261 (2,369,494).(5,161,993)~ 1,14O,800)4,021,193 1,394,494 1,619,494 1,270,000 (349,494) (~,000)(3%OOO)(3%00O) 1,379,494 1,589,494 ~.270,~00 (319,494) {990,000}(3,572~499)129~200 3,70L6~9 1,060,648 4,177,188 4,177,188 70,648 $604,68~9 S 4~306,388 S 3.701,699 Combining Stetement~ & Schedules, 6-28 ~0~2 Comprehensive Annual Ftnancla! Report Gty o.f Re, ton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - SOUTH LAKE WASHINGTON INFRASTRUCTURE For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDITURES Current: Transportation Culture & recreation Capltsl outlay TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDCEU RES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NETCHANGE iN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL -$ VAR~NCE 269 ~269 269 269 734 734 5,241 ~241 5~000 (56,000) 5~000 5,975 (5~025) (56,0oo)(B,706)50294 38 3R $ (2,ooo)(2,ooo) (2,000)- (5B,o00)(S,706)52,294 58,49~5R,49R 499 $52,792 $52,293 201I Comprehensive Annual Financial Report City of Re, ton, Washington COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS December 31, 2011 Page 1 of 2 ASSETS Current assets: Cash & cash equivalents Investments at fair value Beceivebles (net of allowances|: Customer accounts interest - Investmenl;s Due from other funds Due from other governmental units lnveutow of materials and supplies Total current assets Noncurrent assets: Capital assets {net) TOTAL ASSETS AIRPORT TOTAL NON-MAJOR GOLF COURSE ENTERPRISE FUNDS 1,416,885 $500,592 $1,917,477 6,392 3,670 10,062 7,441 7,441 95,976 95,976 59,425 59,425 2,424,672 898,297 3,322,969 12,858,250 8,484,411 21,342,661 15,282,922 $9,382,708 $24,665,630 2011 Comprehensive Annuol Finclndtl! Report LIABIUTIES Current llabilffies: Accounts payable Interfund Loan Payable Accrued interest payable Accrued wages payable Accrued taxes payable NET ASSETS Investment in capRal assets, net of rebated debt Unrestricted TOTAL NET ASSETS COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS December 31, 2011 Page 2of 2 AIRPORT TOTAL NON*MAJOR GOLF COURSE ENTERPRISE FUNDS ~34,737 $18,956 $153,703 94,8~1 366~575 461,463 2,579 2,840 5,419 42,830 56,268 99,095 64,412 9,302 73,714 166,767 166,767 339,446 620,715 960,161 147,359 999 148,358 27,604 57,435 85,039 199,855 1,149,907 1,349,762 374,818 1,208,341 1,583,159 714,264 1,829,056 2,543,320 12,838,230 8,484,411 21,342,661 1,710,408 (930,759)779,649 14,568,658 $7,553,652 $22,I22,310 2011 Comprehensive Annual Financial Report City of Renton, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS NON - MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2011 OPERATING REVENUES: Charges for services TOTAL OPERATING REVENUES BUSINESS-TYPE ACTIVfflES ENTERPRISE FUNDS TOTAL NON*MAJOR AIRPORT GOlF COURSE ENTERPRISE FUNDS $2,294,383 ~2,014,983 $4,309,366 2,294,383 2,014,983 4,309,366 1,388,953 1,229,469 2,618,424 78,030 523,625 601,655 2,093 10,247 12,340 545,005 295,071 840,076 2,014,083 2,038,412 4,072,495 280,300 (43,429]236,871 OPERATING EXPENSES: Operations and maintenance Administrative and general Taxes Depredation TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NON-OPERATING REVENUES(EXPENSES): Intergovern mental revenues Interest revenues Other non-operating revenues(expenses) Interest expense NON-OPERATING REVENUE NET OF EXPENSES INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS Operating transfers (out) CHANGE IN NETASSETS NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 242,722 242,722 9,074 5,247 14,321 2~749 2,797 5,546 (12,723)(41,524)(54,247) 241,822 (33,480)208,342 522,122 (76,909)445,213 (8,848) (656) (9,504) OK 313,274 (77,565)435,709 14,055,384 7,831,217 21,686,601 14,568,658 $7,553,652 $22,122,310 Combln/t~g statements & Schedules, ~’32 201I Comprehensive Annuol Finoncfol Report City of Rentan, Woshlngton STATEMENT OF ~ FLOWS NON*MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2011 Pago 1 OF 2 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received for services Cash pa~l to suppllers for goods & services Cash paid to employees Other operating receipts BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS TOTAL NON*MAJOR AIRPORT GOLF COURSE ENTERPRIS~ FUNDS 2,517,319 ~2,008.028 ~4,525.347 (1,582,888)(1,765,172) 15R,874 158,874 2,749 (38,727}(35,978) 1,112,893 211,103 1.323,996 CASH FLOWS FROM NONCAP1TAL FINANCING ACTIVITIES Transfers from other funds NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES (0,8~)(696)(9,504) (6,~)(Rss)(9,s04) r.J~H FLOWS FROM CApITAL FINANCING ACTIVITIES: Acquisition & construction of ca p~ta] assets Principal payments on debt Interest payments on debt NET CASH PROVIDED {USED) BY CAPITAL FINANCING ACTIVITIES CJ~SH FLOWS FROM INVESTING ACTIVITIES: Payments for inwstments ~nterest On investments NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES NET INCREASE {DECREASE) IN CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS, JANUARY 1 CASH, RESTRICTED CASH .& CASH EQUIVALENTS. DECEMBER 31 {197,427}(111,048)(308,475) (91,678}(55B,S1B)(450,1~6) (672}{672) (289,105)(470o238)(759,343) (164,995)192.775 27.780 (9,456)2,886 (6,570) {174,451)195,66I 21.210 640,489 (64,130)576,359 776,396 564,722 1,341,118 1,416,885 $500,592 $1,917,477 Combining Statements & Schedules, 6~33 201I Comprehensive Anntml Financial Report RECONCIUATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTWF~IES: Operatin8 income (loss) Adjustments tO recondle operating income (loss) to net cash provided (used) by operating Dep~’edation & amortization of deferred charges Other non-operating revenue (Increase) decrease in accounts receivable (Increase) decrease in due from other funds/governmental units (Incf’ease} de~ease in inventory & prepaid items Increase (decrease) in vouchers ~tatnage payable Increase (decrease) in payables & other short-term liabilities Increase (decrease) in Increase (decrease} in Increase (decrease} in accn~ed NONCASH INVESTING, CAPITAL, AND FINANCING ACTNIT~ES Depredation City o~ Renton, Washington STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2011 P~e 2of2 BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS TOTAL NON-MAJOR AIRPORT GOLF COURSE ENTERPRISE FUNDS 280,300 $(43,429)$236,871 545,009 295,071 840,076 245,471 (38,727}206~744 112,359 (17,48~}94,875 (s~,~4s)(83,849) -(9,670)(9,670) (109,279)17,898 (91,381) (4,531)(10,126)(14,657) 9,597 9,997 110,577 999 111,576 16,839 6,974 23,813 832,B93 254,532 1,087,125 1,112,893 $211,103 ~1,323,~96 #REFI $~545,005 $295,071 $840,076 2011 Comprehensive Annuol Finand~/ Repor~ ASSETS Current assets: Cash & cash equivalents Investments at fair value Receivables (net of allowallces): Customer accounts Interest - investmeets Due from other funds Due from other governmental units Prepavments Total current assets Noncurrent assets; Capital assets (net) Intangible assets (net) Total noncurrent assets TOTAL ASSETS Oty of Renton, woshington COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31, 2011 Page 1of 2 TOTAL EQUIPMENT iNSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 2,877,397 7,G92,524 9,969,921 21,963 11,462 33,425 27,777 62,718 90,495 56,301 56~301 42,117 42,117 144,418 93,982 238~400 8,0~4,884 19,276,901 27,321,785 8,376,720 8,376,720 343,328 343,328 8,720,0~8 8,720,048 16,764,932 $19,276,901 $36,041,833 Combining Stutements & Schedules, 6-35 UABIUT~ES Cun’ent liabilities: Accounts payab~ C~alms incurred but not reported AccTued employee benefits payab}e Accrued taxes payable Total cun’eet ~]abIllties Long-term IIablJftles: Acc~ue~i employee wages and benefits payable NET ASSETS Investnlent In capita] assets, Net of related debt Restricted Unrestricted TOTAL NET ASSETS C~ o.f re~ton, Washington COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS December 31, 2011 Page 2 of 2 TOTAL EQUIPMENT iNSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 368,423 ~1~6,454 ~564,877 2,442,195 2,442,195 309,10~23,923 333,027 1,988 1,9B8 679,515 2,662,572 3,342,087 323,727 21,512 345~239 323,727 21,512 345,239 1,Q03,242 2,684,084 3,687,326 8,720,0~8 8,720,048 5,342,695 5,342,695 15,761,690 $16,592,817 $32,354,507 Combining Stotements & S~hedules, 6-36 201I Comprehensive Annual Financial Report Oty of Renton, Washington COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2011 OPERATING REVENUES: Charges for services Other operating revenues TOTAL OPERATING REVENUES TOTAL EQUIPMENT INSURANCE iNTERNAL RENTAL FUND SERVICE FUNDS 12,407,073 $2,971.206 $15,378,279 87,972 12,662,645 12,750,617 12,495,045 /5,633,851 28,128,896 OPERATING EXPENSES: Operations and maintenance AdministraUv~ and general Taxes Depredation TOTAL OPERATING EXPENSES 10,504,327 12,786,522 23,290,849 333,~J4 564,336 897,430 13,810 2,553 16,363 1.887"334 1,887,334 12,738,565 13,353,411 26,091,976 (243.520)2.2B0.44O 2.036.920 187.372 37.673 225.045 39,043 87,690 126,733 16,539 16,539 238~039 649,019 887,058 480,993 774,382 1,255,375 237,473 3,054,822 3,292,295 OPERATING INCOME (LOSS) NONJOPERATING REVENUES (EXPENSES): Intergover~mental revenues Interest revenues Gain (loss) on sale of capital assets Other non-operatlng revenues (expenses) NON-OPERATING REVENUE NET OF EXPENSE INCOME (LOSS) BEFORE CONTRiBUTiONS AND ~RANSFERS Transfe~ in Transfers (out) CHANGE IN NET ASSETS 179,907 179,907 417,380 3,064,822 3,472,202 NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 16,344,310 13,537,995 28,882,305 15,761,690 $16,592,817 ~32,354,507 Comb#~lng Stotements & Schedules. 6-37 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from other funds for servkces Cash paid to suppliers for goods & services Cash paid to employees Other operating receipts NETCASH PROVIDED (USED) BY OPERATING ACTNITIES CASH FLOWS FROM NONCAPITAL FINANCING ACTIV]T1ES Tranders to/from other funds NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: AcqulsRion & construction of capital assets NET CASH PROVIDED (USED) BY CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Payments for Investments Interest on investments NETCASN PROVIDED (USED) BY INVESTING ACTIVITIES NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS, JANUARY CASH & CASH EQUWALENTS, DECEMBER 31 City of Re, ton. Washington COMBINING STATEMENT OF CASH FLOWS iNTERNAL SERVICE FUNDS For the Year Ended December 31, 2011 Page 1 of 2 TOTAL EO.UIPMENT INSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 12,466,926 $15,636,518 ~28,103,444 (10"362.68B)(10.630.695)(21,193,380) $3,377 20,032 73,409 441,950 (2"368,130)(1.926,180) 2,399,568 2,657,725 5,057,293 179,907 179,907 179,907 179,907 (2,601,853)~2,~01.B53) (2,601,853)f2,601.853) 719.171 516.870 1.236.041 18~66 4O.?94 59.559 737.736 557.864 1,295,600 7/5,358 3,215,589 3,930,947 4,159,553 8,800,626 12,960,179 Combining Stotements & Schedules, 6-38 2011 Comprehensive Am~u~l Finoncia! Report Gty of Renton, Washington COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2Oll Pase 2 of 2 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTNITiES: Operating income Adjustments to recondle operating income (loss) to net cash provided (used) by operating activities: Depredation & amortization of deferred charges Other non-operating revenue (increase) decrease in accounts receivable (Increase) decrease in due from other ~nds/governmeetal units (Increase) decrease in tnventow & prepaid ~tems Increase (decrease) in vouchers retainage payable Increase (decrease) In peyables & other shoat-term liabilffies Increase (decrease) In accrued employee leave benefits Total adjuatments NETCASH PROVIDED (USED) BY OPERATING ACTIVITIES NONCASH iNVESTiNG, CAPITAL, AND FINANCING ACTIVITIES Depredation & amortization TOTAL EQUIPMENT iNSURANCE INTERNAL RENTAL FUND SERVICE FUNDS !243,520) $2,280,440 $2,036,920 1,887,334 1,887,334 441,950 686,692 1,128,642 8,798 2,667 11,465 114,426 742,714 857,140 6,144 13,647 19,791 {16,743)(1,074,820)(1,091,563) 2,643,08~377,285 3,020,373 2,399,568 $2,657,725 $5,057,293 Qty of R~nton, Washington STATEMENT OF CHANGES IN ASSETS AND LIABIL~ES AGENCY FUND - SPECIAL DEPOSIT For the Year Ended Decem her 3I, 2011 Page I of I ASSETS Cash Inve~mentsat~irvalue TOTALA~ETS UABIUTIES Vouchers & contracts payable Deposits payable TOTAL UABILITIES BEGINNING ENDING BALANCE DEBITS CREDITS BALANCE 518,893 $865,321 $745,903 $638~311 909,293 S 1,255,721 $1,526,703 ~638,311 63,706 $668,907 ~613,152 $7,951 845,587 673,633 458,406 630,360 909,293 ~,1,342,540 $1,071,558 $638,311 2011 C~mprehe~sive Annual Rnanc~! Repor~City of Rento~, Wo~hlngtot~ STATISTICAL SECTION December 31, 2011 Presentations included in the Statistical Section of the Comprehensive Annual Financial Report (CAFR) provide users detailed information as a context for understanding what the information in the financial statements, note disclosures and the supporting schedules say about the government’s overall financial health. The section is divided into five categories based on the following: FINANCIAL TRENDS These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. REVENUE CAPACITY These schedules present information to help the reader assess the government’s most significant local revenue source, properW tax. DEBT CAPACITY These schedules present information to help the reader assess the affordabiliW of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. DEMOGraPHIC AND ECONOMIC INFORMATION These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place, OPERATING INFORMATION These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs. (42,052.474) $ 145,1L9,347} $ (42,~’~4,417) $ [46,866~.07) $ (54.901.~57) .~ {58,635.735) $ 162,069~910} $ (70,781.0~6) :S 9,950,725 10,837,434 6,757,864 6,27~5~5 4.471.152 3,4~,298 4,573,975 556,~27 9,557,317 2003 TABLE 2 CHANGES IN NET ASSETS LAST TEN FL~.J~L YEARS1 (Aca~ai basLs of accounting) Page 2 of 2 $- 2002 2003 2004 2005 ~ General fund ~ A~I other governmental funds $86o0e0 ’)86,C00 $ 10S,742 $g,0~0 $S,~O0 $8,0C0 $S,000 $8,000 $ 2,4eS, SS9 $ 3.920,136 6,7~o364 8°603°003 9,189.871 ~.0,737,~97 16,474,384 :L3fi09,097 13,478,727 12.020,420 2011 3,149,907 786,61.1 13o8~2o2s~ .........6,828,410 over (under} expenditures Comprehensive AnnuAl RnondAl Report CRy o~ Renton, Washington S9O,O00,O00 $8o,ooo,9o0 $70,0000000 $60,000,000 S9o,9oo,ooo $2o, ooo,ooo $1o, ooo,ooo $o TABLE 5 GENERAL GOVERNMENT TAX REVENUE BY SOURCE LAST TEN FISCAL YEARS (Modified accrual basis of account~ns) 2002 2003 2004 2005 2006 2007 2008 2009 2010 20:11 ~Propert~Tax iiSalesTax ~Admlssion/Util~/Tax I~ExciseTax AlPenalty, lnterest, DeltnquentTax FISCAL PROPERTY ADMISSION YEAR TAX SALES TAX UTILffY TAX EXCISE TAX 2002 18,373,237 16,431,456 9,798,260 4,711,446 2003 19,587,986 17,334,831 10,895,/3L 5,449,877 2004 19,886,805 18,28t,949 9,957,130 6,751,265 2005 21,826,229 18,910,822 10,643,068 6,938,264 2006 23,600,131 20,869,596 11,219,302 7,718,945 2007 23,106,578 22,749,831 11,962,879 8,236,876 2008 29,381,036 23,190,076 14,945,173 4,362,945 2009 32,300,319 22,065,316 14,876,496 4,923,978 2010 32,586,884 21,591~375 16,883,888 4,351,914 2011 33,309,975 22,008,T/7 16,870,284 4,113,705 INTEREST DELINQUENT TAX TOTAL TAX 4,404 49,318,803 5,415 53,273,240 6,048 54,883,197 49 58,318,433 3,799 63,411,773 33,949 66,090,113 6,477 71,885,707 1,353 74,167,462 276 75,414,337 380 76,303,121 StatisticAl Section, 7-7 Clty o.f Re~ton, Washington TABLE 6 PRINCIPAL PROPERTY TAX PAYERS December 31, 2011 TAXPAYER 2011 2002 % OF TOTAL % OF TOTAL TAXABLE"TAXABLE TAXABLE TAXABLE ASSESSED ASSESSED ASSESSED ASSESSED VALUE RANK VALUE VALUE RANK VALUE Boeing Paccar Puget Sound Energy-E]ec/Gas Transwestern Harvest Lakeshore Renton Properties LLC Fred Meyer Stores Inc. Axis Grand Holdings Providence Health ECi Two WTC LLC (WTCTPI LLC) Banton AcquAltlon LLC (Waffon Renton investors Ill) US West Spelker Properties U~ National Tax Search, LLC Rosche One Interests Washington Mutual Bank Avalon Bay Communities Inc All Others Total Assessed Valuation 83,847,100 2 0.73%86,464,606 2 1.55% 76,550,185 3 0.67%75,240,601 3 1.35% 52,108~900 5 0.45%47,040,200 4 0.84% 44,300,759 6 0.39% 41,166,000 7 0.36% 38,7B6,186 8 0.34% 37,194,900 9 0.32% 10,240,360,678 30,713,800 10 0.27% 40,761,767 5 0.73% 38,522,502 6 0.69% 38,363,300 7 0.69% 24,816,400 8 0.44% 23,409,861 9 0.42% 21,206,000 lO 0.38% 89.20"/o 4,464,880,542 79,82% St~ltisticnl Section, 7-8 201I Comprehensive AnnuaI FInandal Report Qty of Renton, Washington TABLE 7 ASSE~ED VALUE OF TAXABLE PROPERTY LAST TEN FIS~,AL YEARS 2002 "2003 2004 2005 2006 2007 2008 2009 2010 2011 ~l Tot al Taxable Asses~=d Value ~ DWect Tax Rate Y~ REAL PROPERTY ’~ TAX EXEMPT ASSESSED RESIDENTtAL COMMERCIAL PERSONAL RF.AL TOTAL A~ESSED DIRECT TAX VALUE PER PROPERTY PROPERTf PROPERTY PROPERTYz~VALUEz RAT~ t CAPITA~ 2002 $ 2,810,986,787 $ 2,008,043,209 S 774,850,492 $$ 5,593,880,488 3.354 $103.898 2003 2,314,785,310 2,921,167,960 747,879,276 5,983,832,546 3.277 108,995 2004 2,598,752,772 3,057,565,937 716,3~3,413 6,372,632,122 3327 115,113 2005 4,043,821,357 1,997,241,116 656,709,434 6,697,771,907 3.227 117,836 2006 4,510,574,558 2,169,976,740 636,713,076 17,212,168 7,334,476,542 3.116 125,971 2007 5,157,095,492 2,439,]~3,680 754,326,325 20,256,008 8,370,801,505 2.884 139,1;’8 2008 6,075,180,284 2,738,107,048 828,745,994 17,643,328 9,659,677,654 2.624 122,840 2009 9,073,798,071 3,246,587,967 885,490,676 27,368,066 13,233,244,780 2.369 158,525 2010 7,759,903,272 3,253,718,932 8d0,554,180 30,552,056 1I ,884,728,440 2.712 138,180 2011 6,536~356,583 4o089,930,106 821,141,161 33,038,511 11,480,465,361 2.832 124,349 ¯ 2011 Comprehensh~e Annual Rnandal Report City of Renton, Washington TABLE 9 PROPERTY T~X LEV[ES AND COLLECTIONS LAST TEN FISCAL YEARS $20,O00,000 S~,O00,O00 $10,000,000 S- FISCAL YEAR 2002 2003 2{304 2005 2006 2007 2008 2009 2010 2011 IgTOTAL TAX ~ Percent Collected TOTAL T~J(COLLECTED WITHIN THE ~COLLECTIONS ~TOTAL COLLECTIONS TO LEVY FOR FISCAL YEAR OF THE LEVY IN SUBSEQUENT DATE FISCAL YEAR AMOUNT % OF LEVY YEARS AMOUNT % OF LEV~ 2011 Comprehensive Annual Financial Report City o.f Renton, Washington TABLE 11 ~ATIOSOF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL Y~ARS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General obligation (Governmental) Revenue (Business-Type) Other Long Term (Governmental) Other Long Term {Business-Type) GOVERNMENTAL ACTIVITIES GENERAL OTHER FISCAL OBLIGATION LONG T~RM YEAR BONDS DEBT 2003 32,245,982 2004 30,629,403 2006 45,584,314 2007 44,017,551 2009 38,480,000 38o973,547 2010 36,425,000 38,511,875 2011 50,290,000 38,053,639 BUSINFcSS-TYPE ACT]VWIES TOTAL OTHER PRIMARY PERCENTAGE REVENUE LONG TERM GOVERNMENT OF PERSONAL DEBT PERBONDSDEBTDEBTINCOME~"CAPITA 31,230,0~0 $ 8,229,373 $73.256,396 7.86%$1,361 29,BTO,BO0 7,637,552 68,953,534 9.40%1,256 37,680,000 8,384,13B 76,693,541 8.71%1,385 35o790,000 11,589,789 76,487,453 8,68%1,346 33,840,000 10,716,520 90,140,834 8.59~1,545 33,405,000 9,878,951 87,301,502 8.17%1,448 43,310,000 8,968,894 94,216,894 8.60%1,196 41,110,000 8,284~962 126,848,5~9 11.63%1,516 36,955,0~0 7,357,546 119,249,421 11.17%1,383 34,925,000 6,443,218 129,711,857 N,/A 1,401 City O/ Renton, Washit~gton TABLE ~[3 RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS 0.80% tESS:NET % OF GO BOND~ GENERAL~AMOUNTS~GENERAL DEBT TO FISCAL OBLIGATION AVAILABLE OBLIGATION ASSESSED2~ASSESSED PER~ YEAR BONDS IN DEBT BOND DEBT VALUE VALUE CAPITA 2002 S 33,797,023 $1,540,203 S 32,256,820 S 5,593,880,488 0.58%S 599 2003 32,245,982 1,879,654 30,366,328 5,983,832,546 0.51%553 2004 30,629,403 1,440,509 29,188,894 6,372,632,122 0.46%527 2005 29,107,664 2,683,999 26,423,665 6,697,771,907 0.39%465 2006 45,584,314 3,068,587 42,515,727 7,334,476,542 0.58%729 2007 44,017,551 E~392,915 42,624,636 8,370,801,505 0.51%707 2008 41,938,000 2,270,986 40,667,064 9,659,677,654 0.42%516 2009 38,480,000 367,652 38,112,348 23,233,244,780 0.29%456 2020 36~425,000 1,009~555 35~415,445 Ii,884,728~440 0.30%411 2012 50,290,000 1,032,360 49,257,640 :[ 2,480~466,361 0.43%532 2011 Comprehensive Annual Fmeneiel Report TABLE 14 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Citp o/ Renton, W~shington Schools 69% Port of Seattle .4% Others 3,% Renton 16% 10% GOVERNMENTAl UNIT DEBT Estimated Percent Estimated Share of OUTSTAN DING~Applicable~overlappin~ debt dily o/Renton Direct Debt ~50,290,000 100%S 50,290,000 City of Renton Over!apping Debt # King County i S 924,690,136 3.47%~32,086,748 Port of Seattle 336,120,000 3.47%12,663,364 Renton School District #403 305,738,450 68.77%210,256,332 Issaquah School District #413.27B,300,100 2.52%7,013,~63 Kent School District #415 206,038,741 0.72%1,488,228 F{re District 20-1 2.91% Fire District 40 1 6,359,431 40.55%2,578,584 Kin8 County Library ~23,216,633 1.50%2,846,749 City O/ Renton Overlapping Debt Total Direct and OverlappinR Debt $266,933,158 S 317,223, E5R St c~ti~tic~f Section, 7-18 2011 Comprehensive Annual RnanclM Report WATER AND SEWER REVENUE BONDS: 8,000,000 6o000o000 4,00O,O0O TABLE 15 pLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Page 1 of 2 Gty of Renton, Washington 2002 2003 2004 2005 2006 2007 20~8 2009 2010 2011 E~Water and Sewer Ne~ Revenue available for debt service I~l Debt Service I~ Coverage Revenue Debt Senr~:e Expenses Net Revenue Fiscal wffhout Available for Year Revenue~DepredaUon Debt Service Pflncipal Interest Coverage~ 2002 24,045,660 17,495,472 6,550,I88 1,805,000 928,303 2.40 2003 25,934,120 16,9B0,519 8,943,601 1,639,000 1,282,115 3.07 2004 27,301,230 18325,863 8,975,367 1,479,000 1,010,268 3.61 2005 27,889,36~180892,824 8,996,536 1,630,000 1,477,124 2.90 2006 27,750,508 18,850,225 8~900,283 1,680,000 1,430,199 2.86 2007 32,887~272 22,020,642 i0,866,630 1,740,000 1,373,036 3.49 2008 32,152,413 23,765°437 8,385,976 1,810,000 1,803,687 3.01 2009 34,795,614 26,894,033 7,901,581 1,890,000 1,758,589 2.17 2010 35,790,870 28,183,489 7,607,381 1,955,000 1,689,455 2.09 2011 43,146,158 28,835,969 14,310,189 2,030,0OO 1,616,365 3.92 Ratio 201i Comprehens~eAnnualFtnan¢la/Repo~ GOLF COURSE REVENUE BONDS~ TABLE 15 ¯PLEDGED-REVENU E COVERAGE LAST TEN FISCAL YEARS Page 2 of 2 CIb/ Of Renton, Washington 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ~ll Golf Course Net Revenue available for debt servtce I~l Debt Servtce ~Coverage Revenue Debt Service RaUo Expenses Net Revenue Fiscal without Available for Year Revenue Depreciation Debt Servlce Pflnclpal Interest CoverageI 2002 2,279~361 1,415,674 863,687 225,000 210,548 1.98 2003 2,177,122 1,573,296 603,826 235.000 201,210 1.38 2004 2,198,597 1,450,445 738,152 250,000 191,223 1.67 2005 2,208,335 1,6570294 551,041 360,000 180,348 1.25 2006 2,337,672 1,725,854 611~818 270,000 168,778 1.39 2007 2,333,955 1,770,684 563,271 285,000 156,358 1.28 2008 2,310,869 1,827,810 483,059 295,000 142,820 1.10 2009 2,163,737 1,798,831 364,906 310,000 128,513 0.83 2010 2,106,614 1,684~423 422,191 2,200,000 113,323 N/A~ 2011 2,020,230 1,763,341 256,889 N/At Comprehensive Annual Flnanciai Report Gty o~ Renton, Washington TABLE 16 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS 1G% 1% [ 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ==~KIng County Unemployment Rate 2002 1,774,312 53,840 77,940,608,000 2003 1,779,300 54,900 79,199,166o000 ~Washlngton State Emph~nent Security D~partment 44,217 36.13 12,892 6.2% 44,800 36.38 13,046 5.3% 49,670 36.60 13,062 4.8% 49.488 36.83 13,192 4.3% 53,488 36.93 13,397 4.0% 57,710 36.97 13,570 3.9% 58,141 37.00 13,836 6.1% 56,904 37.08 13,977 9.9% 55,136 37.24 14,232 8.6% N/A 37.28 14,440 7.1% ~ O~ Re, ton, Washlngtot~ TABLE 17 PRINCIPAL EMPLOYERS 2011 EMPLOYEES RANK CFrY 2002 EMPLOYEES RANK CiTY Boeing Company /2,528 1 27.93%14,481 1 34.44% Valley Medical Center 2,033 2 4.53 1,562 2 3.71 Renton School D~strlct 1,837 3 4.10 1,318 3 3.13 Federal Aviation Administration 1,480 4 3.30 965 4 2.30 Paccar Inc 1,O77 5 2.40 782 5 1.86 Providence WA Regional 838 6 1.87 ------ City of Renton 698 7 :L56 688 6 1.64 King County 516 8 1.15 ..... Convergent Outsourc~ng Inc.428 9 0.95 ------ Puget Sound Educational Set/ices Distdct #121 364 10 0.83.------ Zones International ------533 7 1.27 Wizards of the Coast ------453 8 1.08 IKEA .....358 9 0.85 Total Prindpal Employers 21,799 48.61%21,459 51.04% Total A~I other e m p~oyePs 23,049 51.39%20,588 48.96% Total Employees working within Renton ~4,848 100.00%42,047 100.0~/~ . Source: City of Renton Business license records and individual inquiries 2011 Comprehensive Annual Financfol Report Gty o~ Renton, Washington TABLE 18 FULL TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEAR~ FUNCTION General Government Public SafeLy Police Commissioned O~flcers Non-Commlssioned Officers Fire Commissioned Officers Non-Commlssloned Officers Public Works Administration Transportation Systems Utility Systems Maintenance ~ervices Cu[ture and Recreation Parks and Recreation Ubrary. Museum Golf Course Total 2002 2003 2004 2005 2005 2007 2008~2009z 2010~2011 97.5 96.5 97.5 94.5 89.5 95.0 155.6 163.8 143,3 143,5 88.0 88,0 89.0 91,0 97.0 122.0 124.0 121.0 123,0 123,0 dO,2 40,2 41.2 43.2 42.2 49.2 51.2 46.4 44.4 28.4 105.0 105.0 I06.0 106.0 106.0 109.0 118,0 137.0 136.0 145.0 12.0 12.0 13.0 13.0 14.0 16.0 17.0 18.0 16.0 16.0 42.7 42.7 42.7 42.5 46.5 49.0 4.0 3.5 3.0 3.0 34.0 33.0 34.5 34.5 35.5 40.5 41.0 37.0 33.0 33.0 20.8 20.8 20.8 20,8 24,8 29.3 36.7 37.7 29.5 29,5 61,0 62.0 62,0 62.0 64.1 71.0 88.0 83.0 78.0 78.0 77.5 77.5 77.5 76.5 76.5 81,0 89.5 86.3 81.8 82.8 14,0 14,0 14.0 13.0 ~3.0 14.0 14,0 15.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1,0 1,0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 9.5 9.5 9.5 603.7 602.7 609.2 608.0 620.0 687.0 750,0 759.2 698.5 692.7 StotistlCOI Section, 7-21 Fire Number of calls answered Solid Waste Util~y 6.13 4,85 3.67 3.69 3,86 1.59 2,59 3.08 2.65 2,07 5t=tist~JI Section, 7-22 20ii Comprehensive Annual RnGncia! Report:~Pty o~ Renton, Washington FUNCTION P~bI~: safety Poftce Stations Police Patrol Units Fire stations Transportation Street Imiies) Street{)BhtS Culture and recreation Parks acreage Parks Swimming peels Tennis courts Community centers Waterworks Ut]IY~’ Water mains (mIlesl Fire hydrants San;tab/sewers (miles) Storm sewers (miles) TABLE 20 CAPITALASS~’S STATISTICS BY FUNCTION LAST T~N FISCAL Y~,RS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 7.0 7.0 7.0 7.0 7.0 7.0 1~0 10.0 10.0 10,0 3.0 5.0 5.0 5.0 5.0 5.0 6.0 6.0 6.0 7.0 213.2 213.7 213.7 218.0 224.6 233.7 263.8 263.8 264.5 266.1 2,492.0 2,612.0 2,704.0 2,79Q.0 2,924.0 3,137.0 3,367.0 3,505.0 3,935.0 4~015.0 26,0 26.0 26.0 26,0 26,0 28,0 29.0 30.0 30.0 32.02 17.0 17,0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 289 291.0 291.1 293.0 295.0 300.0 304.0 305.0 305.0 305.0 3,!93 3,240 3,274 3374 3,440 3,544 3,602 3,624 3,651 3,639 176.7 183-5 189.6 193.3 204.9 206.3 215.7 216.4 217.7 219.3 199,4 204.0 209.7 214.8 219,7 222.3 267.5 273.8 274.9 276.1 ~lndedes Natural A~ea acreage, and developed/undeveloped park acreage for Neighborhood Parks, Community Parks, Regional Parks, Spedal Use Parks and Corffdors 2Develobod Neighborhood, Commun~y, Reg~nal and Spa~a] Use Parks only. Two new parks were part of Benson Hill Annexation not previously accounted APPENDIX D ECONOMIC AND 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. POPULATION King County and City of Renton Year King County City of Renton 2012 1,957,000 93,910 2011 1,942,600 92,590 2010(1)1,931,249 90,927 2009 1,909,300 83,650 2008 1,884,200 78,780 (1) Increase in population due to the annexation of the Benson Hill-Cascade area. Source: Washington State Office of Financial Management, September, 2012. TOTAL PERSONAL AND PER CAPITA INCOME King County and State of Washington King County Total Personal Per Capita Year Income (in thousands)Income 2011(1)N/A N/A 2010 $106,806,333 $55,136 2009 104,237,546 54,517 2008 109,927,858 58,628 2007 106,693,888 57,735 (1) Preliminary estimate. State of Washington Total Personal Income (in thousands) $302,529,308 287,174,714 278,944,289 289,433,693 272,624,864 "Source: U.S. Department of Commerce, Bureau of Economic Analysis, September, 2012. Per Capita Income $44,294 44,589 41,837 44,106 42,192 TAXABLE RETAIL SALES King County City of Renton 2012(1)$ 9,652,697,833 $ 467,224,838 2011 40,846,118,928 1,936,916,285 2010 39,275,353,182 1,914,203,608 2009 39,594,903,520 1,970,565,365 2008 45,711,920,389 2,262,469,040 2007 47,766,338,768 2,289,518,889 2006 43,993,478,514 2,093,200,107 2005 40,463,996,808 1,951,188,125 (1) Through 1st quarter. Source: Washington State Department of Revenue, September, 2012. D-1 RESIDENTIAL BUILDING PERMITS King County New Single Family Units New Multi-Family Units ¯Year 2012(1) 2011 2010 2009 2008 Construction Construction Number Cost Number Cost 1,826 $ 540,549,632 3,440 $525,287,103 2,765 785,840,283 3,378 431,699,572 2,578 705,719,017 3,442 325,377,955 2,003 538,910,481 1,183 137,161,103 3,029 866,565,304 7,427 1,009,669,531 o) Estimate, through June 2012. Source:U.S. Bureau of the Census, September 2012 MAJOR EMPLOYERS°) Puget Sound Area Number of Employer Employees The Boeing Company 76,452 U.S. Army Fort Lewis 51,000 Navy Region Northwest 41,300 Microsoft 40,311 University of Washington 27,920 Providence Health & Services 19,091 Wal-Mart Stores, Inc.17,975 Fred Meyer Stores 13,495 King County Government 13,382 U.S. Postal Service 12,367 City of Seattle 10,627 MultiCare Health System 9,028 Franciscan Health System 8,226 Costco 8,224 Group Health Cooperative 8,125 (1) Most recent data available. Does not include part-time or seasonal employment figures. Source: Puget Sound Business Journal, Book of Lists, 2012. Total Construction Cost $1,065,836,735 1,217,539,855 1,031,096,972 676,071,584 1,876,234,835 D-2 2011 MAJOR EMPLOYERS City of Renton Employer The Boeing Company Valley Medical Center Renton School District Federal Aviation Administration PACCAR, Inc. Providence Health & Services City of Renton King County Convergent Outsourcing Inc. Puget Sound Educational Service District Source: City of Renton. Type of Business Aerospace Healthcare Education Government Technology Healthcare Government Government Telecommunications Education Employees 12,528 2,033 1,837 1,480 1,077 838 698 516 428 364 NONAGRICULTURAL WAGE & SALARY WORKERS(1) AND LABOR FORCE AND EMPLOYMENT DATA King County Annual Average 2012(2) 201.__.~1 201.__.~0 200~9 200.__.~8 Civilian Labor Force 1,107,210 1,105,550 1,107,060 1,115,980 1,091,720 Total Employment 1,028,530 1,015,970 1,006,000 1,020,090 1,043,300 Total Unemployment 78,680 89,580 101,060 95,890 48,420 Percent of Labor Force 7.1 8.1 9.1 8.6 4.4 NAICS INDUSTRY~s)2012(2)201..~].1 2011)200._...~9 200~8 Total Nonfarm 1,164,000 1,154,125 1,133,200 1,151,950 1,215,967 Total Private 997,250 989,192 966,233 984,750 1,049,558 Goods Producing 151,800 149,625 148,158 160,442 186,467 Natural Resources and Mining 500 500 467 508 583 Construction 48,850 48,750 49,675 57,142 73,883 Manufacturing 102,450 100,417 98,017 102,792 111,992 Service Providing 1,012,200 1,004,500 985,042 991,508 1,029,500 Trade, Transportation, and Utilities 212,925 211,833 206,350 209,175 224,667 Information 78,825 80,042 79,408 80,192 79,767 Financial Activities 67,475 67,342 67,658 71,192 75,933 Professional and Business Services 187,775 184,692 176,675 176,792 194,242 Educational and Health Services 144,975 142,183 138,142 137,683 133,258 Leisure and Hospitality 111,000 111,233 108,700 108,117 113,358 Other Services 42,475 42,242 41,142 41,158 41,867 Government 166,750 164,933 166,967 167,200 166,408 Workers in Labor/Management Disputes 0 0 0 0 958 Excludes proprietors, self-employed, members of the armed services, workers in private households, and agriculture. Includes all full- and part-time wage and salary workers receiving pay during the pay period including the 12th of the month.(2)Data through April, 2012.(3)North American Industry Classification System. Source:Washington State Employment Security Department, September, 2012. D-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E BOOK-ENTRY TRANSFER SYSTEM The following information has been provided by DTC. The City makes no representation regarding the accuracy or completeness thereof. Beneficial Owners should therefore confirm the following with DTC or the Direct Participants (as hereinafter defined). Language in [brackets] with ~:;-i!:c t!;;7".:;gh has been deleted as permitted by DTC as it does not pertain to the Bonds. 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 ~’ae eft the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, he~:.’ever, tke aggregate r ...... r~ is~..] 2. DTC, the world’s largest securities 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 "cleating corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S, securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Cleating Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Cleating Corporation and Fixed Income Clearing Corporation, all of which are registered cleating agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S, securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. E-1 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC malls an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as 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. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the°event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 1 I. 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. E-2 (THIS PAGE INTENTIONALLY LEFT BLANK) OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY ONLY Standard & Poor’s Rating: AA+ See "RATING" In the opinion of Pacifica Law Group LLP, Bond Counsel, assuming compliance with certain covenants of the City, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum 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. $9,190,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 DATED: Date of Initial Delivery DUE: December 1, as shown herein The City of Rentun, Washington (the "City"), Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"), will be issued as fully registered bonds in the name of Cede & Co., as Registered Owner and as nominee for The Depository Trust Company, New York, New York ("DTC’). DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in denominations of $5,000 or any integral multiple thereof within a maturity.. Purchasers will not receive certificates representing their interest in the Bonds. See "THE BONDS." The Bonds bear interest payable semiannually on each June 1 and December 1, beginning June 1, 2013, until maturity or prior redemption of the Bonds. The principal of and interest on the Bonds are payable by the fiscal agency of the State of Washington, currently The Bank of New York Mellon in New York, New York (the "Bond Registrar"). For so long as the Bonds remain in a "book-entry only" transfer system, the Bond Registrar will make such payments only to DTC, which, in turn, is obligated to remit such principal and interest to the DTC participants for subsequent disbursement to Beneficial Owners of the Bonds as described herein under Appendix E--"BOOK-ENTRY SYSTEM." The Bonds are subject to redemption prior to maturity as provided herein. See "THE BONDS--Redemption." The Bonds are being issued to refund certain maturities of the City’s Water and Sewer Revenue Improvement and Refunding Bonds, 2004, and to pay costs of issuance of the Bonds. See "USE OF PROCEEDS." Maturity Dates, Principal Amounts, Interest Rates, Yields, Prices and CUSIP Numbers on Inside Cover The Bonds are secured by a pledge of Gross Revenue of the City’s combined water, sewer, wastewater and storm drainage system (the "Waterworks Utility") after payment of Cost of Maintenance and Operation (the "Net Revenue"). The lien of the Bonds on Net Revenues is equal to the lien securing the Outstanding Parity Bonds (as defined herein) and superior to all other charges of any kind. The City reserves the fight to issue Future Parity Bonds upon compliance with certain conditions. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY PAYABLE ONLY FROM THE BOND FUND AND RESERVE FUND. THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY OR THE STATE OF WASHINGTON (THE "STATE"), OR ANY POLITICAL SUBDIVISION OF THE STATE, OR A CHARGE UPON ANY GENERAL FUND OR UPON ANY MONEY OR OTHER PROPERTY OF THE CITY OR OF THE STATE, OR OF ANY POLITICAL SUBDIVISION OF THE STATE, NOT SPECIFICALLY PLEDGED BY THE BOND ORDINANCE. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3)(B) of the Code. The Bonds are offered when, as and if issued, subject to the approving legal opinion of Pacifica Law Group LLP, Seattle, Washington, Bond Counsel, and certain other conditions. It is anticipated that the Bonds in definitive book-entry form will be available for delivery through the facilities of DTC in New York, New York, or to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about December 7, 2012. This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Dated: November 7, 2012 $9,190,000 CITY OF RENTON, WASHINGTON Water and Sewer Revenue Refunding Bonds, 2012 MATURITY SCHEDULE Maturity Date Principal (December 1)Amount Coupon Yield Price CUSIP* No. 2013 $40,000 2.00%0.40%101.568 760167UH7 2014 35,000 2.00 0.48 102.996 760167UJ3 2015 35,000 2.00 0.62 104.072 760167UK0 2016 35,000 2.00 0.72 105.017 760167UL8 2017 35,000 2.00 0.87 105.499 760167UM6 2018 100,000 3.00 1.05 111.279 760167UN4 2019 220,000 2.75 1.23 110.141 760167UP9 2020 280,000 3.00 1.43 111.804 760167UQ7 2021 295,000 3.00 1.62 111.493 760167UR5 2022 305,000 3.00 1.80 110.920 760167US3 2023 1,470,000 3.00 1.86 110.342"~760167UT1 2024 1,515,000 3.00 1.94 109.578~"760167UU8 2025 1,560,000 3.00 2.06 108.442J"760167UV6 2026 1,610,000 3.00 2.15 I07.600J"760167UW4 2027 1,655,000 3.00 2.20 107.135J"760167UX2 * Copyright 2012 CUSIP Global Services. CUSI1~ is a registered trademark of the American Bankers Association. These CUSIP numbers were provided by CUSIP Global Services and are not intended to create a database and do not serve in any way as a substitute for the CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. The City takes no responsibility for the accuracy of such CUSIP numbers. "~ Priced tO the par call date of December 1, 2022. CITY OF RENTON, WASHINGTON 1055 S. Grady Way Renton, WA 98055 (425)430-6400 http://rentonwa.gov/* MAYOR AND CITY COUNCIL Member Denis Law Rich Zwicker Randy Corman Terd Briere Marcie Palmer Don Persson Greg Taylor Ed Prince Elected Officials Position Mayor Councilmember- President Councilmcmber - President Pro-Tern Councilmcmber Councilmcmber Councilmcmbcr Councilmcmber Councilmcmbcr Term Expires December 31, 2015 December 31, 2013 December 31, 2013 December 31, 2013 December 31, 2015 December 31, 2015 December 31, 2015 December 31, 2015 Jay Covington Iwen Wang Jamie Thomas Gregg Zimmerman Bonnie Walton City Officials Chief Administrative Officer Administrative Services Administrator Fiscal Services Director Public Works Administrator City Clerk Bond Registrar The Bank of New York Mellon New York, New York (800) 438-5473 Bond Counsd Pacifica Law Group LLP Seattle, Washington Financial Advisor Piper Jaffray & Co. Seattle, Washington 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. No dealer, broker, sales representative or other person has been authorized by the City or Seattle-Northwest Securities Corporation (the "Underwriter") to give any information or to make any representations with respect to the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. No quotations fi’om or summaries or explanations of the provisions of laws or documents herein purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners, of any of the Bonds. The cover page hereof and appendices attached hereto are part of this Official Statement. The information set forth or included in this Official Statement has been provided by the City and from other sources believed by the City to be reliable but is not guaranteed as to accuracy or completeness and it is not to be construed as a representation by the Underwriter. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall create any implication that there has been no change in the financial condition or operations of the City described herein since the date hereof. Certain statements contained in this Official Statement reflect not historical facts but are forecasts and "forward-looking statements." No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words "estimate," "forecast," "project," "anticipate," "expect, .... intend," "believe" and other similar expressions are intended to identify forward-looking statements. The forward-looking statements in this Official Statement are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. All estimates, projections, ~’orecasts, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. The City specifically disclaims any obligation to update any forward- looking statements to reflect occurrences or unanticipated events or, circumstances after the date of this Official Statement, except as otherwise expressly provided in "CONTINUING DISCLOSURE UNDERTAKING." The Bonds have not been registered with the Securities and Exchange Commission under the Securities Act of 1933, in reliance upon a specific exemption contained in such act. The Bonds may, however, be subject to registration or qualification under the securities laws of various states, and may not be transferred in violation of such state laws. The registration or qualification of the Bonds in accordance with applicable provisions of the securities laws of the states in which the Bonds have been registered or qualified, if any, and exemption from registration or qualification in other states, shall not be regarded as a recommendation thereof. No state nor any state or federal agency has passed upon the merits of these Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. The Underwriter has provided the following three sentences for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities 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 herein were obtained by the Underwriter from CUSIP Global Services. The City makes no representation as to the accuracy thereof. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are included in this Official Statement for convenience of the holders and potential holders of the Bonds. The CUSIP numbers were provided by CUSIP Global Services and are not intended to create a database and do not serve in any way as a substitute for the CUSIP Global Services. 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. TABLE OF CONTENTS Page Page INTRODUCTION ...............................................1 THE BONDS .......................................................2 Genoral .....................................................................2 Bond Registrar ..........................................................2 Redemption ...............................................................2 Open Market Purchase ..............................................3 Dofeasanoe ................................................................3 USE OF PROCEEDS ..........................................3 Purpose .....................................................................3 Sources and Uses of Funds .......................................4 Refunding Plan .........................................................4 Verification of Mathematical Calculations ...............4 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS .............................................. 5 Pledge of Revenues of the Waterworks Utility .........5 Flow of Funds ...........................................................5 Rate Covenant. ..........................................................6 Funds and Accounts ..................................................6 Additional Covenants ...............................................7 Future Parity Bonds ..................................................8 Junior Lion Obligations ..........................................10 No Accoleration ......................................................10 DEBT INFORMATION ....................................I0 Description of Outstanding Parity Bonds ................10 Schedule of Parity Bond Debt Svrvico ....................11 Subordinate Lien Obligations .................................I 1 Debt Payment Record .............................................12 Future Financing .....................................................12 THE WATERWORKS UTILITY .....................12 The Water Utility ....................................................12 The Wastowater Utility ...........................................16 Storm Drainage Utility ............................................18 Waterworks Utility.Capital Improvement Plan .......21 Utility Billing and Delinquent Accounts .................22 Permitting and Regulatory ......................................22 Endangered Species Act .........................................22 Financial Statements ...............................................23 THE CITY .........................................................25 City Staff ................................................................25 Labor Rolations .......................................................25 Pension Funding .....................................................26 Fireman’s Pension ..................................................27 Other Post-Employment Benefits ...........................27 Authorized Investments ..........................................28 Budgetary Policies ..................................................29 Risk Management ...................................................29 Auditing of City Finances .......................................30 BOND OWNERS’ RISKS ................................. 30 Special Limited Revenue Obligations of the City...30 Operating Results ....................................................31 Enforceability of Remedies .....................................31 No Acceleration ......................................................31 Loss of Exemption of Interest from Federal Income Taxes ......................................................................31 Loss of Prcminm from Early Redemption ..............31 Sccoudary Markot and Prices ..................................31 Ratings ....................................................................32 Bankruptcy ..............................................................32 Bond Audits ............................................................32 INITIATIVE AND REFERENDUM .................32 FINANCIAL ADVISOR ....................................32 TAX MATTERS ................................................32 Bank Qualified ........................................................33 Premium Bonds ......................................................33 Proposed Tax Legislation; Miscellaneous ...............34 CONTINUING DISCLOSURE. UNDERTAKING ................................................... .........................34 RATING .............................................................36 UNDERWRITING .............................................36 CERTAIN LEGAL MATTERS .........................36 POTENTIAL CONFLICTS OF INTEREST .....36 OTHER BOND INFORMATION .....................36 APPENDIX A-~COPY OF THE BOND ORDINANCE APPENDIX B ~FORM OF BOND COUNSEL OPINION APPENDIX C--FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2011 (AUDITED) APPENDIX D--ECONOMIC AND DEMOGRAPHIC INFORMATION APPENDIX E--BOOK-ENTRY SYSTEM (THIS PAGE INTENTIONALLY LEFT BLANK) OFFICIAL STATEMENT $9,190,000 CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 INTRODUCTION The City of Renton, Washington (the "City"), a municipal corporation duly organized and existing under the laws of the State of Washington (the "State"), furnishes this Official Statement in connection with the offering of $9,190,000 aggregate principal amount of Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"). The Bonds are issued pursuant to Ordinance No. 5672, passed by the Council on October 15, 2012 (the "Bond Ordinance"), and under and in accordance with the Renton Municipal Code and the laws and provisions of the State, including chapters 39.46, 35.92 and 39.53 of the Revised Code of Washington ("RCW"). Capitalized terms not otherwise defmed herein shall have the meanings set forth in Appendix A---"COPY OF THE BOND ORDINANCE." This Official Statement provides information concerning the City, the Bonds and the City’s combined water, sewer, wastewater and storm drainage systems, as the same may be added to, improved and extended (the "Waterworks Utility"). The Bonds are issued on a parity of lien with the following obligations of the Waterworks Utility: ¯Water and Sewer Revenue Refunding Bonds, 1998 (the "1998 Bonds") currently outstanding in the aggregate principal amount of $360,000, which are expected to be redeemed, in whole, on December 1, 2012 with available funds of the City; ¯Water and Sewer Revenue Bonds, 2002 (the "2002 Bonds") currently outstanding in the aggregate principal mount of $1,025,000; ¯Water and Sewer Revenue Refunding Bonds, 2003 (the "2003 Bonds") currently outstanding in the aggregate principal amount of $415,000; ¯Water and Sewer Revenue Bonds, 2004 (the "2004 Bonds") currently outstanding in the aggregate principal amount of $10,335,000, of which $9,045,000 will be refunded with proceeds of the Bonds; ¯Water and Sewer Revenue and Refunding Bonds, 2007 (the "2007 Bonds") currently outstanding in the aggregate principal amount of $9,705,000; ¯Water and Sewer Revenue Bonds, 2008 Series A (the "2008A Bonds") currently outstanding in the aggregate principal amount of $9,975,000; and ¯Water and Sewer Revenue Bonds, 2008 Series B (the "2008B Bonds") currently outstanding in the aggregate principal amount of $2,035,000. The 1998 Bonds, 2002 Bonds, 2003 Bonds, 2004 Bonds, 2007 Bonds, 2008A Bonds, and 2008B Bonds are collectively referred to as the "Outstanding Parity Bonds." See "DEBT INFORMATION" herein. The Bonds are being issued to refund a portion of the callable maturities of the 2004 Bonds, and to pay costs of issuance of the Bonds. See "USE OF PROCEEDS" herein. The City has reserved the right in the Bond Ordinance to issue additional bonds (the "Future Parity Bonds") with a lien on Gross Revenue (as defined herein) of the Waterworks Utility on a parity with the lien of the Outstanding Parity Bonds and the Bonds upon satisfaction of certain conditions. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS--Future Parity Bonds." The Outstanding Parity Bonds, the Bonds and any Future Parity Bonds are collectively referred to as the "Parity Bonds." The Bonds are revenue obligations of the Waterworks Utility. Neither the full faith and credit nor the taxing power of the City is pledged to the payment of the Bonds. The Bonds are not obligations of the State or any political subdivision thereof other than the City. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." THE BONDS General The Bonds will be dated their date of delivery and will be issued in fully registered form in denominations of $5,000 each or integral multiples thereof within a maturity. The Bonds will mature on the dates and in the principal amounts and will bear interest from their date, payable on June 1, 2013, and semiannually thereafter on December 1 and June 1 of each year, at the rates set forth on the inside cover of this Official Statement. Interest on the Bonds will be calculated on the basis of a year of 360 days and twelve 30-day months. The Bonds will be issued in registered form, initially registered in the name Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). Individual purchases of the Bonds will be made initially in book-entry form only and purchasers will not receive certificates representing their interest in the Bonds purchased. So long as Cede & Co. is the Registered Owner of the Bonds, as nominee of DTC, references herein to the Registered Owners or bond owners will mean Cede & Co. and will not mean the "Beneficial Owners" of the Bonds. In this Official Statement, the term "Beneficial Owner" will mean the person for whom a DTC participant acquires an interest in the Bonds. See Appendix E--"BOOK-ENTRY SYSTEM." Bond Registrar The City has adopted the system of registration for the Bonds approved, from time to time, by the State Finance Committee of the State (the "Committee"). Pursuant to chapter 43.80 RCW, the Committee designates one or more fiscal agencies for bonds issued within the State. The State’s fiscal agent, currently The Bank of New York Mellon, New York, New York (the ’~ond Registrar"), will authenticate the Bonds and act as the paying agent and registrar for the purpose of paying the principal of and interest on the Bonds, recording the purchase and registration, exchange or transfer, and payment of Bonds and performing the other respective obligations of the paying agent and registrar. No resignation or removal of the Bond Registrar shal! become effective until a successor has been appointed and has accepted the duties of Bond Registrar. To meet payment requirements for the Bonds as the same becomes due and payable, the City will remit money from the Waterworks Revenue Bond Fund, 2012 held under the Bond Ordinance (the "Bond Fund") to the Bond Registrar. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS~Funds and Accounts" herein. The Bond Registrar will in turn remit such principal and interest to DTC participants for subsequent disbursement to the Beneficial Owners of the Bonds as described in Appendix E--"BOOK-ENTRY SYSTEM." In the event that the Bonds are no longer held by a depository, interest on the Bonds will 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 15th day of the month preceding the interest payment date, and 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; provided, however, that if so requested in writing by the Registered Owner of at least $1,000,000 principal amount of Bonds, interest will be paid by wire transfer on the date due to an account with a bank located within the United States. Redemption Optional Redemption. The Bonds maturing in years 2013 through 2022, inclusive, are not subject to optional redemption prior to maturity. The Bonds maturing on or after December 1, 2023 are subject to redemption at the option of the City, in whole or in part (and if in part, with maturities to be selected by the City) on any date on or after December 1, 2022 at the price equal to the principal amount to be redeemed, without premium, plus accrued interest, if any, to the date fixed for redemption. For as long as the Bonds are held by DTC, 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. If the Bonds are no longer held by a depository, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the Bond Ordinance. 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 ease of a Bond of a denomination greater than $5,000, the City and the Bond 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 that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations authorized in the Bond Ordinance. Notice of Redemption. For so long as the Bonds are held by DTC, notice of redemption (which notice may be conditional) 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 (if the Bonds are no longer held by DTC), notice of redemption shall be given in the manner as provided in the Bond Ordinance. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. Open Market Purchase The City has reserved the fight at any time to use any surplus Net Revenue of the Waterworks Utility available after providing for the payments required by paragraphs (1) through (6) described below under "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS~Flow of Funds," or other available funds, to purchase for retirement any of the Bonds at any price deemed reasonable by the City. Defeasance In the event that money and/or "Government Obligations," as defined in chapter 39.53 RCW, as it may be amended, 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. Such Bonds will cease to be entitled to any lien, benefit or security of the Bond Ordinance except the fight to receive the funds so set aside and pledged, and such Bonds will be deemed not to be outstanding. As currently defined in chapter 39.53 RCW, the term "Government Obligations" means (a) direct obligations of or obligatious.the prineipai and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations; (b)bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-import Bank of the United States, federal land banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation to the extent insured or guaranteed as permitted under any other provision of State law. USE OF PROCEEDS Purpose The proceeds from the sale of the Bonds will be used to refund certain maturities of the City’s outstanding 2004 Bonds for debt service savings, and to pay costs of issuance of the Bonds. See "Refunding Plan" below. Sources and Uses of Funds The table below sets forth the sources and uses of funds in connection with the issuance of the Bonds. Sources of Funds Principal Amount of the Bonds Original Issue Premium Total Sources: $9,190,000 809,906 $ 9,999,906 Uses of Funds Escrow Deposit $9,904,342 Costs of Issuance (1)95,564 Total Uses:$ 9,999,906 (i)Includes Bond Counsel fee, rating agency fees, printing costs, Financial Advisor fees, escrow fees, underwriter’s discount, and other costs associated with the issuance of the Bonds. Refunding Plan The City will use a portion of the proceeds of the Bonds to advance refund and defcase the following callable maturities of the 2004 Bonds (as identified below, the "Refunded Bonds"). The City is refunding $9,045,000 of the Refunded Bonds with proceeds of the Bonds, leaving $1,290,000 in aggregate principal amount of the 2004 Bonds remaining outstanding. Refunded Bonds Maturity Years Principal Interest Call Date CUSIP (December 1)Amounts Rates (100% of Par)Numbers 2024(I)$ 4,005,000 5.00%12/1/2014 760167SM9 2025 1,600,000 5.00 12/1/2014 760167SP2 2026 1,680,000 5.00 12/1/2014 760167SQ0 2027 1,760,000 5.00 12/1/2014 760167SN7 (1)Reflects a partial refunding of the December 1, 2024 Term Bond, specifically, the mandatory sinking fund payments due on December 1,2018 through 2024, inclusive. A portion of the proceeds of the Bonds will be escrowed to the redemption date for the Refunded Bonds on December 1, 2014, at which time the Refunded Bonds will be redeemed at a price of par plus accrued interest to the date of redemption. From a portion of the proceeds of the Bonds, the City will purchase certain direct non-callable United States Government Obligations ("Acquired Obligations"). These Acquired Obligations will be deposited in the custody of U.S. Bank, National Association, Seattle, Washington (the "Escrow Agent"). The maturing principal of the Acquired Obligations, interest earned thereon, and necessary cash balance, if any, will provide payment of: (a)interest and principal on the Refunded Bonds when due up to and including December 1, 2014; and (b)on December 1, 2014, the redemption price (100%) of the Refunded Bonds. The Acquired Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent, pursuant to an escrow deposit agreement to be executed by the City and the Escrow Agent. Verification of Mathematical Calculations Grant Thornton LLP will verify the accuracy of the mathematical computations concerning the adequacy of the maturing principal amounts of and iaterest earned on the Government Obligations, to be placed together with ’other escrowed money in the escrow account to pay when due, pursuant to the call for redemption, the principal of and interest on the Refunded Bonds. The verification will also confirm 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 ~986, as amended (the "Code"). SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Pledge of Revenues of the Waterworks Utility The Bonds are special fund obligations of the City, payable from and secured by Gross Revenue of the Waterworks Utility subject only to the payment of Maintenance and Operation Expense ("Net Revenue") on a parity of lien with the City’s Outstanding Parity Bonds and any Future Parity Bonds. "Gross Revenue" is defined in the Bond Ordinance to 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. "Maintenance and Operation Expense" is defined in the Bond Ordinance to 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. The Bonds are not general obligations of the City, and neither the full faith and credit nor the taxing power of the City or of the State, nor any revenues of the City derived from sources other than the Waterworks Utility, are pledged to the payment thereof. Flow of Funds Gross Revenue of the Waterworks Utility will be deposited into the Waterworks Utility Fund (the "Waterworks Utility Fund"). 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 Credit Facility if the Credit Facility 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 Credit Facility if the Credit Facility secures the payment of principal on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; 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; (5)To make all payments required to be made into the Reserve Fund, including any reimbursements required for Qualified Insurance or Qualified Letter of Credit; (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 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. Rate Covenant The City has pledged in the Bond Ordinance 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: (1)Gross Revenue will at all times be sufficient to (A) pay all Maintenance and Operation Expense on a current basis, 03)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. Coverage Requirement prior to the New Covenant Date (defined in the Bond Ordinance to be at the time the 1998 Bonds, the 2002 Bonds, the 2003 Bonds and the 2004 Bonds are no longer outstanding, which is currently expected to occur on December 1, 2014) is defined in the Bond Ordinance to mean in any calendar year 1.25 times the Maximum Annual Debt Service. From and after the New Covenant Date, the term Coverage Requirement is defined in the Bond Ordinance to mean in any calendar year 1.25 times the Annual Debt Service for such year. Funds and Accounts Bond Fund. The City has created the Bond Fund, which has been designated as a "Parity Bond Fund" and a subaecount of the Waterworks Utility Fund, for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain outstanding, the City has irrevocably obligated and bound 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 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 Waterworks Revenue Bond 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. After the New Covenant Date, 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 under the Code. As of October 1, 2012, the City had $3,648,589 in Qualified Insurance in the form of a surety policy (the "Surety Policy") from Financial Guaranty Insurance Company ("FGIC") delivered in connection with the issuance of the 2007 Bonds, 2008A Bonds, and 2008B Bonds. The Surety Policy originally issued by FGIC has been reinsured by National Public Finance Guaranty Corp. and will terminate on the earlier of the scheduled final maturity date of the 2007 Bonds, 2008A Bonds, and 2008B Bonds (December 1, 2027) or the date on which no 2007 Bonds, 2008A Bonds, and 2008B Bonds are deemed outstanding. The City intends to deposit $2,909,745.00 from available funds of the City into the Reserve Fund at the time of issuance of the Bonds. Such amounts will be sufficient to satisfy the Reserve Requirement on the date of issuance of the Bonds ($2,909,745.00). 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 ease may be, on the Bonds, that deficiency shall be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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 defeasanee 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. Rate Stabilization Fund. The City has previously created a Waterworks Rate Stabilization Fund (the "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, l~ase, 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. See Appendix A for certain requirements relating to disposal of all or a portion of the Waterworks Utility. 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 eormeetion with the operation of the Waterworks U~lity 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. 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 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) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance on or prior to the date of issuance of such Future Parity Bonds. (4)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. (5)There will be on file with the City either: (a)a certificate of the Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (b)prior.to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; 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; 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; 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 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. Refunding Obligations. 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 b~yond the maturities of the bonds to be refunded thereby. Furthermore, nothing contained in the Bond Ordinance prevents the City from issuing Future Parity Bonds to refund maturing Parity Bonds, money for the payment of which is not otherwise available. Junior Lien Obligations The City has reserved the right to issue revenue bonds or other obligations which would be a charge upon Gross Revenue subordinate to that of any Outstanding Parity Bonds. As of October 1, 2012, the City had approximately $5,538,927 in outstanding subordinate lien debt. See "DEBT INFORMATION--Subordinate Lien Obligations." No Acceleration A Bondowner cannot require acceleration of debt service on the Bonds upon the occurrence of an event of default. See "BOND OWNERS’ RISKS---No Acceleration." DEBT INFORMATION Description of Outstanding Parity Bonds The following chart details the Outstanding Parity Bonds. Outstanding Parity Bonds°) As of October 1, 2012 Type of Debt 1998 Water/Sewer Refunding°) 2002 Water/Sewer 2003 Water/Sewer Refunding 2004 Water/Sewer~2) 2007 Water/Sewer & Refunding 2008A Water/Sewer Revenue 2008B Water/Sewer Revenue 2012 Water/Sewer Refunding~3) TOTAL REVENUE BONDS Issued Maturity Outstanding Date Date Principal 3/1/1998 6/1/2013 $ 360,000 7/1/2002 12/1/2012 1,025,000 9/15/2003 6/1/2013 415,000 11/1/2004 12/1/2018 1,290,000 11/6/2007 12/1/2022 9,705,000 1/4/2008 12/1/2027 9,975,000 1/4/2008 12/1/2016 2,035,000 12/7/2012 12/1/2027 9,190,000 $ 33,995,000 (1) (2) (3) The City currently plans to redeem the 1998 Bonds, in whole, on December 1, 2012 with available funds of the City. Reflects the principal mount expected to remain outstanding after the refunding of the Refunded Bonds. See "USE OF PROCEEDS~Refunding Plan" herein. The Bonds. 10 Schedule of Parity Bond Debt Service Outstanding Parity Bonds (1) Year (2)Principal 2012 $ 2,115,000 2013 1,610,000 2014 1,660,000 2015 1,730,000 2016 1,810,000 2017 1,895,000 2018 1,920,000 2019 1,885,000 2020 1,905,000 2021 1,975,000 2022 2,055,000 2023 980,000 2024 1,020,000 2025 1,060,000 2026 1,105,000 2027 1,155,000 Total o)$ 25.880.000 Interest $ 1,078,260 993 383 939 778 869 I00 793 595 707 408 619 608 536 458 461 058 384 858 305,858 223,658 183,478 141,148 96,628 49,665 $ 8.391.43~ The Bonds Principal Interest Total o) ----$3,193,260 $ 40,000 $ 268,794 2,912,177 35,000 272,550 2,907,328 35,000 271,850 2,905,950 35,000 271,150 2,909,745 35,000 270,450 2,907,858 100,000 269,750 2,909,358 220,000 266,750 2,908,208 280,000 260,700 2,906,758 295,000 252,300 2,907,158 305,000 243,450 2,909,308 1,470,000 234,300 2,907,958 1,515,000 190,200 2,908,678 1,560,000 144,750 2,905,898 1,610,000 97,950 2,909,578 1,655,000 49,650 2,909,315 $ 9.190.000 $ 3.364.59~4 $ 46,818.529 (1) (2) (3) Includes the 2004 Bonds expected to remain outstanding after the refunding of the Refunded Bonds, and the other Outstanding Parity Bonds. Excludes the Refunded Bonds. See "USE OF PROCEEDS~Refunding Plan" herein. Based on Fiscal Years ending December 31. Totals may not foot due to rounding. Subordinate Lien Obligations The City retains the fight to issue revenue obligations with a subordinate lien on Gross Revenue of the Waterworks Utility. As of October 1, 2012, the City had the following subordinate lien obligations outstanding: Outstanding Subordinate Lien Obligations As of October 1, 2012 Other Liabilities Pubfic Works Trust Fund Loans: Central Renton Sewer Replacement 1.00% East Renton Interceptor 1.00 Dayton Avenue NE 2.00 NE 27th/Aberdeen Drainage Improvements 1.00 East Kennydale Interceptor 2.00 Honeyereek Interceptor 2.00 Corrosion Control Treatment Facilities 1.00 Maplewood Water Treatment Improvement 0.50 Construct CT Pipeline for Wells 0.50 Maplewood Water Treatment Improvement 0.50 Interest Issue Outstanding Rate Date Maturity Date Principal TOTAL PUBLIC WORKS TRUST FUND LOANS 5/4/1993 7/1/2015 $191,519 6/7/1993 7/1/2013 134,570 5/12/1994 7/1/2014 10,206 5/15/1995 7/1/2015 127,769 1/24/1998 7/1/2016 467,418 12/4/1995 7/1/2016 387,488 1/6/1997 7/1/2017 246,785 1/22/2002 7/1/2021 272,708 11/5/2002 7/1/2022 428,698 6/3/2004 7/1/2024 3,271,765 $ 5,538,927 11 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 Financing Other than the Bonds, the City has no authorized but unissued bonds secured by Gross Revenues outstanding. The City does not expect to issue bonds secured by Gross Revenues in the next 12 months. 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. The Water Utility Description. The Water Utility provides water service for fire protection and for domestic uses to an area of 17.11 square miles within the City limits. As of October 1, 2012, the Water Utility served approximately 17,728 customer accounts, and a population of 55,296. The City also supplies water on a wholesale basis to a portion of the Skyway Water and Sewer District through a single metered connection. Water service within certain areas of the City is also provided by the Soos Creek Water and Sewer District, the Coal Creek Utility District, the Cedar River Water and Sewer District, and King County Water District #90. The City’s water system consists of nine water supply sources, ten reservoirs with 22 million gallons of storage, 12 pump stations, two water treatment facilities, 305 miles of water mains, 3,644 fire hydrants and 17,370 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. The City’s own water supply sources include eight active 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 83 percent of the City’s water production. In addition, the City maintains ten metered water supply interties with Seattle Public Utilities, one emergency intertie with the City of Kent, one emergency intertie with the City of Tukwila and one emergency intertie with the Skyway Water and Sewer District. Together, active, standby and emergeney wells provide 19,450 gallons per minute ("GPM") or 28 million gallons per day ("MGD"). Interties with Seattle Public Utilities and emergency interties with neighboring cities and water districts can provide 13,200 GPM or 19.1 MGD. In 2011, the maximum demand for water was 12.5 MGD and the average day demand was 6.8 MGD. Based on growth forecasts, the City believes that it has sufficient onqine supply capacity to meet demands through at least 2018, or to 2034 with the practice of water conservation efforts. In 2011, the City entered into a fifty year supply agreement with the City of Seattle that will allow the City access to the City of Seattle water supply sufficient to accommodate all projected growth through 2061. 12 The City’s historic water demands are shown in the following table: Water Utility Usage Average Daily Peak Day Usage (MGD)Usage (MGD) 2011 6.8 12.5 2010 6.8 12.8 2009 7.6 14.8 2008 7.4 12.7 2007 8.0 14.8 2006 8.0 15.3 Source: City of Renton. Water Utility Customers. As of January 1, 2012, the City provided water services to approximately 17,728 customers of which approximately 77 percent were 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 2011 2010 2009 2008 2007 Single Family 13,739 13,594 13,500 13,440 13,324 Multi-Family, Commercial, Industrial, Other 2,591 2,559 2,555 2,542 2,526 Irrigation 721 714 704 697 673 Fire Service 624 604 576 544 520 Other0)53 55 66 86 60 Total 17,728 17,526 17,401 17,309 17,103 Includes wholesale water provided to the Skyway Water and Sewer District through a single metered connection. Source: Oty of Renton. Water BillingO) 2011 2010 2009 2008(2)2007 Single Family $ 4,860,354 $ 4,215,608 $ 4,041,651 $ 3,636,201 $ 4,236,683 Multi-Family, Commercial, Industrial, Other 5,607,114 4,677,977 4,292,709 4,149,933 3,911,598 Irrigation 1,521,050 1,227,485 1,592,628 1,218,571 1,037,900 Fire Service 225,247 184,261 163,921 144,703 134,162 Other°)214,569 218,751 212,883 185,181 168,581 Total $12,428,335 $10,524,083 $10,303,792 $ 9,334,588 $ 9,488,932 (1) O) Source: Data in table reflects billings for the Water Utility. Actual receipts may vary. See ’Tinaneial Statements" below. Totals may not foot due to rounding. The City modified its rate structure in 2008 in effort to more accurately reflect cost of services and encourage conservation. Irrigation use was reclassified and consumption became subject to the highest rate tier. Single family rates changed from a two-tiered system to a three-tiered system, with higher incremental rates for the third-tier and a lower base tier rate. As a result of this structural change, the average single family billing decreased by approximately 19% and the irrigation billing increased. Includes hydrants and wholesale water provided to the Skyway Water and Sewer District. Oty of Renton. 13 The following table shows the City’s ten major water customers. Major 2011 Water Customers Customer Boeing Commercial King County Dept. Metro Services City of Renton Renton School District Skyway Water and Sewer Department Service Linen Supply, Inc. The Arbors at Sunset Axis Grand Apartments Public Hospital District No. 1 of King County Copper Ridge Apartments Total Total Amount Percent of Total Billed for Water Water Billing0) $359,869 2.90% 316,647 2.55 293,080 2.36 135,928 1.09 103,910 0.84 100,697 0.81 89,664 0.72 89,172 0.72 85,924 0.69 83,469 0.67 $1,658,361 13.34 Based on 2011 water billings of $12,428,335. 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. The City updates its rate model every other year, in conjunction with its biennial budget process, to determine rate adjustments necessary to maintain the Waterworks Utility. The City adopted a set of financial policies for its Waterworks Utility in 2010 to reduce the reliance of debt financing of future system replacements. As a result, there was a water rate increase of 18 percent in 2011 and 16 percent in 2012. The City is proposing to raise rates an additional five percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and if approved, will take effect on January 1 in the respective years. The following table shows the historical rate increases for the Water Utility. Past Water Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 16%18%10%4%6% Source: City of Renton. 14 The City’s monthly water bills are calculated based on meter size and volume of water in hundreds of cubic feet ("ccf") consumed. Current monthly water service charges arc as follows: 2012 Monthly Water Service Charge (Effective January 1, 2012) Monthly Charge Meter Size Basic Meter Irrigation Meter Fire Meter 3/4"$15.96 $9.60 -- 1"33.06 17.16 $5.69 1 ½"61.07 29.29 6.36 2"95.71 44.86 8.17 3"196.65 94.94 21.58 4"300.00 141.18 26.55 6"585.24 267.40 38.15 8"1,145.52 585.15 51.38 10"1,707.60 752.43 66.29 12"2,485.13 1,086.53 -- Source: City of Renton. 2012 Commodity Rates: 100 cf = 748 gallons (Effective January 1, 2012) Single Family/Duplex Less than 500 el/month 500 - 1,000 el/month Over 1,O0O el/month Multi Family Non-residential Private Irrigation City Irrigation Monthly Charge $ 2.30/100 cf 3.09/100 cf 3.90/I 00 cf 2.98/100 cf 3.16/100 ef 5.06/100 cf 3.56/100 cf Source: City of Renton. Water rates for metered service outside of the City are 1.5 times the rate for metered service within the City. Rate Comparison of Neighboring Water Systems. Shown below are comparative water rate charges of other water utilities near the City: 2012 Single Family Monthly Water Rate Comparison Water System Monthly Rate(a) City of Bellevue $ 51.81 Coal Creek Utility District 43.97 Skyway Water/Sewer District 39.53 City of Kent 38.45 Cedar River Water/Sewer District 37.79 City of Tukwila 37.05 The City 35.19 City of Issaquah 33.14 Soos Creek Water/Sewer District 30.46 City of Auburn 27.84 Rates are based on monthly consumption of 750 cubic feet of water. The Cities of Kent and Tukwila have different water rates during the summer months (June - September). The monthly rates shown above are an average of the summer and non-summer rates. Source: City of Renton. 15 System Development Charges. System development charges for the Water and Wastewater Utilities, are payable at or prior to the time of permit issuance. In the absence of a construction permit, fees are payable prior to building permit issuance. Once the fees have been fully paid for a parcel, no further fees are due unless more land is paved or the building coverage is increased. 2012 Water and Wastewater Utility System Development Charges (Effective January 1, 2012) Fire Service Fee Amount Water Meter Water Service Fee Amount Wastewater Fee Amount (only required if separate or Fire Service Size per Meter per Sewer Connection fire service is needed) 5/8 and¾inch $ 2,236 $1,591 $ 292 1 inch 5,589 3,977 729 1 ½ inch 11,179 7,954 1,458 2 inch 17,886 12,726 2,332 3 inch 35,711 25,452 4,665 4 inch 55,893 39,768 7,288 6 inch 111,786 79,537 14,577 8 inch 178,857 127,258 23,323 Source: City of Renton. The Wastewater Utility Description. The Wastewater Utility system collects wastewater from residential and commercial customers and delivers it to 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 215 miles of wastewater pipelines, 20 lift stations and an additional 15 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 South Treatment Plant. Approximately 75 percent of the City is served by the Wastewater Utility system. Another 15 percent is served by other sewer districts with the remaining area within the City is served by septic tanks or is undeveloped. The City also serves customers outside of the City limits, which includes 106 residential accounts. Wastewater Utility Customers. As of January 1, 2012, the City provided wastewater service to approximately 17,132 customer accounts, 86 percent of which were residential. Customer data and usage by class for the last five years is presented below. Number of Wastewater Customers Single Family Multi-Family, Commercial, Industrial, Other Total 2011 2010 2009 2008 2007 14,675 14,452 14,121 13,904 13,628 2,457 2,451 2,453 2,446 2,401 17,132 16,903 16,574 16,350 16,029 Source: City of Renton. 16 Wastewater BillingO) 2011t2)2010 2009 2008 2007 Single Family $ 4,135,991 $ 2,856,996 $ 2,733,775 $ 2,554,429 $ 2,343,477 Multi-Family, Commercial, Industrial, Other 3,678,390 2,616,748 2,531,209 2,485,600 2,399,698 Total City Sewer 7,814,381 5,473,743 5~64,983 5,040,029 4,743,175 King County Metro Charges 13,306,642 11,989,977 11,372,148 10,115,432 10,135,862 Grand Total $21,121,023 $17,463,720 $16,637,131 $15,155,461 $14,879,037 O) (~) Source: Data in table reflects billings for the Wastewater Utility. Actual receipts may vary. See "Financial Statements" below. Totals may not foot due to rounding. The City approved a 42% rate increase effective beginning in 2011. See "Wastewater Utility Rates and Charges" below. City of Renton. The following table shows the City’s ten major wastewater customers. Does not include King County Metro charges. Major 2011 Wastewater Customers Total Amount Percent of Total Customer Billed for Wastewater Wastewater BillingO) Boeing Commercial $181,042 2.32% Service Linen Supply, Inc.84,786 1.08 Public Hospital District No. 1 of King County 72,113 0.92 G&K Services 69,315 0.89 Copper Ridge Apartments 58,662 0.75 Axis Grand Apartments 56,583 0.72 Maplewood LLC 50,679 0.65 Holiday Inn Renton 47,751 0.61 Royal Hills Preservation LP 47,012 0.60 The Arbors at Sunset 45,214 0.58 Total $ 713,157 9.13% o)Based on 2011 wastewater billings of $7,814,381. Source:City of Renton. Wastewater Utility Rates and Charges. As discussed under "The Water Utility" above, the City updates its rote model each year to determine rate adjustments to maintain the Waterworks Utility. The City adopted a set of financial policies for its utility system in 2010 to reduce the reliance of debt financing of future system replacements. As a result, rates increased 42 percent in 2011 and an additional five percent in 2012. The City is proposing to raise rates an additional ~ive percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and, if approved, Gill take effect on January 1 of the respective years. The following table shows the historical rate increases for the Wastewater Utility. Past Wastewater Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 5%42%4%4%6.5% Source: City of Renton. 17 Current monthly wastewater service charges are as follows: 2012 Monthly Wastewater Utility Rates (Effective January 1, 2012) Customer Type City of Renton Metro Single Family $ 25.08 $ 37.26 Other Users: Base Charge 3.79 N/A Per 100 cf 2.83 N/A Per 750 cf N/A 37.26 Minimum Charge 25.08 37.26 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 City’s monthly rates above, a fiat charge of $37.26 per month is payable to Metro for each single-family residence. For non-residential accounts, Metro charges a minimum fiat rate of $37.26 for the first 7.5 eel of consumption plus an additional $4.97 per ccf for every unit over 7.5 eel. 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: 2012 Single Family Monthly Sewer Base Rate Comparison Sewer System Monthly Rate~) City of Bellevue $56.09 Skyway Water/Sewer District 26.93 The City 25.08 City of Tukwila 19.26 Coal Creek Utility District 19.00 Cedar River Water/Sewer District 18.41 City of Issaquah 18.01 Soos Creek Water/Sewer District 16.85 City of Kent 16.61 City of Auburn 14.70 o)Rates for the Cities of Bellevue and Issaquah were based on a volume of 750 cubic feet of water consumption per month. All other systems reflect a fixed monthly charge. Rates do not include a fiat charge of $37.26 per month payable to Metro where applicable. Source: City of Renton. System Development Charges. System development charges for the Wastewater Utility are shown above under "The Water Utility-System Development Charges." Storm Drainage Utility Description. The Storm Drainage Utility system covers a service area within the existing City corporate boundaries of approximately 23.8 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 fight-of-ways, tracts, and easements dedicated for storm and surface water management purposes. The Storm Drainage Utility system consists of 276 miles of storm system pipe, includes 10,991 catch basins, 4,070 access manholes, 100 storm water retention/detention facilities and 24.7 miles of ditch systems and channels. Potential Annexation. On November 6, 2012, voters in the West Hill community were asked to consider a proposition of whether the West Hill community should be annexed into the City or remain part of unincorporated King County. The West Hill community is a 1,857-acre or 2.9 square mile area bordering Lake Washington to the northeast, the City of Seattle to the north, the City of Tukwila to the south, and the City to the southeast. It has an estimated population of 18 15,853 in seven neighborhoods, including Bryn Mawr, Lakeddge, Skyway, Campbell Hill, Panorama, Skycmst, and Hill Top.. As of the date of this Official Statement, preliminary election results showed annexation falling by approximately nine percent. Election results will be certified on November 27, 2012. If the annexation is approved, the area would receive general governmental services from the City, such as police, fire, permits, and street maintenance services upon a to be determined effective date. The City would also be responsible for providing storm drainage services to the area. Water and sewer services in the area are currently provided by Seattle Public Utilities and the Skyway Water and Sewer District and would likely continue after annexation. Storm Drainage Utility Customers. As of January 1, 2012, the City provided storm drainage service to approximately 22,827 customers of which approximately 92 percent were single family residential. Customer data by class for the last five years is presented below, as well as current revenues of the Storm Drainage Utility. Number of Storm Drainage Customers 2011 2010 2009 2008(1)2007 Single Family 20,980 20,747 20,329 19,900 14,651 High Intensity 880 887 914 880 834 Medium Intensity 588 540 553 534 470 Low Intensity 320 328 339 321 273 Other 59 58 67 64 63 Total 22,827 22,560 22,202 21,699 16,291 In November 2007, voters in the Benson Hill area approved an annexation of unincorporated land bordering the City which increased the geographic size of the City by approximately one-third. After the annexation, the City began providing storm drainage services to the annexed area, but water and sewer services continued to be provided by the Soos Creek Water and Sewer District. Source: City of Renton. Storm Drainage Billing°) 2011(’~)2010 2009 2008(3)2007 Single Family $ 2,547,466 $1,799,916 $ 1,767,503 $ 1,607,074 $971,378 High Intensity 1,678,503 1,228,059 1,272,382 1,126,578 816,886 Medium Intensity 1,283,784 884,389 918,548 856,605 594,128 Low Intensity 758,705 533,547 538~23 477,724 300,789 Other 585,049 417,872 435,877 416,645 323,097 Total $ 6,853,507 $ 4,863,782 $ 4,932,533 $ 4,484,628 $ 3,006,277 (1) (2) (3) Source: Data in table reflects billings for the Storm Drainage Utility. Actual receipts may vary. See "Financial Statements" below. Totals may not foot due to rounding. The City approved a 40 percent rote increase effective beginning in 2011. See "Storm Drainage Utility Rates" below. In November 2007, voters in the Benson Hill area approved an annexation of unincorporated land bordering the City which increased the geographic size of the City by approximately one-third. After the annexation, the City began providing storm drainage services to the annexed area, but water and sewer services continued to be provided by the Soos Creek Water and Sewer District. City of Renton. 19 The following table shows the City’s ten major storm drainage customers. Major 2011 Storm Drainage Customers Customer City of Renton Boeing Commercial Renton School District Washington Department of Transportation King County Department of Transportation Kenworth Truck Company King County Department of Metro Services Stoneway Rock and Recycling Liesure Estates Office The Landing Total Total Amount Percent of Total Billed for Storm Storm Billing°) $418,747 6.11% 282,947 4.13 192,593 2.81 61,709 0.90 60,632 0.88 58,841 0.86 49,386 0.72 47,347 0.69 45,947 0.67 44,556 0.65 $1,262,703 18.42% Based on 2011 storm drainage billings of $6,853,507. Source: City of Renton. Storm Drainage Utility Rates. Rates for the Storm Drainage Utility increased 40 percent in 2011 and an additional 11 percent in 2012. The City is proposing to raise rates an additional five percent in 2013 and five percent in 2014. The proposed rate increases are currently being considered by the City Council and, if approved, will take effect on January 1 of the respective years. The following table shows the historical rate increases for the Storm Drainage Utility. Past Storm Drainage Utility Rate Increases 2012 2011 2010 2009 2008 Rate Increase 11%40%0%0%29.5% Source: City of Renton. Current monthly rates for storm drainage service within and outside the City are as follows: 2012 Monthly Storm Drainage Utility Rates (Effective January 1, 2012) Type Single Family Low Intensity - less than 0.5 acres Low Intensity - greater than 0.5 acres Medium Intensity - less than 0.5 acres Medium Intensity - greater than 0.5 acres High Intensity - less than 0.5 acres High Intensity - greater than 0.5 acres Monthly Charge $11.51 28.50/acre 57.02/acre 41.23/acre 82.42/acre 53.16/acre 106.31/acre Source: City of Renton. 20 2012 Single Family Monthly Storm Base Rate Comparison Storm System Monthly Rate City of Bellevue $ 33.06 City of Auburn 15.75 City of Issaquah 14.08 The City 11.51 Skyway Water/Sewer District 11.08 Coal Creek Utility District 11.08 Cedar River Water/Sewer District 11.08 Soos Creek Water/Sewer District 11.08 City of Kent 10.56 City of Tukwila 8.50 Source: City of Renton. System Development Charges. System development charges for the Storm Drainage Utility are payable at or prior to the time of permit issuance. In the absence of a construction permit, fees are payable prior to building permit issuance. Once the fees have been fully paid for a parcel, no further fees are due unless more land is paved or the building coverage is increased. Type of Land Use New Single Family Residence (Including mobile/manufactured homes) Addition to existing single-family residence greater than 500 square feet 0neluding mobile/manufactured homes) All other uses Fee Amount $1,012.00 per dwelling unit $0.405 per square foot of new impervious surface area, but not more than $1,012.00 $0.405 per square foot of new impervious surface area, but not less than $1,012.00 Source: City of Renton. Waterworks Utility Capital Improvement Plan The City regularly identifies additional capital needs of the Waterworks Utility based on factors that may include expected growth and financial priority. Rapid residential and commercial growth has prompted the City to plan for expansion of its Waterworks Utility capacity. The plan also accounts for projects required to meet current regulatory requirements. The City updates its six-year Capital Improvement Plan ("CIP") every two years. The latest CIP outlines proposed enhancement and development for the Waterworks Utility for the years 2012-2017. Per City policy, all capital improvements to the existing system will be fully funded through utility rates and charges and will not be financed with debt. Additions to the Waterworks Utility may be funded with proceeds of Future Parity Bonds or subordinate lien obligations. 21 Capital Improvement Plan (in Thousands) Category 2012 By Project Type: Improvements $4,755 Major Maintenance 6,465 Regulatory Compliance 720 Total by Type $ 11,940 2013 2014 2015 2016 2017 5,440 $5,050 $4,250 $5,950 $4,850 6,130 6,320 7,620 5,220 6,070 380 330 330 330 550 11,950 $ 11,700 $ 12~00 $ 11,500 $ 11~70 By Utility: Water CIP $4,500 $5,200 $5,350 $5,250 $ 5,250 $5,020 Wastewater CIP 3,790 3,250 3,250 3,250 3,250 3,250 Storm Drainage CIP 3,650 3,500 3,100 3,700 3,000 3,200 Total byUtility $ 11,940 $ 11,950 $ 11,700 $12~200 $ 11,500 $ 11,470 Source: City of Renton. Utility Billing and Delinquent Accounts The Utility Billing division under the direction of the Administrative Services Department provides customer service, billing and revenue collections for the Waterworks Utility. Utility bills are generated monthly and due 25 days later. If the charges billed are not paid within the 20 day period from the due date, such charges become delinquent. If an account is delinquent, the City will assess a penalty to the account and enforce collections. The City’s ability to collect on delinquent accounts is controlled by State law and the Renton Municipal Code. Remedies include, but are not limited to, providing notice, charging fees and interest on unpaid charges for service, terminating water service, and placing a lien for unpaid charges against premises to which such service has been furnished or is available. Such lien is superior to all other liens or encumbrances, except those for general taxes and special assessments, and may be foreclosed by the City in the manner provided by law, in addition to all other available remedies. Permitting and Regulatory The City’s Waterworks Utility is in compliance with known regulations and applicable permits. The City’s existing National Pollution Discharge Elimination System (’¢N-PDES") Permit was issued on January 17, 2007, by the Washington State Department of Ecology under the provisions of the U.S. Environmental Protection Agency’s Clean Water Act. The City’s NPDES permit regulates stormwater discharges from municipally owned or operated stormwater systems in the City. Federal and state water quality laws require a permit for the discharge of stormwater and requires public entities to control discharge of pollutants to protect surface water. The City meets this requirement through inspections and enforcement to prevent and control stormwater impacts, public education regarding good stormwater management practices, operation and maintenanee of the municipal stormwater system, and stormwater monitoring and reporting, among others. The City’s Water Utility is subject to an annual operating permit issued by the Washington State Department of Health. The City’s permit is current and holds a "green" status (fully compliant). To maintain "green" status the City must remain fully compliant with all Safe Drirddng Water Act requirements. The City currently does not have any concerns regarding the City’s ability to renew its annual permit or remain in "green" status. Endangered Species Act In planning future projects, the City evaluates the construction and operation of the facilities to determine if there will bc 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. 22 Financial Statements Waterworks Utility Fund Historical Operating Results - Debt Service Coverage (Years Ending December 31 - Based on Audited Financial Statements) Operating Revenues Charges for sgrvices(IX2) Other operating revenue(2) Total Operating Revenue Operating Expenses°) Operations and maintenanceM (4)King County etro Administrative and general Taxes(~) Total Operating Expenses Net Income from Operations Non-Operating Revenue(6) Interest revenues Other non-operating revenues (expenses) Transfers in (out) Total Non-Operating Income Net Income Adjustment to Revenues Connection/system development charges Available for Parity Bond Debt Service Parity Debt Service 1998 Bonds 2002 Bonds 2003 Bonds 2000 Bonds 2007 Bonds 2008A Bonds 2008B Bonds Parity Bond Debt Service 2011 2010 2009 2008 2007 $40,926,401 $ 33,944,143 $ 31,925,767 $ 29,400,724 $28,661,145 1,495,677 1,014,370 1,991,084 800,908 1,084,632 42,422,078 34,958,513 33,916,851 30,201,632 29,745,777 9,016,625 8,405,890 9,281,224 6,194,147 5,054,666 11,678,248 12,084,663 11,154,866 9,893,020 I 0,163,449 4,729,678 5,056,054 3,905,496 5,108,203 4,765,021 3,411,418 2,636,882 2,552,447 2,571,067 2,037,506 28,835,969 28,183,489 26,894,033 23,766,437 22,020,642 13,586,109 6,775,024 7,022,818 6,435,195 7,725,135 93,042 187,845 349,607 1,022,711 810,519 11,397 99,827 2,796 18,876 28,242 26,844 17,095 100,000 (110,000)- 77,595 300,767 452,403 931,587 838,761 13,663,704 7,079,791 7,475,221 7,366,782 8,563,896 631,038 644,512 529,156 928,070 2,330,976 14,294,742 7,724,303 8,000,377 8,294,852 10,894,872 718,535 724,460 723,443 725,678 726,329 1,092,425 736,995 578,830 237,680 175,765 390,430 737,425 900,141 1,238,085 1,233,260 507,480 507,480 507,480 507,480 507,480 421,850 422,450 423,050 436,387 415,508 415,508 415,508 377,419 100,138 100,138 100,138 90,958 3,646,366 3,644,456 3,648,590 3,613,687 2,642,834 Available for Other Purposes Annual Debt Serviee Coverage Debt Service Coverage Per Bond Covenant(~ $ 10,648,376 $ 4,079,847 $ 4,355,787 $ 4,681,165 $ 8,252,038 3.92 2.12 2.19 2.~0 4.12 3.92 2.12 2.19 2.27 3.46 O)Charges for services include amounts collected from residential and commercial customers on behalf of Metro. See "THE WATERWORKS UTILITY--The Wastewater Utility." (2)A change in financial reporting categorization in 2009 moved certain amounts from Administrative and General to Operations and Maintenance. An additional $I,066,493 was reported in special assessment deferred revenue in 2009 due to a change in accounting for special assessment deferred revenue.(3)Excludes depreciation.(4)See "THE WATERWORKS UTILITY--The Wastewater Utility."(5)Amounts include taxes payable to the City, which are not required to be included in the calculation of Operation and Maintenance Expense under the Bond Ordinance for purposes of calculating debt service coverage. See Appendix A.(6) Excludes Interest Expense and Amortization of Debt. (7) See "SECtJRITY AND SOURCES OF PAYMENT FOR THE BONDS~Rate Covenant." Source: City of Renton. 23 Waterworks Utility Fund Historical Statement of Net Assets (fiscal years ending December 31, 2007 through December 31, 2011 are based on audited financial statements) Audited 2011 2010 2009 2008 2007 Assets Current Assets: Cash and Cash Equivalents $9,207,083 $5,982,067 $7,914,268 $2,300,930 $2,797,689 Investments at Fair Value 5,434,445 5,859,767 5,960,027 12,948,026 7,362,526 Receivables (Net)5,520,410 4,774,383 3,887,778 3,888,404 3,515,607 Due From Other Funds 1,394 - Interfund Loan Receivable 94,887 91,679 475,000 Due from other governmental units 718,624 127,806 196,888 293,813 430,713 Inventories 263,07 266,783 495,303 408,805 351,393 Noncurrent Assets: Restricted Cash --3,145,309 Special assessments deferred 121,251 1,109,710 1,073,605 65,700 52,918 Advances to Other Funds 199,855 294,743 - Capital assets (net)237,130,860 236,393,969 235,200,082 234,518,291 211,899,961 Deferred charges and other assets 470,561 566,022 661,483 756,945 638,432 Total Assets $259,161,049 $255,466,929 $255,865,828 $255,180,914 $230,194,548 Liabilities Current Liabilities: Accounts payable $957,249 $1,843,744 $338,529 $278,638 $448,461 Retainage payable 191,867 142,563 39,764 130,463 95,847 Due to other funds 43,101 1,456 -6,905 Due to other governmental units 904,289 904,291 904,291 - Accrued interest payable 153,497 164,867 175,586 292,458 118,364 Accrued employee wages 380,449 368,025 268,574 247,496 35,225 Accrued taxes payable 32,183 54,909 46,359 37,229 46,727 Custodial accounts 18,640 27,239 39,379 32,159 44,430 Deferred revenue -149,554 134,788 195,269 Revenue bonds payable 2,115,000 2,030,000 1,955,000 1,890,000 1,810,000 Long-term Liabilities: Revenue bonds payable 32,810,000 34,925,000 36,955,000 38,910,000 28,790,000 Unamortized premium 541,878 570,588 623,125 675,662 659,170 Unamortized discount (540,297)(127,900)(567,998)(799,758)(330,837) Deferred amount on rev. bond refunding°)(478,049)(130,399)-(570,280) Deferred revenue 167,920 270,199 - Accrued employee wages 437,625 418,030 518,577 503,083 563,321 Public Works Trust Fund Loans (2)5,538,929 6,443,218 7,347,509 9,171,235 9,802,877 Total Liabilities $43,752,330 $47,558,180 $48,662,850 $51,503,453 $41,715,479 Net Assets Invested in capital assets 195,761,061 192,126,821 188,113,554 184,671,152 171,739,031 Restricted 3,588,179 3,730,167 3,145,309 Unrestricted 19,647,658 15,781,928 15,501,245 15,276,142 13,594,729 Total Net Assets $215,408,719 $207,908,749 $207,202,978 $203,677,461 $188,479,069 Total Liabilities and Net Assets $259,161,049 $255,466,929 $255,865,828 $255,180,914 $230,194,548 Re’fleets unamortized issuance costs and premiums/discounts on refundings. See "DEBT INFORMATION--Subordinate Lien Obligations." Source: CiO~ of Renton. 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 gov~ament. The council is comprised of seven members plus the mayor. Councilmembers are dected to four-year terms on a staggered schedule through citywide dections. Councilmembers are part-time dected officials who exercise legislative authority and determine matters of policy for the City. Member Denis Law Rich Zwicker Randy Corman Terri Briere Marcie Palmer Don Persson Greg Taylor Ed Prince Position Mayor Couneilmember- President Councilmember - President Pro-Tern Councilmember Councilmember Couneilmembdr Couneilmember Councilmember Term Expires December 31 2015 December 31 2013 December 31 2013 December 31 2013 December 31.2015 December 31.2015 December 31. 2015 December 31.2015 The City provides a range of municipal services authorized by State law in addition to water, wastewater and storm drainage services, including police, fire, ambulance service, streets, sanitation, health, recreation, library, public improvements, planning and zoning. City Staff Jay Covington, Chief Administrative Officer. Mr. Covington joined City staffin 1990..Prior to jbining 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. 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. 1wen Wang, Administrative Services Administrator. Ms. Wang joined City staff as Finance and Information Technology Administrator in June of 2008. Prior to joining the City~ Ms. Wang served over fourteen years at City of Federal Way as Finance Director and as Assistant City Manager overseeing finance, human resources, and information technology operations. Ms. Wang has previously served as board member of the Washington Finance Officers Association and a board member of Puget Sound Finance Officer Association. Ms. Wang has a MBA from the University of Houston, Texas, and received CPA and CMA designation in 1986 and 1987, respectively. 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), and the Transportation Systems Division (plans, designs, builds transportation projects; installs and maintains street signalization system; manages the Renton Municipal Airport). 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. Jamie Thomas, Fiscal Services Director. Ms. Thomas joined the City staff as the Fiscal Services Director in November 2011. Prior to joining the City Ms. Thomas served as the Finance Manager for over three years at Valley Communications Center. Prior to that, she was an Assistant Audit Manager for the Washington State Auditor’s Office. Ms. Thomas has an MBA from the University of Washington. Labor Relations The City currently has approximately 682 full-time equivalent 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 25 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. Bargaining Unit American Federation of State, County and Municipal Employees 287 Renton Police Officers’ Guild 107 Renton Police Officers’ Guild Non-Commissioned 28 Renton Firefighters Local 864 130 Renton Firefighters Local 864 Battalion Chiefs 6 Number of Employees Expiration Date December 31, 2012 December 31, 2012 December 31, 2012 December 31, 2012 December 31, 2012 Pension Funding Substantially all of these employees are enrolled in the State of Washington Public Employees Retirement System ("PERS"), the Law Enforcement Officers and Fire Fighters Retirement System ("LEOFF") and the Public Safety Employees’ Retirement System ("PSERS"). Contributions by both employees and employers are based on gross wages. PERS and LEOFF participants who joined the system by September 30, 1977 are Plan 1 members. Those PERS participants who joined on or atter October 1, 1977 are Plan 2 members, unless they choose the option to join Plan.3. PERS Plan 3 is a hybrid of a deferred contribution and defined benefit plan effective September 1, 2002. PSERS was created by the 2004 legislature and became effective July 1, 2006. The City contributed $1,802,877 to PERS, $1,334,543 to LEOFF and $21,518 to PSERS in 2011 for all of the City’s employees that are covered under PERS, LEOFF, and PSERS. The following tables outline the contribution rates of employees and employers under PERS, LEOFF and PSERS. (2) PERS Contribution Rates as of December 31~ 2011 Plan 1 Plan 2 Plan 3 Employer o)7.25%7.25%7.25% Employee 6.00%4.64%Variable ~2) Includes a .16% administration fee. Rates vary from 5% minimum to 15% maximum based on rate selected by the PERS 3 member. LEOFF Contribution Rates as of December 31~ 2011 Plan 1 Plan 2 Employer°) .16%5.24% Employee 0.00%8.46% Includes a .16% administration fee. PSERS Contribution Rates as of December 31~ 2011 Plan 2 Employero)8.86% Employee 6.36% Includes a .16% administration fee. According to the Office of the State Actuary, as of June 30, 2008, PERS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2009 the rates adopted by the State Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1, a closed plan with a large proportion of the retirees. According to a report issued by the Office of the State Actuary in September 2012, and subject to the assumptions therein, the total unfunded actuarial accrued liability of PERS Plan 1 is $3.684 billion (71% funded on an actuarial basis) as of June 30, 2011. In 2005 and 2006, the State Legislature enacted and authorized the State Pension Funding Council to adopt changes in contribution rates to PERS intended to amortize the PERS Plan 1 unfunded actuarial accrued liability by 2024. The contribution rates effective July 1, 2011 and 26 September 1, 2011, include a component of 2.16% and 2.34%, respectively, dedicated to amortizing the local government share of the PEPS Plan 1 unfunded actuarial accrued liability, and a component of 0.16% for administrative expenses. These .rates are subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. While the City’s contributions in 2011 represent its full current liability under the systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the PEPS 2 and 3 will increase. Information regarding all of these plans is presented in Washington State’s Department of Retirement Systems’ annual financial report. A copy of this report 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 (which is not incorporated herein by reference) Fireman’s Pension The Firefighter’s Pension Plan is a closed, single-employer, def’med benefit pension plan established in accordance with chapter 41.18 RCW and the 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 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 yearn for service. At December 31,2011, there were 34 members in this system. Under Washington State law, the Firefighter’s Pension Plan is provided an allocation of all moneys 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. An actuarial valuation is completed every two years, most recently as of January 1, 2011. As of December 31, 2011, the plan’s net pension obligation was overftmded by $1,934,381 and is recorded as a non-current asset on the City’s Government-wide Statement of net Assets. Information regarding all of the City pension plans is presented in the City’s annual financial report. See Appendix C. Other Post-Employment Benefits In accordance with chapter 41.26 RCW, the City provides lifetime medical care for members of LEOFF retirement system hired prior to October 1, 1977. The plan is a closed, single-employer defined benefit healthcare plan administered by the City. As of December 31, 2011, there were 96 retirees and three active employees. The City’s annual other postemployment benefit ("OPEB") cost is calculated based on the annual required contribution ("ARC"), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation. 27 The following table shows the components of the City’s annual OPEB cost for 2011, the amount actually contributed to the plan and changes in the City’s net OPEB: 2011 OPEB Contributions, Changes, and End of Year Obfigation Fiscal Year Ending 12/31/2011 Annual required contribution (ARC) Annual Normal Cost,(BOY)$54,262 Amortization of UAAL*1,704fi44 ARC at end of year $1,758,806 Interest on Net OPEB Obligation Adjustment to ARC 78,799 (120,635) Annual OPEB cost 1,716,970 Employer CotmSutions Change in Net OPEB Obligation (875,699) 841,271 Net OPEB Obligation at BOY Net OPEB Obligation at EOY $ $ *Unfunded Actuarial Accrued Liability (UAAL) The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the ~et OPEB obligation for the years 2009 through 2011 were as follows: Contribution as a Net Fiscal Year Annual Employer Percentage of Annual OPEB Ended OPEB Cost Contribution OPEB Cost Obligation 2011 $1,716,970 $875,699 51.00%$3,125,494 2010 1,702,419 983,868 57.79 2,284,223 2009 1,912,147 1,104,351 57.75 1,565,672 As of December 31, 2011 the City had $5.3 million in net assets in a self-insurance fund set aside to fund the net OPEB obligation. Although this money is not held in trust, the fund has been created to accumulate resources to fulfill the City’s OPEB obligations. Authorized Investments General. Chapter 35.39 RCW limits the investment by a city of its inactive funds or other funds in excess of current needs to the following authorized investments: United States bonds; United States certificates of indebtedness; bonds or warrants of the State and any local government in the State; its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and any other investment authorized by law for any other taxing district or the State Treasurer. Under chapter 43.84 RCW, the State Treasurer may invest in non-negotiable certificates of deposit in designated qualified public depositories; in obligations of the U.S. government, its agencies and wholly owned corporations; in bankers’ acceptances; in commercial paper; in the obligations of the federal home loan bank, federal national mortgage association and other government corporations subject to statutory provisions and may enter into repurchase agreements. Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). 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 28 with city ordinances or resolutions. Funds derived from the sale of bonds or other instruments of indebtedness will be invested or used in such manner as the authorizing ordinances, resolutions or bond covenants may lawfully prescribe. Local Government Investment Pool. The State Treasurer’s Office administers the Washington State Local Government Investment Pool (the "LGIP"), which invests money on behalf of more than 460 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 principles are, in order of priority, (i) the safety of principal; (ii) the assurance of sufficient liquidity to meet cash flow demands; and (iii) the attainment of 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, 2012, the City’s investments at cost totaled $40,589,122 of which 25 percent was invested in the LGIP, 63 percent was invested in certificates of deposit, and 12 percent was invested in US Federal Agency Securities. Authorized lnvestments 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. Budgetary Policies The City budgets it funds in accordance with chapter 35A.33 RCW. Biennial 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. Although not statutorily required, all proprietary funds are budgeted at the fund level as part of the biennial budget process. 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 adopts a biennial budget by ordinance establishing appropriations for City funds, and during the biennium they 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 is a member of the Washington Cities Insurance Authority ("WCIA"). Utilizing chapter 48.62 RCW (self- insurance regulation) and chapter 39.34 RCW (the Interloeal 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 150 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, stop gap, and employee benefits liability. Limits are $4 million per occurrence self-insured layer, and $16 million per occurrence in the re-insured excess layer. The excess layer is insured 29 by the purchase of reinsurance and insurance. Total limits are $20 million per occurrence subject to aggregate sublimits in the excess layers. The WCIA Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage are self-funded from the members’ deductible to $500,000, for all perils other than flood and earthquake, and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage, and lobbyist services. WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and administrative expenses. As outlined in the Interlocal Cooperation Act, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA’s assets in financial instruments which comply with all State guidelines. These revenues directly offset portions of the membership’s annual assessment. A Board of Directors governs WCIA, which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of WCIA. Auditing of City Finances Accounting systems and budgetary controls are prescribed by the Office of the State Auditor in accordance with RCW 43.09.200 and RCW 43.09.230. 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 for the City for the year ended December 31, 2011 is attached as Appendix C, and is incorporated by reference to this Official Statement. BOND OWNERS’ RISKS Prospective purchasers should consult their investment advisors before making any decision as to the purchase of the Bonds. The following discussion, while not setting forth all of the factors that should be considered, contains some of the factors which should be considered, in addition to the other information in this Official Statement, prior to purchasing the Bonds. This section is not meant to be comprehensive or definitive, and there may be other risk factors which will become material in the future. The order in which this information is presented does not necessarily reflect the relative importance of various risks. Special Limited Revenue Obligations of the City The Bonds are special revenue obligations of the City, payable solely from the Gross Revenue of the City’s Waterworks Utility after payment of Cost of Maintenance and Operation. The lien of the Bonds on Net Revenues is equal to the lien securing the Outstanding Parity Bonds and any Future Parity Bonds that may be issued from time to time, and superior to all other charges of any kind. Neither the full faith and credit nor the taxing power of the City is pledged to the payment of the Bonds. The Bonds are not obligations of the State or any political subdivision thereof other than the City. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS." 30 Operating Results A number of factors could impact the results of operations of the Waterworks Utility in the future, including a decrease in the number of customers of the Waterworks Utility, changes in regional and local economic conditions, regulatory and permit requirements, changes in population, increase in Costs of Maintenance and Operations, and changes in general market conditions. There can be no assurance that the Waterworks Utility will be able to maintain the current number of existing users if there are changes in the resident and/or commercial population of the service area. Enforceability of Remedies Any remedies available to the owners of the Bonds upon the occurrence of an event of default under the Bond Ordinance are in many respects dependent upon judicial actions, which are in turn often subject to discretion and delay and could be both expensive and time-consuming to obtain. If the City fails to comply with its covenants under the Bond Ordinance or to pay principal of or interest on the Bonds, there can be no assurance that available remedies will be adequate to fully protect the interests of the owners of the Bonds. In addition to the limitations on remedies contained in the Bond Ordinance, the rights and obligations under the Bonds and the Bond Ordinance may be limited by and are subject to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, and other laws relating to or affecting creditors’ fights, to the application of equitable principles, and to the exercise ofjudieiai discretion in appropriate cases. The opinion to be delivered by Paeifiea Law Group LLP, as Bond Counsel, concurrently with the issuance of the Bonds, will be subject to limitations regarding bankruptcy, insolvency and other laws relating to or affecting creditors’ rights. The various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. A copy of the form of legal opinion of Bond Counsel is set forth in Appendix B. No Acceleration A Bondowner cannot require acceleration of debt service on the Bonds upon the occurrence of an event of default. The City thus would be liable only for principal and interest payments as they became due, and the Bondowners would be required to seek a separate judgment for each payment, if any, not made. Any such action for monetary damages would be subject to any limitations on legal claims and remedies against public bodies under State law. Amounts recovered would be applied to unpaid installments of interest prior to being applied to unpaid principal and premium, if any, which had become due. Loss of Exemption of Interest from Federal Income Taxes The exemption of interest on the Bonds from federal income taxes is dependent upon continuing compliance by the City with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The City has covenanted in the Bond Ordinance to comply with the Code. See "TAX MATTERS." If the interest on the Bonds should be declared taxable by the Internal Revenue Service (the "IRS") or legislation or regulations are adopted or there is a final determination by a judicial or administrative auth6rity requiting interest on the Bonds to be included in the reeipient’s gross income for federal income tax purposes, the interest rate will remain unchanged. Neither the Bonds nor the Bond Ordinance provides for an adjustment of the interest rate or for mandatory redemption of the Bonds in the event that the interest on the Bonds is declared taxable. If interest on the Bonds should become subject to federal income taxation, the market value of the Bonds may be adversely affected. Loss of Premium from Early Redemption Any person who purchases a Bond at a price in excess of its principal amount should consider the fact that certain maturities of the Bonds are subject to early redemption at a redemption price equal to the pfincipai amount of such Bonds plus accrued interest under certain circumstances. Secondary Market and Prices It has been the practice of the Underwriter to maintain a secondary market in municipal securities that it sells. The Underwriter presently intends to engage in secondary market trading of the Bonds, subject to applicable securities laws. However, the Underwriter is not obligated to engage in secondary trading or to repurchase any of the Bonds. No assurance can be given that a secondary market for the Bonds will be available and no assurance can be given that the initial offering prices for the Bonds will continue for any period of time. 31 Ratings There is no assurance that credit ratings assigned to the Bonds at the time of issuance will not be lowered or withdrawn, the effect of which could adversely affect the market price and the market for the Bonds. See "RATING" herein. Bankruptcy Under current Washington law, local governments, such as the City, may be able to file for bankruptcy under Chapter 9 of the United States Bankruptcy Code (the "Bankruptcy Code"). A creditor, however, cannot bring an involuntarily bankruptcy proceeding against a municipality, including the City. The federal bankruptcy courts have broad discretionary powers under the Bankruptcy Code. Taxing districts in the State are expressly authorized to carry out a plan of readjustment if approved by the appropriate court. If the City were to become a debtor in a federal bankruptcy case, owners of the Bonds may not be able to exercise any of their remedies under the Bond Ordinance during the course of a proceeding. Legal proceedings to resolve issues could be time-consuming and expensive, and substantial delays and/or reductions in payments could result. Bond Audits The IlLS has established a general audit program to determine whether issuers of tax-exempt obligations, such as the Bonds, are in compliance with requirements of the Code that must be satisfied in order for the interest on those obligations to be, and continue to be, excluded from gross income for federal income tax purposes. The City cannot predict whether the IRS will commence an audit of the Bonds. Depending on all the facts and circumstances and the type of audit involved, it is possible that commencement of an audit of the Bonds could adversely affect the market value and marketability of the Bonds until the audit is concluded, regardless of its ultimate outcome. 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. Under the Renton Municipal Code, Renton ~oters may initiate Municipal Code amendments and local legislation, including modifications to existing legislation and through referendum may prevent legislation passed by the City Council from becoming law. In recent years there has been an increase in the number of initiatives and referenda filed in Washington, including state initiatives targeting property taxes imposed by local jurisdictions. The City cannot predict whether this trend will continue, whether any filed initiatives will receive the requisite signatures to be certified to the ballot, and whether such initiatives will be approved by the voters and, if challenged, upheld by the courts. FINANCIAL ADVISOR The City has retained Piper Jaffray & Co, Seattle, Washington, as 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. While under contract to the City, the Financial Advisor may not participate in the underwriting of any City debt. 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. 32 Federal income tax law contains a number of requirements ~hat 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 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 falls 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 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 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 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. Bank Qualified The City has designated the Bonds as "qualified rex-exempt obligations" within the meaning of Section 265(b)(3)(B) of the Code. Premium Bonds An amount equal to the excess of the purchase price of a Bond over its stated redemption price at maturity constitutes premium on that Bond. A purchaser of a Bond must amortize any premium over that Bond’s term using constant yield principles, based on the Bond’s yield to maturity. As premium is amortized, the purchaser’s basis in the 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 Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of 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 Bonds. Proposed Tax Legislation; Miscellaneous Tax legislation, administrative actions taken by tax authorities, and court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent the beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future or enacted) could affect the market price or marketability of the Bonds. For example, proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income for federal tax purposes of interest on obligations such as the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and its impact on their individual situations, as to which Bond Counsel expresses no opinion.. CONTINUING DISCLOSURE UNDERTAKING In accordance with Section (b)(5) of Securities and Exchange Commission (the "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 owners of the Bonds to provide or cause to be provided to the Municipal Securities Rulemaking Board ("MSRB") the following annual financial information and operating data for the prior fiscal year (commencing in 2013 for the fiscal year ended December 31, 2012): (1) 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"); (2)A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3)Debt service coverage ratios; and (4) General customer statistics for the Waterworks Utility contained in this Official Statement and provided in the tables "Water Utility Usage," "Number of Water Customers," "Number of Wastewater Customers," and ’‘Number of Storm Drainage Customers" under the heading "THE WATERWORKS UTILITY." Items 2-4 shall be required only to the extent that such information is not included in the Annual Financial Statements. Such annual information and operating data described above will be so provided on or before the end of nine months after the end of the City’s fiscal year. The City’s current fiscal year ends on December 31. The City may adjust such fiscal year by providing written notice of the change of fiscal year to the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Commission. If not provided as part of the annual financial information discussed above, the City will provide the City’s audited annual financial statement prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess often business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: ¯principal and interest payment delinquencies; ¯non-payment related defaults, if material; ¯unscheduled draws on debt service reserves reflecting financial difficulties; ¯unscheduled draws on credit enhancements reflecting financial difficulties; ¯substitution of credit or liquidity providers, or their failure to perform; 34 ¯adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue ORS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; ¯modifications to the rights of Bondholders, if material; ¯optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34-23856, if material, and tender offers; ¯defeasances; ¯release, substitution or sale of property securing repayment of the Bonds, if material; ¯rating changes; ¯bankruptcy, insolvency, receivership or similar event of the City; ¯the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and ¯appointment of a successor or additional trustee or the change of name of a trastee, if material. Solely for purposes of disclosure, without any intent to modify the undertaking as set forth above, the City advises that no credit enhancement, credit or liquidity facilities, or property secures payment of the Bonds. The City shall promptly determine whether the events described above are material. Format for Filings with the MSRB. Until otherwise designated by the MSRB or the Commission, any information or notices submitted to the MSRB in compliance with the Rule are to be submitted through the MSRB’s Electronic Municipal Market Access system ("EMMA"), currently located at www.emma.msrb.org (which is not incorporated into this Official Statement by reference). All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. Notification Upon Failure to Provide Financial Data. The City also agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described above on or prior to the date set forth above. Termination/Modification. The City’s obligations to provide annual financial information and notices of listed events will terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. This section, or any provision hereof, will be null and void if the City (i) 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 (ii) notifies the MSRB of such opinion and the cancellation of this section. Notwithstanding any other provision of the undertaking, the City may amend the provisions described in this section with an approving opinion of nationally recognized bond counsel and in accordance with the Rule. In the event of any amendment of its undertaking, the City will describe such amendment in the next annual report, and will include a narrative explanation of the reason for the amendment and its impact on the type (or in the ease of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a listed event, as described above, and (ii) the annual report for the year in w~ch the change is made will present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Bond Owner’s Remedies Under This Section. A Bond Owner’s or Beneficial Owner’s right to enforce the provisions of the City’s undertaking described in this section will be limited to a fight to obtain specific enforcement of the City’s obligations, and any failure by the City to comply with the provisions of this undertaking will not be an event of default with respect to the Bonds. 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. 35 Other Ongoing Disclosure Undertakings of the City. The City has entered into written undertakings under the Rule with respect to its outstanding obligations (the "Prior Und~akings"). Although the City has been filing its annual financial information on an annual basis, the City recently discovered that ongoing disclosure filings made with respect to certain obligations were not connected on EMMA to all of the City’s outstanding obligations, including its Outstanding Parity Bonds. The City r~sponded by submitting an event notice and connecting and!or refilling the required financial information and operating data for the last five fiscal years on EMMA. The City believes it is currently in compliance with its Prior Undertakings in all material respects. RATING As noted on the cover page of this Official Statement, Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, has assigned a rating of"AA+" to the Bonds. The rating reflects only the view of the rating agency and an explanation of the significance of the rating may be obtained from the rating agency. There is no assurance that the rating will be retained for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the rating will be likely to have an adverse effect on the market price of the Bonds. The City does not have any obligation to take any action, other than file a material event notification, if the rating on the Bonds is changed, suspended or withdrawn. UNDERWRITING The Bonds are being purchased by Seattle-Northwest Securities Corporation (the "Underwriter") at an aggregate price of $9,957,631.90, which represents the principal amount of the Bonds plus original issue premium of $809,905.90 and less an undeh~cfiter’s discount of $42,274.00. After the initial public offering, the public offering prices may be varied from time to time. CERTAIN LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the approving legal opinion of Pacifica Law Group LLP, Seattle, Washington, Bond Counsel and Disclosure Counsel. A copy of the form of the opinion of Bond Counsel is attached hereto as Appendix B. POTENTIAL CONFLICTS OF INTEREST Some or all of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and sale of the Bonds. From time to time, Bond Counsel serves as counsel to the Underwriter and the Financial Advisor in transactions unrelated to the issuance of the Bonds. OTHER BOND INFORMATION All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the City. 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. See Appendix A. ¯ At the time of delivery of the Bonds, one or more officials of the City will furnish a certificate stating that to the best of his or her knowledge, this Official Statement, as of its date and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, misleading. 36 Statements in this Official Statement, including matters of opinion, whether or not expressly so stated, are intended as such and not as representation of fact. This Official Stateme,nt is not to be construed as a contract or agreement between the City and the purchasers of the Bonds. The preparation and distribution of this Official Statement has been authorized by the City. THE CITY OF RENTON, WASHINGTON /s/Iwen Wang Administrative Services Administrator 37 APPENDIX A COPY OF THE BOND ORDINANCE CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITY’S WATER AND SEWER REVENUE REFUNDING BONDS; 1998. PASSED: October 15, 2012 PREPARED BY: PACIFICA LAW GROUP LLP Seattle, Washington ORDINANCE NO. 5672 TABLE OF CONTENTS* Section 1. Definitions .....................................................................................................................3 Section 2. Findings Regarding Parity Provisions ..........................................................................14 Section 3. Authorization and Description of Bonds .....................................................................14 Section 4. Registration of Bonds and Book-Entry System ...........................................................15 Section 5, Redemption; Purchase of Bonds .................................................................................21 Section 6. Priority and Payment from the Waterworks Utility Fund ...........................................25 Section 7. Funds and Accounts ....................................................................................................27 Section 8. Covenants ....................................................................................................................29 Section 9. Tax Covenants .............................................................................................................33 Section 10, Future Parity Bonds ...................................................................................................36 Section 11. Section 12. Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20, Section 21, Section 22. Section 23. Form of Bonds ...........................................................................................................39 Execution of Bonds ....................................................................................................42 Lost, Stolen or Destroyed Bonds ...............................................................................42 Sale of Bonds .............................................................................................................43 Application of Bond Proceeds; Plan of Refunding ....................................................45 Bond insurance .........................................................................................................48 Undertaking to Provide Continuing Disclosure .........................................................48 Defeasance of the Bonds ..........................................................................................53 Amendments .............................................................................................................53 Call for Redemption of 1998 Bonds ..........................................................................56 Contract; Savings Clause ...........................................................................................56 General Authorization, Ratification of Prior Acts .....................................................57 Effective Date of Ordinance ......................................................................................57 This Table of Contents is provided for convenience only and is not a part of this ordillancc. CITY OF RENTON, WASHINGTON ORDINANCE NO. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY’S WATER AND SEWER REVENUE BONDS.. 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITY’S WATER AND SEWER REVENUE REFUNDING BONDS,, 1998. WHEREAS, the City of Renton, Washington (the "City") has created and operates a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (the "Waterworks Utility"); and WHEREAS, the City issued and now has outstanding the following series of water and sewer revenue bonds, each being payable on parity from the revenues of the Waterworks Utility: Authorizing Original Outstanding Series Ordinance Principal Amount Principal Amount 1998 4709 $ 6,120,000 $ 1,045,000 2002 4976 11,980,000 1,025,000 2003 5019 8,035,000 415,000 2004 5098 10,335,000 10,335,000 2007 5313 9,750,000 9,705,000 2008A 5313 9,975,000 9,975,000 2008B 5313 2,035,000 2,035,000 (collectively, the "Outstanding Parity Bonds"); and WHEREAS, the Outstanding Parity Bonds issued under date of November 1, 2004 ¯ mature in principal amounts and bear interest as follows: Maturity Date Principal Interest (December 1)Amount Rate 2013 $ 205,000 3.55% 2014 235,000 3.65 2015 250,000 3.75 2024 4,605,000 5.00 2025 1,600,000 5.00 2026 1,680,000 5.00 2027 1,760,000 5.00 Term Bond (the "2004 Bonds"); and WHEREAS, the 2004 Bonds maturing on and after December 1, 2015 (the "Refunding Candidates"), are subject to optional redemption, in whole or in part, on any date on and after December 1, 2014, at a price of par plus interest accrued to the date of redemption; and WHEREAS, after due con~sideration it appears to this Council that all or a portion of the Refunding Candidates (the "Refunded Bonds") may be defeased and refunded by proceeds of water and sewer revenue refunding bonds authorized herein (the "Bonds") at a substantial savings to the City and its ratepayers; and WHEREAS, the respective ordinances authorizing the issuance of the Outstanding Parity Bonds permit the issuance of additional bonds on a parity with the Outstanding Parity Bonds for refunding purposes if certain conditions are met; and WHEREAS, the City has received a proposal from Seattle-Northwest Securities Corporation, Seattle, Washington (the "Underwriter"} and now desires to issue and sell the Bonds to the Underwriter as set forth herein; and -2- WHEREAS, the Outstanding ParRy Bonds Issued under date of March 1, 1998 (the "1998 Bonds") maturing on December 1, 2012 and December 1, 2013 are subject to optional redemption, in whole or in part, on any date on and after December 1, 2008, at a price of par plus interest accrued to the date of redemption; and WHEREAS, the City now desires to use available funds of the City refund in whole the outstanding 1998 Bonds on December 1, 2012; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES ORDAIN AS FOLLOWS: Section 1. ~. As used in this ordinance, the following words shall have the fo||ow|ng meanings: Acquired Obligations means the Government Obligations acquired by the City under the terms of this ordinance and the Escrow Agreement to effect the defeasance and refunding of the Refunded Bonds. Annu~l Debt Eervice for any year means all the interest on plus all prindpal (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. Base Period means any consecutive 12-month period selected by the City out of the 24-month period next preceding the date of issuance of an additional series of Future Parity Bonds. -3- Bene~icial Owner means any person that has or shares the power, directly or indirectly to make Investment derisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). Band Fend means that spedal fund of the City known as the Waterworks Revenue Bond Fund, 2012 created by this ordinance for the payment of the principal of and Interest on the Bonds. Band Insurnnce Palicy means the municipal bond insurance policy, if any, issued by the Insurer insuring the payment when due of the principal of and interest on all or a portion of the Bonds as provided therein. Band Purchnse Contract means the contract for the purchase of the Bonds between the Underwriter and City, executed pursuant to Se~on 14 of this ordinance. Band 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. Band Registrar means, initially, the fiscal agency of the State of Washington, for the purposes of registering and authenticating the Bonds, maintaining the Bond Register, effectlng transfer of ownership of the Bonds and paying interest on and principal of the Bonds. Band tear means each one-year period that ends on the date se|ected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier of the final maturity date of the Bonds or the date that is fl~e years after the date of issuance of the Bonds, Bond Years end on each anniversary of the date of issue and on the final maturity date of the Bonds. Bonds mean the City’s Water and Sewer Revenue Refundlng Bonds, 2012, authorized to be issued by this ordinance. C~ll D~te for the Refunded Bonds means December 1, 2014. Oty means the City of Renton, Washington, a municipal corporation duly organized and existing by virtue of the laws of the State of Washington Code means the Internal Revenue Code of 1986, as amended, and shall Include all applicable regulations and rulings relating thereto. Commission means the Securities and Exchange Commission. Council means the City Council as the general legislative authority of the City, as duly and regularly constituted from time to time. Coverage Re~luirement nrlor to the New Covenant Date means in any calendar year 1.25 times the Maximum Annual Debt Service. From and after the New Covenant Date. the term Coverage Re~luirement means in any calendar year 1.25 times the Annual Debt Service for such year. ~J’edit ~dllty means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee or other financial instrument or any combination of the foregoin~ which obligates a third party to make payment or provide funds for the payment of financial obligations of the City. There may be one or more Credit Facilities outstanding at any time. De~ignctted Oty Representative means the Mayor, the Chief Administrative Officer and the Finance Director of the City and any successor to the functions of such offices. The signature of one Designated City Representative shall be sufficient to bind the City. -5- 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. EsmowAgent means U.S. Bank National Association, Seattle, Washington. E~raw Agreement means the Escrow Deposit Agreement between the City and the Escrow Agent to be dated as of the date of closing and delivery of the Bonds. Rnance Director means the City’s Finance and Information Services Administrator or the successor to such officer. F/tch 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, Rtch shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. Future Parity Bonds means 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 Outstanding Parity Bonds and the Bonds. Government Obligations means those obligations now or hereafter defined as such in chapter 39.53 RCW. Grass Revenue means 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 p~rpose 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, prindpal 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 spedal account for the purpose of paying a rebate to the United States Government under the Code. Insurer means the munidpal bond insurance company, if any, selected and designated by the Designated City Representative, pursuant to Section 16 of this ordinance, as issuer of a Bond Insurance Policy for all or a portion of the Bonds. Letter oj~ Representetions means the Blanket Issuer Letter of Representations from the City to DTC. Mointenonce ond Operation Expense means 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. M~ximum Annual Debt Service means, at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future calendar year on the 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. MSRB means the Municipal Securities Rulemaking Board or any successors to its functions. Net Proceeds, when used with reference with the Bonds, means the prindpal amount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. Net Revenue means Gross Revenue less Maintenance and Operation Expense. New CovenentDote means from and after the date when all Outstanding Parity Bonds issued prior to 2007 are no longer Outstanding. 199# Bond Ordlnence means Ordinance No. 4709 adopted by the City Council on March 9,1998 authorizing the issuance of the 1998 Bonds. 1998 Bonds mean the Outstanding City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 1998, with a dated date of March 1,1998. 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 prIndpal 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. Outstanding Pority Bond Ordinances mean the ordinances authorizing the issuance of the Outstanding Parity Bonds identified in the recitals to this ordinance. Outstonding Porlty Bonds means the parity water and sewer revenue bonds of the City identified in the recitals to this ordinance. Parity Bonds means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. Parity Bond Fund means any fund created for the payment and redemption of Parity Bonds. ParityRequlrement means Net Revenues equal to or greater than: (a) 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; and (b) 100% of Maximum Annual Debt Service for all subordinate lien evidences of indebtedness secured by Gross Revenue. Private Person means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. prlvute 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 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. Progressional Utility Consultant means 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. Ctuall~ied 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 the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. Quel~fled Letter o~ 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 the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. R~te St~bllizoffon Fund means the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. Rotlng Agency means Moody’s, S&P or Fitch. Refunded Bonds means the 2004 Bonds designated by the Designated City Representative pursuant to Section 15. Rej~unding Account means the account by that name established pursuant to Section 15. Re~Jnding C.~ndid~tes mean the outstanding 2004 Bonds maturing on and after December 1, 2015. 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 means that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709. Reserve Requirement prior to the New Covenant Date means Maximum Annual Debt Service. From and after the New Covenant Date, the term Reserve Requirement means 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 means the SEC’s Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time. $&P means Standard & Poor’s rating Services, a Standard & Poor’s Financial Services LLC business, 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, $&P shall be deemed to refer to any other naUona]ly recognized securities rating agency designated by the City. SteRe means the State of Washington. Term Bcmd$ mean any Parity Bonds identified as such in the Bond Purchase Contract or 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 Parity Bonds in accordance with a mandatory sinking fund requirement. Term Bond Moturity Yeor means any calendar year in which Term Bonds are scheduled to mature. 2004 Bond Ordinence means Ordinance No. 5098 adopted by the City Council on November 1, 2004 authorizing the issuance of the 2004 Bonds. 2004 Bonds means the Water and Sewer Revenue Bonds, 2004, of the City issued under date of November 1, 2004, as more particularly described in the recitals of this ordinance. Underwriter means Seattle-Northwest Securities Corporation, Seattle, Washington. W=terwork$ Utility means 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. Woterwot’ks Utility Fund means 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 Intemretatton. 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 enUties, 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 -]3- 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 indude the plural number and vice versa. Section 2. Findings Regarding Parity Provisions. 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 the Parity Bond Ordinances for the Outstanding Parity Bonds, and that the issuance of the Bonds will result in a debt service savings for the Waterworks Utility and does not require an increase of more than 55,000 in any year for prindpal of and interest on the Bonds over and above the payments that were required to be made for the Refunded Bonds. The conditions contained in the Parity Bond Ordinances for the Outstanding Parity Bonds having been complied with or assured, the payments required herein to be made out of the Waterworks Utility Fund into the Bond Fund and the Reserve Fund to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in the Waterworks Utility Fund equal in rank with the lien and charge thereon for the payments required to be made for the Outstanding Parity Bonds. Section 3. Authorization and Description of Bonds. The City is hereby authorized to issue water and sewer revenue refunding bonds (the "Bonds") in an aggregate principal amount of not to exceed $10,000,000 for the purpose of providing the funds necessary to refund the Refunded Bonds and pay all or a portion of the costs incidental to the foregoing and to the issuance of the Bonds. The Bonds shall be designated the uClty of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012" with any additional series designation, if necessary; shall be dated as of their initial date of delivery; shall be fully registered as to both principal and interest; shall be in the denomination of $5,000 each, or any integral multiple thereof within a maturity, provided that no Bond shall represent more than one maturity; shall be numbered separately in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification; shall bear interest from their date, payable semiannually on the interest payment dates set forth in the Bond Purchase Contract; and shall mature on December I in the years and prindpal amounts set forth and approved in the Bond Purchase Contract executed by the Designated City Representative pursuant to Section 14 of this ordinance. The Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall not be general obligations of the City. Section 4. Registration of Bonds and Book-Entry System. (a) Bond Reg/stror/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 Finance Director upon prior notice to the Bond Registrar and a successor Bond Registrar appointed by the Finance Director. No resignation or removal of the Bond Registrar shall be effective until a successor shall have been appointed and until the successor Bond Registrar shall have accepted the duties of the Bond Registrar hereunder. The Bond Registrar is authorized, on behalf of the City, to authenUcate and deliver Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar’s powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication of the Bonds. (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 17 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 4(h), but such Bond may be transferred as herein provided. All such payments made as described in Section 4(h) 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 Representotlons. The Bonds initially shall be held 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 pa~cipant, the payment by DTC (or any successor depository) or any DTC participant of any amount in respect of the prlndpal of or interest on Bonds, any notice which is perml~ed 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 by a depository, 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 prindpal thereof at the rate stated on such Bond until it is paid. (d)Use of Depository. (1} 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 prindpal therein designated to mature on such date. Registered ownership of such 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 Finance Director pursuant to subsection (2) below or such substitute depository’s successor; or (C) to any person as provided in subsection (4} below. (2) Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository or a determInat~on by the Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the 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. (3) In the case of any transfer pursuant to clause (A) or (B} of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the 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 Finance Director. (4) 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 Finance Director determines that it is in.the best interest of the beneficial owners of the Bonds that such owners be able to obtain physical 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 by a depository. The Finance Director shall deliver a written request to the Bond Registrar, together with a supply of physical 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 on behalf of the Finance Director to the -18- 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 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 prindpal 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 prindpal 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. (f) Bond Reglstrar’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 -19- officers or directors to act as a member of, or in any other capadty 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. (h) Place and Medium of Payment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shali be calculated on the basis of a year of 360 days and twelve 30-day months. For so long as all Bonds are held by a depository, 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 held by a depository, 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 $1,000,000 of Bonds (received by the Bond Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the United States designated by the Registered Owner. Principal of the 8onds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the principal office of the Bond Registrar. Section 5. Redemption: Purchase of Bonds. (a) Mandatory Redemption of Term Bonds and Optional Redemption, if any. The Bonds shall be subject to optional redemption on the dates, at the prices and under the terms set forth in the Bond Purchase Contract approved by the Designated City Representative pursuant to Section 14. The Bonds shall be subject to mandatory redemption to the extent, if any, set forth in the Bond Purchase Contract and as approved by the Designated City Representative pursuant to Section 14. (b) Purchase of Bonds. The City further reserves the right to use at any time any surplus Net Revenue available after providing for the payments required by paragraphs (i) through {vi) of Section 6(b) of this ordinance, or other available funds, to purchase any of the Bonds that are offered to the City at any price deemed appropriate by the City. (c) Selection of Bonds for Redemption. 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 wtth 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 subsection (c). 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 Reglstrar) in increments of SS,000. In the case of a Bond of a denomination greater than $5,000, the City and the Bond Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtalned by dividing the actual principal amount of such Bond by $5,000. In the event that only a portion of the pdndpal sum of a Bond is redeemed, upon surrender of such Bond at the prindpal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the prindpal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate In any of the denominations herein authorized. (d)Notice of Redemption. (1) Official Notice. For so long as the Bonds are held in uncertiflcated form, notice of redemption (which notice may be conditional) 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 (if the Bonds are no longer held in uncertiflcated form), notice of redemption shall be given In the manner hereinafter provided. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an offidal redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. All offidal 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)any conditions precedent to redemption; (E)that if all of the conditions to redemption are met, 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. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. If the conditions to redemption have not been met prior to the date scheduled for redemption, then the City may revoke the redemption by giving notice in the same manner as set forth above. (2) Effect of Notice; Bonds Due. If an unconditional notice of redemption has been given as aforesaid, the Bonds or po~ons of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein spedfled, and from and after such date such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled by the Bond Registrar and shall not be reissued. (3) Additional Notice. In addition to the foregoing notice, 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 po~on of such further notice shall In any manner defeat the effectiveness of a call for redemption If notice thereof Is g~ven as above prescribed. Each further notice of redemption given hereunder shall contain the information required above for an offidal 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 20 days before the redemption date to each party entitled to receive notice pursuant to Section 17 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. (4) Amendment of Notice Provisions. The foregoing notice provisions of this Section 5, including but not limited to the information to be induded In redemption notices and the persons designated to receive notices, may be amended by addltlons, deletions and changes in order to maintain compliance with duly promulgated regulations and recommendations regarding notices of redemption of municipal securities. Section 6. Priority and Payment from the Waterworks Utility Fund. (a) Waterworks Utility Fund. A special fund of the City known as the "Waterworks Utility Fund" has heretofore been established by the City, into which shall be deposited all Gross Revenues as collected. Moneys in the Waterworks Utility Fund shall be trust funds and shall be held separate and apart from all other funds and accounts of the City. (b) Priority o-f Payments .from the Waterworks Utility Fund. 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: {i)To pay Maintenance and Operation Expense; (if)To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; {lii) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of principal on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iv) 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; -25- (v) To make all payments required to be made into the Reserve Fund, indudlng any reimbursements required for Qualified insurance or Qualified Letter of Credit; (vi) 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 prindpal 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 (vii) To retire by optional redemption or purchase any outstanding revenue bonds or revenue warrants of the City, to make necessary additions, betterments, Improvements and repairs to or extensions and replacements of ~ Waterworks utility, to make deposits into the Rate Stabilization Fund, or for any other lawful City purpose. (c) 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 subsection (b) of this section, deposit Gross Revenue Into the Rate Stabilization Fund, excluding prindpal 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 7.. Funds and Accounts. (a) Bond Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund, 2012 (the "Bond Fund"), which shall be a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund. The Bond Fund shall be maintained for the purpose of paying the prindpal of and interest on the Bonds. As long as any Bonds remain 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 prlndpal 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 pdndpal and interest falls due on the Bonds equal to the installment of interest or prindpal and interest. (b) Reserve Fund. 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 Parity Bonds. 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. 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 shal! equal the total amount of pdndpal 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 prindpal or interest, as the case may be, on the Bonds, that deficiency shall be made up from the Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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 -28- 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 Registered Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. (c) Pledge of Revenue and Lien Position. The Net Revenue is hereby 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. (d) Regarding Su.f~lclency o.f Revenues. The Council hereby finds that in fixing the amounts to be paid into the Bond Fund out of the Gross Revenues, it has exercised due regard for the Maintenance and Operation Expense and has not obligated the City to set aside and pay into such Fund a greater amount of such Gross Revenues than in its judgment will be available over and above the Maintenance and Operation Expense. Section 8. Covenants. The City covenants and agrees with the Registered 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: -29- (1) Gross Revenue will at all times be suffident 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 Utiltty 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 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, ($) the City In Its discretion may sell or otherwise dispose of any of the works, plant, properties or fadlities 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 W~aterworks Utility to another municipal corporation so long as Net Revenue of the po~on of the Waterworks Utility so transferred is used for payment of debt service on the Parity Bonds prior -31- to any other purpose. In no event shall such proceeds be treated as Gross Revenue for purposes of this ordinance. (d} Books ond 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 spedal 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. (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) Insurcmce. It at all times will carry fire and extended coverage and such other forms of insurance, indudlng public liability and property damage insurance, with responsible -32- insurers and with polities payable to or on behalf of the City and any additional lnsureds on such of the buildings, equipment, works, plants, fadlities 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 Clty, to protect the Waterworks Utility and the Registered Owners of the Parity Bonds against loss. (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 9. 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 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 Bonds. (a) Arbitrage Covenant. Without limiting the generality of the foregoing, the City covenants that it will not take any action or fall to take any action with respect to the proceeds of sale of the Bonds or any other funds of the City which may be deemed to be proceeds of the 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 Bonds to the initial purchasers thereof, would have caused the Bonds as Uarbitrage 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 Bonds. (b) Private Person Use Umitation .for Bonds. The City covenants that for as long as the Bonds are outstanding, it will not 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 prlndpal 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 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 (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 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 (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 refinanced with the Bonds, and (11) any Private Person Use will not exceed the amount of Net Proceeds of the 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 Bonds. (c) Modl~lcation of Tax Covenants. The covenants of this section are spedfled solely to assure the continued exemption from regular income taxation of the interest on the 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 Bonds. (d) Quailed Tax-Exempt Obligation. The City hereby designates the Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for investment by financial institutions. The City reasonably does not expect to issue more than $10,000,000 in qualifying tax-exempt debt during calendar year 2012. Section 10. 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 Inc~ease in the Reserve Requirement attributable to those Parity Bonds or (2) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance 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 Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (2) prior to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year’s Net Revenue from those customers; (C) income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; (D) The Professional Utility Consultant’s estimate of the Net Revenue to be derived from customers anticipated to connect for whom building permits have been Issued; {E) Income received or to be received which is derived from any person, firm corporation or municipal corporation under any executed contract for water, sewage disposal or other utility service, which revenue was not included in the historical Net Revenue; (F) The Professional Utility Consultant’s estimate of the Net Revenue to be derived from customers with existing homes or buildings which will be required to connect to any additions to and improvements and extensions of the Waterworks Utility constructed and to be paid for out of the proceeds of the sale of the additional Future Parity Bonds or other additions to and improvements and extensions of the Waterworks Utility when such additions, improvements and extensions are not completed; and (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. (f) Refunding Obligations. 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 ParRy Bonds, money for the payment of which is not otherwise available. (g) Subordlnote Lien Obligotions. 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 11. Form of Bonds. The Bonds shall be in substantially the following form: [DTC LANGUAGE] UNITED STATES OF AMERICA NO. STATE OF WASHINGTON ¯ CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 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 prlndpal sum is paid or payment has been duly provided for. Both prindpal of and interest on this bond are payable in lawful money of the United States of America. Interest and prindpal shall be paid as provided in the Blanket Issuer Letter of -39- Representations {the "Letter of Representations") by the City to The Depository Trust Company (aDTC"). 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 aBond RegIstraY’). ¯Capitalized terms used in this bond that are not spedflcally defined have the ¯ meanings given such te~ms in Ordinance No. 5672 of the City adopted on October 15, 2012 ~the ~Bond Ordlnance’). 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 $. . The bonds of this issue are being issued for the purpose of refunding certain outstanding water and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance and in the Bond Purchase Contract. The~ bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended {the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund. 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 prindpal and interest on such bonds. The bonds of this issue are not general obligations of the City. 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 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 paymenti of the Outstanding ParRy 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 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. 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 bythe 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 ,2012. CITY OF RENTON, WASHINGTON [SEAL] By /s/ facsimile or manual Mayor /s/facsimile or manual Citycierk The Bond Reglstrar’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 Refunding Bonds, 2012 of the City of Renton, Washington, dated ,2012. WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer Section 12. 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, or otherwise reproduced 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. Only such Bonds as shall bear thereon a Certificate of Authentication manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 13. 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 Registered Owner thereof upon the Registered 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 14. Sale of Bonds. (a) Bond Sole. The Bonds shall be sold at negotiated sale to the Underwriter pursuant to the terms of the Bond Purchase Contract. The Underwriter has advised the Council that market conditions are fluctuating and, as a result, the most favorable market conditions may occur on a day other than a regular meeting date of the Council. The Council has determined that it would be in the best interest of the City to delegate to the Designated City Representative for a limited time the a’uthorlty to approve the final interest rates, aggregate principal amount, principal amounts of each maturity of the Bonds, selection of the Refunded Bonds, and redemption rights. The Designated City Representative is hereby authorized to approve the final interest rates, aggregate prindpal amount, principal maturities, selection of the Refunded Bonds, and redemption rights for the Bonds in the manner provided hereafter so long as (i) the aggregate principal amount of the Bonds does not exceed $10,000,000, (ii) the final maturity date for the Bonds is no later than December 1, 2027, (iii) the Bonds are sold (in the aggregate) at a price not less than 98% and not greater than 120%, (iv) the Bonds are sold for a price that results in a minimum net present value debt service savings over the Refunded Bonds of 10%, and (v) the true interest cost for the Bonds (in the aggregate) does not exceed 3.25%. In determining whether or not to acquire a Bond Insurance Policy and determining the final interest rates, aggregate principal amounts, principal maturities and redemption rights, the Designated City Representative shall take into account those factors that, in his or her judgment, will result in the Iowes~ true interest cost on the Bonds to their maturity, inciuding~ but not limited to current financial market conditions and current interest rates for obligations comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in this section, the Designated City Representative is hereby authorized to execute the Bond Purchase Contract. The signature of one Designated City Representative shall be sufficient to bind the City. Following the execution of the Bond Purchase Contract, the Designated City Representative shall provide a report to the Council describing the final terms of the Bond~ approved pursuant to the authority delegated in this section. The authority granted to the Designated City Representative by this Section 14 shall expire 120 days after the effective date of this ordinance. If a Bond Purchase Contract for the Bonds has not been executed within 120 days after the effective date of this ordinance, the authorization for the issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale approved unless such Bonds shall have been re-authorized by ordinance ofthe Council. The ordinance re-authorizing the issuance and sale of such Bonds may be in the form of a new ordinance repealing this ordinance in whole or in part or may be in the form of an amendatory ordinance approving a bond purchase contract or establishing terms and conditions for the authority delegated under this Section 14. (b) Delivery of Bonds; Documentotion. Upon the passage and approval of this ordinance, the proper officials of the City indudtng the Designated City Representative, are authorized and directed to undertake all action necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to execute all closing certificates and documents required to effect the closing and delivery of the Bonds in accordance with the terms of the Bond Purchase Contract. (c) Preliminory ond Final O~iciol Stotements. The Finance Director is hereby authorized to ratifif and to deem final the preliminary Offidal Statement relating to the Bonds for the purposes of the Rule. The Finance Director is further authorized to ratify and to approve for purposes of the Rule, on behalf of the City, the Official Statement relating to the issuance and sale of the Bonds and the distribution of the Official Statement pursuant thereto with such changes, If any, as may be deemed by her to be appropriate. Section 15. Aoelication of Bond Proceeds: Plan of Refundin~ (a) Refunding Plono For the purpose of realizing a debt service savings and benefiting the City’s ratepayers, the Council proposes to refund and defease the Refunded Bonds as set forth herein. The Refunded Bonds shall include those Refunding Candidates designated by the Designated City Representative when the Bonds are sold pursuant to the Bond Purchase Contract, Proceeds of the Bonds shall be deposited with the Escrow Agent pursuant to the Escrow Deposit Agreement to be used immediately upon receipt thereof to defease the Refunded Bonds as authorized by the 2004 Bond Ordinance and to pay costs of issuance of the Bonds. The net proceeds deposited with the Escrow Agent shall be used to defease the Refunded Bonds and discharge the obligations thereon by the purchase of 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: (1) interest on the Refunded Bonds due and payable on and prior to the Call Date; and (2) the redemption prices of the Refunded Bonds on the Call Date. 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. (b) Escrow Agent/Escrow Agreement. The City hereby appoints U.S. Bank National Association, SeattJe, Washington, as the Escrow Agent for the Refunded Bonds (the "Escrow Agent"). A beginning cash balance, if any, and the Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining 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 Bonds. In order to carry out the purposes of this SecUon 15, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement. (e) Call for Redemption of Re~unded Bonds. The City hereby Irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the payments described in Section 15(d). The City hereby irrevocably calls the Refunded Bonds for redemption on their Call Date in accordance with the provisions of the 2004 Bond Ordinance authorizing the redemption and retirement of the 2004 Bonds prior to their fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be irrevocable after the issuance of the Bonds 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 the 2004 Bond Ordinance. 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 Finance Director, or, at the direction of the Finance Director, to the paying agent for the Refunded Bonds, sums sufficient to pay, when due, the payments spedfied in Section 15. All such sums shall be paid from the moneys and Acquired Obligations deposited with the Escrow Agent, and the income therefrom and proceeds thereof. All such sums so paid. to said Finance Director shall be credited to the Refunding Account. All moneys and Acquired Obligations deposited with the Escrow Agent and any income therefrom shall be held, invested (but only at the direction of the 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 see that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. Section 16. Bond Insurance. The Finance Director is hereby further authorized to solicit proposals from municipal bond insurance companies for the issuance of a Bond Insurance Policy. In the event that the Finance Director receives multiple proposals in response to a solicitation, the Finance Director may select the proposal having the lowest cost and resulting in an overall lower interest cost with respect to the Bonds to be insured. The Finance Director may execute a commitment received from the Insurer selected by the Finance Director. The Council further authorizes all proper officers, agents, attorneys and employees of the City to cooperate with the 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. Section 17. Undertakin~to Provide ContinuinR Disclosure. (a) Contract/Undertaking. This section constitutes the City’s written undertaking for the benefit of the Registered Owners and Benefidal Owners of the Bonds required by subsection (b){5) ofthe Rule. (b) Financial Statements/Operating Data. The City hereby agrees to provide or cause to be provided to the Municipal Securities Rulemaking Board {"MSRB"), the following annual financial information and operating data for the prior fiscal year, commencing in 2013 with the calendar year ending December 31, 2012: (1) 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 43.09o200, 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"); (2) A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3)Debt service coverage ratios; and (4)General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds and identified in a closing certificate executed by the Designated City Representative and referencing this section. Items (2} through (4) shall be required only to the extent that such information is not included ~n (1). The information and data described above shall be provided on or before nine months after the end of the City’s 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 the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB’s internet webslte or filed with the Commission. If not provided as part of the annual financial information discussed above, the City shall provide the City’s audited annual financial statement prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43°09°200 (or any successor statute) when and if available to the MSRB. (c) Usted Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: ¯Principal and interest payment delinquencies; ¯Non-payment related defaults, if material; ¯Unscheduled draws on debt service reserves reflecting financial difficulties; ¯Unscheduled draws on credit enhancements reflecting financial difficulties; ¯Substitution of credit or liquidity providers, or their failure to perform; ¯Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; ¯Modifications to the rights of Bondholders, if material; ¯Bond calls, if material, and tender offers; ¯Defeasances; ¯Release, substitution, or sale of property securing repayment of the Bonds, if material; ¯Rating changes; ¯Bankruptcy, insolvency, receivership or similar event of the City; -50- ¯The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and ¯Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall promptly determine whether the events described above are material. (d) Formot J~or Filings with the MSRB. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. (e} Not~cotlon Upon Foilure to Provide Finonciol Doto. The City agrees to provide or cause to be provided, in a timely manner, to the MSRB notfce of its fai(ure to provide the annual financial information described in Subsection {b) above on or prior to the date set forth in Subsection (b) above. (f) Terminotion/Modificotlon. The City’s obligations to provide annual financial information and notices of certain listed events shall terminate upon the legal defeasance, prior redempfion or payment in full of all of the Bonds. Any provision of this section shall be null and void if the City (i) 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 -51- otherwise does not apply to the Bonds and (Ii) notifies the MSRB of such opinion and the cancellation of this section. The City may amend this section with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment of this section, the City shall describe such amendment in the next annual report, and shall indude, a narrative explanation of the reason for the amendment and its impact on the type {or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. in addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (A) notice of such change shall be given in the same manner as for a listed event under Subsection (c), and (B) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. {g~ Bond Owner’s Remedies Under This Section. The right of any bondowner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to a 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 an event of default with respect to the Bonds. (h) No Default. Except as otherwise disclosed in the City’s Official Statement relating to the Bonds, the City is not and has not been in default in the performance of its obligations of any prior undertaking for ongoing disclosure with respect to Its obligations. -52- Section 18.. Defeasance of the Bonds. In the event that money and/or Government Obligations maturing or having guaranteed redemption prices at the option of the holder at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) suffident to redeem and retire part or all of the Bonds in accordance with the their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Bond Fund or any account therein for the payment of the pdndpal of and interest on the certain Bonds so provided for and such Bonds shall then cease to be entitled to any lien, benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds shall no longer be deemed to be Outstanding hereunder, or under any ordinance authorizing the issuance of bonds or other indebtedness of the City. Within 30 days of any defeasance of Bonds the Bond Registrar shall provide notice of defeasance of Bonds to Registered Owners of the Bonds being defeased and to each party entitled to receive notice in accordance with Section 17. Section 19. 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. -53- (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 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 Registered 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 Coundl, 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 prindpal amounts. (e) Excluslon 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. (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 URegistered 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 20. Call for Redemption of 1998 Bonds. For the purpose of realizing a debt service savings and benefiting the ratepayers of the City, the City Council hereby authorizes the refunding of the 1998 Bonds identified in the recitals to this ordinance. Available funds of the City in the amount necessary to refund the 1998 Bonds, in whole, shall be used on or before December 1, 2012 for the payment of interest on and the redemption price of the 1998 Bonds on such date. The City hereby irrevocably calls the 1998 Bonds for redemption on December 1, 2012 in accordance with the provisions of the 1998 Bond Ordinance authorizing the redemption and retirement of the 1998 Bonds prior to their fixed maturities. The City’s Finance and Administrative Services Administrator is hereby authorized and directed to provide for the giving of notice of the redemption of the 1998 Bonds in accordance with the applicable provisions of the 1998 Bond Ordinance. The costs of such notice shall be an expense of the city. Section 21. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds shall cons~tute a contract between the City and the Registered 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 Cityshall be declared by any court of competent jurisdiction and after final appeal (if any appeal be taken) to be contraw 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 22. General Authorization: Ratification of Prior Acts. The Mayor, the Chief Administrative Officer, the 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 23. Effective Date of Ordinance. This ordinance shall be effective upon passage, approval, and thirty (30) days after publication. PASSED by the City Council this 15th day of October, 2012. Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this 15th day of October, 2012. Approved as to form: Paciflca Law Group LLP Bond Counsel Date of Publication: Denis Law, Mayor -57- CERTIFICATE I, the undersigned, City Clerk of the City Council of the City of Renton, Washington {the "Cit~’), DO HEREBY CERTIFY: 1. The attached copy of Ordinance No. 5672 (the "Ordinance") is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on October 15, 2012, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect after publication in the City’s official newspaper as provided by law; and 2. A quorum of the members of the City Coundl was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of October, 2012. Bonnie I. Walton, City Clerk APPENDIX B FORM OF BOND COUNSEL OPINION December 7, 2012 City of Renton, Washington Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re:City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $9,190,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City"), and have examined a certified transcript of all of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Refunding Bonds, 2012, in the principal amount of $9,190,000 (the "Bonds") issued pursuant to Ordinance No. 5672, passed by the Council on October 15, 2012 (the "Bond Ordinance"), to refund certain water and sewer revenue bonds and to pay costs of issuance of the Bonds. Capitalized terms used in this opinion 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 and the Bond Purchase Contract. 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. 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 payable solely out of special funds of the City known as the Bond Fund and the Reserve Fund, except to the extent that the enforcement of the rights and remedies of the holders of the Bonds may be limited by laws relating to bankruptcy, reorganization, insolvency, moratorium or other similar laws of general application affecting the fights of creditors, 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 bank~ptcy, 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 said Bond Fund out of Gross Revenue of the Waterworks Utility certain fixed amounts necessary to pay and secure the payment of the principal of and interest on the Bonds as the same become due. The City has further pledged that the payments to be made into the Bond Fund out of Gross Revenue of the Waterworks Utility shall constitute a lien and charge upon such Gross Revenue superior to all other charges of any kind or nature whatsoever, except for Maintenance and Operation Expense of the Waterworks Util!ty, and equal in rank to the lien and charge on such Gross Revenue to pay and secure the payment of the principal of and interest on the City’s Outstanding Parity Bonds and any Future B-1 Parity Bonds that may be issued after this date on a parity with such bonds and the Bonds. The City has reserved the fight to issue Future Parity Bonds on the terms and conditions set forth in the Bond Ordinance. 4. Interest on the Bonds is excludable from gross income for federal income tax purposes under existing law 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. The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. 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. 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, PACIFICA LAW GROUP LLP B-2 APPENDIX C FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2011 (AUDITED) (THIS PAGE INTENTIONALLY LEFT BLANK) Washington State Auditor Brian Sonntag INDEPENDENT AUDITOR’S REPORT June 29, 2012 Council City of Renton Renton, Washington We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Renton, King County, Washington, as of and for the year ended December 31, 2011, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about ~hether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Renton, King County, Washington, as of December 31, 2011, and the respective changes in financial position and, where applicable, cash flows thereof fur the year then ended in conformity with aecoanting principles generally accepted in the United States of America. Irmumn~e Bu~g, P.O. Box 40021 ¯ Olympia, Waslt~lton 98504-0021 ¯ (360) 902-0370 ¯ TDD Re~ay (800) 8336388FAX (3~0) 753-0646 ¯ http’J~ao.t~a.gov As described in Note 1, during the year ended December 31, 2011, the City has implemented the Govermnenlal Accounting Standards Board Statement.No. 54 - Fund Balance Reporting and Governmental Fund Type Definitions. In accordance with Government Auditing Standards, we will also issue our report dated June 29, 2012, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. That report will be issued under separate cover in the City’s Single Audit Report. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral pint of an audit performed in accordance with Government Auditing Standards and should be considered in assessing’the results of our audit. Accounting principles generally accepted in the United States of America require that the mauagement’s discussion and analysis on pages 3-1 through 3-14, budgetary comparison information on page 5-I, pension trust fund on pages 5-2 and information on postemployment benefits other than pensions on pages 5-3 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying information listed as combining financial statements on pages 6-1 through 6--40 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying aecounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 201I ComprehemNe Annual Financial Report City of Renton, Washington The information identified in the table of contents as ihe Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR This page intentionally left blank. 2011 Comprehensive Annuol Financial Report City oJ Renton, Washington MANAGEMENT’S DISCUSSION AND ANALYSIS The City of Renton’s discussion and analysis provides a narrative overview of the City’s financial activitles for the fiscal year ended December 31, 2011. 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 2011 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 flnandal 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 identifi/individual fund issues or concerns. FINANCIAL INFORMATION The City’s 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 Finandal Statements for its major and non-major governmental funds were prepared on the modified accrual basis of accounting in cooformity with GAAP. The City’s major and non-major enterprise funds, internal service funds, and pension funds were accounted for on the full .accrual basis of accounting in conformity with GAAP. The City of Renton, along with all cities, counties, and other governmental entYdes in Washington, must comply with the Budgeting, Accounting, and Reporting System (BARS) as defined by the Washington State Auditor’s Office (SAO). 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; 3. accountability for control of assets and obligations; and 4. 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. SAO reviews the City’s !nternal controls, and the City receives and takes action on all the recommendations made. The 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 Coundl must authorize any budget increase or decrease to any fund. 2011 Comprehensive Annuo/ Flnonck~FReport Qty oJ~ Renton, Woshington Financial Highlights ¯The City’s total assets as of December 31, 2011, exceeded liabilities by $453.3 million. ¯As of December 31, 2011, the City’s Governmental Activities reported net assets of $453.3 million. Of this total, $53.2 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. ¯Investment in capital assets (net of related debt) comprises 5373.6 million of the $453.3 million in Governmental Activities net assets. ¯The business type activities have total net assets of $240.4 million. 90.3% of this total, $217.1 million, represents the City’s investments in capital assets (net of related debt). An unrestricted balance of $23.3 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, 2011, was $141.5 million. Of thls amount, $41.4 million are revenue bonds and PWTF loans dedicated to the waterworks projects. Employee leave balances and other post-employment benefits total $9.1 million. The balance of $91.0 million of City debt is dedicated for general governmental purposes, including the purchase of City Hall, the construction of the downtown parking garage, construction of two libraries, replacement of a fire station, purchase of a fire station, the construction of a regional communications center and construction of a regional jail fadllty. 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 Finandal 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 2011. 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. 20~ Comprehensive Annual Financial Report City af Renton, Washlngron Figure 1 REQUIRED COMPONENTS OF THE ANNUAL FINANCIAL REPORT In addition to the required components shown in Figure 1, the City’s annual report also indudes 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 Sedan, 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 Renten. This section provides a long- term perspective on the City’s economy. BASIC FINANCIAL STATEMENTS Government-wlde 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 prindpally supported by taxes and intergovernmental revenues (referred to as "governmental activities") from functions that are Intended to recover all or a significant po~on 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 waterworks (water, sewer, and surface water), solid waste management and services, golf course, and airport. 201i Comprehensive Annu(# RnoncPJI Report City of Renton, Washington The Statement of Net Assets presents information on all of the Clty’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 flnandal 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, and water infrastructure). The Statement of A~ttvltles 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, Judicial, Security of Person and Property, Physical Environment, Me.ntal 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 the 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 and revenue even though some amount of these taxes will not be available to the City for several years. Unpaid vendor obligafions are illustrated as an accounts payable obligation as of December 31. Fund Financial Statements The Clty 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: i 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 20II Comprehensive Annum Financial Report City o~ Renton, Washington ¯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 of 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 Fund, Municipal Facilities CIP Fund and Capital Improvement Fund. 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 financial 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 finandng derisions. 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 fadlitate 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 specifically addressed 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 s~rvices to various City 2011 Comprehensive Annum Flnoncial Report City o.f Renton, Washington 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. The 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-wlde 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 ac~dvities 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 essent|al 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. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Assets Changes in Net Assets may serve as a useful indicator of a government’~ flnandal position. The overall financial position has improved for the City of Renton over the prior year. Changes in Net Assets from 2010 to 2011 shows an increase in total net assets of $21.4 million. 20~i Comprehensive Annual Financial Report City o.f Renton, Washington Table I is a condensed version of the Government-wide Statement of Net Assets. The majority of the City’s net assets (85%) 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 decreased from 2010 to 2011 by $6.3 million. investments in capital assets decreased by $9.4 million In the Governmental activities, which is due to the issuance of $16.7 million of new debt to build two new libraries. Very little capital work had taken place in 2011; therefore no significant assets have been recbrded related to the new debt. Business-type activities Increased $3.1 million primarily due to capital act|vlty as opposed to significant reductions in debt although revenue bond debt in the Golf Course fund (a business-type activity) was replaced by an interfund loan from the General Fund in 2010. Intarfund loan debt Is not included in the calculation of Investments in capital assets net of related debt. Restricted assets, representing resources that are subject to external restrictions on how they may be used, equate to 3.8% of total net assets, up from 1.7% in 2010. This increase is related to the $16.7 million of new debt issued in 2011 which is restricted for capital construction related to the new libraries. The remaining balance (unrestricted net assets) of $76.6 million will be used to meet the City’s ongoing commitments and plans. As of December 31, 2011, 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) increased in 2011 by $22.4 million. Governmental activities generated 57% of this total or $12.7 million, while business-type activities generated $9.7 million of this total. 2011 Comprehensive Annual Financial Report City o, f Renton, Washington Table 2 is a condensed version of the Statement of Activities for the City. ~97 s~7 ~ ~ Sixty-six percent (66%) of the City’s total activities are for governmental activities such as providing police, fire, parks, libraries, recreation, building safety, and planning services. The remaining activities relate to business-type services provided by the City. The largest business-type activities include water, sewer, surface water and solid waste activities. Governmental Activities Analysis Governmental activities cost a total of $108.4. million in 2011, up 2% from 2010. Of this amount, $43.2 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 and contributions. The net expense (total expenses less program revenues) of $65.2 million was the cost of governmental services City taxpayers primarily paid through various taxes. 2011 Comprehensive Annual Finenciel Report City o.f Renton, Washington2011 Comprehensive Annual Financial Report City o/ Renton, Washington Chart i portrays the cost of each of the City’s governmental programs along with each program’s generated revenues (fees and intergovernmental revenues specifically related to that program). Chart 2 depicts the sources of revenues that fund governmental activities. Approximately sixty- three percent (63%) is from various taxes. Charges for services, grants, and interest earnings generate thirty-three percent (37%} of total revenue for general governmental activities. Business-Type Activities Analysis Charts 3 and 4 present the same information on business-type activities as illustrated for governmental activities. Chart 3 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). The City’s largest business-type activity, the Waterworks Utility, had a positive net change ($8.4 million) at the end of 2011 compared to $21,000 change in 2010. This large increase is primarily due to rate increases, which are necessary to replace failing systems and provide on-going capital infrastructure replacements. The City generated $45.6 million in various fees for services and other sources from waterworks activities and had $37.1 million in expenses. The Airport’s total expenses were ~;2.0 million, Total revenues for 2011 were $2.0 million, which is consistent with 2010 revenues. The Solid Waste Utility’s revenues were $15.0 million generated from fees for services and 5111,488 in grants and contributions. The total expenses were $14.4 million. The Golf Course generated a total of $2.0 million in green fees, driving range charges, and other user fees. The total expenses for the Golf Course were $2.1 million. The Golf Course had a loss of $85,000 for the year. Manaqement’s Discussion and Anaiysis, 3-I0 20ii Comprehensive Annual Financial Report City o.f Renton, Washington Business-type activities are supported primarily from charges for services. In the City of Renton, $62.3 million wa~ generated from charges for services in the business-type activities. These comprise ninety-eight percent (95%) of the total financial support for these activities. Grant revenues increased $1.8 million from 2010 to 2011 largely due to a surface and storm water improvement grant for approximately $1.0 million and US Department of Transportation grant for approximately $500,000 for the airport taxiway improvements. FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds Analysis The 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 $49.2 million, an increase of $17.2 million In comparison to last year. This large increase is attributed to a $16.7 million in general obligation bonds issue in 2011. Approximately fifty-nine percent (59%) constitutes unrestricted fund balance, which has been either committed or assigned to reflect the City Council and management’s plans and commitments to be expended in future periods. 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 or capital reserves. The large increase in fund balances resulted from the issuance of general obligation debt, mentioned above, and is restricted for the capital construction of two new libraries. The General Fund is the chief operating fund of the City. At the end of the current year, unrestricted fond balance of the general fund was $13.8 million, while total fund balance ended at $15.7 million. Although unrestricted, this balance has assigned designation for specific functions and plans approved by the City Council. The fund balance increased by $1.3 million as the City was able to realize expenditure savings in excess of revenue received. The Municipal Facilities CIP fund has been included as a major fund of the City due to the importance of municipal projects that may be accounted for In this fund in any given year. The fund balance increased by $17.1 million in 2011 and is directly related the general obligation debt noted earlier. The Capital Improvement fund is the last major governmental fund. This fund accounts for the many transportation-related projects in the City. The fund balance increased $129,200. 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. Net assets in the Waterworks Utility Fund and the Solid Waste Fund were $215.4 million and $2.9 million respectively. This represents an increase in the 20Ii Cornprehens~ Annua! Financial Report Gty o~ Renton, Woshlngton Waterworks Utility Fund of $7.5 million and an increase in the Solid Waste Fund of $0.7 million. The factors concerning the finances of these two funds have been addressed In the discussion of business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS During the year there was a $4.2 million increase in appropriations between the original and final amended budget. This increase was mainly due to 2010’s LEOFF1 medical contribution to fully fund actuarially determined annual obligations for 2010 ($700,000) and to fund the gap for banking s.ervlce fees ($197,000). Other increases were department carryfoward requests which were offset by an increase of $2,7 million to budgeted revenues. In addition, the General Fund did not spend $6.1 million of the legally appropriated expenditures. As a result, the General Fund fund balance increased by $768,000 in 2011. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City of Renton’s investment in capital assets, including construction in progress, for its governmental and business-type activities as of December 31, 2011, amounts to $691.3 million as presented on the following table. The increase of $6.6 million in 2011 is made up of large capital projects such as Rainier Ave., Strander Blvd., Lake Washington Trail, Rainer Ave. storm water improvements, and Stonegate/Summerwind wastewater improvements. More detail about the City’s Capital Assets can be found in Note 5 to the financial statements. Debt Administration As shown in Table 4, the City’s total outstanding debt at December 31, 2011, was $129.7 million. This was a net increase (new issues less prindpal payments and refunding) of $10.5 million. Manogemen~’$ Discussion end AnMysls, 2011 Comprehensive Annual Financial Rel~ort City of Renton, Washington The City was able to reduce aggregate debt service payments and realize present value gains by refunding 2001 General Obligation Refunding Bonds. More detailed information about the City’s long-term debt can be found in Note 13 to the financial statements. FUTURE YEAR’S BUDGETARY IMPACTS The 2011-2012 adopted budget is the first biennial budget for the City of Renton. After the mid- biennial budget adjustment, total adopted revenue is $487 million against total expenditures of $532 million. The adjusted revenue shows an increase of 6.9% from the combined 2009-2010 adopted budget level and the expenditures reflect an increase of 14.9% from the adopted 20~9- 2010 budgeted expenditures. In addition to implementing a biennial budget, the City also formed a Community Budget Advisory Group comprised of local residents, business owners, and community leaders. This group was asked several questions in order to solicit their suggestions on opportunities for greater effidencles and costs savings. They were able to provide the City with a number of valuable recommendations, some of which have been included in the 2011-2012 adopted budget. We initially saw a promising start in early 2010, but the recovery slowed to a crawl during the second quarter of 2010. Our modest growth projections for 2011 were barely met. Housing starts and permits slowly began increasing in 2011 and continue with upward growth into the first quarter of 2012. During budget preparation in 2010, our preliminary projections indicated that maintaining current levels of services in General Government Operations would result in a deficit of $2 million in this budget" period. We made the necessary adjustments to bring our expenditures in line with our revenue projections through the next biennium. Every department made difficult choices, reducing or reorganizing services while minimizing adverse impacts to our citizens. In addition, the 2011-2012 adopted budget does not restore any of the service reductions made during 2010 even though some of these cuts and reductions cannot be sustained in the long run. It is likely these service reductions will remain for the 2013-2014 biennial budget~ The City is committed to continuing efforts to evaluate the way we do business. We will continue to right-size the structure of government, We will continue to engage our emplovees to help find innovative and effective ways of serving our citizens. We will continue to practice fiscal responsibility and reduce our debt. And we will continue to work with our labor groups to find sustainable ways of managing our labor costs In order for us to continue to provide quality services to our citizens with fewer dollars. 2011 Comprehensive Annual Finonctol Report City of Renton, Woshlngtot~ The City continues to benefit from progressive economic development activities even as the country continues to struggle through the worst economic recession in history. ¯The Landing is a master planning development area on land previously owned by Boeing. The development has added more than 900 residential units and 600,000 square feet of retail, including a major entertainment district to the city’s core. Restaurants and stores at the Landing have enjoyed double-digit sales growth over the previous year. Several new tenants have come in including Dick’s Sporting Goods, Marshalls and Panera Bread. ¯Harrington Square, a very impressive apartment complex celebrated its grand opening in the Highlands/Sunset area. ¯A number of new companies located in Renton this year that resulted in over 500 new local jobs for our community and new businesses opened in the Downtown, Cascade Village, Renton Village, Southport and Highlands areas of the City. Downtown Renton continues to attract new businesses including several new restaurants, Pike Place Bakery, a new children’s clothing store and a book store. ¯The Farmers Market continues to enjoy record attendance- over 4,000 people every week and 58 registered vendors. The market has also expanded to Valley Medical Center on Sundays. ¯The Seahawks Training Camp brought over 22,000 people to Renton during the summer, many who shopped and dined in our community. ¯Private investors purchased the 21 acres south of the Landing and we are looking forward to a significant redevelopment of this area. ¯The City signed a historic agreement with Boeing for a 20-year renewed lease for the Renton Municipal Airport. Boeing continues to have over 2,000 orders worth more than ¯ ~;157 billion, and announced that their increased production of the 737 MAX will take place in Renton, increasing production rates to 42 airplanes per month by 2014. ¯Waterways Cruises has been successfully operating their unique sightseeing and dinir~g cruises from Southport in Renton, bringing over 7,000 visitors to our community in its first year of operation. ¯The Compass Regional Veteran’s Center opened in downtown Renton. This attractive four- story building occupies nearly 60,000 square feet and offers 58 units of affordable housing for veterans and their familles and 8,500 square feet of retail space. For more information regarding future year’s budgetary impacts, please refer to the Transmittal Letter within this document under: Foctors A~ecting Finonciol Condition - Economic Condition. REQUESTS 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 lwen Wang, Finance and lnformationTechnology Administrator, 1055 Sou~h Grady Way, Renton, WA 98057 or visit our web site at www.rentonwa.~ov. Manogemer~’s Discussion ond Anot~t$, 3-14 ASSETS Cash and cash equivalents Cash with fiscal agent Deposit with fiscal agent Recehmbles (net of allowance for uncollectthles) Land UABILIT1ES A~counts payable and other lta bilges Interest payable Unearned revenue Non-current liabilities: Due within one year Due In more than one year Total liabilities Pub~ safedy Cuture and rec~e~on OPEB I~b~y City o.f Rentan, Wush~ngmn STA~E M E NT OF N~T ASSETS December 3~L, 2011 PRIMARY GOVERNMENT GOVERNMENTAL BUS[N ESS-TYPE ACTIVITIES ACTIVITIES TOTAL 45,475,533 $12,606,868 $58,082,401 125,134 125,134 1,329,607 1,329,607 28,826,729 7,441,156 34267,885 14,496,078 8,124,483 22,620,56:1 1,514,117 (1,514,117) 322,500 322,500 238,401 238,401 4209~L5o627 591,812 43,507,439 647,589 827,827 1,475,416 182,417,081 6,165~21 188,582,402 32,803,660 8,882,098 41,7~5,7~8 216,927,958 242,488,276 459,416.234 565,717,514 286,046°224 851,763,738 10,713,999 3,056,935 13,770,934 209,084 158,915 367"399 2,026,320 316,279 2,342,599 7,120,581 30180,123 i0,300,704 92,329.264 38°889,340 131,218,604 112,399,248 45,601,592 1580000,840 373,641,842 217,103,722 590,748,564 31,600 31,600 577,252 577,282 19,448.219 19,448.219 1,032,361 1,032,361 5,342,695 5,342,695 53,244,297 23,340,910 76,585~207 453,318,266 ~;240,444,632 $ 693,762,898 B~sic Flnunctal Statements, 4-2 FUNCTIONS/PROGRAMS Primary government: Governmental actIMt~es: General governmenL Judtclel Public safety Physical environment Trsnsportation Economic environment Health and human se~elces Culture and re~reation Interest on long-term debt Total governmental activities Business-type acthrlt~es: Waterworks utility Airport Solid waste utilRv Golf course Total business-type activ~tfes Total primary government ~ o~Renton, Washington STATEMENT OF ACTNIT]ES For the Year Ended December 31, 2011 Page 1of 2 PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND CAPITAL GRANTS EXPENSES SERVICES CONTRIBUTIONS & CONTRIBUTIONS 4.268"321 $2,756,613 $1,186,986 $32,661 2,563,989 3,565.216 38,034 52,627,849 641,483 7,936,188 2,151"322 1,015"323 83,192 25,376,308 3,275,596 8"338,820 11,724,871 6,491,151 2,486,3~6 334,896 11,955,737 1,793,86~]108,973 "295,258 2,165,960 37,148,813 43,003,494 159,585 2,424,982 2,026,804 2.294,383 194,395 48,327 55,709,754 62,328.294 465,468 2,473"309 164,129,529 77,862,784 16,006~65 14,609,291 General revenues: Taxes: Property taxes Retail sales taxes Business taxes Exdse taxes Penalties and interest Interest and investment earnings Miscellene~us Transfers Total general revenues and transfers Change In net assets Netassets-beginning Prior Period Adjustment Net assets - endln8 Bostc Financtol Statement, 4-2 202I Comprehensive Annual Rn~ncial Repo~ NET (EXPENSE)REVENUE AND CHANGES IN NET ASSETS PR}MARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE (292,061)$ 1,036,261 1,o16,261 (1,052,807)(1,052,807} {4,437,021)(4,437,021) (5,757,643)(5,757,643) (2,165,560)(2,165o560) 8,439,248 8,439,248 510,301 510,301 692,721 692,721 9,557,317 9,557,317 (65,208,406)9,557,317 (59,051,089} 22,008,777 22,008,777 16,870~84 16,870,284 4.113,705 4,113,705 380 380 37,454 (37,454) 77,934,863 150,871 78,085,734 12,726,457 9,708,188 22,434,645 440,591,809 231,802,937 672,394,746 (1,066,493)(1,066,493) 453,318,266 $ 240,444,532 $ 693,762,898 The note~ to the flno~dol statements are an integral part oJ b~ls stoternen~ City o~ Renton, Washington GENERAL BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2011 Page 1 of 2 Gty o:f Renton, Woshingto~ MUNICIPAL FACILITIES CIP CAPITAL IMPROVEMENT ASSETS Cash & cash equivalents $7,873,281 $14,572,104 $¯ 2,306,585 $ Cash w~sh fiscal agent 125,134 Deposit w~th fiscal agent 1329.607 Investments 4,632,146 8,601,129 1,361,453 Receh/ab~es (net of allowances) Taxes 2,880,657 Customer accounts 3,753,123 Accrued interest & penalty 45,678 38,480 12,110 Spech~l assessments ~ Interfund loans receivable 500,416 Due from other funds 44,053 10,822 Due from other governmental units 4,842.807 85,168 561,616 Advances to other funds 1,716,067 TOTALASSETS $26~413,372 $"23,307,703 $5,571,371 $ OTHER TOTAL GOVERNMENTAL GOVERNMENTAL FUNDS FUNDS 3,8~2,456 $ 2S,5~4,4~ 1,329,607 2,262,082 16,856,810 1500 3,754,623 19,279 19,279 500,416 747 55,632 2,079,596 7,569,287 8,224,9~7 $63,517,393 Basic Financial Stotements, MUNICIPAL OTHER TOTAL FAQLR]~S CAPITAL GOVERNMENTAL GOVERNMENTAL GENERAL QP IMPROVEMENT FUNDS FUNDS 33,148 34 16,475 73,546 1,019 15,748,776 22~927~571 4,306,388 6,2/5,855 49,198,5~ 2011 Compreher~i~e Annual Rno~da! Report RECONCIUATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS December 31, 2011 FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Capita! assets and other non<un’ent as~ts used in governmental activities are not flnandal resources and therefore are not reported in the 8ovemmental funds. Other non-~u~rent assets Intangible assets (nat of accumu[ated amortization) Capital assets (net of accumulated depreciation) Def~r~ed revenue Certain ilab~litles {such as bonds payable and acc~Jed expenses) are not due and payable in the current period and therefore are not reposed in the governmental funds Interest payable Long-term liabilities Internal seP/~e funds are used by manasement to charge the costs of assets and liabilities of the internal service funds that are reported with NET ASSETS OF GOVERN MENTAL ACT]VfflES Ctty of Re, ton, Woshingto~ $49,298,590 42,896,348 647,589 432,148,699 4r097,082 {199,896) (99,449,844) 23,979,698 453318,266 Boric Finon¢lol Stotements, 4-6 2011 Comprehensive Annual Financial Report City oJ Renton. Washington STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December $1,2011 GENERAL MUNICIPAL OTHER TOTAL FACILITIES CAPITAL GOVERNMENTAL GOVERNMENTAL CIP IMPROVEMENT FUNDS FUNDS REVENUES Taxes $71,443,862 $575,234 $-$4,247,592 $76,266,688 Ucenses and permits 2,665,983 1,696,116 48,763 4,410,862 intergovemmentel revenues 10’534,331 389,757 7,706,388 811,481 29,441,957 Cberges for services 3,860,290 658 330,076 4,191,024 Fines and forfeits 3,150,326 3,150326 interfund revenues 3,057,642 3,057,642 Contributions 192,699 (3,692)4,034,441 65,000 4,288,448 Investment earnings 366,332 51,568 16,429 40,949 475,278 Miscellaneous revenues 646,868 114 42 1,584 648,608 TOTAL REVENUES 95,918~33 1,013,639 13,493,416 5"545,445 115,930,833 EXPENDITURES Current: General government 10"598,389 339,122 295 10,937,806 Judldal 2"563,989 2,563,989 Public safety 52,986,589 52,986,589 Physical environment 2,048.971 2,O48,971 Transportation 8,018,267 2,019,343 7~4 10,038~344 Economic environment 5,876,231 325,731 245,201 6,447,163 Health and human sez~/ices 511,934 511,934 Calture and ~ec~eaUon 10,215,229 868,867 81,98~11o166,O81 Capital outlay 78,089 2,322,659 12.565,685 ~5,425 14,981,858 Debt sewtce: Pflndpal payments 2,783,237 2,783,237 Interest and fls~l charges 116,744 9,188 2,376,944 2"502,876 TOTAL EXPENDITURES 92,897,588 3,973,123 14.594,216 5"503,821 116,968,848 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 3,020,645 !2,959~484)(1,140,800)41,524 (1,038,015) OTHER FINANCING SOURCES (USES) Transfer in 15,420 2,010,822 1,270,000 590,408 3,886,650 Trander (out)(2,268,329)(76,772){1,799,056)(4,144,157) Restricted for OPEB -9,425,000 9,425,000 GO bends issued 16,715,000’16,715,000 premium on general obllgatfon debt 1,405,553 862,616 2,268,169 Sale of cap~tsl assets 500 payment to refunded bend escrow agent (9,950,000)(9,950,000) TOTAL OTHER FINANCE SOURCES (USES)(2,252,409)20,054,603 1,270,000 (871,032)18,201,162 NET CHANGE IN FUND BALANCE 768,236 17,095,119 ;L29,200 (820,408)17,163,147 FUND RALANCE JANUARY 1 14,980,540 5t832,452 4,177,188 7,045,263 32,035,443 FUND RALANCEDECEMBER31 $ 15,748,776$ 22,927,571 $4,306,388 $6,215,855 $49,198,590 RECONCIUAT]ON OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTWITIES GOVERNMENTAL ACTIVITIES For the Year Ended December 31, 2011 NET CHANGES IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Governmental fiJnds report capital outlays as expenditures. However~ in the Revenues in the statement oi= acth/ftJes that do not provide current financial resources are not reported as revenue in the funds. The issuance of long-term debt (e.&o bonds, leases) provides current flnandal resources to govemmeotal funds, whi~e the repayment of the pdndpal of long-term debt consumes the current flnandal resources of 8ovemmeotal funds. Neither transaction, however, has any effect on net assets. Also~ Increase (decreaseJ in other non-current assets which Include the Net Pension Asset and Investments tn Joint Ventures which are not reported in governments[ funds. Internal ser~ce funds are used by management to charge the costs M ~rtsin acth, ltles to Individual funds~ The net revenue (e~pee~e) of the internal se~lce CHANGES IN NET ASSETS OF GOV E RN M E NTAL ACTIVITIES Ci~ o~ Renton, Woshing~on S 17,163,147 2,479.608 3°472,203 12,726,457 Boric Fin~ncicd Stol:ements, 4~8 Current assets: Cash & cash equhmlen~s Investments at f~ir value Receivables (net of allowances): Customer accounts Specfa~ assess~’nents Due from other funds Inteffund loan rece|vable Advances to other funds Capital assets (net) Deferred charges and other assets TOTAL ASSETS ~ oJ Benton, W~zshtngton STATEMENT OF NET ASSETS PROPRIETARY FUNDS De~ember 31, 2011 Page lof2 BUSIN ESS~PfPE ACTIVR]ES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACT]VWIES WATERWORKS SOLID ENTERPRISE ENTERPRISE INTERNAL SERVICE LFI~LITY WASTE FUNDS FUNDS FUNDS 5,434,445 874,928 1,131,784 7,441,157 9,969,921 5,376,766 1,563,827 100,804 7,041,397 33,425 93,298 93,298 50,346 6,942 10,052 67,350 90,495 38,025 7,441 45,466 56,301 94,887 94,887 718,624 107,838 95,976 922,438 42,117 263,073 59,425 322,498 238,400 21,238,522 4,073~70 3,322,969 28,635,361 27,321,785 121,251 121,251 199,855 199,855 236,303,033 21,342,861 257,645,694 827,827 827,827 470,56’1 470,561 237,922,527 21~42 661 259,265 188 259,161,049 ~ 4,073,870 ~ 24,865,630 $ 287,900,549 8,376,720 343,328 3,72D~g 36,041,833 BoSI¢ Finonctol Statements, 4-9 20II Com~rehensive Annum Finonciel Report Due to other ~unds Inteffund ~oans payable D~e to other governments Revenue bonds payable Total current liabilities Revenue bonds payable De~erred revenue NET ASSETS net of related debt Rest~cted fur OPEB Unrestricted City oJ Renton, Washington STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2011 Page 2 of 2 BUSINESS-TYPE ACTWITIES ENTERPRISE FUNDS GOVERNMENTAL OTHER TOTAL ACTIVITIES WATERWORKS SOUD ENTERPRISE ENTERPRISE INTERNAL SERVICE UTILiXY WASTE FUNDS FUNDS FUNDS 957,249 $ 1,06~,,838 S 153,703 ~ 2,172,590 291,867 191,867 32,810,000 32,810,0Q0 541,878 541,878 (540,297)~(540,297J 1,349,762 1,349,762 167~920 148,358 316,278 437,625 16,166 85,039 538,830 5,538,929 5,538,929 38°956,055 16,166 1,583,159 40,555,380 564,$7~ 2,442,193 333,027 1,988 3,342,087 345,239 345,239 3,687,326 195,761,061 21,342,661 217,103,722 19~647,658 2 913 603 779,649 23,340 910 215,408,719 ~;2,913,603 $22,122,310 ~;240,444,632 $ 5,342,695 Oty o~Renton, Woshtn~on OPERATING INCOME (LOSS) NON-OPERATING REVENUES(EXPENSES): Inte~ovemmental revenues Investment earnings Gain (]o~) on sale of capital assets Other nan-ope~tin~ revenues (exp~lses) Interest expense Amor~zetJon Of debt discount and expense NON-OPERATING REVENUE NET OF EXPENSE INCOME {LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS Capital contflb~tlons Transfers in Restricted for OPEB CHANGE IN NET ASSETS NET ASSETS, JANUARY 1 Pflor Year Adjustment NET ASSETS, JANUARY 1 RESTATED STATEMENT OF REVENUES, EXPENSES, AND CHANGES iN FUND NET ASSETS PROPRIETARY FUNDS For the Year Ended December 31, 2011 41,557,439 $~,4,942"041 $4~09o366 $60~08,~46 $~5o378,279930~553 1,3~6 93~,94B 7,38~66~58~2~236 871 8,199,776 2,036¢920 1,448,377 11~488 242,722 ~,802.587 22~,045 93,042 9,726 14~321 117,089 126,733 1~,397 4,670 5,546 21,613 887,058 (1,387,713)(54,247)(1,441,960) 7,457,117 707,122 445,213 8,609,452 8e566,463 706,016 435 709.9.708,188 207,908,749 2,207,587 21,686,601 231~02,B37 $2$5,408,719 $ 2,913,e0~$ 22"122"310 $ 240,444,632 $ 179,907 3,472"202 28~82,305 28~82"305 32,3~,507 CASH FLOWS FROM INVESTING ACTp41TIES: Proceeds flora s~de of investments UTIUTY WASTE FUNDS FUNDS FUNDS $42"399,593 ~15,028,494 $4,525~347 $61,953,434 $ 32"019 (7,94~.|23,813 47,891 73,409 13~113,0~3 756,752 I 323,996 15,193,761 5,057~293 (26,844)(1,106~ ~(37o454)179,907 (26,844) $(~,206) ~137,4541 179,907 425,322 Che~k Figures 425,322 TOTAL CASH & ~A~H EQUIVALEN3~, DECEMBER 31 $ 9,207,08~ $ ~ ~ ~ $ ~.2,606,870 ~ 16,891,126 2011 Comprehensive Annual Finand~l Report STATEMENT OF ~ASH FLOWS PROPRIETARY FUNDS For the Year Ended December 31, 20ii Page 2 of 2 City o~ Renan, Washingto~ BUSINES~TYPE ACTNKIE~GOVERNMENTAL ENTERPRISE FUNDS ACTIVR]ES OTHER TOTAL INTERNAL WATERWORKS ~OLID ENTERPRISE ENTERPRL%E SERVICE UTIUTY WASTE FUNDS FUNDS FUNDS RECONCILIATION OF OPERATING INCOME (LOSS) TO NET C~H PROVIDED (USED} BY OPERATING ACTWIT[ES: Operating income {loss)~7,381~6~7 $ 1 Adjustments tO recondle operating Income (loss) to net cash provided (used) by operatin5 acth~es: Depreciation & amortizet~on of deferred char~es 6,8~5,480 Other non-operating revenue 11,997 {lnO’ease) decrease in accounts receh~able 277,030 (increase} ~ in due from other fands/8ovemmental un~(1,958,998} (Increase} decrease In inventory & prepaid items 3,710 Increase (decrease) In vouchers retalnage payable 49,304 Increase {decrease) In due to etber fands/govemmental units 1,501503 Ir~,ease {decrease) in payables & other short-term liabllffies (917,820} Increase (decrease) in customer deposits Increase (decrease} in deleted ~eenues (102,279) lil~ease (decrease) in acc~Jed employae leave benefits 32,019 Total adjustments 5,731,346 NET CASH PROVIDED {USED) BY OPERATING ACTIVITIES Restrleted for OPEn NONC~SH INVESTING, CAPITAL, AND FINANCING ACTIVITIES Pdor Pedod Adjustment Contributions of caplta] assets Net amort, bend prem. discount & bend issue costs Depredation 8,199,776 $2~056,920 840,076 7,675,556 1,887,334 116,158 206,744 334,299 1,I28,642 ~3,o~7 ~,87s (23,256)(83,848)(2,066,102}857,140 (9,670) {91,381){42,077)153,946 75,639 (14,657)(856,838)(1,091,563) 9,597 9,597 111,576 9,297 ~23 813 49,748 53,618 175,514 %087,125 6,~J3,98S 89,653 89,653 6,835,480 840,076 7,675,556 The notes to the. finundM stotements me an Integral part o[ this statement. STATEMENT OF FiDUCIARy NET ASSETS FIDUCIARY FUNDS December 31, 2011 ASSETS Cash & cash equivalents Investments at fair value: Federal National Mortgage Association US Treasury Str~ps Certificates of deposR Receivables (net of aEowances) Interest on Investments TOTAL ASSETS LIABILITIES Vouchers & contracts payable Deposits payable TOTAL LIABILFRES NETASSETS Held In trust for pension benefits & other purposes PENSION TRUST AGENCY FIRERGHTER’S SPECIAL PENSION DEPOSITS 1,173,234 ~591,487 692,497 3,048,843 9,321,323 591,487 7,~oo 584,287 591,487 City o~ Rento~, Washington 2011 Comprehensive Annual FIn~cial Repot STATEMENT OF CHANGES IN FIDUC~ARy NET ASSETS FIREMEN’S PENSION FUND For the Year Ended December 31, 2011 ADDmONS: Other contributions: Fire Insurance premiums transferred in Investment income Investment Inte~est Net increase / (decrease) In the fair va{ue of investments TOTAL ADDmONS DEDUCTIONS: Benefit payments Administrative and general TOTAL DEDUCTIONS NET INCREASE {DECREASE) NET ASSETS -JANUARY 1 NET ASSETS - DECEMBER 31 PENSION TRUST FIREMEN’S PENSION 355,380 654,354 1,124,788 284,826 8,762 293,588 831,200 8,490,123 9o321,323 NOTES TO THE FINANCIAL STATEMENTS January 1, 2011 through December 31, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Renton was incorporated on September 6, 1901, and operate~ 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 polldes 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. Effective for Fiscal Year 2011 reporting, the City implemented the following new accounting and reporting standards issued by the Governmental Accounting Standards Board (GASB): GASB Statement No. 54 - Fund B~lonce ReporUng and Governmental Fund Types- This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The statement further provides clarified definitions of the general fund, special revenue fund type, capital projects fund type, debt service fund type, and permanent fund type. 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. 201i Comprehensive Annual Ftnondal Report City qf Renton, Washington 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, public safety, physical environment, transportation, economic environment, health and human services, 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 ls more on the sustainabllity of the City as an entity and the change in the City’s net assets resulting from the current year’s activities. 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. FUND FINANCIAL STATEMENTS In the fund flnandal statements, the financial transactions are recorded in individual funds, each accounted for by a separate set of self-balandng accounts that comprise assets, Ilal~llities, 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 minlmum 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 stater~ent are presented on current financial resources and modified accrual basis of accounting. Since governmental fund Basic Financial Stotements, 4-17 City o~ Renton, Washington statements are presented on a different measurement focus and basis of accounting than the Government-wide statements’ governmental column, reconciliation is presented at the end of 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 prindpal 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, public safety, physical environment, transportation, economic environment, health and human services, culture and recreation). Interfund fund activity has been eliminated from the Government-wide financial statements. Exceptions are payments in lie~J 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 utilities. Elimination of these charges would distort the direct cost and program revenues for these functlon~. 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 legislative and executive departments, court services, finance and legal departments, development services, police and fire departments, human resources and technical services, community services, parks, economic development, streets, property management for City owned leased facilities, library and museum, fire memorial, and fire department’s health and wellness programs. 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. Community development block grant activities are accounted for within this fund, which is federally funded. MUNICIPAL FACILITIES CIP FUND The Municipal Facilities Construction Fund accounts for the acquisition and development of municipal facilities. Resources include general and special revenue taxes, grants, and Coundl- approved general obligation bonds. o~ Benton, W~shington CAPITAL IMPROVEMENT FUND This fund supports the City of Renton transportation projects and projects linked with various State and Federal funding programs. Many of the projects depend on grants, LIDs, and mitigation revenue. ENTERPRISE FUNDS WATERWORKS UTILITY FUND 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 connection charges. SOUD WASTE FUND Solid waste, recycllng, 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 SPECIAL REVENUE FUNDS ARTERIAL STREET FUND The Arterial Street Fund was established pursuant to state law allocaUng the one-half cent State Gasoline Tax revenue to cities and towns for construction, improvements, and major repair of streets. 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. 1% FOR ART FUND The City of Renton established this fund to account for one percent of construction project actual costs to be used for the selection, acquisition and]or installation of works of art to be placed in, on, or about City public facilities. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. 20~I Comprehensive Annual Finan~al Repor~C;ty o.F Renton, Washing~an SPRINGBROOK WETLANDS BANK FUND The City of Renton established this fund in 2007 for the purpose of providing accounting for the Springbrook Creek Wetland and Habitat Mitigation Bank project. The fund will receive revenue by selling Wetlands Credits to third parties and to the City’s internal departments. DEBT SERVICE FUNDS GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND This debt service fund accounts for the following outstanding debt issues: 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. 2002 limited tax general obligation bonds which provided funding for the construction of a new fire station. ¯2006 limited tax general obligation bonds which provided funding for the construction of South Lake Washington infrastructure improvements. ¯2009 intergovernmental debt related to the Fire District #40 asset transfer as a result of the Benson Hill annexation. ¯2010 intergovernmental refunding debt which refunded a portion of the 2000 intergovernmental debt for the construction of a new facility for Valley Communications Center. ¯2010 limited tax general obligaUon refunding bonds which refunded a portion of the 2001 limited tax general obligation bonds for the construction of a downtown parking facility. ¯2011 limited tax general obligation bonds which funded the development and construction of 2 new libraries. 1997 LIMITED GO BONDS - CITY HALL This debt service fund accounts for the following outstanding debt Issue: 2011 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 tlmited tax general obligation bonds for the purchase of Renton City Hall. Basic Financial Str~ement~ 4-20 20~1 Comprehensive Annual FintmdM RepoR CAPITAL PROJECT FUNDS COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND Accounts for monies collected from developers to offset lmpacts c~eated by their developments to City fadlities. FIRE IMPACT MmGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City fadlities. TRANSPORTATION IMPACT MmGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUND The 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 which provide for the design, cons~uction, labor wages and benefits, and equipment required to implement the project. ENTERPRISE FUNDS 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-Wlly 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. The fund accounts for the operation, maintenance, debt service, and capital improvements of the facility. OTHER FUND T~PES INTERNAL SERVICE FUNDS EQUIPMENT RENTAL The Equipment Rental Fund accounts for the costs of maintaining and replacing all City vehicles and auxiliary equipment, except for fire apparatus and replacement of police patrol vehicles. In addition, this fund accounts for the City’s information technology, facilities and communications costs. All costs, including depreciation, are factors in calculating the rates that are charged to each user department. Comprehensive Annual Flnoncial RepoR City of Ren~on, Washington 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. 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. Accrual Both 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 governmental 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 City of Renton, Washington 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 r~ciplent~ 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: Le., both measurable and available. "Available" means collectible within the current 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, UABIUTIES, 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 matudty 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. De,ferred 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 lendlngJborrowlng 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 Uadvances to/~om other~unds" (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 Uinternal balances~ (Refer to Note 10). 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 unamortlzed portion of the excess of bonds proceeds over their face value (exduding accrued interest and issuance costs). Deferred Amount-Re[undlng - 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. All inventories are carded at cost on the first in, first out - FIFO basis, with the exception of the Public Works Maintenance shops inventory. The value of this inventory is calculated using the average cost method. Certain payments to vendors reflect Costs applicable to future accounting pedods and are reported as prepaid items in both the Government-wide and fund statements. 5. Capital Assets and Depredation (refer to Note 5). 6. Deferred Revenues This account indudes 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 capadty. City of Renton, Woshi~gton 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 recondling item between the fund and Government- wide presentations. 9. Fund Balance Fund balances presented in the governmental fund financial statements represent the difference between assets and liabilities reported within the governmental fund. Fund Balance is classified into the following categories: Nonspendable - items that cannot be spent due to form; inventories, prepaid amounts, long- term loan receivables, or amounts that must be maintained intact legally. Restricted- amounts constrained for specific purposes imposed by external parties. Committed - amounts constrained by the City Council, either though formal budget adoption, contract approvals, or for other purposes formally approved by the Council. Assigned - all amounts remaining in governmental funds, other than the general fund, not classified as nonspendable, restricted or committed. Amounts reported as committed also include year-end encumbrances that have received approval from the City Council and re- appropriated in the following year’s carry forward budget~ Also, the City’s finandal polities require a maximum amount of 12% and minimum of 8% fund balance to remain in the general fund for cash flow purposes. Unassigned - any remaining fund balance in the general fund not classified as nonspendable, restricted, committed or assigned. 10. Net Assets (refer to Note 11). 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, Umber 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. 2011Comprehens~eA~nuelFIno~alReport City o~ RP~Iton, Woshlngton 3. lnterfund 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/Expenses Expenses in the Government-wide Statement of Activities are reported by function as a governmental activity (general government, judicial, public safety, physical environment, transportation, economic environment, health and human services, 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 principal and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating" In 2010, operating expenses were consolidated to Operations and maintenance, Administrative and general, Taxes and Depreciation. The other categories reported previously (Benefit payments, Professional services, and Insurance were assigned to Operations and maintenance and Administrative and general as appropriate. 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 A~J:OUNTABILITY The City of Renton budgets its funds under Generally Accepted Accounting Principles (GAAP) at the fund level. Annual appropriated budgets are adopted for governmental funds on a biennial basis. 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 ar~ Schedules of Revenues, Expenditures, and Changes in Fund Balances (Budget to Actual) reporting the Actual Budgetary GAAP Basis verses Actual GAAP Basis of Accounting 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: Prior to November 1, the Mayor submits a proposed budget to the City Council. This budget is based on priorities established by the Coundl; estimates provided by the City departments during the preceding months; balanced by revenue estimates made by the Mayor. 2.The City Coundl 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 GAAP basis of accoun’dng. Any comparisons between budget and actual revenues and expenditures are reported under the GAAP basis. The biennial 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 three times during 2011. Original budgeted inflows as compared to the final budgeted inflows are as follows: Ina~ase Original Final {Decrease) Fund INto~s Inflows Inflows General Fund ~94,25:1,824 ~96,971,788 $2,719,964 Arterial Street Fund 620,000 620,000 Hotel/Motel Tax Fund 245,000 245,0~O 1% for Art Fund ~5,000 32.000 17,00~ Cable Communications Development Fund 85,000 85,000 General Government Miscellaneous Debt Servica Fund 4,71~,035 15,069,950 10,354,915 Community Development Impact MitisaUon Fund 60,000 121,352 61,352 Fira ImpacL Mltisat~on Fund 100,Q00 1000~00 Transportation Impact MItlliaUon Fund 250,000 250,000 Municipal Facilities C1P Fund 13,310,000 22,172,058 8,862,058 General Government Capital Improvement Fund :L0,657,819 i5,970,043 5,312,224 Airport Fund 3,439,418 3,865,418 426,000 Solid Waste Utility Fund 15,015,942 15,015,942 - . Golf Course Fund 2,583,545 2,583,545 Waterworks UtiUty Fund 44,828,741 46,660,496 1,831,755 Equipment Repair and Replacement/Information Technology/Fadltt~es / Communications Fund 12,438,679 12,872,709 434,030 Insurance Fund 16,662,625 17,362,625 700,000 Firemen’s Pension 300~0QO 300~00 - City of Rento~, Washington Original budgeted outflows as compared to the final budgeted outflows are as follows: Original Final (Decrease) Solid Waste UtlHW Fund 14,951,710 14,95~710 Equipment Repair and Repia~ment / IT/Fadli~es / For the year 2011 and on, the City will operate and adopt a biennial budget. At year-end 2011, the City of Renton noted the Leased City Properties Fund, exceeded its final adopted budget by $119,892. For financial reporting purposes, this fund is reported within the General Fund, but is reported separately for budget purposes. NOTE 3. DEPOSITS AND INVESTMENTS A. Deposits The 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 (last updated and approved on February 23, 2009), which complies with the guidelines within Chapter 35A.40.050 RCW. This allows for investment of excess cash and inactive cash, directs that the 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. City of Renton, Washington 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 2aT-pools recognized by the Securities and Exchange Commission. A 2a7-11ke-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-reglstered mutual funds to use amortized cost rather than fair 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 2a7-1ike 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 B~siness-type Activities. C. Deposit and investment Schedule As of December 31, 2011, the City of Renton had the following investments: W~hted TOTAL iNVESTMENTS ~$37~46~,839 $39,367,131 Cash $48,191,882 $1,764,721 $49,956,603 Restricted Cash To~]Cash&ln~nts $g2,3~),286 $6,863,967 $99,214~53 Credit risk. Credit Risk is the risk that an issuer or other counter party to an investment will not ~u/,fill 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. Basic Financial Statements, 4-29 201~ Comprehensive Annual Financial Report Certificates of Deposit are insured by the FDIC up to $250,000 and, additionally, by collateral held In a multiple finandal ln~tutlon collateral pool administered by the Washington Public Deposit Protection Commission (WPDPC), The Washington State Local Government Investment Pool (LGIP) is a 2a7-11ke-pool and is operated In a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940, ISecudWType ValueCost Cash Equivalents Local Government Invesl~nent POOl [LGIP)~9,890,519 $9,890o519 unrated unrated llnve~stnmnts Certff~ates of Deposit (within WPDPC)34,960,382 34,950,382 unrated unrated FNMA Z~RO COUPON 99,556 154,634 N/A N/A US TREASURY ZERO COUPON 2.406,901 4,252,1/5 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 ls the risk that, in the event o,f the ,failure o,f the counter party to a transaction, a government will not be able to recover the value o,f investment or collateral securities that ore in the possession o,f 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 oj: Credit Risk. Concentration o,f credit risk is the risk o,f loss attributed to the magnitude o,f a government’s investment in o single issuer. The City diversifies its investment instruments to avoid incurring unreasonable risk inherent with the over-investment of instruments and issuers as follows: Maxi~mds ]per Polio/Mmdmum Maximum U.S. Treasuries 100%100% U.S. Asendes 75%50% Ce~ of ~ (within WPDPC)~%2~ ~1 Governmental ]nve~ment P~I (LG~P)~%~% Commercial ~per 25%5% Interest Rote Risk. Interest rote risk is the risk thut changes in interest rotes overtime, adversely o[~ecting the ,fair value o,f an investment. The City’s portfolio is managed within the parameters C~ty o~ Renton, Washtngm~ established by the Investment Policy, which limits the weighted average maturity of the portfolio to five years. Investment Pool $9,890,5:1g $$$$9,890,529 I IwRhin WPDPC)14,39~,I08 12,950,682 5,600,192 2~015,400 34,960~82 ] FNMA~ROCOUPON ,54,634 ~,,6~ NOTE 4. PROPERTY TAXES The 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 lew 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 $3.60 per $1,000 of assessed value (RC~. 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 munldpal purpose (RCW 41.16.060). The tax rate limit may be reduced for any of the following reasons: 1.The Levy Umit: 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 which restricted individual taxing districts from collecting, in any year, more than a one percent increase in their regular, non-voted, leW over the highest lew amount since ~.985 was overturned by the courts. However during 2007, the state legislature reinstated this limit City o~ Renton, Woshlngton with the passage of H82416. 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 lew rate will be decreased. The One Percent Constitution Umit: 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 spedal 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 lew taxes below the legal limit. Special levies approved by the voters are not subject to the above limitations. There is currently no excess levy for General Obligation Bond debt~ The City’s r~gular lew per the King County Assessor’s 2011 Annual Report is 2.83207. NOTE 5, CAPrrALASSETSAND DEPRECIATION A. GENERAL POUCIES 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 original historical cost when transferred between proprietary and governmental funds.) Intangible assets, either purchased or internally developed, with a cost of $5,000 or more that are identifiable by meeting one of the following conditions: ¯The asset is capable of being separate or divided and sold, transferred, licensed, rented, exchanged; or ¯The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable. 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. GOVERN MENTAL cAPrFAL ASSETS Governmental long-lived assets of the Ci~ purchased, leased, or constructed are recorded as expenditures in the governmental funds and are capitalized, net of depreciation, in the Government-wlde statements. The infrastructure component of GASB ~4 for assets acquired after January ~L, 1980 was implemented retroactively in 2004. Any gain on the sale of capital assets is recorded in the Statement of Activities as General revenues, Miscellaneous. Donated capital assets are capitalized at estimated fair value of the item at the date of its donation. C. PROPRIETARY FUND CAPITAL ASSETS Capital assets of proprletary funds are capitalized in their respective statement of net assets, net of depreciation. Any gain on the sale of capital assets Is recorded in the Statement of Activities as General revenues, Miscellaneous. D. DEPRECIATION AN D AMORTIZATION Depredation on all depredable assets is provided on the straight-line basis over the following useful lives: Amortization on all intangible assets is provided on the straight-line basis over the following useful lives: Estimated Type of Asset Service Life Computer Software 3-:L5 years Land Use Rights 3-:12 years Patents, Trademarks, Copyflshts 3-50 years Other Intangibles with definite useful lives 3-:12 years Depredation and Amo~zation Expense was charged to functions/programs of the primary government as follows: Governmental Ac6vffies General Government Public Sa fety Physical Environment Transportation Economic Development Culture and Re~eation Health and Human Services Internal Service Funds (General Go~mmental) rotaI-Go~er~l Activities 43,~9 43,989 3o7~3o7~ 545,~- $ 545,~ 295,071 *$295,071 Business-Type A~lvltles Waterworks Airport Golf Course rota|-Busines~Type ~ oJ~ Renton, Woehingto~ E. SUMMARY OF CHANGES Capital asset activity for the year ended December 31, 2011 was as follows: rotal Intangible ~sset~83~123 (4r296~-827,827 9u~ne~pe capital assets, net $ Z58~68,232 $ 4,608,441 $ 4.403,151 S 258,473,522 201~ Comprehensive Annual Finonc;a! Report City of Renton, Washington At the end of 2011, a total of 47 projects comprise the Construc’don 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 commltments as of December 31, 2011, are as follows: ~96 ZONE RESERVOIR & PUMP STATION AUTOMATIC METER READING CONVERSION ~DE ~NTERCEPTOR E~T RENTON LIFT STATION ELIMINATION E~OT SPAWNING CHANNEL ~ ~£MA REPAIR ~MERGEN~ POWER TO PUMP STATION ~MERGEN~ RESPONSE PROJ ~ROUND WATER UNDER ~NFLUEN~ ~ ~ARD[E AVE UNDERPASS STORM SYSTEM iMPROVEMENT ~KE AVE S - RAINIER AVE S STORM IMPROVEMENTS .IB~R~ HiGH L~FT STATION .g WA BLVD-HAW~ ~ND WATER IMPROVEMENTS .K WA BW-H AWKS ~ND STORM SYSTEM IMPROVeMeNTS 223.352 20,896 423.446 2,191,494 236,745 80,581 281,020 7,774 2011 Comprehensive Annual Fin~n~M RepoR City o.f Renton, Washington NOTE 6. PENSION PLANS With the excepUon 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 statewlde 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 System~ (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, P.O. Box 48380, Olympia, WA 985048380. The City is the administrator of the Fireflghter Pension Plan for all fireflghters 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 MIIliman, Consultants and Actuaries, may be obtained by contacting the City of Renton, Finance Division, 1055 South Grady Way, Renton, WA 98057. The following disclnsures are made pursuant to GASB Statements No. 27, Accounting .for Pensions by Store ond LocM Government Employers and No. 50, Pension Disclosures, on Amendment o.f GASB Stotements No. 25 ond No. 27. Public Emolovees’ Retirement System (PERSTI Plans 1, 2. and 3 Plan Descdntion PERS 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, 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 2011Comprehens~eAnnuMFinm~dMRepoR City o~ Re~ton, Washington 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. Notwithstanding, PERS Plan 2 and Plan 3 members may opt out of plan membership if terminally ill, with less than five years to llve. 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. PERS Plan 1 members are vested after the completion of 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 two percent of the average final compensation (AFC) per year of service, capped at 60 percent. (The AFC is based on the greatest compensation during any 24 eligible consecutive compensation months.) Plan 1 members who retire from inactive status prior to the age of 65 may receive actuarially reduced benefits. The benefit is actuarially reduced to reflect the choice of a survivor option. A cost-of-living allowance (COLA) is granted at age 66 based on years of service credit times the COLA amount, increased by three percent annually. Plan 1 members may also elect to receive an additional COLA amount that provides an automatic annual adjustment based on the Consumer Price Index. To offset the cost of this annual adjustment, the benefit is reduced. PEPS Plan 2 members are vested after completion of five years of eligible service. Plan 2 members may retire at age 65 with five years of service with an allowance of two percent of the AFC per year of service. (The AFC is based on the greatest compensation during any eligible consecutive 60-month period.) Plan 2 members who retire prior to the age of 65 receive reduced benefits. If retirement is at 55 or older with at least 30 years of service, a three 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 a cost-of-living allowance is granted (based on the Consumer Price Index), capped at three percent annually. PERS 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 one percent of the AFC per year of service. (The AFC 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 po~on of their plan after ten years of service; or after five years if twelve months 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. Plan 3 members who retire prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a three percent per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the ~ oJ Renton, Washington choice of a survivor opUon. There is no cap on years of service credit; and Plan 3 provides the same cost-of-llving allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, eithe~ as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. Judicial Benefit Multiplier Beginning January 1, 2007 through December 31, 2007 judicial members of PERS were given the choice to participate in the Judicial Benefit Program (JBM). Jus~dces and Judges in PERS 1 and 2 may make a one-time irrevocable election to pay increased contributions that would fund a retirement benefit with a 3.5% multiplier. The benefit would be capped at 75% of AFC. Judges in PERS Plan 3 can elect a 1.6% of pay per year of service benefit, capped at 37.5% of average compensation. Members who choose to participate In JBM will accrue service credit at a higher multiplier beginning with the date of their election, be subject to the benefit cap of 75% of AFC, pay higher contributions, stop contributing to the Judicial Retirement Account (JRA), and be given the option to increase the multiplier on past judicial service. Members who do not choose to participate will: continue to accrue service credit at the regular multiplier; continue to participate in JRA, if applicable; never be a participant in the JBM Program; and continue to pay contributions at the regular PERS rate. Newly elected or appointed justices and judges who chose to become PERS members on or after January 1, 2007, or who have not previously opted into PERS membership, were required to participate in the JBM Program. Members required into the JBM program would: return to prior PERS Plan if membership had previously been established; be mandated into Plan 2 and not have a Plan 3 transfer choice, if a new PERS member; accrue the higher multiplier for all judicial service; not contribute to JRA; and not have the option to increase the multiplier for past judicial service. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans of June 30, 2010: Retirees and benefldades receiving benefits 76,899 Terminated plan members entitled to but not yet receiving benefits 28,860 Active plan members vested 105~21 Active plan members non-vested 51t0~5 Total 262~85 2022 Comprehensive Annual Finm~cial Report Clz7 oJ Renton, Washington Following is a summary of the number of government employers participating In PERS as of June 30, 2010. Number of Par~:ipath~ Emldoye~’s State School Counties/ Other Political Total Plaxz A~encies Districts Munldpalitles Subdivisions Members PERS 1 144 227 158 180 ¯ 709 PERS 2 179 271 494 944 PERS 3 165 205 302 673 Tota I 4,89 227 634 976 2~326 Funding Policy Each 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 six percent for state agencies and local government unit employees, and 7.5 percent for state government elected officials. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of P[an 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. As a result of the implementation of the Judicial Benefit Multiplier Program in January 2007, a second tier of employer and employee rates was developed to fund, along with investment earnings, the increased retirement benefits of those justices and Judges that participate in the program. 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 contrlbution rates expressed as a percentage of current-year covered payroll, as of December 31, 2011, were as follows: Members not participating in JBM: Contribut~r PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer*7.25%7~5%7.25% Employee 6.00%4.64%*** ¯ The employer rates ln~ude the employer administrative expense fee currently set at 0.16%. ** Plan 3 defined benefit portion only. *** Variable from 5% to 15% based on rate selected bythe member. ~O.Z; Comprehensive Annuc~! Financial Repor~City o~ Renton, W~shington Members participating in JBM: 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 2011 $44,457 ~;1o496~92 $261,528 2010 47,133 1,318,045 225.748 2009 71,860 1,826,40~.312,631 Law Enforcement Officers’ and FIreflehters’ Retirement System (LEOFF| plan~; 1 ~pd 2 Plan Description LEOFF 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, flrefighters and as of July 24, 2005, those emergency medical technIdans who were given the option and chose LEOFF Plan 2 membership. LEOFF membership is comprised primarily of non-state employees, with the Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception. Effective July 1, 2003, the LEOFF Plan 2 ReUrement Board was established by lniUative 790 to provide governance of LEOFF Plan 2. The Board’s duties include adopting contribution rates and recommending polio/changes to the Legislature for the LEOFF Plan 2 retirement plan. LEOFF defined benefit retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays through state legislative appropriations. LEOFF retirement benefit provisions are established in state statute and may be amended by the State Legislature. LEOFF Plan 1 members are vested after the completion of five years of eligible service. Plan 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 (FAS) is as follows: City o~ Renton, Woshlngton Pertent of Flna{ Term of ~Average Salary 20 or more years 2.0% 10 but ~ess than 20 yea~I~% 5 but less ~an 10 yea~i.~ The FA5 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 ten years of service. A cost-of-living allowance is granted (indexed to the Consumer Price Index). LEOFF Plan 2 members are vested after the completion of 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 two percent of the FAS per year of service. The FAS Is based on the highest consecutive 60 months. Plan 2 members who retire prior to age 53 receive reduced benefits. Benefits are actuarially reduced for each year that the benefit commences prior to age 53 and to reflect the choice of a survivor option. If the member has at least 20 years of service credit and is age 50, the reduction is three percent for each year prior to age 53. There is no cap on years of service credit; and a cost-of-llving allowance is granted (indexed to the Consumer Price Index), capped at three percent annually. Membership in LEOFF consisted of the following as of the latest actuarial valuation date for the plans of June 30, 2010: Retirees and beneficiaries receiving benefits 9,647 Terminated plan members entitled to but not yet receiving benefits 782 Active plan members vested 13,420 Active plan members non-vested 3~656 Total 27f505 Following is a summary of the number of government employers participating In LEOFF as of June 30, 2010. Numbs" of Part~dpaUn~ Eml~oyer~ LEOFF 2 8 214 ~2 374 Funding Policy Starting on July 1, 2000, LEOFF Plan I 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. LEOFF Plan 2 employer and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. All employers are required to contribute at the level required by state law. The Legislature, by means of a special funding arrangement, appropriated money from the state General Fund to Cit~ oJ Renton, Washington supplement the current service liability and fund the prior service cost of LEOFF Plan 2 in accordance with the requirements of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. However, this special funding situation Is not mandated by the state constitution and thls 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, 2011, were as follows: Contributor LEOFF Plan I LEOFF P~an 2 Employer*0.~.6%5.24% Employee 0.00%8.46% *The emplo~r rates Include tJ1e employer admin- Istrative elq:lense fee currentlyset at 0.16%. 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 Plsn 1 LEOFF Plan 2 2Oll $494 $1,3340049 2010 394 1,278,378 2009 487 I~S8~.17 Public Safety Employee’s Retirement Svstem (PSERS| Plan 2 Plan Description PSERS is a cost-sharing multiple-employer retirement system comprised of a single defined benefit plan, PSERS Plan 2. PSERS was created by the 2004 legislature and became effective July 1, 2006. PSERS Plan 2 membership includes full-time employees of a covered employer on or before July 1, 2006, who met at least one of the PSERS eligibility criteria, and elected membership during the election period of July 1, 2006 to September 30, 2006; and those full-time employees, hired on or after July 1, 2006 by a covered employer, that meet at least one of the PSERS eligibility criteria. A "covered employer" is one that participates in PSERS. Covered employers include: State of Washington agencies: Department of Corrections, Department of Natural Resources, Parks and Recreation Commission, Gambling Commission, Washington State Patrol, Uquor Control Board; Washington state counties; and Washington state cities except for Seattle, Tacoma and Spokane. To be eligible for PSERS, an employee must work on a full-time basis and: have completed a certified criminal justice training course with authority to arrest, conduct criminal investigations, enforce that criminal laws of Washington, and carry a firearm as part of the job; or Ctr~ of Renton, Wc~shtngton ¯have primary responsibility to ensure the custody and security of incarcerated or probationary Individuals; or ¯function as a limited authority Washington peace officer, as defined in RCW 10.93.020; or ¯have primary responsibility to supervise eligible members who meet the above criteria. PSERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PSERS retirement benefit provisions are established in state statue and may be amended only by the State Legislature. PSERS Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 60 with at least ten years of PSERS service credit, with an allowance of two percent of the average final compensation (AFC) per year of service. The AFC is the monthly average of the member’s 60 consecutive highest-paid service credit months, excluding any severance pay such as lump-sum payments for deferred sick leave, vacation or annual leave. Plan 2 retirees who retire prior to the age of 60 receive reduced benefits..If retirement is at age 53 or older with at least 20 years of service, a three percent per year reduction for each year between the age at retirement and age 60 applies. There is no cap on years of service credit; and a cost-of-living allowance is granted (based on the Consumer Price Index), capped at three percent annually. Membership is PSERS consisted of the following as of the latest actuarial valuation date for the plan of June 30, 2010: Retirees and benefldarles receiving benefits 7 Terminated plan members entitled to but not yet receiving benefits Active plan members vested Active plan members non-vested 4~210 Total 4~2~7 Following is a summary of the number of government employers participating in PSERS as of June 30, 2010. State School Counties/ Other Political Total Plan ARenc~es Distflcts MunldpalitJes Subdivisions Members Fundin~z Polio/ Each biennium, the state Pension Funding Coundl adopts PSERS Plan 2 employer and employee contribution rates. The employer and employee contribution rates for Plan 2 are developed by the Office of the State Actuary to fully fund Plan 2. All employers are required to contribute at the level established by the Legislature. The methods used to determine the contribution requirements are established under state statute in accordance with Chapters 41.37 and 41.45 RCW. Basic Finance! Stotements, The required contribution rates expressed as a percentage of current year covered payroll, as of December 31, 2011 were as follows: ~on~ributor PSERS Plan Z Employer*8.86% Employee 6.36% The employer rates Include the employer administrative expense fee currently set at O.16%. Both the City and the employees made the required contributions. The City’s required contributions for years ended December 31, were as follows: Yea r PSERS Plan 2 2010 64,909 2009 73,255 Flrefl=hter’s Pension Plan Description The Flrefighteds Pension Plan is a closed, slngle-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 flrefighters employed prior to March 1, 1970, when the LEOFF retirement system was established. The retirement benefits 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, 2011, there were 34 members in the System: Retirees and benefldades receiving benefits 31 Retirees and benefidades currently receiving full retirement threugh LEOFF 3 Ac~ve plan members vested Active plan members non-vested Total 34 Fundine Policy Under state law, the Fireflghter’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 Fireflghter’s Pension Plan are paid by the Plan. For 2011, this cost was :~8,762, An actuarial valuation is done every two years and was completed as of January 1, 2011. The Actuarial Valuation of Fireflghters’ Pension Fund table is reported in the Required Supplemental 2011 Comprehensive Annual Finondel Report City of Ren~on, Washington Information section, and a recap of the Schedule of Funding Progress for the last five valuations is as follows: ~roundedtothousands) Valuation Unfunded Actua dal Date Actuaflal Value Actuarial AccruedAccrued Uabiltties Funded January I of Assets Uabillttes {UAAL)Ratio zoo1 $7,067 $6,780 $(287)104% $ 2003 9,189 6,472 (2,717)142% 2005 7,777 6,254 (1,S23) *124% 2007 7,847 6,364 (1,483)123% 2009 8,941 6,517 (2,424)337% 2011 8f940 3e914 (4~576)217% UAAL as a Covered Percentage of Payroll Covered Payroll n/a n/a n/a n/a * A $29 decrease in the actuarial ac~’ued liabilities was made after the Cites financial report was published and before the ve[uation was released, Significant actuarial assumptions used in the January 1, 2011, valuation include: Valuation date: January 1, 2011 Actuarial cost method: entry age normal Amo~zation method: 30~year, closed as of January 1, 2000 Remaining amortization period: 20 years Asset valuation method: fair value Actuarial assumptions: 1) investment rate of return - 4%; 2) projected salary increases - 3.75%; 3) inflation - 2.75%; and, 4) cost-of-living adjustments - based upon salary increase assumption for FPF benefits, inflation assumption for LEOFF benefits. The Annual Required Contribution (ARC) was computed using the Entry Age Normal Cost Method. Under this method the projected benefits are allocated on a level basis as a percentage of Salary over the earnings of each individual between entry age and assumed exit age. The amount allocated to each year is called the Normal Cost and the portion of the Actuarial Present Value of all benefits not provided for by future Normal Cost payments is called the Actuarial Accrued Uabllity. Since all members have already retired, the amount of the Normal Cost Is zero. The Unfunded Actuarial Accrued Uabillty (UAAL) is the Actuarial Accrued Uability minus the actuarial value of the Fund’s assets. The following Annual Pension Cost and Net Pension Obligation table presents the annual Normal Cost and the ARC as of January 1, 2011, assuming the UAAL is amortized over a closed 30-year period beginning January 1, 2000. Bosic Finanda! Stotements, 4-46 City o~ Renton, Woshington Annual required contribution (ARC) ~. Annual Normal CostBeginningofYear 2. Amortization of UAAL Beginning of Year 3. Interestto End of YeaP 4. ARea( End of Year [1+2~3]$(172,788) 5. Interest on Net Pension Obligation $(43,291) ¯ 6, Adjustment to ARC 174~178) 7, AnnuaI pension cost(APC) [4~S-~I {141,901) 8. Employer Con(r] butlons** 70,327 ~ Change in Net Pension Obligation [7-8] 1212~228) 10. Net Pension Obligation at Beginning of Year ~ (1~082r280) it NetPenslonObilgationatEndofYear [9+101 $ {1,294,508) Assumed interest rate: 4.01 in 2009, 4.0% in 2010, and 4.~/~ in 2011. Employer contrlbutions for pensions are total contributions to the fiJnd he(of disbursements for medical and adminlstratl~ expenses. The Annual Development of Pension Cost ls recapped as follows: Apnua[Total Fiscal Year Endln~ 12/g1/2oo6 :12/31/2007 12/31/2008 12/3~J2oo9 12/31/2010 ARC at EOY on NPO Adjustment Cost $ (~z~,s41) $ (33,~04)(44,0~s} S (I09,088)(~,88s)(~4,ssi}(~4,0~s) (:109,958)(46,349)(67,070)(89,247) (172,788)(4g,291)(74,178)(141,901) (172,788)(51,780)(91,589)(132,979) (348,435)(61,382}(112,34S)(297,472) Employer Change In Cont;dbuUons NPO Is] 59,088 $ SB,T/7 (ZS3,g~2) 88o0SS (~SS,~) Fiscal Year NPO Amort.Amort. Of Ending Endln~Balance {Galn)/Loss Factor**(GaIn)/Loss Balance [7=r~-pryr7]is=l-s]{9]po=py,’Z:t/~] 12131/2oo6 $ {773,188) $ (172,6o9)13.s788o S H4,o3s) $ (77~,188} 12/31/2007 (926,978) (~69,745)14.16300 (54,591) (B26,978) z2/3Uzoos {%,0e2.280) {176,01~)13.~120 (s7,889) Three year trend information Is recapped as follows: Fiscal Year Endtn~ December 31, 2009 December 31, 2010 Dece tuber 31, 2011 Annual Contribution as a Net Pension Pension Cost (APC) PercentaBe of APC Obligation INPO) (297,472)N/A (1,934,381) Ctr~ o~ Re~to~, WoOing(on Employees are not required to make contributions. The contributions to the System for 2011 Include $115,054 from fire insurance premiums and $355,380 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 2011, $280,888 was paid for benefit payments and $3,938 for medical payments. The Net Pension Obligation decreased $399,826 to ($1,934,381) and Is included as a non- current asset, in the City of Renton’s Governmental-wide Statement of Net Assets. N01~ 7, OTHER POST EMPLOYMENT BENEFITS Plan Description In accordance with the Revised Code of Washington (RCW) 41.26, the City provides lifetime medical care for members of the Law Enforcement Officers and Firefighters (LEOFF) retirement system hired prior to October 1,1977. The plan ls a closed, single-employer defined benefit healthcare plan administered by the City. Under authorization of the LEOFF Disability Board, direct payment is made for other retiree medical expenses not covered by standard benefit plan provisions. Financial reporting for the LEOFF retiree healthcare plan is included in the City’s Comprehensive Annual Finandal Report. The plan does not issue stand-alone financial statements. An actuarial valuation financial report Is prepared by Nlcolay Consulting, and may be obtained by contacting the City of Renton, Finance Division, 1055 South Grady Way, Renton, WA 98057. As of December 31, 2011, there were 96 retirees and 3 active employees. FundlnR Policy Funding for LEOFF retiree healthcare costs is provided entirely by the City as required by RCW. The City’s funding policy is based upon pay-as-you-go financing requirements. The plan member is not required to contribute to the cost of the plan. Annual OPEB Cost and Net OPEB Obligation The City’s annual other postemployment benefit (OPEB) cost is calculated based on the annual required contribution (ARC), an amount actuadally determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, ls projected to cover the normal cost each year and to amo~ze any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation. City of Re~to~, Washington A~nual required contflbut~on (ARC) Annual Normal Cost (BOY) AmorUzation of UAAL (BOY)~ Interest to End o~Year ARC at end of yea r Interest on Net OP~B Obligation Adjustment to ARC Annual OPEB cost EmPloyer Contributions Cbanae in Net OPEB Ob[fsation Net OPEB Obligation at BOY Net OPEB ObltgaUon at EOY Fiscal Year Endtn~ z~/3V2011 1,923,621 S 1//33,753 $ 1,758,806 24,311 S ~,~27 s 76,7~ *Unfunded Actuarial A~rued Uabillty (UA~L) The Net OPEB Obligation of $3,125,494 is included as a noncurrent liability on the City of Renton’s Governmental-wide Statement of Net Assets. TheCity’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2011 and the two preceding years were as follows: Percentage of Annual Employer OPEB Cost Net OPEB Year OPEB CoSt Contribution Contributed Obligation 2010 1,702,419 983,868 57.79%2,284,223 2011 :1,716,970 875,699 51.00%3,125,494 Funded Status and Fundin~ Progress As of January 1, 2011, the mos~ recent actuarial valuation date, the plan was 0% funded. The accrued liability for benefits was $27,835,211 and the actuarial value of the assets was $0 resulting in an unfunded actuarial accrued liability (UAAL) of $27,835,211. The covered payroll was $434,132, and the ratio of the UAAL to the covered payroll was 6411.70 percent. Net assets of $5,342,695 restricted in the Insurance Fund for the purpose of funding a portion of the UAAL. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. 2021 Comprehensive Annu=l FlnanciM Report Ci~ of Renton, Weshingtan The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and indude the types of benefits PrOvided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. The January 1, 2011 actuarial valuation repor~ was prepared using the projected unit credit method. The actuarial assumptions used included a 4.00% discount rate, which is based upon the long-term investment yield On the investments that are expected to be used to finance the payment of benefits. The following health care trend rate assumptions were used: Expected Armual Incz~ase In Heal~ C~re Cost Medicare Nu~fn8 Den~[ and The UAAL is being amortized based on a level dollar amortization over a closed 30 year-period that began in 2008 at the assumed discount rate. NOTE 8. CONTINGENCIES The 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 Provisions The 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 indentures The City is in compliance with all significant bond indentures and restrictions. Leases The City also leases office facilities for the City Attorney’s office. Total cost for this lease was $90,000 for the year ended December 31, 2010. The lease term ends December 31, 2011. The City has extended the lease for one (1) additional year. The future minimum lease payments for 2012 are $90,000. Construction Commitments Refer to Note 5. NOTE 9. RISK MANAGEMENT The 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 dties to lew a non-voted property tax increase to pay for uninsured claims. An analysis of the self-insurance retention levels, limits of insurance, and claims administratorfor ~he major types of coverage are as follows: CltyofRenton, Woshlngton Rls~Rutenttoa Type of commie O~urre~ Property - Expires $25,000 oz/o~/zoz2 Liability - Expires $250,000oz/oli2ozz Auto Uablllty - Expires 01/0~/2012 $15o000 Public Officials (E&OI -"$250,000 occurrence subject to Authority sub41mlts) {per occurrence)Authority Expires 01/0~J2012 Authority Equipment breakdown -~5,0~0"~50,O00,OOO Zurfd~ Expires i/0~/2012 Crime- Expires 12/31/2012 $10,000 $2~00,000 NaUonal Union Airport ~labillty - Expli~s 0 $100,000,000 Ace Property & :]J01F2012 C~sualty Under~round storage tank -$25,000 $2,0OO,0OO Colony Insurance Expired 1/0]~2012 Co. Excess Worker’s comp -$350,000 $1o000,000 Safety National Expires ~/01/2012 Excess Employee health -$175,000 N/A Symet ra Expires ~]JO~t2013 There is o 4-hour utility interruption clrzuse, prior to the deducible becoming applicable. For policy term January 1, 2012 to January 1, 2013, there were no reductions in insurance coverage and an increase in premiums; however, 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 cries 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 150 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 hlstory incurred during membership, Uability coverage is written on an occurrence basis, without deductibles. Coverage indudes general, automobile, police, public officials’ errors or omissions, stop gap, and employee beneft~s liability. Umits are $4 million per occurrence self insured layer, and $16 million per occurrence in the re-insured excess layer. The excess layer Is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits are $20 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 $500,000 for all perils other than flood and earthquake, and insured above that amount by the purchase of Insurance. 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 fuliy 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 inter[ocal, W¢IA 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 membershlp’s annual assessment. A Board of Directors governs WCIA, which Is comprised of one designated representative from each member. The Board elects an Executive Commlttee 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, 2011, the City had accrued "~he following amounts for outstanding claims: CIt~ o~ Renton, Woshln~to~ Prope~ &Workers Employee 2011 Ualdltt~f Compematlon Health T~als IBNR datms at beginning of the year $697,531 $696,8~0 $ 1,899,079 $3,293,490 l~erty &wodze~s Employee NOTE 10. INTERFUNDTRANSACT1ONS Interfund 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 o~ 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. 2011 Comprehensive Annuol Financial Report Oty oJ Renten, Woshtngtcm The following is a recap of interfund balances for 2011 at the fund I~vel for the purpose of reclassifying revenue/expendltures between funds: Fund General Fund General Debt Se~ce Fund Tranportatton ~mpact Fund Municipal Fad~itles Fund Capital Improvement Fund Subtotal Govermnent/d Fmtds Airport: Solid Waste Waterworks UUltty Fund subtotal Enterprise Fmids Information Technology Fadlitles Subtotal Internal Sendce Funds TOTAL Due From Other Funds $44,0~3 747 10,822 7o441 38,025 $ 4S,4~ 17.500 38,801 DImTo Other Flmds 39,73E At the government wide level, the following interfund balances occurred for the purpose of reclassifying revenue/expenditures between activities: Due From Due TO General Fund I $4,328 $7,441 Transportation Mitigation Fund 747 Airport:7,441 Waterworks Utility Fund 5,075 The following is a recap of interfund loans for 2011 at the fund level for capital improvement purposes: Interbred Loam lnta~u~d Lmms Fmtd Rece~alde Payable General Fund Capital improvement Fund S~tetal Go~ermnen~d Funds $2,21~,483 $700o000 Golf Course 1,~26,483 Atrport 294,742 Waterworks Utility Fund 294,742 S ubtota I Enterprise Funds $294,742 $1,811,225 TOTAL 20.~2 Comprehensive Annual Financial Report:City o~ Renttm, Woshington At the government wide level, only one interfund loan occurred for capital improvement: Fmtd Receivable Payable General Fund Golf Couese 1~16,483 The following is a recap of interfund transfers for 2011 at the fund level: Fund General Fund Arterial Street Fund One Peffcent for Art Fund General Debt Service Fund CommunltyServlces Impact Mitigation Fund Fire Impact Mitigation Fund Transportation Impact Mitigation Fund Capital Improvement Fund Subtotal Governmental Funds Airport: Golf Course Solid Waste Wate~’orks Utility Fund Subtotel Enterprise Funds Equipment Rental Information Technolosy Facilities Subtotal Internal Service Funds Flremen’s Pension Trust Fund TOTAL $15,420 529,056 6:1,352 2,010,822 1,270,00C 3,886~650 Transfers Out 2,258,329 620,000 529,056 650,000 76,772 4,144,157 8,848 656 1,106 26,844 37,454 23,526 119,122 37,782 18o,43~ 115,054 523 523 201~ Comprehensive Annu~! FhtonciM Report 20I~ Comprehensive Annual Financial Report City o.~ Renton, Washington At the government wide level, the following transfers occurred: Fund Airport Golf Course Solid Waste Waterworks Utility Fund Equipment Rental Information Services TOTAL Tranfe~s 1olO~ 26,844 23,52~ $~7,454 $37,4S4 NOTE 11. NETASSETS The 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. Restricted net 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 net assets first, as appropriated opportunities arise, but reserve the right to selectively defer the use thereof to a future project or replacement equipment acqulsltlon. Restricted governmental activity net assets are as follows: Unrestricted net assets represent unrestricted liquid assets. Unrestricted Governmental Activities have committed and assigned designations that reflect the City Coundl and management’s plans and commitments to expend resources for certain purposes in future periods. Funds with committed designations reflect amounts constrained by the City Council, either through formal budget adoption or other purposes formally approved by the Council. Amounts with assigned designations reflect all amounts remaining in governmental funds, other than the general fund, not classified as nonspendable, restricted or committed. Assigned amounts also include year-end encumbrances that have received approval from the City Council and re-appropriated in the following year’s carry forward budget. The City’s financial policies require a maximum amount of 12% and minimum of 8% fund balance to remain in the general fund for cash flow purposes. Unrestricted governmental net assets are classified as follows: NOTE 12. PRIOR PERIOD ADJUSTMENTS Buslness-Tvne Activities A prior period adjustment of $1,066,493 was made to reduce revenue and receivable balances for Special Assessment District principal. This amount is for outstanding principal not due to the City until the effected propert,/owners take action to connect to the wastewater system. In prior years this outstanding amount was recorded as a revenue and receivable. NOTE 13. LONG TERM DEBT The City of Renton’s long-term debt consists of General Obligation Debt, repaid mainly from general governmental revenue sources, Proprietary Debt, repaid from proprietary revenues and compensated absences/other post employment benefits. These debts are accounted for in the following areas: 1) The outstanding general obllgaUon 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. Compensated absences and other post employment benefits are generally liquidated mainly from the general fund and to a lesser extent, the internal service funds. City o! Renton, Woshington Outstanding debt issues as of December 31, 2011 are as follows: Type of Debt GOVERNMENTAL DEBT: General ObRgatlon Bonds: Limited; 2002 GO Bonds 20~ GO Bonds 2010 GO Refundin8 Bonds 2011 GO Library Bonds 2011 GO Refunding Bonds SUBTOTAL LIMITED GO 2008 Water/Sewer Revenue (b| Issued Maturity OrlRInal IssuedInterest Rates Date Date Amount 2.50%-5.00%07/15/2002 12/01/2022 $3,895,OO0 4,25%-5.O0%08/08/2OO6 12/0~/2028 17,980,OO0 9,75%03/0~/2~O9/01/2028 6,798,085 93,0gZ,~S 4.~ozl~12~s 12~01/2027 9,975,~0 4.17%01/~/20~12/01/2016 2,035,~ 2.0~12/~/1995 07/01/2016 1,840,568 0.50%01/22/2~2 07/01/2021 567~831 0.5~11/05/2~2 07/01/2022 814,527 0.50%~/03/2~07/0~2024 5,150,000 TOTAL AMOUNT iSSUED ON OUTSTANDING DEBT AS OF DECEMBER 31, 2011 2011 Comprehensive Annual Ftnonciaf Repmt City oi Renton, Woshington Outstanding debt additions and retirements are summarized as follows: Llmlted General OId~Ratfon De~t 2001 GO Refunding Bonds 2006 GO Bonds 2010 GO Refunding Bonds 2011 GO UbraW Bonds 2011 GO Refunding Bonds Unamortized ldlscount}/premlum 2009 (A) SCORE Tax Exempt T~tal M~ellane~s BoRtmdn~ Bolame EmEn~ Bolam~ Dm Within One ¯ 01/01/2011 Ad~tiom Deductions 1~J1~011 Year Employee Leave Benefits (Comp. Absences) Other post-employment benefits payable Total Governmental DeM 5,248,382 3,020,5O2 2,991578 S,~77,~06 3,008,0B4 2~.84~23 ~,716,970 R75,699 3,~5,494 ~ty Of Rentot~, Washit~gton Outstanding debt additions and retirements are summarized as follows (continued): Honeyc~eek Interceptor 58/~32 DEEP DISCOUNT DEBT As of December 31, 2011, the City of Renton has no deep discount debt outstanding. SPECIAL ASSES.~/IENT.DEBT WITH GOVERNMENTAL COMMITMENT As of December 31, 2011, the City of Renton has no spedal assessment debt outstanding. DEBT UMIT 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 I 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 City of Rento~, W~shington 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 capadties for the City of Renton. ARBITRAGE The City engages an outside agency to calculate its’ arbitrage rebate liability on outstanding tax- exempt bonds and certificates of participation under Section 148(f) of the Internal Revenue Code. No additional rebate Was found due for any revenue or general obligation bonds for 2011. ISSUED/REFUNDED DEBT On August 2, 2011, the City issued $16,715,000 in Umlted Tax General Obligation (LTGO) Bonds with an average interest rate of 3.72%. The proceeds were used to finance all or a portion of the costs of acquiring land for and constructinl~ improving, and equipping two new public library facilities and repairing, renovating and improving existing library fadlities; providing the form and terms of the bond. On September 21, 2011, the City issued $9,425,000 in Umited Tax General Obligation Refunding Bonds with an average interest rate of 3% to advance refund ~;9,950,000 of outstanding 2001 Umited Tax General Obligation Bonds. The net proceeds were used to purchase U.S. government securities which were deposited with an escrow agent to provide for all future debt service payments on the refunded bonds. As a result, these bonds are considered defeased. The advance refunding resulted in a reduction in the aggregate debt service payments of ~;1,402,171 and a present value gain of $1,348,396. On May 30, 2011, the City issued $700,000 in an interfund loan (from General Fund to Capital Improvement Fund) with an average interest rate of 2.25% to help finance a portion of the remaining costs for the Southwest 27th Street/Strander Boulevard Connection Project. The lnterfund loan will be fully repaid on May 30, 2016. In prior years the City defeased certain bond issues by placing the proceeds of new bonds In an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the t~ust account assets and the liability for the defeased bonds are not included in the City’s financial statements. The schedules of assets, liabilities, and net assets of the City’s escrow accounts as of December 31, 2011 are provided in the followlng table. ANNUAL DEBT SERVICE REQUIREMENTS The annual debt service requirements to maturity, including prindpal and interest, for long- term debt as of December 31, 2011, are as follows: 2017-2021 27,692,9~14,431,874 12,113,~4,978,~8 AMOUNT AVAILABLE FOR DEBT SERVICE Fund balances that have been reserved for debt repayment are $1,032,361 in the general governmental funds. OPERATING LEASES The City has Golf Course Operating Lease agreement for the amount of $87,800 and dated June 2007. This lease is for the purchase of 50 Club Car Golf Carts. The lease qualifies as an operating lease for accounting purposes because the individual cost of each golf cart is below the City’s capitalization threshold of $5,000. Payments are made monthly at an interest rate of 5.25%. The debt service for this lease is accounted for in the Municipal Golf Course System Fund (404). As of December 31, 2011, the City made its final payment and has a remaining balance of zero dollars. NOTE 14 - DEFERRED CHARGES IN PROPRIETARY FUNDS As of December 31, 2011, the total amount of deferred charges and other assets reported in the proprietary funds is $470,561. 100% of this amount is reported in the Waterworks Utility Fund and is for debt issuance costs related to the 2002-2008 Revenue Bonds. This amount will be fully amortized by 2027. NOTE 15. SEGMENTINFORMATION An 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 2010. B=sic Rnancia! Stotements, 4-63 City o~ Renton, Woshlngton NOTE 16. JOINTVENTURES A joint venture is a legal ~ntity or other organization that results from a contractual agreement and that is owned, operated, or governed by two or more pa~cipants as a separate and specific activity subject to joint control in which the participants retain (a) an on-golng financial interest or (b) an on-going financial responsibility. The City participates in two joint ventures. VALLEY COMMUNICATIONS CENTER The Valley Communications Center (Valley Comm) was established August 20, 1976, when an lnterlocal 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 ~o 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 Highllne 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 financial information as of December 31, 2011 related to Valley Comm: Auburn 19.43% $4,575,538 $148,189 .~4,723,727 Completed Flnandal Statements for Valley Comm can be obtained from the Valley Communications Center, 23807- 98~ Avenue South, Kent, WA 98031. CityofRenton, W~shingto~ SOUTH CORRECTIONAL ENTITY (SCORE) The South Correctional Entity (SCORE) consolidated correctional facility was established February 25, 2009, when an lnterlocal Agreement (the "Original Interlocal Agreement") was entered into by seven participating municipal governments, the "Member Cities" of Auburn, Burien, Des Moines, Federal Way, Renton, SeaTac and Tukwi]a, under the authority of the "lnterlocal Cooperation Act" (RCW 39.34). This "Original Interlocal Agreement" was amended and restated October 1, 2009 and named the City of Des Motnes as the "Host City" and the remaining Member Cities as "Owner Cities". This interlocal agreement is known as the "Formation Interlocal Agreement". Pursuant to a separate "Host City Agreement" dated October 1, 2009, the Host City will not enjoy the same equity position as the Owner Cities until all debts issued are paid and the Host City fulfills all of its obligations as outlined in the Agreement. SCORE, an governmental admlnistrative agency pursuant to RCW 39.34.030 (3), has the power to acquire, construct, own, operate, maintain, equip, and improve a correctional facility known as the "SCORE Facility" and to provide correctional services and functions incidental thereto, for the purpose of detaining arrestees and sentenced offenders in the furtherance of public safety and emergencies within the jurisdiction of the Member Cities. The SCORE Facility may serve the Member Cities and Subscribing Agencies which are in need of correctional facilities. Any agreement with a Subscribing Agency shall be in writing and approved by SCORE as provided within the SCORE Formation Interlocal Agreement. Financing for the acquisition, construction, equipping, and improvement of the SCORE Facility will be provided by bonds Issued by the South Correctional Entity Fadlity Public Development Authority (the "SCORE PDA"), a public development authority chartered by the City of Renton pursuant to RCW 35.21.730 through 35.21.755 and secured by the full faith and credit of the Cities of Auburn, Burien Federal Way, Renton, SeaTac, and Tukwila (the "Owner Cities"). The SCORE PDA Issued $86 million in special obligation bonds in 2009 to carry out the facility development project. The following is a summary of the debt service requirements for the bond issue: ¢ft~ of Renton, Washington 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 financial information as of December 31, 203.1 related to SCORE: Completed financial statements for SCORE and sCORE PDA can be obtained from the SCORE office, City of Renton, 3.055 South Grady Way, Renton, WA 98057. NOTE !7. 5UB~EO, UENT EVENTS There were no significant subsequent events that occurred after the end of the reporting period and before the issuance of the financial statements. 2011 Comprehensive A~nuQI Rnandol Report City o~ Renton, Washington REQUIRED SUPPLEMENTARY INFORMATON SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - GENERAL FUND For the Year Ended December 31, 2011 REVENUES Taxes Ucanses and parrnits InturSovernn~n~al revenue~ Charses for seP,~ces Fines and forfeits Inteffund revenues CentHbetions Miscellaneous revenues TOTAL REVENUES EXPENDITURES Cun’ent: General 8overement Judicial Public safety Physical environment T~ansportatlon Health and human services Culture and reerea~on Capital outlay Debt service: Pdndpai payment TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in Transfer (out) Sale of capital assets TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 71,O57,275 $71,138o351 $71,44‘3,862 $~05"511 2,642,987 2,400,645 2,665,983 265,338 8,901,802 11.558,406 10,534,331 (1,024,075) 3,912,697 3,934,697 3,860,290 (74,407} 3,168,351 3,168,351 3,150,326 (18,025) 3,314,65‘3 3,673,171 3,057,642 (615,529) 100,0~0 168,875 192,699 23,824 477,730 237,~43 366,332 128,789 676~329 676,329 646,868 !29,461) 94,251,824 96,956,368 95~918~333 (1,038,0‘35) 10,228,422 11,129,091 10,598,389 (5,30,702) 2,466,177 2,495"576 2"563,989 68,313 52,110,671 53,388,852 52,986"589 (402263) 2,453,387 2,435,235 2,048,971 (386,2~4) 8,282,944 8,250,976 8,018,267 (~132,709) 5,977,163 7,198,248 5,876,231 (1,322,017) 528,610 539,236 511,934 (27,302) 10,510,896 10"572,271 10,215,229 (357,042) 267,559 89,882 78,089 {11,793) 700,000 (700,000) 92,826.829 96,799,467 92,897,688 (‘3,901,779! 1,425,~FJ5 156,901 ‘3°020°645 2,863,744 15,420 15,420 (2,008,000)(2,2430707)(2,268,329)24"522 .~0 5OO (2,008,000)(2,228,287)(2,252,409)25,122 NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY I Prior Pdod Adjustment FUND BALANCES JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 I582,005)(2,071,386)768f236 2,888,866 10,895,379 14,980,540 (14,980,540) 140980,540 14,980,540 10,895,379 ~14,980,540 $14,980"540 $ 10,313,374 $12,9G9,154 $15,748,776 $2,839,622 NOTE TO THE REQUIRED SUPPLEMENTARY INFORMATION NOTE 1: Budget and actual Information is presented on a GAAP basis of accountin& Required Supplementary In}=ormotton, 5-2 City o~ Renton, Woshlngton REQUIRED SUPPLEMENTARY INFORMATION ACTUARIAL VALUATION OF FIREFIGHTERS’ PENSION FUND EMPLOYER CONTIUBUT~ON3 December 31, 2011 ANNUAL FIRE TOTAL REQUIRED EMPLOYER INSURANCE EMPLOYER CONTRIBUTION FISCAL YEAR ENDING CONTRIBUTIONS*PREMIUMS CONTRIBUTIONS (ARC! PERCENTAGE OF ARC CONTRIBUTED December 31, 2006 $(18,753)$77,821 $59,068 ~(11‘3,541)N/A December 31, 2007 (25,285)85,062 59,777 (i09,968)N/A December 31, 2008 (19,894)85,949 66,035 (109,968)N/’A December 31, 2009 (36,296}106,623 70,327 (172,788)N/A December 31, 2010 (5,618)112,686 107,068 (172,788)N/A December 31, 2011 (12,700}115,054 102,354 {348,435)N,/A Employer contributions for pension are total contflbuflons to the Fund net of disbursements from the Fund for medical expenses under RCW 41.26.150 and administrative expenses. Required 5upplementery In~rm~on, 5-2 City o.f Renton, Washington REQUIRED SUPPLEMENTARY INFORMATION LEOFF 1 RETIREE MEDICAL BENEFITS SCHEDULE OF FUNDING PROGRESS December 31, 2011 VALUATION DATE January $, 2009 Janurav ~., 2010 Januray 1, 203.1 AC’TUAR~L VALUE OF ASSETS s UNFUNDED ACTUARIAL ACTUARIAL ACCRUED ACCRUED UABILITES UABiUTIES 27,98S,358 27,985,358 UAALAS A PERCENTAGE FUNDED COVERED OF COVERED RATIO PAYROLL PAYROLL 0%$43.1,952 7848.27% 0%43.4,264 6755.45% 0%434,132 643.%70% Required Supplementary information, 5-3 2011 Comprehensive Annum Rnancla~ Report T~nis page intentionally lef~ blank. Gty of Rento~, W~shington Required Supplernentory Information, 2011 Comprehensive Annual Rnoncfa! Repo~City o~ Renton, Woshington Non-Major Govemmental Funds Special Revenue Funds ARTERIAL STREET FUND The Arterial Street Fund was established pursuant to state law allocatfng the one-half cent State Gasoline Tax revenue to dues and towns for construction, improvements, and major repair of streets. HOTEL/MOTEL TAX FUND Accounts for monies collected through an increase of 1% 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. 1% FOR ART FUND The City of Renton established this fund to account for one percent of construction project actual costs to be used for the selection, acquisition and/or lr~stallation of works of art to be placed in, on, or about City public facilities. CABLE COMMUNICATIONS DEVELOPMENT FUND The Cable Communications Development Fund accounts for funding for promotion and development of cable communications as established by City ordinance. SPRINGBROOK WETI.ANDS BANK FUND The City of Renton established this fund in 2007 for the purpose of providing accounting for the Springbrook Creek Wetland and Habitat Mitigation Bank project, The fund will receive revenue by selling Wetlands Credits to third parties and to the City’s internal departments. City o~ Renton, Washington Debt Service Funds GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERVICE FUND This debt service fund accounts for the following outstanding debt issues: ¯2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall, ¯2002 limited tax general obligation bonds which provided funding for the construcUon of a new fire station. 2006 limited tax general obligation bonds which provided funding for the construction of South Lake Washington infrastructure improvements. 2009 intergovernmental debt related to the Fire Dlstrlct #40 asset transfer as a result of the Benson Hill annexation. ¯2010 intergovernmental refunding debt which refunded a portion of the 2000 intergovernmental debt for the construction of a new facility for Valley Communications Center. 2010 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation bonds for the construction of a downtown parking fadlity. 2011 limited tax general obligation bonds which funded the development and construction of 2 new libraries. 1997 UMITED GO BONDS - CITY HALL This debt service fund accounts for the following outstanding debt issue: 2011 limited tax general obligation refunding bonds which refunded a portion of the 2001 limited tax general obligation refunding bonds which refunded a portion of the 1997 limited tax general obligation bonds for the purchase of Renton City Hall. Combining Stc~ernents & Schedules, 2011 Comprehensive Annual RnandM Report Oty oJ Re~ton, Woshlngton Capital Project Funds COMMUNITY DEVELOPMENT IMPACT MmGATION 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 MmGATION FUND Accounts for monies collected from developers to offset impacts created by their developments to City facilities. SOUTH LAKE WASHINGTON INFRASTRUCTURE PROJECT FUND The 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 which provide for the design, construction, labor wages and benefits, and equipment required to implement the project. Combintt~g Statements & schedutes, 6-3 2011 Comprehens~e Annual RntmdM Report Non-Major .Proprietary Funds Enterprise Funds AIRPORT FUND The Airport Fund accounts for revenues and expenses for 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 ~s available. GOLF COURSE FUND The Golf Course Fund was created after the City acquired the Maplewood Golf Course. The fund accounts for the operation, maintenance, debt service, and capital improvements of the facility. Internal Service Funds EQUIPMENT RENTAL The Equipment Rental Fund accounts for the costs of maintaining and repladng all City vehicles and auxiliary equipment, except for fire apparatus and replacement of police patrol vehicles. In addition, this fund accounts for the City’s information technology, facilities and communications costs. All costs, including depreciation, are factors in calculating the rates that 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. Expenses are paid from the insurance Fund and rates are charged to departments based on use and/or coverage requirements. ASSETS Cash & cash equhtalents Investments Interfund loans re<:elaahle Due from other Bovernmental units A~counts payable Total liabilities Committed ASsIBned Total fund balances City oJ Re~to~, Woshlngton COMBiNiNG BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 P~Be lof6 SPECL~L REVENUE FUNDS ARTERIAL HOTE~J PATHS & STREET MOTEL TAX TRAILS $99,099 ~~52,628 ~2,077 ~8,49B 90,088 1,226 1,382 841 12 9B,O00 30,473 -$ 254,974 99,030 3~15 254,974 274,030 3"315 254,974 $274,O~O $3"31S Combining stotamen~s & Schedules, 6-5 201.1 Comprehensive Annual Flnandat Report ASSETS Cash & cash equivalents Investments Customer accounts lnt en~und loans receivable Due from other 8ovemmental units TOTAL ASSETS UABILPI~ES AND FUND BALANCES Assigned COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 PaBe 2 of 6 SPECIAL REVENUE FUNDS 1% FOR CABL~ COMM. ART &DEVELOPMENT SPRINGBROOK TOTAL WETLANDS SRF 76,554 $136,075 $415,814 $882,247 45,186 80,318 245,433 520,744 1,500 1,500 447 728 2o311 5,721 126o473 500 500 100,000 275,000 121~687 87,470 663,558 1,230,034 121,687 18~7,470 663"558 1,505,034 122,187 $218,621 $663,558 $1,536,685 Comprehensive Annual Fi~oncim’ Repor~ COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS De.tuber 3~., 2011 PaEe3 of 6 GENERAL TOTAL DEBT DSF ASSETS Cash & cash equivalents $647~10 $647,210 Investments 382,013 382,0~.3 Receivables (net of allowances): Special assessments 8,076 8,076 Due from other 8ovemmental units 1,953,223 1,953,223 TOTAL ASSETS 2,990,522 2.990,522 UABILITIES AND FUND BALANCES Uab,Bies Accounts payable $5,454 $5,454 Deferred revenue 1,952,708 1,952,708 Total liaMlitias 1,958,162 1,958,162 Fund balances" Nonspendabie Bestrlctad 1,o32,360 1,032,360 CommRted 20ii Comprehensive A~nual Rnonct~ Report ASSETS Cash & cash equivalents Investments Receivables (net of allowances): Acc~ed interest & penalty Interfund loans receivable Due from other governmental units TOTAL ASSETS UABILiT]ES AND FUND BALANCES UabllRles Deferred revenue Total )ia bll~ties Fund balances Restricted Committed Assigned Unasdsned Total fund balances TOTAL UABILITIES AND FUND BALANCES COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 Pase4of 6 C.D. IMPACT FIRE IMPACT TRANS. IMPACT SO LK WA ]NFRA- MmGAT]ON MmGAT~ON MITIGATION STRUCTURE 924~548 $934,599 $410,756 $33,076 545,711 551,644 242,447 19~523 19,279 4~796 6,43B 3,986 ~193 747 1,475,055 1,492,678 677,215 52,792 19,279 400,000 1,075,655 1,492,678 280,000 52,024 377,936 768 1,475,C~5 1,492,678 657,936 52,792 $~1~475,055 $1,492,678 $677,215 $52,792 Combining Statements & Schedules, 6-8 COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS De~ember 31, 2011 Pase6 of 6 ASSETS Cash & cash equivalents Investments Rece;vables (net of allowancesh Accrued interest & penalty Interfund loans receivable Due from other governmental units TOTAL ASSETS LIABIUT1Eg AND FUND BALANCES Deferred revenue Total liabilities Fund balances Restricted Assigned Total fund baiances TOTAL CPF 2.302.979 1359.325 19.279 15.410 747 3.697.740 19,279 19,279 732,024 2,946,437 3,678,461 ~,6~7,740 City o~ Rento,. W~shington Combining Stotemen~; & S~edules. ASSETS Cash & cash equlvakmts Investments Receivables (net of allowances): Customer accounts Accrued }ntere~t & penalty Special assessments Inter~nd loans receivable Due from other governmental units TOTAL ASSETS UABILIT~ES AND FUND ~ALANCES Liabilities Accounts payable Retainage payable Deferred revenue Total ~la bii~ties Fund balances 8es~lctad Committed Assigned Total fund balances TOTAL LIABILITIES AND FUND ~e~LANCES Cit~ o~ Ren~, Washington COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS December 31, 2011 PaRe 6 of 6 TOTAL TOTAL SRF DSF TOTAL OTHER T(~TAL GOVERNMENTAL CPF FUNDS 882,247 S 647,210 S 2,302,979 $3~32,436 520,744 382,013 1,359~325 2,262,082 5,721 126,473 1‘536,6s5 1,500 19.279 19,279 8,076 8.076 15.410 21.131 1.953.223 747 2.080.443 2,990‘52~2 ,~3,697°740 $8,224,947 31,151 5OO 5.454 $-$36‘505 500 1.952.708 19.279 1.971.987 1.958.162 19,279 2.009.092 275,000 1,230,034 1,505,034 1‘536,g~ 1.032.300 1.032.960 732,024 1.007.024 2,946,437 4.176.471 1,032,360 3,678,461 6,215,855 2,990,522 $3,697,740 $8,224.947 Combining Stotement~ & S~hedules. 6-i0 2011 Comprehensive Annum Fin¢znct~J RepoR Cf~ oJ Renton, COMBINING STATEMENT OF REVENUES. EXPENDITURES. AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31~ 2011 Pa6e 1 of 6 SPECIAL REVENUE FUNDS ARTERIAL HOTEL~PATHS STREET MOTEL TAX TR~ILS REVENUES IntergoYemmental r~enu~502.347 17 EXPENDffURES Current: General 6overnment Economic environment Culture & recreation Capital outlay TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPEN D~TURES OTHER FINANCING ,SOURCES (USES) Transfer {out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE iN FUND BALANCE 245.201 245.201 504,381 32.748 17 FUND BALANCE JANUARY 1 FUND BALANCE JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 2011 Comprehensive Annu~zl Rn~ciul Report COMBiNiNG STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES REVENUES Taxes Ucenses and permits lnter6overnmental revenues Contributions Interest MP~:ellaneous revenues TOTAL REVENUES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, 2011 Pa6e 2 of 6 1% FOR CABLE COMM.SPRINGBROOK TOTAL ART & DEVELOPMENT WETLANDS SRF 48,763 48,763 502.347 65.000 623 1.050 3,231 8.154 623 91.397 3.231 877,598 EXPENDITURES Current: General 6overnment 295 295 Economic environment 245,201 CuRure & recreation 76.744 76.744 Capit~[ outlay 15,425 15~425 TOTAL EXPENDITURES 15,720 76,744 337,665 EXCESS (DEFICIENCY~ OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Trand’er (out) TOTAL OTHER FINANCE SOURCES (USES) (15.097)14,653 3,231 539,933 (~20,000) (szo,ooo) (~o97)z4,ss3 3,231 (~o,o~7)NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE JANUARY i RESTATED FUND BALANCE DECEMBER 31 136,784 172,817 660,327 1,585,101 /36,784 $172,817 S 660,327 S 1,585,101. 12~,~s7 $zs7,47o ~~3~s8 ~1~,0~ Combining Stotements & Schedules. 6-12 201;1 ~omprehensive Annum RnancfM Repor~City oJ Renton, W~shington COMBINING STATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCE OTHER GOVERNMENTAL FUNDS For the Year Ended December 3;I, 20;11 P~’~e 3 of 6 REVENUES Taxes Intergovernmental revenues Interest TOTAL REVENUES EXPENDITURES Debt service: Principal payments Interest and fiscal charges TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDitURES GENERAL 1989 UGO BOND TOTAL DEBT REDEMPTION DSF 309,134 309,134 11,338 11,338 4,316,314 4,316,3;14 2,783,237 2,783,237 2,376,944 2,376,944 (843,857)(843,867) OTHER FiNANCiNG SOURCES (USESJ Transfer In 529,056 529,056 Refunding bonds issued 9,425,000 Premium on general ob~lBaUon debt 862,6;16 862,616 Payment to refunded bond escrow ~gent (9,950,000)I9~950r000) TOTAL OTHER FINANCE ~OURCES (USES}866,672 866,672 NETCHANGE (N FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE JANUARY 1 RESTATED FUND BALANCE DECEMBER 31 22,80S 22,805 1,0O9,55B ;1,009,555 ;1,0Og,BsB S - $Z,0Og,BBS, 1032,360 $-$1,032,360 City o.f Renton, Washingtot~ COMBINING STATEMENT OF REVENUES, EXPEN DF~URES, AND CHANGES IN FUND fjALANCES REVENUES Charge~ for ser~ces Interest TOTAL REVENUES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, Page4 of 6 C.D. IMPACT FIRE IMPACT TRANS. IMPACT MITIGATION MITIGATION MITIGATION 63,560 83,803 182,713 6,697 9,117 S,374 70,257 92,920 ;188,087 70,257 92,920 188~087 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in Transfer {out) TOTAL OTHER FINANCE SOURCES (USES} 61,352 (6S0,0O0) BZ,3B=(Bzg,0SB)(B50,0OO} NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 1,343,446 ;1,928,814 1,119,849 Combining Statements & Sd~edules, 6-;14 City oJ Renton, W~shing~o~ COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES INFUND BALANCES OTHER GOVERNM EI~q’AL FUNDS For the Year Ended December 31, 203.1 pare5 of 6 SO LK WA INFRA-TOTAL STRUCTURE CPF REVENUES Charges for services 330,076 Interest 269 21,457 TOTAL REVENUES 269 351,533 EXPENDitURES Current: Transportation 734 734 Culture & recreation 5,241 5,241 TOTAL EXPENDITURES 5,975 5,975 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES ~5,706)345,558 OTHER FINANCING SOURCES (USES) Transfer in 61,352 Transfer (out)(!,179,05g) TOTAL OTHER FINANCE SOURCES (USES)(1,117,704) NET CHANGE IN FUND BALANCE {5,706)(772,146) FUND BAU~NCEJANUARY 1 58,498 4,4g0,607 FUND BALANCE JANUARY 1 RESTATED $58,498 $4,450,607 FUND BALANCE DECEMBER 31 $52~79~2 $3,678,461 Combining 5toteme~ts & ~J~edu/es, 6-3‘5 203‘1 Comprehensive Annual FinanciM Report Ci~/ qf Renton, Washlngto~ COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS For the Year Ended December 31, 2013. Pase 6of6 REVENUES Taxes Licenses and permits Intergovemmental revenues Charges for services Contributions Interest Miscellaneous revenues TOTAL REVENUES TOTAL OTHER TOTAL TOTAL TOTAL GOVERNMENTAL SRF DSF CPF FUNDS 25:[,750 $9,995,842 $- $4,247,592 48,763 48,763 502,~47 309,134 811,481 330,076 330,076 65,000 65,000 8,/54 11,338 21,457 40,949 ~,584 1,584 877,598 4,316,314 351~533 5,$45,445 EXPENDITURES Current: General government Physical environment Transportsflon Economic environment Mental & physical beatth Culture & recreation Debt sen/ice: Principal payments interest and fiscal charges TOTAL EXPENDITURES 295 245,201 7g,744 15,425 295 245,201 734 734 76,744 15,425 5,241 5,241 2,783,237 2,783,237 2,376,944 2,376,944 337,665 g,160,181 5,975 5~03,821 539,933 (843,867)345,558 41,624 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in Transfer (out} Refunding bonds issued Premium on gener~[ obligation debt Payment to refunded bond escrow agent TOTAL OTHER FINANCE SOURCES (USES) 529,056 61,352 590,408 (620,000){1,179,056](1,799,056) 9,425,900 9,425,000 862,616 862,616 (B,BSO,O00)(9,9S0,000) (620,000}866,672 (1,117,704)(871,932) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 (80,067)22,805 (772,246][829,408} 1,585~.101 1,009,555 4,450,607 7~045,263 1,505,034 $1,032,360 $3,678,461 $6,215,855 Combining Stotements & Schedules. 6-16 Gty oJ Renton, W~shington SCHEDULE OF REVENUES, EXPENDITURES° AND CHANGES.IN FUND BAU~NCES BUDGET TO ACTUAL- ARTERIAL STREET FUND For the Year Ended December 3% Z01J. REVENUES interRovemmental revenues Interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USE~) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 617,99o S 617,ooo S so2247 3,000 3,000 2,034 620,000 620,000 504,381 (114,653) 62o°00o 620°o0o S04oSR~ (620,000)(620,000!{620,900) (~2o~ooo)(~2o, o0o)(~2o,ooo~ (115,619) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 !1/5,619)(115,619) Combining S~tements & Sdnedule~, 6-27 2011 Comprehensive A~nual Financial Report:CRy of Renton, W~shington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - HOTEL/MOTEL TAX FUND For the Year Ende~ December 31, 201~. REVENUES Taxes Contributions Interest TOTAL REVENUES EXPENDITURES Current: Economic environment TOTAL EXPENDFrURES EXCESS (DERC[ENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 180,000 S 180,000 $211,750 $31,750 65,000 65,000 65,000 1,199 1,199 245,000 245,000 277,949 32~949 245~000 450°000 245,201 1204,799) 245,000 450,000 245,201 (204,799) 32,748 237,748 NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 2011 Comprehensive Annual Financial ~ oJRenton, washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - PATHS AND TRAILS FUN D For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDrTURES TOTAL EXPENDITURES EXCESS (DEFICIENCY~ OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 3,264 3~299 3,264 $3,299 3,298 3,315 $16 Combining Stotements & Schedules, 6-19 201I Comprehensive Annual FIncmd~l Report City o~ Renton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGETTO ACTUAL - 1% FOR ART FUND For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPEN D~’U RE;~ Current: General government Capita~ out~y TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer in TOTAL OTHER FINANCE SOURCES (USES) BUDGETEDAMOUNTS ORIGINAL FINAL ACTUAL VARIANCE ¯$- S B2s ~623 623 623 295 295 50,0OO 68~257 ~5A25 (52,832) 50,000 68,257 15,720 (52537) ISO,O00)(68,257)115,097)53,160 15,000 32,000 (32,0001 ~5,000 32,000 (32,000) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 3.I {35,000)(36,257)(15,097)21,160 128,796 136,784 136,784 0 Combining Statements & Schedules, 6-20 C/ty oJ Renwn, W~shingtan SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGETTO ACTUAL - CABLE COMMUNICATIONS DEVELOPMENT FUND For the Year Ended December 31, 2011 EXPENDRURES Current: Culture and recreation ~pltaI outlay TOTAL EXPENDITURES EXCESS {DEFICIENCY) OF REVENUES OVER EXPEND~TIJRES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 3~ BUDGETED AMOUNTS OR~GINAL RNAL ACTUAL VARIANCE 40,000 $4O,000 $40,000 S 45,000 45,000 48,763 3,763 1,050 1,050 85,000 85,000 91,397 6,397 45,674 45,674 76,744 31,070 40¢000 175,627 !1TS~627) 8~,674 221,301 76,744 (144,557) (674)(136,301)14,653 150,954 (674)(136,301)14,653 150,954 88,718 172,817 172,817 0 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL- SPRINGBROOK WETLANDS BANK FUND For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDRURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE " $- S 3~31 S 3,231 3,231 3,231 3,231 3,231 NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 3J 3,231 3,231 459,528 660.327 660,327 459,52~8 S 660.52~7 S 663~B8 S 3,231 Combining Statement~ & Schedules, 6-22 Cf~/ oJ Ret~to~, Woshlngton SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - GENERAL GOVERNMENTAL MISCELLANEOUS DEBT SERWCE FUND For the Year Ended December 31, 201:L REVENUES Taxes ]nterBovernment~l revenues Interest TOTAL REVENUES EXPENDITURES Debt sendce: Pflndpal payments Interest and fis~l charBes TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Refundtn8 bonds issued Premium on general obligation debt Payment to refunded bond escrow aBent TOTAL OTHER FINANCE SOURCES (USES) BUDGETED AMOUNTS ORIGINAL RNAL ACTUAL VARIANCE 3,915,056 $3,819.288S 3,995,842 $176,554 270,923 270,923 309,134 38.211 11,338 11,338 4,185,979 4,090,211 4,316,314 226,103 2,620,236 2,881,423 2,783.237 (98,186) 2,094,799 2,347,581 2,376,944 29,263 4,715,035 5.229,104 5,160,181 (68~923) (529,0~6)(3,138,893)(843,867)295,026 529,056 692,123 529,556 (163,067] 10,287,616 9,425,000 (862,616) 8~2,616 862,616 (B,050,001)19~050,000)Z B29,O~6 1,029,738 866,672 (163,066) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 2011 C~mprehenslve Annual Rnencial Report SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - COMMUNITY DEVELOPMENT IMPACT MITIGATION FUND For the Year Ended December 31, 2011 REVENUES Charges for services interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDWURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds of Iong-te~m debt Transfer in Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGF~D AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 60,0OO 60,000 63,560 3,560 6,697 6,697 60,000 60,000 70,257 10,257 60,000 60,O00 70,257 10,257 (340,000) (278,648) 131,609 410,257 :L,126,594 1,343,446 1,343,446 0 $786~594 $1,064,798 S 1,475,05B $4;10.257 Combining Statements & Schedules, 6*24 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - FIRE IMPACT M[’rlGATIO N FUND Fer the Year Ended De:ember 31, 2011 REVENUES Charges for services interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDITURES EXCESS {DEFICIENCY} OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES {USES) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 100,000 $83,803 $(16,197} 9,117 9,117 160,000 92,920 iOOoOOO lOO,OOO BZ,RZO Combining 5ttz*emenB & Schedules, 6-25 2012 Comprehensive Annual FinandM Report City o,f Renton, W~lngton SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGETTO ACTUAL -TRANSPORTATION IMPACT MITIGATION FUND For the Year Ended December 31, 2011 REVENUES Charges for services Interest TOTAL REVENUES EXPENDITURES TOTAL EXPENDITURES EXCESS (DEF~IENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfer (out) TOTAL OTHER FINANCE SOURCES (USES) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY l FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 240,000 S 240,000 $182,713 $(97,2R7) 10,000 10,000 5,374 (4,626) 150,000 250,0OO 188,0B7 (61,913) 250,000 250,000 188,O87 (61,913) (499,494)(999,494)(6S0,000)(~49,494) 307,640 $370,35~6 $657,93~6 S 287,580 Combining S~ements & Schedules, 6-26 City oJ R~nton, W~hlngton SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES iN FUND BALANCES BUDGET TO ACTUAL - M UNICIPAL FACILITIES CAPITAL IMPROVEMENT FUND For the Year Ended De~ember 31, 2011 REVENUES Taxes Intersovemmenta~ revenues Char8es for services Contributions ~nterest Miscellaneous revenues TOTAL REVENUES EXPENDITURES Current: General 8ovemment Physical environment Economic endronment Culture & recreation Capital outlay Debt serv~e: Interest payment TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds of Ions-term debt Premiums on bends sold TransFer in TransFer {out) TOTAL OTHER FINANCE SOURCES {USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 160,000 {150,000) 325,731 325,731 70,000 70,000 868,867 798,867 14~892,000 19,198,227 2,322,659 (16,875,568) (17,976,169!(2,959,484)15,016,685 1,405,553 1,405,353 2,400,000 2,010,822 (389,178) (76,772)(76,772) 20,483,228 20,054,603 (428,625) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 3,457,170 5,832,452 5,832,452 G~y o~ Renton, Washington SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN ~:UND BALANCES BUDGET TO ACTUAL - GENERAL GOVERNMENT CAPITAL IMPROVEMENT FUND For the Year Ended December 31, 2011 REVENUES ~ontribut]ons TOTAL REVENUES EXPENDITURES Current: TransportaUon Capital o~tlay Debt service: Interest payment TOTAL EXPENDITURES EXCESS (DEFICIENCY} OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) TransFer In TransFer (out) TOTAL OTHER FINANCE SOURCES (USES) NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY 1 FUND BALANCE DECEMBER 31 BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE 1,630,000 $1"530,000 $1,596,115 S 6~,115 7,633"325 12,020,549 7,706"388 (4"314,161) 700,000 (700,000) 4,0~4,441 4,034,441 16,429 16,429 42 42 9,263,325 14"350"349 13,453,416 (897,133) 2,019,343 2,019,343 11,632,819 19"512"542 12,565,685 (6,946,857) 9,188 9,188 11,632,819 19,512,542 14,394,216 (4,918"326) (2,369,494)(5,161,993)(1,140,8OO)4,021,193 1,394,494 1,619,494 1,270,000 (349,494) (ZS,O00}{30°00O)(30,000) 1"379,494 1"589,494 1,270,000 (319,494) 1390,000)(3,572,4991 129,200 3,701,699 1,050,648 4,177,188 4,177,188 70,648 $604,689 $,4,306,~88, $ .......3,701,699 Comprehensive Annual Financial Report Gty oJ Renton, SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL - SOUTH LAKE WASHINGTON IN FRASTRUCTURE For the Year Ended December 31, 2011 REVENUES Interest TOTAL REVENUES EXPENDITURES Current: Transportation Culture & recreation Capital outlay TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES Transfer (out) TOTAL OTHER FINANCE SOURCES (USESI NETCHANGE IN FUND BALANCE FUND BALANCE JANUARY ~. FUND BALANCE DECEMBER 3~ BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL -S VAR~NCE 269 S 269 269 269 734 734 5~41 5,241 (56,000)(5,7061 50,294 (2,ooo)-(z,ooo} (2,000)2,o00 38 58,499 58~498 (:].) Combining Stotemen~s & Schedules, 6-29 20~LI Comprehensive ~nuol Financial Report City o.f Renton, Woshlngto~ COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTERPRISE FUNDS December 31, 2011 Pase 1 of 2 ASSETS Current assets: Cash & cash equivalents Investments at fair value Receivables (net of allowances): Customer accounts Interest - investments Due from other funds Due from other 5overnmenta[ units Inventory of materials and supplies Total current assets Noncurrent assets: Capital assets (net) TOTAL ASSETS AIRPORT TOTAL NON-MAJOR GOLF COURSE ENTERPRISE FUNDS 1,416,885 ~500592 $1,917,477 836,311 295,473 1,131,784 61,667 39,137 100,804 6,392 3,670 "10,D62 7,441 7,441 95,976 95,976 59,425 59,425 2,424,672 898,297 3,322,969 12,858,250 8,484,411 21,342,661 15,282,922 $9,382,708 ~24,665,630 Combining Statements & Schedules, &.~O LIAB]LrTIES Current liabilities: Accounts payable Inteffund Loan Payable NET ASSETS Investment in capita[ assets, net of related debt Unrestricted TOTAL NET ASSETS Oty oJ Renton, Wushln~on COMBINING STATEMENT OF NET ASSETS NON-MAJOR ENTEBPRL~,E FUNDS December 31, 2011 Page 2 of 2 AIRPORT GOLF COURSE TOTAL NON-MAJOR ENTERPRISE FUNDS ~34,737 ~18,966 $153,703 94,888 366,575 461,463 2,579 2,840 5,419 42,830 56,263 99,095 64,412 9,302 73,714 166,767 166,767 339,446 620,715 960,161 147,359 999 148,358 27,604 57,435 85,039 199,855 1,149o907 1,349,762 374,818 1,208,341 1,583,159 714,26~1,829,056 2,543,320 12,858,250 8o484,411 21,342,661 1,710,408 (930,759)779,649 14,568,658 S 7,553,652 $22,122,310 Combining Stetements & Schedules, 6-31 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS NON - MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2011 OPERATING REVENUES: Charges for services TOTAL OPERATING REVENUES BUSIN ESS-~YPE ACTIVWIES ENTERPRISE FUNDS TOTAL AIRPORT GOLF COURSE ENTERPRISE FUNDS 2,294,383 2,014,983 4,309,366 OPERATING EXPENSES: Ope~et]ons and maintenance Administrative and general Taxes Depredation TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS] NON-OPERATING REVENUES(EXPENSES): Intergovemmenta[ revenues Interest revenues Other non-operaUng revenues(expenses) interest expense NON-OPERATING REVENUE NETOF EXPENSES INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS OperatlnB transfers (outJ CHANGE IN NETASSETS NET ASSETS, JANUARY 1 NET ASSETS. DECEMBER 31 1"388o955 1,229,469 2,618,424 78,030 523,625 601,655 2,093 10~247 12,340 545r005 295,071 840,076 2,014,083 2,058,412 4,072,495 280,300 (43,429)236,871 242,722 242,722 9,074 5,247-14,321 2,749 2,797 5,546 (12~723!(41,524)(54,247) 241,822 (33,480)208~342 522,122 (76,909)445,213 (B,84~) (6s6) (B,5041 OK B13,274 (77565)435,709 14,568,658 ~7,553,652 $22,122,310 201i ~omprehensive Annum Fincmdol Report GO/o~f Renton, Washington STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS For the Year Ended December 31, 2011 Page 1of 2 CASH FLOWS FROM OPERATING ACTIVITIES: Cash receh~ed for services Cash paid to suppliers for goods & sendces Cash paid to employees Other opera~ng receipts Other non~operatinR receipts NET CASH PROVIDED (USED) BY OPERATING ACTIVIT}ES CASH FLOWS FROM NONCAPITAL FINANCING ACTWITIES Transfers from other funds NET CASH PROVIDED (USED} BY NONCAPITAL FINANCING ACTIVITIES BUSINESS-TYPE ACTIVR’IES ENTERPRISE FUNDS TOTAL NON-MAJOR AIRPORT GOLF COURSE ENTERPRISE FUNDS 2,517~319 ~2,008,028 $4,525,347 {1,582,888)(1,705,172) 16,839 6,974 23,813 158,874 158,874 2,749 (38,727}{35,978) 1,112,893 211,~i03 1,323,996 (8,848)(656){9,504) (8,84S)(656) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: Acquisinon & construction Of capital assets principal payments on debt Interest payments on debt NET CASH PROVIDED {USED) BY CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTWIT~ES: Payments for investments Interest on investments NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES NET INCREASE {DECREASE) IN CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS, JANUARY 1 CASH, RESTRICTED G&SH ,& CASH EQUIVALENTS, DECEMBER 31 {197,427)(111,048)(308,475) {071)(672) {174,451)195,~1 21,210 Combining Stotements & 5~hedu/es, 6-33 201I Comprehensive Annuel Rnandol Report RECONCIUATION OF OPERATING INCOME {LOSS) TO NET CASH PROV1DE.D {USED) BY OPERATING ACTN]TIES: Operating income (lOSS) Adjustments to recondle operatln8 income {~oss) to net cash provided {used) by operating activ~es: (increase) decrease in other funds/8over nment~l units Increase (decrease) tn Increase (decrease) In deferred revenues Increase (decrease) ~n accrued NONCASH INVESTING, CA PITAL~ AND FINANCING ACTIVITIES Depreciation City o~ Renton, Washington STATEMENT OF CASH FLOWS NON*MAJOR ENTERPRL~E FUNDS For the Year Ended December 31, 2011 Page2 Of 2 BUSINESS-TYPE ACTIVITIES ENTERPR~E FUNDS TOTAL NON-MAJOR AIRPORT GOLF COURSE EN3"£RPRISE FUNDS $28003~0 $(43,429} $236,871 245,471 (38,727}206,744 112,359 [17,484]94,875 {S3,84S) (9,670)(9,670) (109,279)17,898 (91,381) (4~.31)(10,116)(14,607) 9597 9~97 $545,005 $295,071 $840,076 ASSETS Current assets: Cash & r~sh equivalents Receiv~bles (net of allowances): Due f~om other funds Noncurrent assets: Capita] assets (net) Int~mglble assets (net) Total noncurrent assets TOTAL ASSETS City ol Rento~, Washin~n COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS Decembei" 31, 2011 Pase ~. of 2 TOTAL EQUIPMENT iNSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 21,963 11,462 33,425 27,777 62,718 90,495 56,301 56,301 42,117 42,117 144,418 93,982 238~400 8;~14,884 19.276,901 27,321,785 8.376,720 8,376,720. 343,328 343,328 8,720,048 8,720o048 16,764,932 $19.276,901 ~36,041,833 Combining Sto~eme~ts & Schedules, 6-35 Current liabilities: Accounts payable Clelms incurred but not reported Accrued employee benefits payable Accrued taxes payable Total current liab~lities Accrued employee wases and benefits payable Net of related debt Restricted City oI Renton, Woshlng~o~ COMBINING STATEMENT OF N ET ASSETS INTERNAL SERVICE FUNDS December 31, 2011 Pase2 of 2 TOTAL EQUIPMENT INSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 368,423 ~196,4.54 ~564,877 2,442,195 2,442,195 309,104 23,923 333,027 1,988 1,988 679"515 2,662~72 3,342,087 323,727 21,512 34B~239 323~727 21"512 345.239 1o003,242 2,684,084 3,687,326 8,720,048 8,720,048 5,342,695 5,342,695 7,041,642 11,250,122 18,291,764 ~5,761,690 $16,592,817 $32,3.54,507 2011 Comprehensive Annual Ftnenclal Report CO MBIN1NG STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSE~, INTERNAL SERVICE FUNDS For the Year Ended December 31, 2011 TOTAL EQUIPMENT INSURANCE iNTERNAL RENTAL FUND SERVICE FUNDS 87,972 12,662,645 12,750"617 12,495,045 15,633,851 28,228~896 OPERATING EXPENSES: Operations and maintenance Administrative and general Taxes OPERATING INCOME (LOSS] NON-OPERATING REVENUES (EXPENSES): k~teriovemmental re~ienues Interest revenues Gain (loss} on sale of capital assets Other noreoperatlng revenues (expenses) NON-OPERATING REVENUE NET OF EXPENSE 10,504,327 12,786,522 23,290,849 333,094 564,336 897,430 13,810 2,558 16,363 1,887,334 1,887,334 12,738,565 13,353,411 26,091,976 {243,S20)2,280°440 2,036,920 187,372 37,673 225,045 39,043 87,690 126,733 16,539 16,539 238,039 649,019 887,058 480,993 774,382 1,255~375 iNCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 237,473 3,C54~822 3,292,295 179,907 179,907 417,380 3,054,822 3,472,202 Transfers in Transfers (out) ~IANGE IN NET ASSETS NET ASSETS, JAN UARY 1 NET ASSETS, DECEMBER 31 15,344,310 13,537,995 28"682,305 Combining Statements & Schedules, 6-37 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from other funds for seP.’k:es Cash paid to suppliers for goods & services Cash paid to employees Other operating receipts NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NONCAPITAL RNANCING ACTIVITIES Transfers to/from other funds NETCASH PROVIDED {USED) 8Y NONCAPITAL FINANCING ACTIVtT]ES CASH FLOWS FROM CAPITAL FINANCING AC33VIT]ES: Acquisition & constz*uctton of capital assets NETCASH PROVIDED {USED) BY CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Paymeltts for investments Interest on investments NET CASH PROVIDED (USED) BY INVESTING ACTNITIES NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS CASH & CASH EQUIVALENTS, JANUARY CASH & CASH EQUWALENTS, DECEMBER 31 COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended December 31, 2011 PaBe 1 of 2 TOTAL EQUIPMENT INSURANCE INTERNAL RENTAL FUND SERVICE FUNDS 12,466,926 $15,636,518 $28,103,444 (10,562"685){10,630,695)(21,193,380) 53,377 20,032 73,409 441"950 (2,368,130)(1"926,180) 2,399,568 2,657,725 S,057~93 179,907 179,907 179,907 179,907 (2"601,853)(2,601"8~3) {2,601"853){2,601,858} 719,171 516,870 1"236,041 18,565 40,994 59,559 737,736 557,864 1,295,600 715,358 3,215,589 3,930,947 4,159,553 8,800,626 12,960,179 20~ Comprehensive Annua! Financi~l R~port COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS TOTAL EQUIPMENT INSURANCE INTERNAL RENTAL FUND SERVICE FUNDS RECONCIUAT]ON OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED] BY OPERATING ACTN~TiES: Opemtin8 Income (loss)$(243,520! ~2,280,440 $2,036,920 AdJustments to recondlo operating income (loss) to net cash provided (used) by operetleg actht~es: Depreciation & amol~.aUon of deferred charges 1,887,334 1,887,334 Other non~operatle8 revenue 441,950 686,692 1,128,642 (increase) decrease in accounts receivable 8~798 2,667 11,465 (increase) decrease in due from other funds/governmental units 114,426 742,714 857,140 (Increase} decrease in inventory & prepaid items 6,144 13,647 19,791 Increase (decrease) in vouchers retoinage payable 153,946 153,946 Increase (decrease) in payables & other shod-term Eahfi~es (16,743)(1,074,820) Increase {decrease) in accrued employee leave benefits 47,233 6,385 53,618 Total adjustments 2,643,088 377,285 3,020~373 NETCASH PROVIDED (USED) BY OPERATING ACTNFRES $ 2,399,56~8 $,2,657,725 $5,(~57,293 NONCASH INVESTING, CAPITAL, AND RNANCING ACTIVITIES Deprec}atlen & amortization $1~887,334 $- $1,887~334 C~nbining St~ements & Schedules, 6-39 City o~ Renton, Wast~in~to~ STATEMENT OF CHANGES IN A~SETS AND LIABILITIES AGENCY FUND - SPECIAL DEPOSIT For the Year Ended December 31, 2011 Pagelof 1 ASSETS Cash Investments at fair value TOTAL ASSETS LIABILITIES Vouchers & contracts payable Deposits poyab!e TOTAL LIABILITIES BEGINNING ENDING BALANCE DEB~TS CREDITS BALANCE 518,893 ~855,321 $745,903 $638,311 ~o,4oo ~0.~o ~o~.2~~ s I.zss.72~. S ~,526.70.._._.__....__~ S6~,3~1 63,706 $668,907 $613,152 S 7,~51 8A5,587 673,633 458,406 630,360 ~0~,2~~3 $1,342~4o S 1,07~,5s8 S 638,311 STATISTICAL SECTION December 31, 2011 Presentations included in the Statistical Section of the Comprehensive Annual Financial Report (CAFR) provide users detailed information as a context for understanding what the information in the financial statements, note disclosures and the supporting schedules say about the government’s overall financial health, The section Is divided into five categories based on the following: FINANCIAL TRENDS These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. REVENUE CAPACrW These schedules present information to help the reader assess the government’s most significant local revenue source - property tax. DEBT ~PACR’Y These schedules present information to help the reader assess the affordablllty of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. DEMOGRAPHIC AND ECONOMIC INFORMATION These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. OPERATING INFORMATION These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs. TABLE 2 CHANGES IN NET A~SETS L~ST TEN FISCAL (Accrual basis of accounting) Page 2 of 2 lilGeneral fund ltlAll other 8ovemmental funds NonSpendab]e~ Restricted= Committsdx A~lled~ $ 83o0~0 ~ 83,000 $ 108,742 ~ 800~0 $ 8,000 $ 8,0~0 $ 8,000 $ 8,000 $ 2°468,569 3.920,I~6 6,758,364 8,603,C03 9,18L9,871 ~,0,737,~97 ~. 6,474o384 13o509,097 15,478,727 12,020,420 ~.,Z49,907 $ ~,2~o,~oo $ ~o,o~o S ~o,ooo $ 24OOOOO S 6~,soo S 075,0oo S ~,o~o,~o $S 6,771~4 S 7,468,49~ 6,828,410 20II Comprehenshre Annual Rnanciol Report CJW ~ Renton, Weshlngto~ TP3LE 5 GENERAL GOVERNMENT TAX REVENUE BY SOURCE LAST TEN FISCAL YEARS (Modified accrual basLs of accounting} ~Properb/Tax ]~SalesTax ~Admission/UtflltyTax ]~ExdseTax ~penalty, lnterest, DeltnquentTax RSCAL PROPERTY ADMISSION YEAR TAX SALES TAX UTILITY TAX EXCISE TAX 2002 18,373,237 16,431,456 9,798,260 4,711,446 2003 19,587,986 I7,334,831 10,895,131 5,449,877 20C5 21,826,229 18,910,822 10,643,0~8 6,938,264 2006 23,600,131 20,869,596 11,219,302 7,718,945 2007 23,106,578 22,749,831 11,962,879 8,236,876 2010"32,585,884 21,591,375 16o883o8118 4,351,914 2011 33,309,975 22,008,777 16,870,284 4,113,705 INTEREST DEUNQUENT TAX TOTAL TAX 4,404 49,318~03 5,415 53,273~40 6,048 54,883,197 49 58,3~8,433 3,799 63,411,773 33,949 66,090,113 6,477 71,885,707 1,353 74,167,462 276 75,414,337 380 76,303,121 StaUstt~ol Section, 7-7 Ci~, o~ Ren~, Wush~n~on TABLE 6 PRJNCIPAL PROPERTf TAX PAYERS December 31, 2011 TAXPAYER 2011 2002 % OF TOTAL % O F TOTAL TAXABLE"TAXABLE TAXABLE TAXABLE ASSESSED ASSESSED ASSESSED ASSESS£D VALUE RANK VALUE VALUE RANK VALUE Boetng Paccar Puget Sound Energy-Ele~Ges Transwestern Harvest Lakeshore Renton Properties LLC Fred Meyer Stores Inc. Ax~s Grand Holdings Providence Health ECI Two WTC LLC (WTCTPI LLC) Renton Acquldt fon LLC (Walton Renton Investors Ill) US West Spelker Properties LP National Tax Search, LLC Rosche One Interests Washington Mutual ~ank Avalon ]~ey Communities A~I Others Total Assessed V~|uat~on 83,847,100 2 0.73%86,464,606 2 1.55% 76,550,185 3 0.67%75,240.601 3 1.35% 69,486~249 4 0.61% 52,108,900 5 0.45%47,040,200 4 0.84% 44,300,759 6 0.3~Yo 38,786,186 8 0.34% 37,194,900 9 0.32% 10o240,360,678 11,480,466,361 30,713,800 10 0.27% 40,761,767 5 0.73% 38522,902 6 0.69"% 38,363,300 7 0.69% 24,816,400 8 0.44% 23,409,861 9 0.42% 21,206,900 10 038% 89.20%4,464,880,542 79.82% i00,00%~ 5~593,880,488 100.00% 2011 Comprehensive Annual Rnandal Report City o~ Renton. Washington 2,000,000,000 TABLE 7 ASSESSED VALUE OF TAXABLE PROPERTY LAb[ TEN FISCAL YEARS 2002 2003 2004 2005 2005 2007 2008 2009 2010 2011 I~Total Taxable Assessed Value g~ Dt~ect Tax Rate REAL PROPERTY ~ TAX EXEMPT ASSESSED FISC~RESIDENTIAL COMMERCIAL PERSONAL REAL TOTAL ASSESSED DIRECT TAX VALUE PER "fEAR PROPERTY PROPERTY PROPERTY PROPERTY1~VALUE~RATE z CAPITA~ ~ 5,593,880,488 3.354 $103,8~8 5,983,832,546 3.277 108,995 6372,632,122 3327 115,113 6,697,771~907 3.227 117,836 17,222,168 7334,476,542 3.126 125,971 20,256,008 8370,801,505 2.884 139,178 17,643~28 9,659,677,654 2.624 122~40 27,368~066 13,233,244,780 2.369 158~525 30~552,056 11,884,728,440 2.712 138,180 33,038,511 11,480,466,361 2.832 ~.24o349 7-9 201~ ~omprehendw Annual ~y a/ ~enton, WagOn,ton TABLE 9 PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 I~ TOTAL TAX ~ Percent Colle~ed FISCAL YEAR TOTAL TAX COLLECTED WITHIN THE ~COLLECTIONS a TOTAL COLLECTIONS TO LEVY FOR FISCAL YEAR OF THE LEVY IN SUBSEQUENT DATE FISCAL YEAR AMOUNT % OF LEVY YEARS AMOUNT % OF LEVY 2002 $18,581,814 $18,285,~08 98.4%$295,513 Stot~stl~ol Section, 7-11 City o~ Renton, Weshlngton TABLE 11 RATIOS OF OUTSTANDING DEBT BY ~YPE LAST TEN FISCAL YEARS 2002 2003 2~4 2005 2006 2007 2008 2009 2010 20~1 ~General Obl~gation (Go~emmenta|)~ Other Long Term (Governmental) Revenue (Business-Type}B Other Long Term (Business-Type) ¯GOVERNMENTAL ACTWITIES GENERAL OTHER FISCAL OBLIGATION LONG TERM YF.AR BONDS DEBT 2002 2003 32,245,982 2004 30,629,403 2005 29,107,664 2006 45,584,314 2007 44,017,551 2008 41,938,000 2009 38,480,000 38,973,.~.7 2010 36,425,000 38,511,878 2011 50,290,000 38,053,639 TOTAL OTHER PRIMARY PERCENTAGE REVENUE LONG TERM GOVERNMENT OF PERSONAL DEBT PER BONDS DEBT DEBT INCOMEt CAWi’A 29,070,000 7,637,552 68,953,5~4 9.40%1,256 37,680,000 8o384,138 76,693,541 8.71%1,385 35,790,000 11,589,789 76,487,453 8.68%1,346 34,925,000 6,443,218 129,711,857 N/A 1,401 2011 Cornpreheasive Annuol Rnm~do! Report Oty o~ Renton, Washington 0.80°,0 0.70% 0.60% 0.50% 0.40%0 0~00% TABLE ~.3 RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN RSCAL YEARS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 e=~==eperaent of General ObltBation Debt to Assessed Value LESS:NET GENERAL:AMOUNTSz GENERAL FISCAL OBUGATION AVAILABLE OBUGATION ASSESSEDz"~ YEAR BONDS IN DEBT BOND DEBT VALUE OF GO BONDS DEBT TO ASSESSED PER3 VALUE CAPITA 2002 $33o797,023 $1,540,203 $32,256,820 $5,593,880,488 0.58%$599 2003 32,245,982 ;L,379,654 30,366,328 5,983,832,545 0.51%553 2004 30,629,403 1,440o509 29,188,894 6,372,632,122 0,46%527 2005 29,107,6~04 2,683,999 26,423,665 6,697,T/1,907 0.3~465 2006 45o584o314 3,068,587 42~15,727 7,334,476,542 0.58%729 2007 44,017,551 1,392,91B 42,624,636 8,370,801,505 0.51%707 2008 41,938,000 1,270,936 40,667,064 9,659°677,654 0,42%516 2009 38o480,0~0 367,652 38,112,348 13,233,244,7B0 0.29%456 2010 36,425,000 1,009,555 35,415,445 1~,,884,728,440 0.30%411 2011 50,290,000 1,032,360 49,257,640 11,480,466,361 0.43%532 2011 Comprehensive A~nual Rnan¢fal Report TABLE 14 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT G~y Of Renton, Washington Schools 69% Port of Seattle Others i% Renton 16% County 1o% DEBT Estimated Percent Estimated Share of GOVERNMENTAL UNIT OUTSTANDINGz Applicablez overlapping debt G~y of Renton Direct Debt $50,290,0~0 100%$50,290,(T30 City o~ Renton Overlapping Debt a KinB County3 $924,690,136 3.47% Port of Seattle 336,120,000 3.47~ Renton School District #403 305,738,450 68.77% Issaquah School D!stdct #41:1 278,300,1~0 2.52% Kent Sdlool District #415 206,038,741 0.72% Fire District 20~1 2.91% Fire Dist~ct 40-1 6,359,431 40.55% [On8 County Ubrary 123,116,633 Cityo~RentonOveHeppingOebt Total Direct and Over[appbt8 Debt 32,086,748 11,663,364 210,256,332 7,013,163 1,488,218 2,578,584 1,846,749 $ 317,223,158 z Kin8 COUZ~y’s debt excludes propdetapi*type debt, publlc fl~:~lRies dJstflct debt flrmrtced flora spedaI ~xes and hoteVmot~ tax financed debt ~ that report~r~ d~st~ct Fo~ example, w~thtn ~f code 2100, the Renan ScamPI DIstr~ct and the I~rrR CormW LibraW district o~erlap w~t~t StatLstlcal Sec~n, 7-~6 City o~ Renton, Washington TABLE 3.5 PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Pa6e 1 of 2 WATER AND SEWER REVENUE BONDS: 6o000.000 6.000.000 4.000.000 2.0000000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ~lWater and Sewer Net Revenue available for debt service ~l Debt Service l~3Coverege Fiscal Year Revanue~ 2002 24.045.660 2O03 25.034.120 2004 27.301.230 2005 27,889.360 2006 27.750.508 2007 32,887,272 2008 32,152,413 2009 34,795,614 2010 35,790,870 2011 43.145.158 Revenue Debt Sewice Expenses Net Revenue without Available for Depreciation Debt Set, ice Pflndpal Interest 17,495,472 6,550,188 16.990.5~9 8.943.601 18,325,863 8,975,367 18,892,824 8,996,536 18,850,225 8,900,283 22020,642 10,866,630 23,766,437 8,385,976 26,894,033 7.901~581 28.183.489 7.607.381 28.835.959 14.310.189 RaUo 1,680,00~1,430,199 2.86 1,740,000 1,373,036 3.49 1,810,000 1,803,687 3.01 1,890,000 1,758,589 2.17 1,955,0~1.689.455 2.09 StottstJ’col Section. 7-I7 202~ ComprehensJve Annual Financial Report City o.f Reeton, Woshtngton GOLF COURSE REVENUE BONDS~ TABLE 15 PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Page 2 of 2 2,S00.0OO 1,000,000 500,O00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Golf Course Net Revenue evallab]e for debt ser,.dce ~ Debt Service ~ Coverage Revenue Debt Service Ratio Expenses Net Revenue Fiscal without Avaliab~e for Year Revenue Depreciation Debt Sen~ce Pflncipal Intere~Coverege 2002 2,279,361 1,415,674 863,687 225,000 210,548 1.98 2003 2,177,I22 1,573,296 603,826 235,000 201,210 1.38 2004 2.198.597 1.460.445 738,152 250.000 ~91,223 1.67 2006 2,337,672 1,725,854 611,818 270,0~0 168,778 1.39 2007 2,333,955 1,770,684 563,271 285,000 156,358 1.28 2(]~8 2,310,869 1,827,810 483,059 295,000 142,820 1.10 2009 2,163,737 1,798,831 364,906 310,000 128,513 0.83 2011 2,020,230 10763~.~41 256,889 N/Az Source: C~V of ~enton Finance Dillon 2011 Comprehensive AnnuaI Rnancial Report Washington TABLE 16 DEMOGRAPH{C AND ECONOMIC STATIST] CS L~T TEN FISCAL YEARS 10% 7% 5% 4% 2% o% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ~Klo8 County Unemployment Rate 2002 1,774,312 53,840 77,940,605,000 2003 1,779,300 54,900 79,199,166o000 2004 1,788,300 55,360 88,407,884,000 2005 1,808,300 56,840 89,032,307,000 2006 1,835,3~]58,360 97, 750,314,000 2007 1,861,300 60,290 106,805o239,000 2008 1,884,200 78,780 109,551,329,000 2009 1,~)09,300 83,650 i09,053,408,000 2010 1,933,400 86,230 106,806,333,000 2011 1,942,600 9Z,590 N/A ~U-~. Bureau of Economic ~U.% Bureau of Economic ~Washlnston State Office of Fmandal Management eWashtngrton State Emp[oymenl: S~cu~Ity Department 44,217 36.13 12,892 6.2°’0 44,800 3638 13,046 5.3% 49,670 36.60 13,062 49,488 36.83 13,192 4.3% 53,488 36.93 13,397 4.0% 57,710 36.97 13’570 3.9% 58,141 37.00 13,836 6.1% 56,904 37,08 13,977 9.0% 55,136 37.24 .14,232 8,6% N/A 37.28 14,440 7.1% City o~ Renton, Washington TABLE 17 PRINCIPAL EMPLOYERS 2011 EMPLOYEES RANK CITY Boelo8 Company 12~28 1 Valley Medical Center 2,033 2 Ranton School District 1,837 3 Federal Aviation Administration 1,480 4 Paccar Inc 1,077 5 Providence WA Regional 838 6 City of Renton 698 7 KInB County 516 8 Conversent Outsourdng Inc.428 9 2002 EMPLOYEES RANK CITY 27.93%14,481 1 34.44% 4.53 1,562 2 3.71 4.10 1,318 3 3.13 3.30 955 4 2.30 2.40 782 5 1.86 1.56 688 6 1.64 --533 7 1.27 --453 8 1.08 --358 9 0.85 --319 10 0.76 48.61%21,459 51.04% 51.30%20,588 48.96%" 100.00%42,047 100.00% Source: City of Renton Business license records and individual loqutrlo~ 2011 Comprehens~m ArmuM Rna~dot Report City o~ Re,ton, Washington TABLE 18 FULLTIME EQUIVALENT ~ GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN RSCAL YEARS FUNCTION Public Safety Polk:e Commissioned OIficers Non-Commissioned Officers Flre Commlsdoned Officers Non-Commissioned Officers Public Works AdmlntstraUon Transportation Systems UUl~ty Systems Maintenance Sendces Culture and Re~’eatk)n Parks and Reo’eation Ubraw Museum Golf Course Total 2002 2003 2004 20~5 2006 2007 20081 200~2 20~.03 2011 97.5 96.5 97.5 94,5 89.5 95.0 155,6 163.8 143.3 143.5 88,0 88.0 89,0 91.o 97.0 122.o 124,0 121.0 123.0 123.O 40.2 40,2 41.2 43.2 42.2 49.2 51.2 46.4 44,~28,4 105.0 105.0 106.0 106.0 10~.0 109,0 118,0 137.0 136.0 145.0 12.0 12.0 13.0 ~3.0 14.0 16.0 17.0 18.0 16.0 16.O 42.7 42.7 42.7 42.5 46.5 49.0 4.0 3.5 3.0 3.0 34.0 33.0 ~4.5 34.5 35.5 40.5 41.0 37.0 33.0 33.0 20.8 20.8 20.8 20,8 24,8 29.3 36.7 37.7 29.5 29,5 61.0 62.0 62.0 62.0 64,1 71.0 88.0 83.0 78.0 78.0 77.5 77.5 77.5 76.5 76.5 81.0 89.5 86.3 81.8 82.8 14,0 14,0 14.0 13.0 13.0 14.0 14.0 1.0 1.0 1.0 1:0 1,0 1.O 1.O 1.0 1.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 9.3 9.5 9-5 603.7 602.7 5093 608,0 620,0 687.0 750.0 759.2 698.5 692.7 Solid W~e ~ 201.I Comp~ehemlve Annual Rnondo! Report City o’1 Renton, Woshlngton FUNCTION Public safety Street (miles] Streetlights Parks acreage San~ary sewers (milest TABLE 20 CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1,0 1.0 1~1.0 7.0 7.0 7.0 7.0 5.0 5.0 5.0 5~ 1~1~1.0 1.0 1.0 1.0 7~7.0 1~0 ~.0 1~0 10.0 5.0 5.0 6~6.0 5.0 7.0 213.2 213.7 213.7 218.0 224.6 233,7 263.8 263.8 264,5 266,1 2,492.0 2,612.0 2,704.0 2,790.0 2,924.0 3,137.0 3,367.0 3,505.0 3,935o0 4,015.0 1,158.0 1,158.0 1,158.0 1,158.0 1,160.0 1,160.0 1,181.0 1,183.0 1,183.0 1205.8t 26.0 26.0 26.0 26.0 26.0 28.0 29,0 30.0 30.0 32,0~ 1.0 1,0 1.0 1.0 1.0 1.0 1.0 17.0 17.0 17.0 17.0 17.0 17,0 17,0 17.0 17,0 17.0 1.0 1.0 1.0 1,0 1.0 1.0 1,0 1.0 1,0 1.0 289 291.0 291.1 293.0 295.0 300.0 304.0 305.0 305.0 305.0 3,193 3,240 3,274 3,374 3,440 3,544 3,602 3,624 3,651 3,639 176.7 1833 189.6 193.3 204.9 206.3 215.7 216A 217.7 219.3 199.4 204.0 209.7 214.8 219.7 222.3 267.5 273,8 274.9 276,1 tincludes Natural Area acreage, and deve~oped/undevelopnd park acrease for Nelshborhood Parks, Community Parks, Reglonai Parks. Spedal Use Parks and Corridors z Developed Neighborhood, CommunRy, Re~onal and Speda[ Use Parks only. Two new parks were part of Benso~ Hill Annexation not previously accounted StQtl~’~JI Section, 7.23 APPENDIX D ECONOMIC AND 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. POPULATION King County and City of Renton Year King County City of Renton 2012 1,957,000 93,910 2011 1,942,600 92,590 2010°)1,931,249 90,927 2009 1,909,300 83,650 2008 1,884,200 78,780 O) Increase in population due to the annexation of the Benson Hill-Cascade area. Source: Washington State Office of Financial Management, September, 2012. TOTAL PERSONAL AND PER CAPITA INCOME King County and State of Washington King County Total Personal Per Capita Year Income (in thousands)Income 2011o)N/A N/A 2010 $106,806,333 $55,136 2009 104,237,546 54,517 2008 109,927,858 58,628 2007 106,693,888 57,735 (1) Preliminary estimate. State of Washington Total Personal Income (in thousands) $302,529,308 287,174,714 278,944,289 289,433,693 272,624,864 Source: U.S. Department of Commerce, Bureau of Economic Analysis, September, 2012. TAXABLE RETAIL SALES King County City of Renton 2012(I)$ 9,652,697,833 $ 467,224,838 2011 40,846,118,928 1,936,916,285 2010 39,275,353,182 1,9!4,203,608 2009 39,594,903,520 1,970,565,365 2008 45,711,920,389 2,262,469,040 2007 47,766,338,768 2,289,518,889 2006 43,993,478,514 2,093,200,107 2005 40,463,996,808 1,951,188,125 Per Capita Income $44,294 44,589 41,837 44,106 42,192 (1) Through 1st quarter. Source: Washington State Department of Revenue, September, 2012. D-1 RESIDENTIAL BUILDING PERMITS King County New Single Family Units New Multi-Family Units Year 2012(1) 2011 2010 2009 2008 Construction Construction Number Cost Number Cost 1,826 $ 540,549,632 3,440 $ 525,287,103 2,765 785,840,283 3,378 431,699,572 2,578 705,719,017 3,442 325,377,955 2,003 538,910,481 1,183 137,161,103 3,029 866,565,304 7,427 1,009,669,531 (1) Estimate, through June 2012. Source:U.S. Bureau of the Census, September 2012 MAJOR EMPLOYERS°) Puget Sound Area Number of Employer Employees The Boeing Company 76,452 U.S. Army Fort Lewis 51,000 Navy Region Northwest 41,300 Microsoft 40,311 University of Washington 27,920 Providence Health & Services 19,091 Wal-Mart Stores, Ine.17,975 Fred Meyer Stores 13,495 King County Government 13,382 U.S. Postal Service 12,367 City of Seattle 10,627 MultiCare Health System 9,028 Franciscan Health System 8,226 Costco 8,224 Group Health Cooperative 8,125 (1) Most recent data available. Does not include part-time or seasonal employment figures. Source: Puget Sound Business Journal, Book of Lists, 2012. Total Construction Cost $1,065,836,735 1,217,539,855 1,031,096,972 676,071,584 1,876,234,835 D-2 2011 MAJOR EMPLOYERS City of Renton Employer The Boeing Company Valley Medical Center Renton School District Federal Aviation Administration PACCAR, Inc. Providence Health & Services City of Renton King County Convergent Outsourcing Inc. Puget Sound Educational Service District Source: City of Renton. Type of Business Aerospace Healthcare Education Government Technology Healthcare Government Government Telecommunications Education Employees 12,528 2,033 1,837 1,480 1,077 838 698 516 428 364 NONAGRICULTURAL WAGE & SALARY WORKERSO) AND LABOR FORCE AND EMPLOYMENT DATA King County Civilian Labor Force Total Employment Total Unemployment Percent of Labor Force 2012~2)201~1 1,107,210 1,105,550 1,028,530 1,015,970 78,680 89,580 7.1 8.1 Annual Average 20111 20011 20011 1,107,060 1,115,980 1,091,720 1,006,000 1,020,090 1,043,300 101,060 95,890 48,420 9.1 8.6 4.4 NAICS INDUSTRY~3) Total Nonfarm Total Private Goods Producing Natural Resources and Mining Construction Manufacturing Service Providing Trade, Transportation, and Utilities Information Financial Activities Professional and Business Services Educational and Health Services Leisure and Hospitality Other Services Government Workers in Labor/Management Disputes 2012~2) 1,164,000 997,250 151,800 500 48,850 102,450 1,012,200 212,925 78 825 67 475 187 775 144975 111 000 42 475 166 750 0 Excludes proprietors, serf-employed, members of the armedo services, Includes all full- and part-time wage and salary workers receiving pay month.(2)Data through April, 2012.(3)North American Industry Classification System. Source: 201..._.~1 20111 20011 20011 1,154,125 1,133,200 1,151,950 1,215,967 989,192 966,233 984,750 1,049,558 149,625 148,158 160,442 186,467 500 467 508 583 48,750 49,675 57,142 73,883 100,417 98,017 102,792 111,992 1,004,500 985,042 991,508 1,029,500 211,833 206,350 209,175 224,667 80,042 79,408 80,192 79,767 67,342 67,658 71,192 75,933 184,692 176,675 176,792 194,242 142,183 138,142 137,683 133,258 111,233 108,700 108,117 113,358 42,242 41,142 41,158 41,867 164,933 166,967 167,200 166,408 0 0 0 958 workers in private households, and agriculture. during the pay period including the 12th of the Washington State Employment Security Department, September, 2012. D-3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E BOOK-ENTRY TRANSFER SYSTEM The following information has been provided by DTC. The City makes no representation regarding the accuracy or completeness thereof. Beneficial Owners should therefore confirm the following with DTC or the Direct Participants(as hereinafier defined). Language in [brackets] with ~tri!:c tl:r~;;gh has been deleted as permitted by DTC as it does not pertain to the Bonds. 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 ~o’~.-’e e~ the Securities, [eae~] in the aggregate principal amount of such issue, and will be deposited with DTC. [!f, ~" 2. DTC, the word’s largest securities 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of seeurities certificates. Direct Participants include both U.S. and non-U.S, securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC’). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered cleating agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S, securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor’s rating of AA+. 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.dtee.com. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, whieh will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. E-1 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to tune. 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. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. E-2 Denis Law Mayor October 31, 2012 Administrative Services Iwen Wang, Administrator Pacifica Law Group LLP Attn: Deanna Gregory 1191 Second Avenue, Suite 2100 Seattle, Washington 98101-2945 Re: City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds") Dear Ms. Gregory: Pacifica Law Group LLP is serving as bond counsel and disclosure counsel on the above captioned issue. As Finance and Information Services Administrator for the City of Renton, Washington (the "Issuer"), I hereby certify as follows: To the best of my knowledge and belief, after due review, the Preliminary Official Statement relating to the issuance of the above referenced Bonds (the "Preliminary Official Statement"), except for matters relating to DTC, Piper Jaffray & Co., as financial advisor (the "Financial Advisor"), and Seattle- Northwest Securities Corporation, as underwriter (the "Underwriter"), 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 Preliminary Official Statement 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 15c2-12(b)(1); and The Issuer hereby authorizes the Financial Advisor and the Underwriter to distribute and otherwise utilize the Preliminary Official Statement in connection with the marketing of the Bonds. Sincerely, ~~nistrator Renton City Hall ¯ 1055 South GradyWay ¯ Renton, Washington 98057 ¯ rentonwa.gov STANDARD &POOR’S RATINGS SERVICES One Market Steuart Tower, 15th Floor San Francisco, CA 94105-1000 tel 415 371-5000 reference no.: 1232996 October 23, 2012 City of Renton Renton City Hall - 5th Floor 1055 South Grady Way Renton, WA 98057 Attention: Ms. Iwen Wang, Administrator - Finance Division Re:US$8,700,000 City of Renton, Washington, Water & Sewer Revenue Refunding Bonds, Series 2012 Dear Ms. Wang: Pursuant to your request for a Standard & Poor’s rating on the above-referenced issuer, we have reviewed the information submitted to us and, subject to the enclosed Terms and Conditions, have assigned a rating of "AA+". Standard & Poor’s views the outlook for this rating as stable. A copy of the rationale supporting the rating 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. This rating is based on financial information and documents we received prior to the issuance of this letter. Standard & Poor’s assumes that the documents you have provided 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 final documents with the changes clearly marked. 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 Page 1 2 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 Standard & Poor’s is pleased to be of service to you. For more information on Standard & Poor’s, please visit our website at www.standardandpoors.com. If we can be of help in any other way, please call or contact us at nypublicfinance@standardandpoors.com.Thank you for choosing Standard & Poor’s and we look forward to working with you again. Sincerely yours, Standard & Poor’s Ratings Services a Standard & Poor’s Financial Services LLC business. PP enclosures cc:Ms. Jane D. Towery, Managing Director- Public Finance Piper Jaffray & Co. 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PF Ratings U.S. (05/17/11) STANDARD &POOR’S RATINGS SERVICES RatingsDirect° Summary: Renton, Washington; Water/Sewer Primary Credit Analyst: Adam Torres, New York (1) 212-438-2481; adam_torres@standardandpoors.com Secondary Contact: Scott D Garrigan, Chicago (1) 312-233-7014; scott_garrigan@standardandpoors.com Table Of Contents Rationale Outlook Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT OCTOBER 24, 2012 1 1030127 I 300971433 Summary: Renton, Washington; Water/Sewer Many issues are enhanced by bond insurance. Rationale Standard & Poor’s Ratings Services has assigned its ’AA+’ long-term rating to Renton, Wash.’s series 2012 water and sewer revenue bonds. At the same time, Standard & Poor’s affirmed its ’AA+’ rating on Renton’s water and sewer revenue bonds outstanding. The outlook is stable. The city is issuing the bonds to refund its series 2004 bonds. The ratings reflect our view of the waterworks system’s: ¯Strong historical debt service coverage (DSC) and liquidity, which we expect to continue; ¯Planned rate increases from 2013-2016 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 (general obligation rating: AAA/Stable) metropolitan area. Our view of the system’s moderate capital spending needs in the next five years, which we expect will limit the growth of cash reserves provided by rate increases, offsets these strengths. A net revenue pledge of the city’s waterworks system secures the bonds, which includes water, sewer and storm drainage. Bond provisions are within the standard range for a net revenue pledge of this type, and include a 1.25x maximum annual debt service (MADS) additional bonds test and a 1.25x MADS rate covenant. Bond provisions also include a debt service reserve fund funded at MADS. Renton, with a population of about 94,000, is in King County, at the southern end of Lake Washington, 20 miles southeast of Seattle and 60 miles northeast of Olympia (AA/Stable). The city’s effective buying income, in our view, is good per median household, at 109% of the national average; and strong per capita at 119% of the national average. Renton’s largest employer is The Boeing Co., with about 13,000 employees in the city; the company has an estimated workforce of 76,000 based in the region. The unemployment rate was 6.5% in August 2012, compared with a statewide rate of 8.5% and a national rate of 8.2%. Water supply is sufficient, given the mix of supply from Renton’s own wells, supply interties with Seattle Public WWW.STANDARDANDPOORS.COM/RATINGSDIRECT OCTOBER 24, 2012 2 1030127 I 300971433 Summary: Renton, Washington; Water/Sewer Utilities, and additional emergency interties with surrounding cities. In 2011, the city’s average daily demand was 6.8 million gallons per day (mgd), with a peak demand of 12.5 mgd, compared with the city’s total production of 28.0 mgd. Through various interties, including Seattle, the city has access to an additional 19.1 mgd. In 2011, Renton entered a 50-year supply agreement with Seattle that it projects to be sufficient for all growth during the contract’s term. The leading 10 water customers represented 13% of total revenues in 2011, which we consider diverse. King County provides wastewater services to the city through a contract that expires in 2056; officials pass cost increases on to city customers. Average daily sewer flow is about 6 mgd with peak flow of about 8 mgd; the county does not limit the amount of flow from Renton. We believe that the wastewater system is likewise diverse, because the leading 10 customers, represented a diverse 9% of total revenues in 2011. The typical residential water consumer pays an approximate combined $117 per 1,000 cubic feet monthly: $42.91 for water service, $62.34 for wastewater service (including$37.26 to metro), and $11.51 for storm water service, with the last two being flat rate. Water, sewer, and storm rates increased in 2011 18%, 42%, and 40%, respectively, and further in 2012 by 16%, 5%, and 11%, respectively. The city is expecting annual 5%-6% rate increases on each system for 2013-2016. Annual DSC by the system has been consistently strong, in our view, during the past five years and well above Renton’s policy of maintaining 1.25x to 1.50x coverage. Senior-lien DSC has been above 2.00x in the past five years and was 3.93x in 2011, with coverage of senior- and subordinate-lien (public works trust fund loan) debt at 3.07x. Management estimates senior-lien DSC to rise to 5.5x in 2012, with combined coverage rising to 3.6x given the substantial rate increases. We believe the waterworks system’s cash position has been strong historically; it was $14.6 million, or 185 days, in 2011. The city projects a similar range for 2012, but for it to increase to nearly $20 million by the end of 2013, again based on rate increases. However, due to capital spending, it is unclear to what extent the system will maintain this higher figure, because management often has a practice of building cash in advance of major capital expenditures. Nevertheless, we expect the cash position to remain what we consider to be strong overall. Renton’s planned waterworks capital projects during fiscal years 2013-2018 totals about $73 million for all three systems combined, with $26 million in water projects, $20 million in wastewater spending, and $28 million in storm water costs. Management expects no additional bond issuance, funding the capital improvement plan instead from a combination of grants and rates. Outlook The stable outlook reflects our expectation that Renton’s waterworks system will continue to generate net revenues well above its DSC requirement. In addition, we do not expect a significant change from the city’s practice of making regular rate increases as it deems necessary and using a combination of revenues, reserves, and revenue bonds to support capital projects, allowing management to maintain what we view as sound liquidity. We do not expect to raise or lower the rating during the next two years given capital spending plans. WWW.STANDARDANDPOORS.COM/RATINGSDIRE(:T OCTOBER 24~ 2012 3 1030127 [ 300971433 Summary: Renton, Washington; Water/Sewer Related Criteria And Research ¯USPF Criteria: Key Water And Sewer Utility Credit Ratio Ranges, Sept. 15, 2008 . ¯USPF Criteria: Standard & Poor’s Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globaicreditportal.com. All ratings affected by this rating action can be found on Standard & Poor’s public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT OCTOBI~R 24, 2012 4 1030127 I 300971433 Copyright © 2012 by Standard & Poor’s Financial Services LLC. All rights reserved. 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STANDARDANDPOORS.COM/RATINGSDIRECT McGRAW-HILL OCTOBER 24, 2012 5 1030127 J 300971433 ESCROW DEPOSIT AGREEMENT CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 THIS ESCROW AGREEMENT, dated as of December 7, 2012 (herein, together with any amendments or supplements hereto, called the "Agreement") is entered into by and between the City of Renton, Washington (the "City") and U.S. Bank National Association, Seattle, Washington, as escrow agent (herein, together with any successor in such capacity, called the "Escrow Agent"). The notice addresses of the City and the Escrow Agent are shown on Exhibit A attached hereto and made a part hereof. WlTNESSETH: WHEREAS, the City heretofore has issued and there presently remain outstanding the obligations described in Exhibit B attached hereto (the "Refunded Bonds"); and WHEREAS, pursuant to Ordinance No. 5672 passed on October 15, 2012 (the "Bond Ordinance"), the City has determined to issue its Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"); and WHEREAS, a portion of the proceeds of the Bonds will be used for the purpose of providing funds to pay the costs of refunding the Refunded Bonds; and WHEREAS, Grant Thornton LLP has prepared a report dated December 7, 2012 (the "Verification Report") relating to the source and use of funds available to accomplish the refunding of the Refunded Bonds, the investment of such funds in Government Obligations (as defined herein) and the adequacy of such funds and investments to provide for the payment of the debt service due on the Refunded Bonds; and WHEREAS, pursuant to the Bond Ordinance, the Refunded Bonds have been designated for redemption prior to their scheduled maturity dates and, after provision is made for such redemption, the Refunded Bonds will come due in such years, bear interest at such rates, and be payable at such times and in such amounts as are set forth in Exhibit C attached hereto and made a part hereof; and WHEREAS, when Escrowed Securities have been deposited with the Escrow Agent for the payment of all principal and interest of the Refunded Bonds when due, then the Refunded Bonds shall be legally defeased; and WHEREAS, the issuance, sale, and delivery of the Bonds have been duly authorized to be issued, sold, and delivered for the purpose of obtaining the funds required to provide for the payment of the principal of, interest on and redemption premium (if any) on the Refunded Bonds when due as shown on Exhibit C attached hereto; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, the sufficiency of which hereby are acknowledged, and to secure the full and timely payment of principal of and the interest on the Refunded Bonds, the City and the Escrow Agent mutually undertake, promise and agree for themselves and their respective representatives and successors, as follows: Article 1. Definitions Section 1.1. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the meanings assigned to them below when they are used in this Agreement: Escrow Fund means the fund created by this Agreement to be established, held and administered by the Escrow Agent pursuant to the provisions of this Agreement. Escrowed Securities mean the noncallable Government Obligations described in Exhibit D attached to this Agreement, or cash or other noncallable obligations substituted therefor pursuant to Section 4.2 of this Agreement. Government Obligations mean direct, noncallable (a)United States Treasury Obligations, (b)United States Treasury Obligations - State and Local Government Series, (c) non-prepayable obligations which are unconditionally guaranteed as to full and timely payment of principal and interest by the United States of America or (d)REFCORP debt obligations unconditionally guaranteed by the United States. Paying Agent means The Bank of New York Mellon, as the fiscal agency of the State of Washington, and as the paying agent for the Refunded Bonds. Section 1.2. Other Definitions. The terms "Agreement," "City," "Escrow Agent," "Bond Ordinance," "Verification Report," "Refunded Bonds," and "Bonds" when they are used in this Agreement, shall have the meanings assigned to them in the preamble to this Agreement. Section 1.3. Interpretations. The titles and headings of the articles and sections of this Agreement have been inserted for convenience and reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Bonds in accordance with applicable law. Article 2. Deposit of Funds and Escrowed Securities Section 2.1. Deposits in the Escrow Fund. Concurrently with the sale and delivery of the Bonds, the City shall deposit, or cause to be deposited, with the Escrow Agent, for deposit in the Escrow Fund (as defined below), the funds (from the proceeds of the Bonds and a cash contribution by the City) sufficient to purchase the Escrowed Securities and pay costs of issuance described in Exhibit D, and the Escrow Agent shall, upon the receipt thereof, acknowledge such receipt to the City in writing. Article 3. Creation and Operation of Escrow Fund Section 3.1. Escrow Fund. The Escrow Agent has created on its books a special trust fund and irrevocable escrow account to be known as the Refunding Account (the "Escrow Fund"). The Escrow Agent hereby agrees that upon receipt thereof it will deposit to the credit of the Escrow Fund the funds and the Escrowed Securities described in Exhibit D attached hereto. Such deposit, all proceeds therefrom, and all cash balances from time to time on deposit therein (a) shall be the property of the Escrow Fund, (b) shall be applied only in strict conformity with the terms and conditions of this Agreement, and (c) are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Bonds as set forth in Ordinance No. 5098 adopted by the City Council of the City on November 1, 2004 (the "Refunded Bond Ordinance"), which payment shall be made by timely transfers of such amounts at such times as are provided for in Section 3.2 hereof. When the final transfers have been made for the payment of such principal of and interest on the Refunded Bonds, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3.2. Payment of Principal and Interest. The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent from the cash balances from time to time on deposit in the Escrow Fund, the amounts required to pay the principal of the Refunded Bonds at their respective redemption dates and interest thereon to such redemption dates in the amounts and at the times shown in Exhibit C attached hereto. Section 3.3. Sufficiency of Escrow Fund. The City represents that, based upon the information provided in the Verification Report, the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient to provide moneys for transfer to the Paying Agent at the times and in the amounts required to pay the interest on the Refunded Bonds as such interest comes due and the principal of the Refunded Bonds as the Refunded Bonds are paid on an optional redemption date prior to maturity, all as more fully set forth in Exhibit E attached hereto and as required for the legal defeasance of the Refunded Bonds under the terms of the Refunded Bond Ordinance. If, for any reason, at any time, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund shall be 3 insufficient to transfer the amounts required by the Paying Agent to make the payments set forth in Section 3.2. hereof, the City shall timely deposit in the Escrow Fund, from any funds that are lawfully available therefor, additional funds in the amounts required to make such payments. Notice of any such insufficiency shall be given promptly as hereinafter provided, but the Escrow Agent shall not in any manner be responsible for any insufficiency of funds in the Escrow Fund or the City’s failure to make additional deposits thereto. Section 3.4. Trust Fund. The Escrow Agent or its affiliate, shall hold at all times the Escrow Fund, the Escrowed Securities and all other assets of the Escrow Fund, wholly segregated from all other funds and securities on deposit with the Escrow Agent; it shall never allow the Escrowed Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent; and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Escrowed Securities and other assets of the Escrow Fund shall always be maintained by the Escrow Agent as trust funds for the benefit of the owners of the Refunded Bonds; and a special account thereof shall at all times be maintained on the books of the Escrow Agent. The owners of the Refunded Bonds shall be entitled to the same preferred claim and first lien upon the Escrowed Securities, the proceeds thereof, and all other assets of the Escrow Fund to which they are entitled as owners of the Refunded Bonds as set forth in the Refunded Bond Ordinance. The amounts received by the Escrow Agent under this Agreement shall not be considered as a banking deposit by the City, and the Escrow Agent shall have no right to title with respect thereto except as a trustee and Escrow Agent under the terms of this Agreement. The amounts received by the Escrow Agent under this Agreement shall not be subject to wan’ants, drafts or checks drawn by the City or, except to the extent expressly herein provided, by the Paying Agent. Article 4. Limitation on Investments Section 4.1. Investments. Except for the initial investment in the Escrowed Securities the Escrow Agent shall not have any power or duty to invest or reinvest any money held hereunder, or to make substitutions of the Escrowed Securities, or to sell, transfer, or otherwise dispose of the Escrowed Securities. Section 4.2. Substitution of Securities. [Reserved] 4 Article 5. Application of Cash Balances Section 5.1. In General. Except as provided in Section 2.1, 3.2 and 4.2 hereof, no withdrawals, transfers or reinvestment shall be made of cash balances in the Escrow Fund. Cash balances shall be held by the Escrow Agent in United States currency as cash balances as shown on the books and records of the Escrow Agent and, except as provided herein, shall not be reinvested by the Escrow Agent; provided, however, a conversion to currency shall not be required (i) for so long as the Escrow Agent’s internal rate of return does not exceed 20%, or (ii) if the Escrow Agent’s internal rate of return exceeds 20%, the Escrow Agent receives a letter of instructions, accompanied by the opinion of nationally recognized bond counsel, approving the assumed reinvestment of such proceeds at such higher yield. Article 6. Redemption of Refunded Bonds Section 6.1. Call for Redemption. The City hereby irrevocably calls the Refunded Bonds for redemption on their earliest redemption dates, as shown in the Verification Report and on Appendix A attached hereto. Section 6.2. Notice of Redemption/Notice of Defeasance. The Escrow Agent agrees to give a notice of defeasance and a notice of the redemption of the Refunded Bonds pursuant to the terms of the Refunded Bonds and in substantially the forms attached hereto as Appendices A and B attached hereto and as described on said Appendices A and B to the Paying Agent for distribution as described therein. The notice of defeasance shall be given immediately following the execution of this Agreement, and the notice of redemption shall be given in accordance with the ordinance authorizing the Refunded Bonds. The Escrow Agent hereby certifies that provision satisfactory and acceptable to the Escrow Agent has been made for the giving of notice of redemption of the Refunded Bonds. Article 7. Records and Reports Section 7.1. Records. The Escrow Agent will keep books of record and account in which complete and accurate entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for inspection during business hours and after reasonable notice by the parties hereto and by the owners of the Refunded Bonds. 5 Section 7.2. Reports. While this Agreement remains in effect, the Escrow Agent monthly shall prepare and send to the City a written report summarizing all transactions relating to the Escrow Fund during the preceding financial month, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund for payments on the Refunded Bonds or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. Article 8. Concerning the Paying Agents and Escrow Agent Section 8.1. Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 8.2. Limitation on Liability. The liability of the Escrow Agent to transfer funds for the payment of the principal of and interest on the Refunded Bonds shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligors of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. The Escrow Agent is not a party to the proceedings authorizing the Bonds or the Refunded Bonds and is not responsible for nor bound by any of the provisions thereof. In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Agreement. The Escrow Agent makes no representations as to the value, conditions or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the City thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall not incur any liability or responsibility in respect to any of such matters. It is the intention of the parties hereto that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder. 6 The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own neglect or willful misconduct, nor for any loss unless the same shall have been through its negligence or bad faith. Unless it is specifically otherwise provided herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the City with respect to arrangements or contracts with others, with the Escrow Agent’s sole duty hereunder being to safeguard the Escrow Fund, to dispose of and deliver the same in accordance with this Agreement. If, however, the Escrow Agent is called upon by the terms of this Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Agent shall be liable only for its own willful misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the City or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with, among others, the City at any time. Section 8.3. Compensation. The City shall pay to the Escrow Agent fees for performing the services hereunder and for the expenses incurred or to be incurred by the Escrow Agent in the administration of this Agreement pursuant to the terms of the Fee Schedule dated as of December 7, 2012. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses as Escrow Agent or in any other capacity. Section 8.4. Successor Escrow Agents. Any corporation, association or other entity into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or otherwise transfer all or substantially all of its corporate trust assets and business or any corporation, association or other entity resulting from any such conversion, sale, merger, consolidation or other transfer to which it is a party, ipso facto, shall be and become successor escrow agent hereunder, vested with all other matters as was its predecessor, without the execution or filing of any instrument or any further act on the part of the parties hereto, notwithstanding anything herein to the contrary. If at any time the Escrow Agent or its legal successor or successors should become unable, through operation or law or otherwise, to act as escrow agent hereunder, or if its property and affairs shall be taken under the control of any state or federal court or administrative body 7 because of insolvency or bankruptcy or for any other reason, a vacancy shall forthwith exist in the office of Escrow Agent hereunder. In such event, the City, by appropriate action, promptly shall appoint an Escrow Agent to fill such vacancy, ff no successor Escrow Agent shall have been appointed by the City within 60 days, a successor may be appointed by the owners of a majority in principal amount of the Refunded Bonds then outstanding by an instrument or instruments in writing filed with the City, signed by such owners or by their duly authorized attorneys-in-fact. If, in a proper case, no appointment of a successor Escrow Agent shall be made pursuant to the foregoing provisions of this section within three months after a vacancy shall have occurred, the owner of any Refunded Bond may apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon, after such notice, if any, as it may deem proper, prescribe and appoint a successor Escrow Agent. Any successor Escrow Agent shall be a corporation organized or doing business under the laws of the United States or the State of Washington, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000 and subject to the supervision or examination by federal or state authority. Any successor Escrow Agent shall execute, acknowledge and deliver to the City and the Escrow Agent an instrument accepting such appointment hereunder, and the Escrow Agent shall execute and deliver an instrument transferring to such successor Escrow Agent, subject to the terms of this Agreement, all the rights, powers and trusts of the Escrow Agent hereunder. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in ’and confirming to such successor Escrow Agent all such rights, powers and duties. The obligations assumed by the Escrow Agent pursuant to this Agreement may be transferred by the Escrow Agent to a successor Escrow Agent if (a)the requirements of this Section 8.4 and the Refunded Bond Ordinance are satisfied; (b) the successor Escrow Agent has assumed all the obligations of the Escrow Agent under this Agreement; and (c)all of the Escrowed Securities and money held by the Escrow Agent pursuant to this Agreement have been duly transferred to such successor Escrow Agent. Article 9. Miscellaneous Section 9.1. Notice. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed to the City or the Escrow Agent at the address shown on Exhibit A attached hereto. The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall b~ conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other parties not less than ten days prior notice thereof. 8 Section 9.2. Termination of Responsibilities. Upon the taking of all the actions as described herein by the Escrow Agent, the Escrow Agent shall have no further obligations or responsibilities hereunder to the City, the owners of the Refunded Bonds or to any other person or persons in connection with this Agreement. Section 9.3. Binding Agreement. This Agreement shall be binding upon the City and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the owners of the Refunded Bonds, the City, the Escrow Agent and their respective successors and legal representatives. Section 9.4. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Section 9.5. Washington Law Governs. This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Washington. Section 9.6. Time of the Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Agreement. Section 9.7. Notice to Rating Agencies. In the event that this Agreement or any provision thereof is severed, amended or revoked, the City shall provide written notice of such severance, amendment or revocation to Moody’s Investors Service at 7 World Trade Center at 250 Greenwich Street, New York, New York, 10007, Attention: Public Finance Rating Desk/Refunded Bonds; and to Standard and Poor’s Ratings Services, 55 Water Street, New York, New York 10041, Attention: Refunded Bonds Municipal Bond Department. Section 9.8. Amendments. This Agreement shall not be amended except to cure any ambiguity or formal defect or omission in this Agreement. No amendment shall be effective unless the same shall be in writing and signed by the parties thereto. No such amendment shall adversely affect the rights of the holders of the Refunded Bonds. No such amendment shall be made without first receiving 9 written confirmation from the rating agencies (if any) which, have rated the Refunded Bonds that such administrative changes will not result in a withdrawal or reduction of its rating then assigned to the Refunded Bonds. If this Agreement is amended, prior written notice and copies of the proposed changes shall be given to the rating agencies which have rated the Refunded Bonds. EXECUTED as of the date first written above. CITY OF RENTON, WASHINGTON Ad~trative~S~ervi~es Ad~istrator ¯ U.S. BANK NATIONAL ASSOCIATION Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Appendix A Appendix B Vice President Addresses of the City and the Escrow Agent Description of the Refunded Bonds Schedule of Debt Service on Refunded Bonds Description of Beginning Cash Deposit and Escrowed Securities Escrow Fund Cash Flow Notice of Redemption for the 2004 Bonds Notice of Defeasance for the 2004 Bonds 10 written confirmation from the rating agencies (if any) which have rated the Refunded Bonds that such administrative changes will not result in a withdrawal or reduction of its rating then assigned to the Refunded Bonds. If this Agreement is amended, prior written notice and copies of the proposed changes shall be given to the rating agencies which have rated the Refunded Bonds. EXECUTED as of the date first written above. CITY OF RENTON, WASHINGTON Administrative Services Administrator U.S. BANK NATIONAL ASSOCIATION Exhibit A -- Exhibit B -- Exhibit C -- Exhibit D -- Exhibit E -- Appendix A -- Appendix B -- Vice President Addresses of the City and the Escrow Agent Description of the Refunded Bonds Schedule of Debt Service on Refunded Bonds Description of Beginning Cash Deposit and Escrowed Securities Escrow Fund Cash Flow Notice of Redemption for the 2004 Bonds Notice of Defeasance for the 2004 Bonds 10 EXHIBIT A Addresses of the City and Escrow Agent The City:City of Renton 1055 S. Grady Way Renton, WA 98055 Attention: Administrative Services Administrator Escrow Agent:U.S. Bank National Association Corporate Trust Services PD-WA-T7CT 1420 Fifth Avenue, 7th Floor Seattle, WA 98101 Attention: Carolyn Morrison O) EXHIBIT B Description of the Refunded Bonds City of Renton, Washington Water and Sewer Revenue Bonds, 2004 Maturity Dates (December 1) 20240) 2025 2026 2027 Principal Amount $4,005,000 1,600,000 1,680,000 1,760,000 Interest Rates 5.00% 5.00 5.00 5.00 Term Bond. EXHIBIT C Schedule of Debt Service on the Refunded Bonds Date 06/0112013 12/01/2013 06/01/2014 12/01/2014 Interest $226,125.00 226,125.00 226,125.00 226,125.00 $904,500.00 $ $ Pfincipa~ Redemption Price --$ 9,045,000.00 9,045,000.00 $ Tot~ 226,125.00 226,125.00 226,125.00 9,271,125.00 9,949,500.00 C-1 EXHIBIT D Escrow Deposit Cash: $1.50 Other Obligations: Principal Description Maturity Date Amount SLGS-Cert 06/01/2013 $215,047 S LGS-Celt 12/01/2013 214,472 SLGS-Note 06/01/2014 214,809 S LGS-Note 12/01/2014 9,260,012 $ 9,904,340 Yield 0.130% 0.160 0.190 0.240 Costs of Issuance: Escrow Agent Fee (U.S. Bank) Bond Counsel & Disclosure Counsel (Pacifica Law Group) Financial Advisor (Piper Jaffray & Co.) Rating Agency (Standard & Poor’s) Escrow Verification (Grant Thornton) TOTAL: Total Cost $215,047.00 214,472.00 214,809.00 9,260,012.00 $9,904,340.00 1,100.00 30,000.00 7,500.00 10,500.00 2,500.00 51,600.00 D-1 Date Escrow Requirement EXHIBIT E Escrow Fund Cash Flow Net Escrow Receipts 12/07/2012 --$1.50 06/10/2013 $226,125.00 226,124.85 12/01/2013 226,125.00 226~ 125.59 06/10/2014 226,125.00 226,125.08 12/01/2014 9,271,125.00 9,271,124.01 $ 9,949,500.00 $ 9,949,501.00 Excess Receipts $ 1.50 (0.18) 0.59 0.07 (0.99) $ 1.00 Cash Balance $1.50 1.32 1.91 1.99 1.00 E-1 APPENDIX A NOTICE OF REDEMPTION* City of Renton, Washington Water and Sewer Revenue Bonds, 2004 NOTICE IS HEREBY GIVEN that the City of Renton, Washington (the "City") has called for redemption on December 1, 2014, its outstanding Water and Sewer Revenue Bonds, 2004 (the "Bonds"). The Bonds to be refunded will be redeemed at a price of one hundred percent (100%) of their principal amount, plus interest accrued to December 1, 2014. The redemption price of the Bonds is payable on presentation and surrender of the Bonds at the office of: The Bank of New York Mellon Worldwide Series Processing 2001 Bryan Street, 9th Floor Dallas, Texas 75021 -or- Wells Fargo Bank National Association Corporate Trust Department 14th Floor - M/S 257 999 Third Avenue Seattle, Washington 98104 Interest on the Bonds to be refunded or portions thereof which are redeemed shall cease to accrue on December 1, 2014. The following Bonds are being redeemed: Maturity Dates (December 1) 2024~l) 2025 2026 2027 New New Principal Interest Original CUSIP Refunded Unrefunded Call Date Amounts Rates Numbers CUSIPS CUSIPS (at 100%) $ 4,005,000 5.00%760167SM9 760167UY0 760167UZ7 12/01/2014 1,600,000 5.00 760167SP2 12/01/2014 1,680,000 5.00 760167SQ0 12/01/2014 1,760,000 5.00 760167SN7 12/01/2014 ~1) Term Bond. By Order of the City of Renton, Washington * This notice shall be given not more than 60 nor less than 30 days prior to December 1, 2014 by first class mail to each registered owner of the Refunded Bonds. In addition notice shall be mailed to The Depository Trust Company of New York, New York; MBIA Insurance Corporation (or its successor in interest); D.A. Davidson & Co.; Standard & Poor’s Rating Group; Fitch Ratings; and to the Municipal Securities Rulemaking Board. A-i The Bank of New York Mellon, as Paying Agent Dated: Withholding of 28% of gross redemption proceeds of any payment made within the United States may be required by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act") unless the Paying Agent has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee. Please furnish a properly completed Form W-9 or exemption certificate or equivalent when presenting your Bonds. A-ii APPENDIX B Notice of Defeasance* City of Renton, Washington Water and Sewer Revenue Bonds, 2004 NOTICE IS HEREBY GIVEN to the owners of that portion of the above-captioned bonds with respect to which, pursuant to an Escrow Deposit Agreement dated December 7, 2012, by and between the City of Renton, Washington (the "City") and U.S. Bank National Association, Seattle, Washington (the "Escrow Agent"), the City has deposited into an escrow account, held by the Escrow Agent, cash and non-callable direct obligations of the United States of America, the principal of and interest on which, when due, will provide money sufficient to pay each year, to and including the respective maturity or redemption dates of such bonds so provided for, the principal thereof and interest thereon (the "Defeased Bonds"). The Defeased Bonds will be called on December 1, 2014, at a price of 100% plus accrued interest. Such Defeased Bonds are therefore deemed to be no longer outstanding pursuant to the provisions of Ordinance No. 5098 of the City, authorizing the issuance of the Defeased Bonds, but will be paid by application of the assets of such escrow account. The Defeased Bonds are described as follows: Water and Sewer Revenue Bonds, 2004 (Dated November 1, 2004) Maturity Dates (December 1) 2024o) 2025 2026 2027 New New Principal Interest Original CUSIP Refunded Unrefunded Call Date Amounts Rates Numbers CUSIPS CUSIPS (at 100%) $ 4,005,000 5.00%760167SM9 760167UY0 760167UZ7 12/01/2014 1,600,000 5.00 760167SP2 12/01/2014 1,680,000 5.00 760167SQ0 12/01/2014 1,760,000 5.00 760167SN7 12/01/2014 (1) Term Bond. * This notice shall be given immediately by first class mail to each registered owner of the Defeased Bonds. In addition notice shall be mailed to The Depository Trust Company of New York, New York; MBIA Insurance Corporation (or its successor in interest); D.A. Davidson & Co.; Standard & Poor’s Rating Group; Fitch Ratings; and to the Municipal Securities Rulemaking Board. B-i Information for Individual Registered Owner The addressee of this notice is the registered owner of Bond Certificate No. __ Defeased Bonds described above, which certificate is in the principal amount of $. All of which has been defeased as described above. of the B -ii NOTICE OF REDEMPTION* City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 1998 NOTICE IS HEREBY GIVEN that the City of Renton, Washington (the "City") has called for redemption on December 1, 2012, its outstanding Water and Sewer Revenue Refunding Bonds, 1998 (the "Bonds"). The Bonds to be refunded will be redeemed at a price of one hundred percent (100%) of their principal amount, plus interest accrued to December 1, 2012. The redemption price of the Bonds is payable on presentation and surrender of the Bonds at the office of: The Bank of New York Mellon Worldwide Series Processing 2001 Bryan Street, 9th Floor Dallas, Texas 75021 -or- Wells Fargo Bank National Association Corporate Trust Department 14th Floor - M/S 257 999 Third Avenue Seattle, Washington 98104 Interest on the Bonds to be refunded or portions thereof which are redeemed shall cease to accrue on December 1, 2012. The following Bonds are being redeemed: Maturity Dates Principal Interest CUSIP (December 1)Amounts Rates Numbers 2013 $ 360,000 5.10%760167RB4 By Order of the City of Renton, Washington * This notice shall be given not more than 60 nor less than 30 days prior to December 1, 2012 by first class mail to each registered owner of the Refunded Bonds. In addition notice shall be mailed to The Depository Trust Company of New York, New York; Financial Security Insurance, Inc. (or its successor in interest); Piper Jaffray, Inc. (or its successor in interest); Standard & Poor’s Investors Service; Fitch ISBA (or its successor in interest) and to the Municipal Securities Rulemaking Board. ezDisclose Notice Proof Summary Report 430486 11/02/2012 Client Name: Notice Issuer: Issue Title: Job Type: Notice Memo: Customers: Role Paying Agent Issues: The Bank of New York Mellon - (a) Syracuse CITY OF RENTON WATER 1998 Redemption Issue Date: 03/01/1998 Pub Date: 11/01/2012 Call Type: Partial Call Date: 12/01/2012 Reliance: 2 Total Amt Called: $360,000.00 The Bank of New York Mellon -111001150 40092501 2001 Bryan St., 9th Floor Dallas TX 75201 800-275-2048 Default Org Paying Agent (a) Syracuse Address 760167RB4 5.1000 0.0000 06/01/2013 00 MU F $360,000.00 100.00000000 N/A N/A N/A ..... Total for CUSIP ~unt Called 760167RB4 $360,000.00 ezDiac!ose Notice Proof Summary Report Page 1 of 1 CERTIFICATE OF RECEIPT OF ESCROW AGENT I, the undersigned for U.S. Bank National Association, Seattle, Washington (the "Escrow Agent"), do hereby certify, with respect to the redemption, in part, of a portion of the outstanding principal and interest on the Water and Sewer Revenue Bonds, 2004 maturing on December 1, 2018 through December 1, 2027 (the "Refunded Bonds"), of the City of Renton, Washington (the "City") as more particularly described in Ordinance No. 5672 of the City, passed on October 15, 2012 (the "Bond Ordinance) authorizing the issuance by the City of its Water and Sewer Revenue Refunding Bonds, 2012 (the "Refunding Bonds") are being issued to refund the Refunded Bonds, as follows: 1. The Escrow Agent has established an escrow fund named the "2004 Bond Refunding Account" (the "Escrow Fund") pursuant to the Escrow Deposit Agreement between the City and the Escrow Agent, dated December 7, 2012 (the "Escrow Agreem_ ent"). 2. The Escrow Agent has received $9;955,941.50 from Seattle-Northwest Securities Corporation, as purchaser of the Refunding Bonds, and pursuant to the Escrow Agreement, has invested the sum of $9,904,340.00 in United States Government Obligations, as described in Exhibit D to the Escrow Agreement, $1.50 was retained as a beginning cash balance, and $51,600.00 was used and used to pay costs of issuance of the Refunding Bonds as described {n Exhibit D of the Escrow Agreement. The Escrow Agent has received such securities and deposited such securities in the Escrow Fund to be held in trust for the security and benefit of the owners of the Refunded Bonds and to be applied, together with interest on such securities, to the payment of the principal of and interest on the Refunded Bonds as the same shall become d~e, as set forth in Exhibit C to the Escrow Agreement. . 3. The U.S. Government Securities described in paragraph 2 of this certificate will be deposited in the Escrow Fund as of their respective dates of purchase to be held in trust for the security and benefit of the owners of the Refunded Bonds and will be applied, together with interest thereon, as provided in the Bond Ordinance and the Escrow Agreement. 4. Attached to this certificate i~ evidence of the authority of the undersigned to execute this certificate and the Escrow Agreement on behalf of the Escrow Agent. Dated as of this 7th day of December, 2012. U.S. BANK NATIONAL ASSOCIATION Seattle, Washington By: ! bank CORPORATE TRUST SERVICES 1420 Fifth Ave, 7th Floor PD-WA-T7CT Seattle, WA 98101 AUTHORIZED SIGNATURES I hereby certify that the following is a true and exact extract from Article VI of the Bylaws presently in effect for U.S. Bank National Association, a national banking association organized and existing under ,the laws of the United States: Article VI CONVEYANCES, CONTRACTS, ETC. All transfers and conveyances of real estate, mortgages, and transfers, endorsements or assignments of stock, bonds, notes, debentures or other negotiable instruments, securities or personal property shall be signed by any elected or appointed officer. All checks, drafts, certificates of deposit and all funds of the Association held in its own or in a fiduciary capacity may be paid out by an order, draft or check bearing the manual or facsimile signature of any elected or appointed officer of the Association. All mortgage satisfactions, releases, all types of loan agreements, all routine transactional documents of the Association, and all other instruments not specifically provided for, whether to be executed in a fiduciary capacity or otherwise, may be signed on behalf of the Association by any elected or appointed officer thereof. The Secretary or any Assistant Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board under this Bylaw without the necessity of further action by the Board. I further certify that the following officers of U.S. Bank National Association have been duly elected and qualified and now hold respective offices, that the signatures of such officers are authentic: Nancy Stahl Vice President Debby R. Wight Vice President Greg E. Skutnik Assistant Vice President Ryan P. Brennan Trust Officer Sherrie L. Pantie Vice President Vice President Deborah Kuykendall Vice President IN WITNESS WHEREOF, I have hereunto set my hand this "~ay of ~ ~q’~t~", 2012. U.S. BANK NATIONAL ASSOCIATION, By: ~ Senior Vice President usbank.com OF U.S. BANK NATIONAL ASSOCIATION: ~’ ARTICLE L MEETINGS OF SHAREHOLDERS ¯. ¯: ........:’i :!:... :’-.:’"’.~:. :!" " "’" "".. - ~ ::’~" "" "" "’-’~.;i ~ .o’"" ~’~ ’:":’i~’:*:": : " ~’" :. ,’::" ....-"" ....¯ The ~ua~.. m~.ting 9..f .the s~hplde~, for the eiecl~on of.directors, a~...d the transaction.of other. bus~s, .s.h...fl! .~.. ~he!d,at a. :....~...e...and. p!ac~ :as,the C .h~m., ~ .gr:.P...resident ma...y d.esignate... -, notice as is Sl~itie~t in’theArtiCles ~f A~sociatiOn. ’ ....... Section 3. Quorum The Board of Directors may, and in the event of its failure ~o tO db, ffie Chairmati Of the Board ma); appg..int Inspectg~ of Election who shall determine the pr~enc, e of quorum, the shareh011de~..at..~ ~and ..special mee..t~gs of shar6hqlde~s~ :.ii.I .. ...: ::::: .’ ..... "i" i.ii ’.. .... . i. Section 5. Voting " ’ ......" " "": ...." In deciding on questions at meetings of shareholders, except in the ~ieetion ofdirect61S~:: each shareholder shall be entitled to one.vote for.each share of stock he!d.....A majo..ri..ty of votes cast shaJi:de~id~ ~~t~ ~b~ai~ed tO thesh~arehoide~;~C~i~t where by law,a !~ge.rvote is required. In all elections of directors, each shareholder shall have the right to ~,0~e the nim~i~shares owned by him for as many persons as there are direetors to be e..leg.t.e:..d,’ Or t.o cum~e:..s:u.ch shares and give one candidate as many votes as the number of directors multiplied by the rimiaber of~ s.~. es equ .a!., 0r.to .dis...trj’bute them on the same principle among as many ean~...dates as he The shareholders may act without notice or a meeting by a unanimous written consent by all shareholders. .- Page 1 of 9 ARTICLE H. Section 1.Term of Office The directors of this Association shall hold office for one year and until their successors are duly elected and qualified. Section 2. Num~___~r As provided in the Articles of Association, the Board of this Assopiation shall consist of not less than five nor more than twenty-five members. At any meeting 6f theshareholders held for the purpose of electing directors, or changing the number thereof, the number of directors may be determined by a majority of the votes east by the shatehOld~rs in person or by proxy. Any vacancy occurring in the Board shall be filled by the remaining directors. Between meetings of the shareholders held for the purpose of electing directors, the Board by a majority vote of the full Board may increase the size of the Board by not more than four directors in any one but not to more than a total of twenty-five direet0rs, and fill any vacancy so.created in the Board. All dir~ors shall hold office until their successors are elected and qualified. Section 3. Regular Meetings The o.rgani’zational meeting of the Board of Directors Shall be held as soon as practicable following the annual m~eting of shardi0id~rs at such time andpihce~ the" c~... .a~i. or Presidentmay designate: 0their regular m~etings of the Board 0fDireet6rslshfil! be held qtiai’teflyat sueh-tinie rindplaice//~ may b~ designated inthe notieebfthe ifieetilig. When any regular meeting of the Board falls on a holiday, the meeting shall be’held 0nthe nexf~g business day, unless the Board shall designate some other day. of the Assod~ti6h; of iiith~ {ieSi0f three m&eDire~t0r~: NofiEe 6f th~ purposes of such meetings shall be i~iven6£ letter, b~rf¢idpli6ne; in p~i~s~ b~, ..... electronic mail or other reasonable manner to every Director.,:.: .....- Section 5. Quorum . ~ d~ide each m~ ~mi~re~ exe~ where o~e ~d by lawor the ~el6s 0t:~ Byla~ of ~s Page 2 of 9 Directors, excluding full-time employees of the Bank, ’shall reCeivesuch reasonable compensation as may be fixed from time to time.by the Board of Directors. ARTICLE III.¯" O ’raCV, RS Section 1. Who Shall Constitute ... iThe 0ffiee~s oi’the Assb~iati0h~h~ b~ a ChaJrm~ ~f the Board~. Chief ExecUtive Offie~r~ a l~e~ident, aSeeretary, arid orbSofficers such a~V~ C~an ofthe:B0~d, . Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Trust Officers, Assistant Trust Officers, Controller, and Assistant Controller, as the Board may appoint from.time to.time. The Board may choose to delegate authority to elect officers other than the C~ .an.: ...hiefExecutive Officer, President, Secretary, Vice Chairman and Executive Vice Presidents, tO th~ Chief Executive Officer or President. Anyperson may hold two offices. The Chief Executive Officer" and thepre.s...iden, shall at all times be members of the Board of Directors. All officers shall be elected for and shall hold office un~.t.he.ir..respeetiye successors are elected and qualified or until their earlier death, resignation, retirement, disqualification or removal from office, subject to the righ~ of the.Board of Directors in its sole discretion to discharge any officer at any time ......... Section 3. Chairman of the Board Th.eC~an of:the.Board s .hail have.general.exeentive powers and duties and shall perform, such.0~her dufies.~may be assigned from ".tim~ ..to time byShe Board of Dir.ectors. He- shall, when ~esent~ presid~ a~ a!l. meetings 9f the shareho!.dgrs. ~ ~.an..d ~direetors and shal! be.ex...-.. officio a member~of all committees of the Board. Section 4~ O~ef Executive Officer, The Chief Executive Officer, who may also be thd Chairman or the President, shallhave general executive powers and duties and shall perform such other duties as may be assigned fr6m time to time by the Board of Directors. Section 5. president The President shall have general executive powers and duties and shall perform such other duties as may be assigned from time to time by the board of Directors. In addition, if designated by the Board of Directors, the President shall be the Chief Executive Officer and shall have all the powers and duties of the Chief Executive Officer, including the same power to name temporarily a Chief Executive Officer to serve in the absence of the President if there is a vacancy in the position of the chairman or in the event of the absence or incapacity of the Chairman. Page 3 of 9 Section 6. Vice Chairmen of the Board The Board of Direetoi~s shall have the power:t0 eli~et ofieor more ViceChairmen bfthe Board of Directors. Any such Vice Chairman of the Board shall participate in the formation of the policies of the Association and shall have such other duties as may be assigned to him from time to time by the Chairman of the Board 0r.by the Board of Directors. Section 7, Other Officers The Secretary and all other officers appoin.ted by the Board of Directors shall have such duties as defined by law and as may from time to tired be assigned to them by the Chief Executive Officer or the Board of Directors. " ARTICLE IV. COMMITTEES Section 1. Compensation Committee The duties of the Compensation Committee of the Association shall be carried out by the Compensation Committee of the financial holding company that is the parent of this Association. Section 2. Committee on Audit The duties of the Audit Committee of the Association shall be carried out by the Audit Committee of the financial holding company that is the parent of this Association, Section 3. Trust Risk Management Committee The Board of Directors 0fthis Association shall appoint a Trust Risk Management Committee to provide oversight of the fiduciary activities of the Association. The Trust Risk Management Committee shall determine policies govemiiag fiduciary ~ctivities: The Trust Risk Management Committee or such sub-committees, officers or othbrs as may be duly:designated by the Trust Risk Management Committee shall oversee the processes related to fiduciary activities to assure conformity with fiduciary policies it establishes:, itieluding ratifying theacceptance." and the.dos’.mg out or.m!inquis .,1~...entof.all..lZ~.:ts...All.ae~0ns 0f.the Tms..t Risk Cbfiimitiee shalll~ rel~rted td the Board 0fDireetoi~s. " ’ " ’ " . i ...... The Board of Direztors may appoint, from time to time, other committees for such purpo .~s and with such powe....~., as the Board may.direct. ¯’:-ARTICLE V. : ........:~ ~MINUTE BOOK ¯ The organization papers of this Assobiation, the Bylaws as revised or amended from time to time and thd proceedings ofall regular and special meetings of the shareholders andthe directors shall berecorded ina-minute bo6k or books. All reports of.committeesrequired to be made to the Board shall be recorded in a minute book or shall be filed by theI~eording Officer. The minutes ’6f each meeting of the shareholders and the Board shall be signed by the re~ording officer. ’~ ; " ’":": : "~ : "" ARTICLE VL CONVEYANCES, CONTRACTS, ETC. :All transfers and bonVeyances: 6f real estate, mortgages, and ttansfers,endor~ements or assignments of ~t0ek~b0hds, notes, delSeiitmes Or other.negotiable instruments, seeuritie~pr personal property shall be signed.by any clewed or appointed officer. " : " - " " ~".: .:All cheeks, drafts, certa~eates of deposit and all funds of the Association held in its own orin a fiduciary capacity may be lJaid out by an Order, draft or check bearing the manual or -: facsimile signature of any elected or.hppointed officer of the Association. ’ ..... All mortgage satisfactions, .releases, all types of loan agreements, all routine transactional documents of the Association, :and all other instruments not specifically provided for, whether to be exeeuted..in afidueiary capacity or otherwise, may be signed on behalfof the Association by any.elected or appointed officer thereof. : .... :-- . .. The Secretary or any Assistant Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board under this Bylaw without the necessity of further action by the Board. ARTICLE VH. SEAL The Association shall have no corporate seal. ARTICLE VIII. INDEMNIFICATION OF DIRECTORS, . OFFICERS, AND EMPLOYEES Section 1. .General.... The Association shall .indemnify to the full extent permitted by and in the manner. permissible .under the Delaware General Corporation Law, as amended from time to time (but, in the case of any .such amendment, only to the extent that such amendment permits the Association to provide broader indemnification fights than said law permitted the Association to provide. Page 5 of 9 prior to such amendment), any person made, or threatened to be made, a party to any action, suit, or proceeding, whether criminal, civil, admires’ trative, or..investigative, by reason of the fact that such person (i) is or was a director, advisory dire~or, or officer of the Association or any predecessor of the Association, or (ii) is or was a director, advisory director or officer of the Association or any predecessor of the Association and served any other eorporatior~.partnership, joint ~enture, trust, employee benefit plan or other enterprise as a director, advisory director, officer, partner, trustee, employee or agent at the request of.the Association or any predecessor of the Association; provided, however, that the Association shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person, except for a proceeding contemplated by Section 4 of this Article VIII, only ff such proceeding (or part thereof) was authorized by the Board of Directors. Section 2. Advancement of Expenses. The fight to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be paid by the Association the expenses incurred in defending any such proceeding or threatened proceeding in advance of its f’mal disposition, such advances to be paid by the Association within 20 days after the receipt by the Association of a statement or statements from the claimant requesting such advance or advances from time to time; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director, advisory director or officer in his or her capacity as a director, advisory director or officer (and not in any other capacity in which service was or is rendered by such person while a director, advisory director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Association of an undertaking by or on behalf of such director, advisory director or officer, to repay all amounts so advanced if.it shall ultimately be determined that such director, advisory director or officer is not entitled to be indemnified under this Article VIII or otherwise. : ...... ." ~. Section 3... Procedure for Indemnification: To obtain indemnification under this Article VIII, a claimant shall submit to the Association a written request, including thereinor therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the elaimant is entitled to.indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this Section 3,a det~mlination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (1) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the elaimant for a determination by Independent Cotmsel, (i) by a majority vote of the Disinterested Directors (as hereinafter defined); even though less tbma a quorum, or by a majority vote of a committee of Disinterested Directors designated~by a majority vote of Disinterested Directors, even though less than a quorum, or (ii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel in a written opinion to.the Board of .... Directors, a copy of which shall be delivered to the claimant. In the event the determination of entitlement to indemnification.is to be made by Independent Counsel at the request of the claimant, the Independent Counsel shall be selected by the Board of Directors. tfit is sO:.. determined that the claimant is entitled to indemnification, payment to the claimant shall be:- made Within 10 days after- such determination. . ..... " ..... " :. ¯ --.- ...... ¯. Page6 Section 4. Certain Remedies. Ira claim under Section 1 of this Article VIII is not paid in full by the Association within thirty days after a written claim pursuant to Section 3 of this Article VIII has been received by the’Association, or ira claim under Section 2 of this Article VIII is not paid in full by the Association within twenty days after a written claim pursuant to Section 2 of this Article VIl-lhas been received by the Association, the claimant may at any time thereafter bring suit against the AsSociation to recover the unpaid mount of the claim and, if successful in whole or in part, the claimant shallbe entitled to be paid also the expense of prosecuting such claim. It shall be a defen~e"to any such action (other thanan action bro~ight to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaldng; ff any is :required, has been tendered to the Association) that the claimant has not met the standard of coiaduct which makes it permissible under the General Corporation Law of the State of Delaware for the Association to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Association. Neither the failure ofthe Association (including its Board of Directors or Independent Counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determinationby the AsSbci~tion (including its Board of Directors or Independent Counsel) that the claimant has not met such applicable standard of Conduct, shall be a defense to the action or create a presumption that the’daimanthas not met the applicable standard of conduct. Section 5. Binding Effect. If a determination shall have been made pursuant to Section 3 of this Article VIII that the claimant is entitled to indemnification, the Association shall be bound by such detemfination in any judicial proceeding commenced pursuant to Section 4 of tiffs Article VIII. Section 6.Validity of this Article VIII. The Association shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 4 of this Article VIII that the procedures and presumptions of this ArtiCle VIII are not va!id, binding and enforceable and shall stipulate in such proceeding that the Asso:eiation is bound by all the provisions of this Article VIII. Section 7. Nonexclnsivity, etc. The right to indemnification and the payment of expenses incurred in defending a proceeding or threatened proceeding in advance of its final disposition conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Association, Bylaws, agreement, vote of shareholders or Disinterested Directors or otherwise. No repeal or modification of this Article VIII, or adoption of any provision inconsistent herewithshall in any way diminish or adversely affect the rights of any present or former director, advisory director, officer, employee or agent of the Association or any predecessor thereofhereunder in respect of any occurrence or matter Page 7 of 9 arising, or of any claim involving allegations of acts or omissions occurring or arising, prior to any such repeal or modification. .... Section 8. Insurance. The Association may maintaini .nsurance, at its expense~ to protect itself and any dire.ctor, officer, employee or agent of the Association or another corporation, partnership, joint venture, trust or other enterprise against any expens~,..lia..bility or loss, whether or not the Association .:. would have the power to indemnify such personagainst such expense, liability or loss under the. General Corporation Law of the State of Delaware. To the extent that the Association..ma~...tains _any policy or policies providing such insurance, each such director or offieer,.and each such. :. .... agent or employee to whom rights to inden’mifieation have been granted as provided in Section 9. of this Article VIII, shall be covered by such policy or policies in aeeordanee with its or their- terms to the maximum extent of the coverage thereunder for any such director, officor, employee or agent. Section 9. Indemnification of Other Persons. The Association may grant rights tO. indemnification, and rights to be paid by the Association the expenses incurred in defending any proceeding in advance of its final disposition, to any present or former employee or agent of the Association or any predecessor of the Association to the fullest extent of the provisions of thi.’s Article VIII.with respect to the indemnification and advancement of expenses of.directors, advisory directors and officers of the Association. Section 10. Severability. If any provision or provisions o{tiiis Article viii shall be held to be invalid, ..illegal or:. unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the:.. remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph of this ha’fide VIII containing any such provision held to be invalid, illegal or ... unenforceable, that is not itselfheld to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) .to .t-he fullest extent, possible,.the Pr0visio~ of this Article VIII (including, without limitation, each such portion 0f~any paragraph:0f .this ...... ..... ¯ Article VIII e0ntaining any such provis..ion held tot.be, invali.,d,.il!..egal or ..u0enforceab!e) shall..be. ~ :. construed so as to give effect to the intent manifested by the provision held inval.id, ".dlegal..o.r,.-::. - unenforceable. Section 11.Certain Definitions. (1) "DisinterestedDi~eet0r"m~nsa director of the Association who i~ was not a party to .the matter.in respect of .which.indemnification is sought by.the. : ::..~ :.. ¯ " independent l~aetitionerthit is experienced in matters of corporation law and shall Page 8 o19 include any such person who, under the applicable standards of professional conduct th~n prevailing, would not have a conflict of interest in representing either the Association or the claimant in an action to determine the claimant’s fights under this Article VIII. Section 12. Notices. Any notice, request or other communication required or permitted to be given to the Association under this Article VIII shall be in writing and either delivered in person or sent by teleeopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Association and shall be effective only upon receipt by the Secretary. Section 13. Payments Notwithstanding any other provision ofthis Article VIII, however, (a) any indemn~eation payments to an institution-affiliated party, as defined at 12 USC 1813(u), for an administrative proceeding or civil action initiated by a federal banking agency, shall be reasonable and consistent with the requirements of 12 USC 1828(k) and the associated regulations; and (b) any indemnification payments and advancement of costs and expenses to an institution-affiliated party, as defined at 12 USC 1813(u), in eases involving an administrative proceeding or civil action not initiated by a federal banking agency, shall be consistent with safe and sound banking practices. ARTICLE IX. AMENDMENTS These Bylaws, or any of them, may be added to, altered, emended or repealed by the Board at any regular or special meeting of the Board. ARTICLE X. GOVERNING LAW This Association designates the Delaware General Corporation Law, as amended from time to time, as the governing law for its corporate governance.procedures, to the extent not inconsistent with Federal banking statutes and regulations. March 4, 2009 Page 9 of 9 Cash Flow and Yield Verification Report City of Renton, Washington December 7, 2012 Contents Le~er Exhibit A Exhibit B Exhibit B-1 Exhibit B-2 Exhibit C Exhibit C-1 Appendix I Schedule of Sources and Uses of Funds Escrow Account Cash Flow Cash Receipts From and Yield on the SLGS Debt Service Payments on the Refunded Bonds Debt Service Payments and Yield on the Bonds Original Issue Premium on the Bonds Applicable schedules provided by Seattle-Northwest Securities Corporation GrantThornton Report of Independent Certified Public Accountants On Applying Agreed-Upon Procedures City of Renton 1055 South Grady Way Renton, Washington Pacifica Law Group LLP 1191 Second Avenue, Suite 2100 Seattle, Washington U.S. Bank National Association 1420 Fifth Avenue, Seventh Floor Seattle, Washington Seattle-Northwest Securities Corporation 1420 Fifth Avenue, Suite 4300 Seattle, Washington Audit ¯ Tax ¯ Advisory Grant Thornton LLP 200 S 6th Street, Suite 500 Minneapolis, MN 55402-1459 T 612.332.0001 F 612.332.8361 www.GrantThornton.com $9,190,000 City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 Dated December 7, 2012 We have performed the procedures described in this report, which were agreed to by the City of Renton, Washington (the "City") and Seattle-Northwest Securities Corporation (the "Underwriter"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Underwriter. The Underwriter is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue (the "Bonds") for the purpose of refunding a portion of the City’s outstanding Water and Sewer Revenue Bonds, 2004 (the "Refunded Bonds") as summarized on the next page. This agreed-upon procedures engagement was ,conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. Grant Thornton LLP U.S, member firm of Grant Thornton International Ltd Page 2 Principal Principal Maturities Issue Issued Dated Refunded Refunded Redemption Redemption Date Price 2004 $10,335,000 November 1, 2004 $9,045,000* Represents a portion of the principal amount outstanding. 12-1-24 and 12-1-25 to 12-1-27 12-1-14 100% VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Underwriter provided us with schedules (Appendix I) summarizing future escrow account cash receipts and disbursements. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Bonds assuming the Refunded Bonds will be redeemed on December 1, 2014 at 100 percent of par plus accrued interest. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Underwriter. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-2 independently calculating future escrow account cash receipts and disbursements and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: Subscription confu’mation, dated November 7, 2012, and Schedule of U.S. Treasury Securities provided by the Underwriter used to acquire certain United States Treasury Securities - State and Local Government Series (the "SLGS’) insofar as the SLGS are described as to the principal amounts, interest rates, maturity dates, issuance date and ftrst interest payment date; and Offidal Statement and Ordinance for the Refunded Bonds provided by the Underwriter insofar as the Refunded Bonds are described as to the maturity and interest payment dates, principal amounts, interest rates and optional redemption date and price. The principal amount of the December 1, 2018 sinking fund redemption amount of the December 1, 2024 term bond represents a portion of the principal amount outstanding as provided by the Underwriter. In addition, we compared the interest rates for each maturity of the SLGS, as shown on the Schedule of U.S. Treasury Securities, with the maximum allowable interest rates shown on the Department of Treasury, Bureau of Public Debt, SLGS Table for use on November 7, 2012 and found that the interest rates were equal to the maximum allowable interest rates for each maturity. Our procedures, as summarized in Exhibits B through B-2, prove the mathematical accuracy of the schedules provided by the Underwriter summarizing future escrow account cash receipts and disbursements. The schedules provided by the Underwriter and those prepared by us reflect that the anticipated receipts from the SLGS, together with an initial cash deposit of $1.50 to be deposited into the escrow account on December 7, 2012, will be sufficient to pay, when due, the principal and interest related to the Refunded Bonds assuming the Refunded Bonds will be redeemed on December 1, 2014 at 100 percent of par plus accrued interest. Page 3 VERIFICATION OF YIELDS The Underwriter provided us with schedules (Appendix I) which indicate that the yield on the cash receipts from the SLGS is less than the yield on the Bonds. These schedules were prepared based on the assumed settlement date of December 7, 2012 using a 360-day year with interest compounded semi-annually. The term "yield", as used herein, means that yield which, when used in computing the present value of all payments of principal and interest to be paid or received on an obligation produces an amount equal to, in the case of the cash receipts from the SLGS, the purchase price, and in the case of the Bonds, the issue price. In addition, we found that the schedules provided by the Underwriter, which assume the redemption of the December 1, 2023 through December 1, 2027 maturities identified on Exhibits C and C-1 at par on December 1, 2022 plus accrued interest, correctly treat those Bonds as yield-to-call Bonds as retired on the respective dates that for each Bond produces the lowest yield for the issue that includes the Bonds. Those Bonds identified as yield-to-call Bonds on the attached Exhibits C and C-1 are those Bonds that are subject to optional redemption and that are issued at an issue price that exceeds the stated redemption price at maturity of such Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Bonds and the number of complete years to the first optional redemption date for the Bonds. We found that there are no other yield-to-call Bonds other than those identified on the attached Exhibits C and C-1. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B-1 and C independently calculating the yields on (i) the cash receipts from the SLGS calculated on Exhibit B-l, and (ii) the Bonds using the Official Statement provided by the Underwriter insofar as the Bonds are described as to the maturity and interest payment dates, dated date, principal amounts, interest rates, optional redemption date and price, and issue price to the public, The results of our calculations, based on the aforementioned assumptions, are summarized below: Yield Exhibit ¯Yield on the cash receipts from the SLGS ¯Yield on the Bonds 0.237690%B-1 1.978879%C Our procedures, as summarized in Exhibits B-1 and C, prove the mathematical accuracy of the schedules provided by the Underwriter summarizing the yields. The schedules provided by the Underwriter and those prepared by us reflect that the yield on the cash receipts from th4 SLGS is less than the yield on the Bonds. In addition, we have prepared schedules not attached hereto, which indicate that the yield on the cash receipts from the SLGS, assuming reinvestment of the cash balances in the escrow account at an interest rate of 20%, is less than the yield on the Bonds. Page 4 We were not engaged to, and did not, perform an examination or a review in accordance with attestation standards established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion or limited assurance on the items referred to above. Accordingly we do not express such an opinion or limited assurance. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parries. Minneapolis, Minnesota December 7, 2012 Exhibit A City of Renton, Washington SCHEDULE OF SOURCES AND USES OF FUNDS December 7, 2012 SOURCES: Principal amount of the Bonds Original issue premium $9,190,000.00 809,905.90 $9,999,905.90 USES: Purchase price of the SLGS Beginning cash deposit to the escrow account Costs of issuance Underwriter’s discount Contingency $9,904,340.00 1.50 51,700.00 42,274.00 1,590.40 $9,999,905.90 Exhibit B City of Renton, Washington ESCROW ACCOUNT CASH FLOW Date Cash deposit on December 7, 2012 06-01-13 12-01-13 06-01-14 12-01-14 Cash receipts from SLGS (Exhibit B-l) $226,124.82 226,125.59 226,125.08 9,271,124.01 $9,949,499.50 Debt service payments on Refunded Bonds (Exhibit B-2) $226,125.00 226,125.00 226,125.00 9,271,125.00 $9,949,500.00 Cash balance $1.50 1.32 1.91 1.99 1.00 Exhibit B-1 City of Renton, Washington CASH RECEIPTS FROM AND YIELD ON THE SLGS Receipt date 06-01-13 12-01-13 06-01-14 12-01-14 Interest Cash receipts Principal rate Interest from SLGS $215,047 0.130%$11,077.82 $226,124.82 214,472 0.160%11,653.59 226,125.59 214,809 0.190%11,316.08 226,125.08 9,260,012 0.240%11,112.01 9,271,124.01 $9,904,340 $45,159.50 $9,949,499.50 Purchase price of the SLGS Present value on December 7, 2012 using a yield of 0.237690% $225,865.34 225,598.00 225,329.70 9,227,546.96 $9,904,340.00 $9,904,340.00 The sum of the present values of the cash receipts from the SLGS on December 7, 2012, using a yield of 0.237690%, is equal to the purchase price of the SLGS. Exhibit B-2 City of Renton, Washington DEBT SERVICE PAYMENTS ON THE REFUNDED BONDS Date 06-01-13 12-01-13 06-01-14 12-01-14 Interest Prindpal rate $9,045,000 (1) $9,045,000 Interest $226,125.00 226,125.00 226,125.00 226,125.00 $904,500.00 Debtservice payments $226,125.00 226,125.00 226,125.00 9,271,125.00 $9,949,500.00 (1) Actual maturity dates, principal amounts and interest ratesare as follows: Maturity Principal Interest date amount rate 12-01-24 $4,005,000 *5.000% 12-01-25 1,600,000 5.000% 12-01-26 1,680,000 5.000% 12-01-27 1,760,000 5.000% $9,045,000 Represents a portion of the principal amount outstanding as provided by the Underwriter. City of Renton, Washington DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Exhibit C Page 1 of 2 $,9,190,000 issue dated December 7, 2012 Interest Date Principal rate 06~01-13 12-01-13 $40,000 2.000% 06-01-14 12-01-14 35,000 2.000% 06-01-15 12-01-15 35,000 2.000% 06-01-16 12-01-16 35,000 2.000% 06-01-17 12-01-17 35,000 2.000% 06-01-18 12-01-18 100,000 3.000% 06-01-19 12-01-19 220,000 2.750% 06-01-20 12-01-20 280,000 3.000% 06-01-21 12-01-21 295,000 3.000% 06-01-22 12-01-22 ’305,000 3.000% 06-01-23 12-01-23 1,470,000 3.000% 06-01-24 12-01-24 1,515,000 3.000% 06-01-25 12-01-25 1,560,000 3.000% 06-01-26 12-01-26 1,610,000 3.000% 06-01-27 12-01’27 1,655,000 3.000% $9,190,000 Interest $132,119.17 136,675.00 136,275.00 136 275,00 135 925.00 135 925.00 135 575.00 135 575.00 135 225.00 135 225.00 134 875.00 134 875.00 133 375.00 133 375.00 130 350.00 130350.00 126,150.00 126,150.00 121,725.00 121,725.00 117,150.00 117,150.00 95,100.00 93,100.00 72,375.00 72,375.00 48,975.00 48,975.00 24,825.00 24,825.00 $3,364,594.17 Total debt service $132,119.17 176,675.00 136,275.00 171,275.00 135,925.00 170,925.00 135,575.00 170,575.00 135,225.00 170.225.00 134.875.00 234.875.00 133.375.00 353.375.00 130.350.00 410.350.00 126,150.00 421,150.00 121,725.00 426,725.00 117,150.00 1,587,150.00 95,100.00 1,610,100.00 72,375.00 1,632,375.00 48,975.00 1,658,975.00 24,825.00 1,679,825.00 $121554,594.17 (1) Adjusted debt service $132,119.17 176,675.00 136,275.00 171,275.00 138,925.00 170,925.00 135,575.00 170,575.00 135,225.00 170,225.00 134,875.00 234,875.00 133,375.00 353,375.00 130,350.00 410,350.00 126,150.00 42i,150.00 121,725.00 8,236,725.00 $11,837,744.17 Present v~ue on December 7, 2012 using a ~eld of 1.978879% $130,867.68 173,286.89 132,352.10 164,714.81 129,438.08 161,173.02 126,587.38 157,706.73 123,798.64 154,314.33 121,070.52 208,769.85 117,389.56 307,974.59 112,490.06 350,656.25 106,742.76 352,867.80 100,990.16 6,766,714.69 $9,999,905.90 City of Renton, Washington DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Exhibit C Page 2 of 2 The present value of the future payments is equal to: Principal amount of the Bonds Original issue premium $9,190,000.00 809,905.90 $9,999,905.90 The sum of the present values of the adjusted debt service payments of the Bonds on December 7, 2012, using a yidd of 1.978879%, is equal to the issue price of the Bonds. : (1)Assumes that the December 1, 2023 through December 1, 2027 ma{-urities are called on December 1, 2022 at 100 percent of par plus accrued interest. Exhibit C-1 City of Renmn, Washington ORIGINAL ISSUE PREMIUM ON THE BONDS Initial. public Original Maturity Interest offering issue date Principal rate Yield price premium 12-01-13 $40,000 2.000%0.400%101.568%$627.20 12-01214 35,000 2.000%0.480%102.996%1,048.60 12-01-15 -35,000 2.000%0.620%104.072%1,425.20 12-01-16 35,000 2.000%0.720%105.017%1,755.95 12-01-17 35,000 2.000%0.870%105.499%1,924.65 12,01-18 100,000 3.000%1.050%111.279%11,279.00 12-01-19 220,000 2.750%1.230%110.141%22,310.20 12-01-20 280,000 3.000%1.430%111.804%33,051.20 12-01-21 295,000 3.000%1.620%111.493%33,904.35 12-01-22 305,000 3.000%1.800%110.920%33,306.00 12-01-23 1,470,000 3.000%1.860%110.342% (1) (2)152,027.40 12-01-24 1,515,000 3.000%1.940%109.578% (1) (2)145,106.70 12-01-25 1,560,000 3.000%2.060%108.442% (1) (2)131,695.20 12-01-26 1,610,000 3.000%2.150%107.600% (1) (2)122,360.00 12-01-27 1,655,000 3.000%2.200%107.135% (1) (2)118,084.25 $9,190,000 $809,905.90 (1) Maturities were priced to call on December 1, 2022 at 100 percent of par. (2) Represents the yield-to-call Bonds included for purposes of computing yield on the Bonds. APPENDIX I Applicable schedttles provided by Seatde-Northwest Securities Corporation SOURCES AND USES OF FUNDS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Dated Date 12/07/2012 Delivery Date 12/07/2012 Sources: Bond Proceeds: Par Amount 9,190,000.00 Premium 809,905.90 9,999,905.90 Uses: Refunding Escrow Deposits: Cash Deposit SLGS Purchases 1.50 9,904,340.00 9,904,341.50 Delivery Date Expenses: Cost of Issuance Underwdter’s Discount 51,700.00 42,274.00 93,974.00 Other Uses of Funds: Additional Proceeds 1,590.40 9,999,905.90 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 3 Date 12/07/2012 06/01/2013 12/01/2013 06/01/2014 12/01/2014 ESCROW SUFFICIENCY City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Escrow Net Escrow Excess Excess Requirement Receipts Receipts Balance 1.50 1.50 226,125.00 226,124.82 -0.18 226,125.00 226,125.59 0.59 226,125.00 226,125.08 0.08 9,271,125.00 9,271,124.01 -0.99 9,949,500.00 9,949,501.00 1.00 1.50 1.32 1.91 1.99 1.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 15 ESCROW CASH FLOW City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Present Value Net Escrow to 12/07/2012 Date Principal Interest Receipts @ 0.2376897% 06/0t/2013 215,047.00 11,077.82 226,124.82 225,865.34 12/01/2013 214,472.00 11,653.59 226,125.59 225,598.00 06/01/2014 214,809.00 11,316.08 226,125.08 225,329.70 12/01/2014 9,260,012.00 11,112.01 9,271,124.01 9,227,546.96 9,904,340.00 45,159.50 9,949,499.50 9,904,340.00 Escrow Cost Summary Purchase date Purchase cost o~ securities Target for yield calculation 12/07/2012 9,904,340.00 9,904,340.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...kRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 14 ESCROW COST DETAIL City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Type of Maturity Par Total Security Date Amount Rate Cost Global Proceeds Escrow: SLGS 06/01/2013 215,047 0.130%215,047.00 SLGS 12/01/2013 214,472 0.160%214,472.00 SLGS 06/01/2014 214,809 0.190%214,809.00 SLGS 12/01/2014 9,260,012 0.240%9,260,012.00 9,904,340 9,904,340.00 Purchase Cost of Cash Total Date Securities Deposit Escrow Cost Yield Global Proceeds Escrow: 12/07/2012 9,904,340 1.50 9,904,341.50 0.237690% 9,904,340 1.50 9,904,341.50 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 13 Type of Security ESCROW DESCRIPTIONS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Type of Maturity First Int Par Max SLGS Date Pmt Date Amount Rate Rate Dec 7, 2012: SLGS Certificate 06/01/2013 06/01/2013 215,047 SLGS Certificate 12/01/2013 12/01/2013 214,472 SLGS Note 06/01/2014 06/01/2013 214,809 SLGS Note 12/01/2014 06/01/2013 9,260,012 9,904,340 0.130% 0.130% 0.160%0.160% 0.190%0.190% 0.240%0.240% SLGS Summary SLGS Rates File Total Certificates of Indebtedness Total Notes Total original SLGS 07NOV12 429,519.00 9,474,821.00 9,904,340.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 12 ESCROW REQUIREMENTS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Period Principal Ending Interest Redeemed Total 06/01/2013 226,125.00 226,125.00 12/01/2013 226,125.00 226,125.00 06/01/2014 226,125.00 226,125.00 12/01/2014 226,125.00 9,045,000.00 9,271,125.00 904,500.00 9,045,000.00 9,949,500.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...kRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 19 SUMMARY OF BONDS REFUNDED City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Maturity Interest Par Call Bond Date Rate Amount Date 2004 Water & Sewer Revenue Bonds (11/1/04), 04WS: TERM2024 12/01/2018 5.000%60,000.00 12/01/2014 12/01/2019 5.000%185,000.00 12/01/2014 12/01/2020 5.000%245,000.00 12/01/2014 12/01/2021 5.000%265,000.00 12/01/2014 12/01/2022 5.000%280,000.00 12/01/2014 12/01/2023 5.000%1,450,000.00 12/01/2014 12/01/2024 5.000%1,520,000.00 12/01/2014 SERIALS 12/01/2025 5.000%1,600,000.00 12/01/2014 12/01/2026 5.000%1,680,000.00 12/01/2014 12/01/2027 5.000%1,760,000.00 12/01/2014 9,045,000.00 Call Price 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 20 Period Ending BOND DEBT SERVICE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Principal Coupon Interest Debt Service 06/01/2013 132,119.17 12/01/2013 40,000 2.000%136,675.00 06/01/2014 136,275.00 12/01/2014 35,000 2.000%136,275.00 06/01/2015 135,925.00 12/01/2015 35,000 2.000%135,925.00 06/01/2016 135,575.00 12/01/2016 35,000 2.000%135,575.00 06/01/2017 135,225.00 12/01/2017 35,000 2.000%135,225.00 06/01/2018 134,875.00 12/01/2018 100,000 3.000%134,875.00 06/01/2019 133,375.00 12/01/2019 220,000 2.750%133,375.00 06/01/2020 130,350.00 12/01/2020 280,000 3.000%130,350.00 06/01/2021 126,150.00 12/01/2021 295,000 3.000%126,150.00 06/01/2022 121,725.00 12/01/2022 305,000 3.000%121,725.00 06/01/2023 117,150.00 12/01/2023 1,470,000 3.000%117,150.00 06/01/2024 95,100.00 12/01/2024 1,515,000 3.000%95,100.00 06/01/2025 72,375.00 12/01/2025 1,560,000 3.000%72,375.00 06/01/2026 -48,975.00 12/01/2026 1,610,000 3.000%48,975.00 06/01/2027 -24,825.00 12/01/2027 1,655,000 3.000%24,825.00 132,119.17 176,675.00 136,275.00 171,275.00 135,925.00 170,925.00 135,575.00 170,575.00 135,225.00 170 225.00 134 875.00 234 875.00 133 375.00 353 375.00 130 350.00 410 350.00 126 150.00 421 150.00 121,725.00 426,725.00 117,150.00 1,587,150.00 95,100.00 1,610,100.00 72,375.00 1,632,375.00 48,975.00 1,658,975.00 24,825.00 1,679,825.00 9,190,000 3,364,594.17 12,554,594.17 Annual Debt Service 308,794.17 307,550.00 306,850.00 306,150.00 305,450.00 369,750.00 486,750.00 540,700.00 547,300.00 548,450.00 1,704,300.00 1,705,200.00 1,704,750.00 1,707,950.00 1,704,650.00 12,554,594.17 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 5 PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Date Debt Service Present Value to 12/07/2012 1.9788789% 06/01/2013 132,119.17 130,867.68 12/01/2013 176,675.00 173,286.89 06/01/2014 136,275.00 132,352.10 12/0t/2014 171,275.00 164,714.81 06/01/2015 135,925.00 129,438.08 12/01/2015 170,925.00 161,173.02 06/01/2016 135,575.00 126,587.38 12/01/2016 170,575.00 157,706.73 06/01/2017 135,225.00 123,798.64 12/01/2017 170,225.00 154,314.33 06/01/2018 134,875.00 121,070.52 12/01/2018 234,875.00 208,769.85 06/01/2019 133,375.00 117,389.56 12/01/2019 353,375.00 307,974.59 06/01/2020 130,350.00 112,490.06 12/01/2020 410,350.00 350,656.25 06/01/2021 126,150.00 106,742.76 12/01/2021 421,150.00 352,867.80 06/01/2022 121,725.00 100,990.16 12/01/2022 8,236,725.00 6,766,714.69 11,837,744.17 9,999,905.90 Proceeds Summary Delivery date 12/07/2012 Par Value 9,190,000.00 Premium (Discount)809,905.90 Target for yield calculation 9,999,905:90 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...kRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 8 PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Assumed Call/Computation Dates for Premium Bonds Bond Component Maturity Call Call Date Rate Yield Date Price SERIALBQ 12/01/2023 3.000%1.860%12/01/2022 100.000 SERIALBQ 12/01/2024 3.000%1.940%12/01/2022 100.000 SERIALBQ 12/01/2025 3.000%2.060%12/01/2022 100.000 SERIALBQ 12/01/2026 3.000%2.150%12/0112022 100.000 SERIALBQ 12/01/2027 3.000%2.200%12/01/2022 100.000 Net Present Value (NPV) to 12/07/2012 @ 1.9788789% -16,648.09 -5,583.12 11,972.64 25,912.58 34,332.59 Rejected Call/Computation Dates for Premium Bonds Bond Maturity Component Date Call Call Rate Yield Date Price SERIALBQ 12/01/2023 3.000%1.860% SERIALBQ 12/01/2024 3.000%11940% SERIALBQ 12/01/2025 3.000%2.060% SERIALBQ 12/01/2026 3.000%2.150% SERIALBQ 12/01/2027 3.000%2.200% Net Present Value (NPV) to 12/07/2012 Increase @ 1.9788789%to NPV -4,497.17 12,150.92 19,218.47 24,801.59 49,907.80 37,935.16 77,608.36 51,695.78 100,117.22 65,784.63 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 9 Bond Component Serial Bonds (BQ): BOND PRICING City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Maturity Yield to Call Date Amount Rate Yield Price Maturity Date 12/01/2013 40,000 2.000.A 0.400%101.568 12/01/2014 35,000 2.000%0.480%102.996 12/01/2015 35,000 2.000%0.620%104.072 12/01/2016 35,000 2.000%0.720%105.017 12/01/2017 35,000 2.000./*0.870%105.499 12/01/201 8 I00,000 3.000"/*1.050%111.279 12/01/2019 220,000 2.750"./,1.230%110.141 12/01/2020 280,000 3.000%1.430%111.804 12/01/202 1 295,000 3.000"/*1.620%111.493 12/01/2022 305,000 3.000"/*1.800%110.920 12/01/2023 1,470,000 3.000"A 1.860%110.342 12/01/2024 1,515,000 3.000",/*1.940%109.578 12/01/2025 1,560,000 3.000"/*2.060%108.442 12/01/2026 1,610,000 3.000"/*2.150%107.600 12/01/2027 1,655,000 3.000"/*2.200%107.135 c c c c c Call Price 1.949%12/01/2022 100.000 2.092%12/01/2022 100,000 2,247%1210112022 100.000 2,359%1210112022 100.000 2.429%1210112022 100.000 Premium (-Discoun0 627.20 1,048.60 1,425.20 1,755.95 1,924.65 11,279.00 22,310.20 33,051.20 33,904.35 33,306.00 152,027.40 145,106.70 131,695.20 122,360.00 118,084.25 9,190,000 809,905.90 108.812904% -0.460000"/* 108.352904% Dated Date 12/0712012 Delivery Date 12/07/2012 First Coupon 06/01/2013 Par Amount 9,190,000.00 Premium 809,905.90 Production 9,999,905.90 Underwriter’s Discount -42,274.00 Purchase Price 9,957,631.90 Accrued Interest Net Proceeds 9,957,631.90 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...hRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 4 Global Corporate Trust Services 1420 Fifth Ave, 7th Floor Seattle, WA.98101 Justin Mon Wai SNWSC jmonwai@snwsc Dear Justin: November 7, 2012 City of Renton, Washington Water and Sew~" Revenue Bonds, 200,* In connection with the referenced mmsaction and at the request of the City of Renton, Washington Issuer, U.S. has entered a subscription on SLGSafe, for State and Local Goverument Securities to be purchase on December 7, 2012, Attached is a copy of the subscriptiou confirmation. Please review the details to confirm that they are con’ect, and notify me prior to the Issue Date if there are any el, ors, Absent notification from you of any corrections to be made, we will assume that the subscription information attached is correct. Very truly yours, Carolyn Morrison Attachment hven Wa,g, CityofRenton Demma Gregory, Pa~ifica Law Group LLP Kristin Patterson, Pacifiea Law Group LLP Stephanie Seroogy, Grant Thornton LLP usbank.com DEPARTMENT OF THE TREASURY BUREAU OF THE PUBLIC DEBT PARKERSBURG, WV 26 i 06-0396 SUBSCRIPTION CONFIRMATION State and Local Government Series Securities Treasury Case Number: Program Type: Issue Amount: Issue Date: Owner Name: TIN: Rate Table Date: Status: Confirmation Date: Confirmation Time: 201206759 Time Deposit $9,904,340.00 12/07/2012 City of Renton 91-6001271 11/07/2012 Complete 11/07/2012 01:56 PM EST U.S. Treasury Securities SLGS Time Deposit Subscription View OMB: No: 1535-0092 Date/Time: 11/07/2012 01:58 PM EST Page: 1 of 2 Issue Information Treasury Case Number Status Issue Date Issue Amount Rate Table Date 201206759 Complete 12/07/2012 $9,904,340.00 11/07/2012 Owner Taxpayer Identification Number Underlying Bond Issue Owner Name Address Line 1 Line 2 Line 3 City State Zip Code Contact Name Telephone Fax E-mail 91-6001271 City of Renton, Washington Water and Sewer Revenue Bonds, 2004 City of Renton Renton City Hall 1055 S Grady Way Renton WA 98057 Iwen Wang, Finance and Information Technology Administrator 425-430-6858 425-430-6855 Trustee ABA Routing Number Bank Reference Number Bank Name Address Line 1 Line 2 Line 3 C~ty State Zip Code Contact Name Telephone Fax E-mail 091000022 U.S. Bank National Association Corporate Trust Services PD-WA-T7CT 1420 Fifth Ave 7th Floor Seattle WA 98101 Carolyn Morrison 206-344-4678 206-344-4630 carolyn.morrison@usbank.com Funds for Purchase ABA Routing Number 091000022 Bank Name Contact Name Telephone Fax E-mail U.S. Bank National Association Carolyn Morrison 206-344-4678 206-344-4630 carolyn.morrison@usbank.com U.S. Treasury Securities SLGS Time Deposit Subscription View OMB: No: 1535-0092 Date/Time: 11/07/2012 01:58 PM EST Page: 2 of 2 ACH Institutions & Instructions ABA Routing Number 091000022 Bank Name Address Line 1 Line 2 Line 3 City State Zip Code Contact Name Telephone Fax E-mail U.S. Bank National Association 60 Livingston Ave EP-MN-WS3T St. Paul MN 55107-2292 INCOME PROCESSING 651-466-5989 866-895-2142 ABA Routing Number 091000022 Account Name ACH RECEIPTS Account Number 173100077762 Account Type Checking Subscriber ABA/TIN Organization Name Address Line 1 Line 2 Line 3 City State Zip Code Contact Name Telephone Fax E-mail 091000022 US Bank NA 1420 Fifth Ave Seattle WA 98101 Nicole Decamp 206-344-4677 206-344-4630 NICOLE.DECAMP@USBANK.COM Viewers ABArrlN J Organization Name No Viewers Assigned Securities Secudty Number 1 2 3 4 SecurityType C ofl C ofl Note Note Principal Amount $215,047.00 $214,472.00 $214,809.00 $9,260,012.00 Interest Rate 0.130000000 0.160000000 0.190000000 0.240000000 Maturity Date 06/01/2013 12/01/2013 06/01/2014 12/01/2014 First Interest Payment Date 06/01/2013 06/01/2013 Security Description Eltanket Issuer Letter of Representations 10041-0099 ONGOING DISCLOSURE CERTIFICATE I, Iwen Wang, Administrative Services Administrator, of the City of Renton, Washington (the "City"), do hereby certify with respect to the City’s Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds") issued on the date hereof pursuant to Ordinance No. 5672 adopted by the City Council on October 15, 2012 (the "Bond Ordinance"), as follows: (a) The City has agreed in the Bond Ordinance to provide, or cause to be provided, certain annual financial information and operating data to the Municipal Securities Rulemaking ’Board for the benefit of the holders and beneficial owners of the Bonds and in order to assist the participating underwriter in complying with Rule 15c2-12 of the Securities and Exchange Commission, with respect to the Bonds (the "Undertaking"). This certificate is being provided pursuant to Section 17(b)(4) of the Bond Ordinance. (b) Pursuant to Section 17(b)(4) of the Bond Ordinance, in addition ~o the financial information and operating data required therein, the City shall provide general customer statistics for the Waterworks Utility contained in the Official Statement~for the Bonds and provided in the tables "Water Utility Usage," "Number of Water Customers," ’¢Number of Wastewater Customers," and ’¢Number of Storm Drainage Customers" as shown under the heading "THE WATERWORKS UTILITY." The terms of the Undertaking shall otherwise be subject to the provisions of the Bond Ordinance. All capitalized terms used in this certificate shall have the same meaning as def’med in the Bond Ordinance. Dated as of this 7t~ day of December, 2012. Iwen City of Renton, Washington CLOSING CERTIFICATE The undersigned hereby certifies and represents to Seattle-Northwest Securities Corporation (the "Underwriter") that she is the duly appointed and acting Administrative 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: This certificate is delivered in connection with the offering and sale of the $9,190,000 Water and Sewer Revenue Refunding Bonds, 2012 (the "Bonds"). The representations and covenants of the City set forth in the Bond Purchase Agreement for the Bonds (the "Purchase Agreement"), dated November 7, 2012, between the City and the Underwriter, and in the Bond Ordinance were true and correct when made and remain true and correct as of this date. o o 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 (f) materially affecting the f’mances of the City. 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; provided, however, no representation or warranty is hereby made with respect to information within the Final Official Statement relating to The Depository Trust Company, the book- entry system, the Financial Advisor or the Underwriter. Capitalized terms not defined herein shall have the meaning set forth in the Purchase Agreement. Dated this 7th day of December, 2012. Administratorzrzrzr~ City of Renton, Waglaington SIGNATURE IDENTIFICATION CERTIFICATE We, Denis W. 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 Refunding Bonds, 2012 (the "Bonds") of the City are true and correct facsimiles of our signatures. The Bonds are dated as of their delivery, are in the aggregate principal amount of $9,190,000, are designated the "City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 2012," are in the denomination of $5,000 each or integral multiples thereof~ are fully registered, are numbered, bear interest at the rates per annum set forth in the following schedule, payable on June 1, 2013, and semiannually thereafter on the first days of each succeeding June and December, and mature on December 1 in the years and amounts as follows: Maturity Years Principal Interest (December 1)Amounts Rates 2013 $40,000 2.00% 2014 35,000 2.00 2015 35,000 2.00 2016 35,000 2.00 2017 35,000 2.00 2018 100,000 3.00 2019 220,000 2.75 2020 280,000 3.00 2021 295,000 3.00 2022 305,000 3.00 2023 1,470,000 3.00 2024 1,515,000 3.00 2025 1,560,000 3.00 2026 1,610,000 3.00 2027 1,655,000 3.00 Dated as of this 7t~ day of December, 2012. ~Signature Title Mayor City Clerk STATE OF WASHINGTON ) ) SSo COUNTY OF KING ) On this __~ day of ~),-~eart~et- , 2012, before me, the Undersigned,- a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared Denis W. Law, to me known to be the Mayor of the City of Renton, Washington, described in and who executed the wit,~tl ~fi~e~r~.g_oing instrument; and acknowledged to me that he signed said instrument as ~ ..~, .~..~_t~ act and dee~xfor th~-se~ an~d l~urposes therein mentioned. STATE OF WASHINGTON ) ) SS. COUNTY OF KING ) On this 7~day of ]~m~,"., 2012, before me, the u~dersigned, a ~otary Public in and for the State of Washington, duly commissioned and sworn, personally appeared Bonnie I. Walton, to me known to be the City C]erk of the City of Renton, Washington, described in and who and foregoing instru~nt; and acknowledged to me that she signed said instrument ount , act and d~d~r the,’ u~’gi)and p~aq~,es therein mentioned. ~[Palmed Name]%\I L.~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 Refunding Bonds, 2012 (the "Bonds"), which are being issued in the aggregate principal amount of $9,190,000 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") 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 1.148-11, 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 Ordinance No. 5672, passed on October 15, 2012, authorizing the issuance and sale of the Bonds (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"), attached as Exhibit A to this certificate, on the certificate of Piper Jaffray & Co. (the "Financial Advisor"), attached as Exhibit B to this certificate, and on the Verification Report delivered by Grant Thornton LLP on the date hereof (the "Report"). 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 (a) to provide funds that will be used to advance refund and defease a portion of the City’s Water and Sewer Revenue Bonds, 2004 (the "2004 Bonds") that would otherwise mature on December 1, 2024 and all of the 2004 Bonds that would otherwise mature on December 1, 2025 through December 1, 2027, inclusive (collectively, the "Refunded Bonds"), and (b) to pay the costs of issuance of the Bonds. The primary purpose of the transaction undertaken in connection with the issuance of the Bonds is a bona fide governmental purpose. 6.The Refunded Bonds. (a) General. The Refunded Bonds were issued to provide funds (a) to pay a portion of the cost to carry out the City’s system or plan for additions to and betterments and extensions of the City’s combined water, sewer, wastewater and storm drainage systems (the "Waterworks Utility"), (b) to make a deposit to the City’s Reserve Fund for any obligations of the City issued on a parity of lien with the Refunded Bonds, and (c) to pay costs of issuance of the Refunded Bonds. No portion of the purchase price of the Refunded Bonds represents a loan made from the proceeds of another tax-exempt obligation. All of the original and investment proceeds allocable to the Refunded Bonds have been expended. No portion of the proceeds of the Refunded Bonds was used to pay the principal of, or interest on, any other issue of governmental obligations. (b) Bond Fund. The City has maintained a pooled debt service fund for the Refunded Bonds (the "Bond Fund") and has on hand in such Bond Fund certain amounts that will be used for the payment of debt service on the Refunded Bonds and other Outstanding Parity Bonds of the Waterworks Utility or to secure such payment. The City has continued the Bond Fund under the Bond Ordinance for purposes of the payment of debt service on the Bonds, the Outstanding Parity Bonds and any Future Parity Bonds, as described in paragraph 14 below. (c) Reserve Fund. The City has maintained a pooled reasonably required reserve fund for the Refunded Bonds (the "Reserve Fund") and has on hand in such Reserve Fund certain amounts that are pledged to the payment of debt service on the Refunded Bonds and other Outstanding Parity Bonds of the Waterworks Utility in the event that amounts in the Bond Fund are insufficient to make such payments. The City has continued the Reserve Fund under the Bond Ordinance for purposes of securing the payment of debt service on the Bonds, the Outstanding Parity Bonds and any Future Parity Bonds, as described in paragraph 14 below. The Bonds are the first advance refunding of the Refunded Bonds. 7.Amount and Expenditure of Sale Proceeds of the Bonds. (a) Amount of Sale Proceeds. The sale proceeds from the issuance of the Bonds are $9,999,905.90, based on the amount set forth on Exhibit A hereto. Such amount represents the stated redemption price at maturity of the Bonds of $9,190,000.00, plus original issue premium of $809,905.90. 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. -2- (b) Expenditure of Sale Proceeds. The sale proceeds of the Bonds and other available funds will be expended as follows: (i) The amount of $9,904,340.00 representing proceeds of the Bonds will be deposited in the escrow fund established pursuant to the Escrow Agreement (the "Escrow Fund") and used on the date hereof to purchase United States Treasury Certificates of Indebtedness and Notes, State and Local Government Series (the "Escrowed Securities"). The proceeds of the Escrowed Securities will be used as described in the Report to pay the principal of, and interest and redemption premium, if any, on the Refunded Bonds. No portion of the proceeds of the Bonds is expected to be used to pay any interest on, or principal of, any issue of governmental obligations other than the Bonds and the Refunded Bonds. (ii) The amount of $42,274.00 will be allocated on the date of issuance of the Bonds to the Underwfiter’s discount or compensation. (iii) The amount of $57,600.00 will be disbursed to pay other costs of issuance of the Bonds. (iv) The amount of $1.50 will be deposited as the initial cash balance in the Escrow Fund and disbursed on June 1, 2013, to pay debt service on the Refunded Bonds. (v) The amount of $1,590.40 (representing a rounding amount) will be deposited in the Bond Fund and used to pay debt service on the Bonds. 8.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. 9. Investment Proceeds. The best estimate of the City is that investment proceeds resulting from the investment of any proceeds of the Bonds will be expended for one of the purposes described in section 7 or for the payment of debt service on the Bonds. 10. Transferred Proceeds. There are no transferred proceeds with respect to the Bonds because all of the proceeds of the Refunded Bonds have been expended prior to the date on which proceeds of the Bonds are disbursed to pay principal of the Refunded Bonds. 11. 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. -3- (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 governmental 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. As set forth in Exhibit A, the weighted average maturity of the Bonds does not exceed the remaining weighted average maturity of the Refunded Bonds, both of which weighted average maturities have been computed by the Underwriter, and the weighted average maturity of the Refunded Bonds is not greater than 120 percent of the weighted average estimated economic life of the portion of the projects financed by the Refunded Bonds (the "Projects"), determined in accordance with section 147(b) of the Code. Such weighted average estimated economic life is determined in accordance with the following assumptions: (i) the weighted average was determined by taking into account the respective cost of each of the assets financed by the Refunded Bonds; (ii) 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); (iii) 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 (iv) land or any interest therein has not been taken into account in determining the average reasonably expected economic life of such Projects, unless 25 percent or more of the net proceeds of the Bonds is to be used to finance land. 12. 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 -4- 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. The yield has been computed by treating the portion of the Bonds that are subject to optional redemption and 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 Bonds as redeemed at their 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. Based on the representation of the Underwriter, set forth in Exhibit A, the yield on the Bonds, as calculated in the manner set forth above, is 1.978879 percent. 13.Temporary Periods and Yield Restriction. (a) not be invested. Uninvested Amounts. The amount described in paragraphs 7(b)(iv) will (b) Issuance Costs and Additional Proceeds. The amounts described in paragraphs 7(b)(ii) and 7(b)(iii) will be disbursed within 13 months of the date hereof for costs of issuing the Bonds or debt service on the Bonds; therefore, such amounts will be invested for an allowable temporary period. To the extent any portion of the amounts described in paragraphs 7(b)(ii) is not expended within 13 months, the City will take steps to restrict the investment of such amounts to a yield which is not materially higher than the yield on the Bonds. (c) Refunding. The yield on the Escrowed Securities is computed using the same compounding interval and financial conventions used to compute the yield on the Bonds. The yield on the Escrowed Securities is the discount rate that, when used in computing the present value as of the date the Escrowed Securities were first allocated to the Bonds of all unconditionally payable receipts to be actually or constructively received from the Escrowed -5- Securities, produces an amount equal to the amounts to be actually or constructively paid for the Escrowed Securities. The Escrowed Securities purchased with Bond proceeds are all yield- restricted nonpurpose investments that are a single class of investments and that are treated as a single investment because all of the Escrowed Securities are held in a refunding escrow as described in paragraphs 7(b)(i) above. Such purchase price is equal to the price paid by the City to the United States for the Escrowed Securities. As set forth in the Report, the yield on the Escrowed Securities for the advanced refunded bonds is determined in this manner and is 0.237690 percent, a yield that is not higher than the yield on the Bonds. Pursuant to section 1.148-9(g) of the Regulations, the City hereby elects to waive the 30 day temporary period available under section 1.148-9(d)(2)(i) of the Regulations. 14.Funds. (a) Bond Fund. Pursuant to the Bond Ordinance, the City has confirmed the debt service fund designated the Bond Fund, which will be used primarily to achieve a proper matching of Net Revenues of the Waterworks Utility and debt service on the Bonds, within each Bond Year. The Net 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 at an unrestricted yield for a 13-month temporary period beginning on 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 15 below. (b) Reserve Fund. The Reserve Fund confirmed in the Bond Ordinance will be used to secure payment of debt service on the Bonds and other Parity Bonds in the event that the funds in the Bond Fund are insufficient. As of October 1, 2012, the City had $3,648,589 in Qualified Insurance in the form of a surety policy (the "Surety Policy") from Financial Guaranty ~surance Company ("FGIC") delivered in connection with the issuance of the City’s water and sewer revenue bonds issued in 2007 and 2008. The City deposited $2,909,745.00 from available funds of the City into the Reserve Fund at the time of issuance of the Bonds. Such amounts are sufficient to satisfy the Reserve Requirement on the date of issuance of the Bonds ($2,909,745.00). No proceeds of the Bonds will be deposited into the Reserve Fund. To the extent that the amount in deposit in the Reserve Fund in the aggregate exceeds the least of (a) ten percent of the stated principal amount of the Bonds and the Parity 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 or the applicable series of Parity Bonds), (b)the maximum annual principal and interest requirements of the Bonds and the Parity Bonds, and (c) 125 percent of average annual principal and interest requirements of the Bonds and the Parity Bonds, the portion of the excess allocable to the Bonds 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 15 below. -6- 15. Minor Portion. All gross proceeds will be invested in accordance with paragraphs 13 and 14 above. To the extent such amounts remain on hand following the periods set forth in paragraphs 13 and 14 above or exceed the limits set forth in paragraph 14 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. 16. Issue. 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. 17. Compliance With Rebate Requirements. 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. No rebate will be due with respect to the sale proceeds and investment proceeds of the Bonds if all such proceeds are expended within 6 months of the date of issue of the Bonds. 18. No Excess Gross Proceeds. Except for any earnings on the portion of the amount described in paragraph 7(b)(iii) above, all gross proceeds of the Bonds will be expended for: (a) the payment of principal, interest or call premium on the Refunded Bonds as described in paragraph 7(b)(i) above; (b) 7(b)(ii); and the payment of underwriter’s compensation as described in paragraph (c) the payment of costs of issuance as described in paragraph 7(b)(iii). -7- Investment earnings on the amount described in paragraph 7(b)(iii) are expected to be de minimis; accordingly the excess gross proceeds of the Bonds will be less than one percent of the original proceeds of the Refunded Bonds. 19.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 term 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 governmental 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. 20. 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 any of the Bonds to be an "arbitrage bond" within the meaning of section 148 of the Code and the Regulations. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change such expectations. 21.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) Not more than 10 percent of the proceeds of the Bond will be used and not more than 10 percent of the proceeds of the Refunded Bonds has been 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 roles: (A) any activity carded 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 Projects refinanced by the Bonds 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 or the Refunded Bonds as a result of ownership, -8- 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 Projects. (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 Projects 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 Projects that is not subject to any material contingencies. (iii) Not more than 10% of the debt service on the Bonds will be directly or indirectly derived from payments (whether or not to the City or any related party) in respect of property, or borrowed money, used or to be used for a private business use. Furthermore, not more than 10% of the debt service on the Bonds will be directly or indirectly secured by any interest in property used or to be used for a private business use or payments in respect of property used or to be used for a private business use. (iv) 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 Projects refinanced 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 tax or other governmental revenues and the City reasonably expects to spend such amounts on governmental programs within 6 months from the date of commingling. -9- Furthermore, the City will not sell or otherwise dispose of all or any portion of the Projects 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 Projects 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. 22. Weighted Average Maturity. The weighted average maturity of the Bonds and of the Refunded 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 of the respective issues and the number of years to maturity (determined separately for each group of identical bonds of the respective issues and taking into account mandatory redemptions), divided by the aggregate sale proceeds of the respective issues. 23. Federal Guarantee Prohibition. The Bonds are not "federally guaranteed" and the City will not cause or allow the Bonds to become "federally guaranteed". Unless otherwise excepted under section 149(b) of the Code, the Bonds will be considered federally guaranteed if: (a) The payment of principal or interest with respect to the Bonds is guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); (b)5 percent or more of the proceeds of the Bonds are to be: (i) used in making loans the payment of principal or interest with respect to which are to be guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof), or (ii) accounts; or invested (directly or indirectly) in federally insured deposits or (c) The payment of principal or interest on the Bonds is otherwise indirectly guaranteed (in whole or in part) by the United States (or an agency or instrumentality thereof). The Bonds shall not be treated as federally guaranteed by reason of (i) any guarantee by the Federal Housing Administration, the Department of Veterans Affairs, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association, (ii) any guarantee of student loans and any guarantee by the Student Loan Marketing Association to finance student loans, (iii) any guarantee by the Bonneville Power Authority pursuant to the Northwest Power Act as in effect on July 18, 1984, or (iv) any guarantee by a Federal home loan bank described in Code section 149(b)(3)(E) that is made in connection with the original issuance of bonds during the period beginning on July 8, 2008 and ending on December 31, 2010 (or a renewal or extension of a guarantee so made). -10- The federal guarantee prohibition shall not apply to (i) proceeds of the issue invested for an initial temporary period until such proceeds are needed for the purpose for which such issue was issued, (ii) investments of a bona fide debt service fund, (iii) investments of a reasonably required reserve fund, (iv) investments in bonds issued by the United States Treasury, or (v) other investments permitted under Regulations. 24. Bonds are not Hedge Bonds. Not more .than 50 percent of the proceeds of the Refunded Bonds was 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, and the City reasonably expected at the time the Refunded Bonds were issued that at least 85 percent of the spendable proceeds of such issue would be used to carry out the governmental purposes of such issue within the three-year period beginning on the date of issue of the Refunded Bonds. CITY OF RENTON, WASHINGTON By: Name: Title: Date: Admmastratlve Services mlstmtor December 7, 2012 -11- 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 Refunding Bonds, 2012 (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 Underwriter has purchased the Bonds from the City pursuant to a Bond Purchase Agreement dated November 7, 2012 (the "Sale Date"), for an aggregate purchase price of $9,957,631.90. (A) Based on our records and other information available to us which we have no reason to believe is not correct, on the date of Sale Date all of the Bonds were the subject of a bona fide initial offering to the public at prices no higher than, or yields no lower than, those shown on the inside cover of the Official Statement relating to the Bonds (the "Official Statement"). (B) The issue prices set forth in 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. Based on our records and other information available to us which we have no reason to believe is not correct, on the Sale Date at least 10 percent of each maturity of the Bonds were sold to the public at initial offering prices not greater than the respective prices shown on the cover of the Official Statement, except for those Bonds maturing in each of the years 2013 and 2017 which as of the Sale Date were purchased by dealers. (C) On the Sale Date, based upon then prevailing market conditions we had no reason to believe any of the Bonds would be initially sold to the public at prices greater than the prices, or yields less than the yields, shown on the inside cover of the Official Statement. The aggregate of such issue prices of all of the Bonds is $9,999,905.90. The initial public offering prices described above do 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 Underwriter or wholesalers. A-1 3. The yield on the Bonds is not less than 1.978879 percent. For purposes of this certificate, yield has been computed as described in paragraph 12 of the Federal Tax Certificate. 4. The weighted average maturity of the Bonds is 12.2205 years and the remaining weighted average maturity of the Refunded Bonds is 12.5419 years. The weighted average maturity was computed as described in paragraph 22 of the Federal Tax Certificate. 5. To the best of my knowledge, which was acquired in the course of structuring the Bonds on behalf of the City, (i) the Bonds were not structured to take advantage of the difference between tax exempt and taxable rates except as identified in the Federal Tax Certificate with respect to permissible investments subject to arbitrage rebate, and (ii) the Bonds were not issued earlier, in a greater amount, with reserves or sinking funds larger, or with a maturity longer than was reasonably necessary to refinance the Projects. The Underwriter hereby authorizes the City to rely on the statements made herein in connection with making the representations set forth in the Federal Tax Certificate to which this certificate is attached 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. The Underwriter hereby authorizes Pacifica Law Group LLP to 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. Capitalized terms used herein and not otherwise defined have the meaning ascribed to such terms in the Federal Tax Certificate to which this certificate is attached. SEATTLE-NORTHWEST SECURITIES CORPORATION Name: Lindsay Sovde J Title: Senior Vice President Date: December 7, 2012 EXHIBIT B CERTIFICATE OF FINANCIAL ADVISOR I, the undersigned officer of the Financial Advisor, make this certificate for the benefit of all persons interested in the exclusion from gross income for federal income tax purposes of the interest on the Bonds. Each capitalized term used herein has the meaning specified for such term in the Federal Tax Certificate to which this Exhibit B is attached (the "Federal Tax Certificate"). I hereby certify as follows as of the Issue Date: 1. I am the duly chosen, qualified and acting officer of the Financial Advisor 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 Financial Advisor. I am the officer of the Financial Advisor who has worked with representatives of the City in structuring the financial terms of the Bonds. 2. I have worked closely with representatives of the City in structuring the financial terms of the Bonds. To the best of my knowledge, which was acquired in the course of structuring the Bonds on behalf of the City, (i) the Bonds were not structured to take advantage of the difference between tax exempt and taxable rates except as identified in the Federal Tax Certificate with respect to permissible investments subject to arbitrage rebate, and (ii) the Bonds were not issued earlier, in a greater amount, with reserves or sinking funds larger, or with a maturity longer than was reasonably necessary to refinance the Project. The City may rely on the statements made herein in connection with making the representations set forth in the 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. Pacifica Law Group 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. PIPER JAFFRAY & CO. Name:°J~e D. Towery Title: Managing Director Date: December 7, 2012 CITY OF RENTON, WASHINGTON $9,190,000 WATER AND SEWER REVENUE REFUNDING BONDS, 2012 FINAL NUMBERS NOVEMBER 7, 2012 1420 Fifth Avenue, Suite 4300 ~ Seattle, WA 98101 , (206) 628-2882 . www.snwsc.com Washington ¯Oregon . Idaho , Utah ~ California TABLE OF CONTENTS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Report Page Summary of Refunding Results ...........................1 Savings ....................................2 Sources and Uses of Funds ............................3 Bond Pricing ..................................4 Bond Debt Service ................: ...............5 Aggregate Debt Service ..............................6 Bond Summary Statistics .............................7 Proof of Arbitrage Yield .............................8 Form 8038 Statistics ...............................10 Escrow Descriptions .,. ................................12 Escrow Cost Detail ...............................13 Escrow Cash Flow- . ...............................14 Escrow Sufficiency -. ..............................15 Escrow Statistics .................................16 Proof of Composite Escrow Yield ..........................17 Prior Bond Debt Service .............................18 Escrow Requirements ..............................19 Summary of Bonds Refunded ...........................20 Unrefunded Bond Debt Service ...........................21 Cost of Issuance .................................22 Nov 7, 2012 9:29 am Prepared by Seattle-NOrthwest Securities Corp.(k:\...\dbc\cityLRENTON:RENTON-R04WS_BQ,R04WS_BQ) SUMMARY OF REFUNDING RESULTS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Dated Date Delivery Date Arbitrage yield Escrow yield Bond Par Amount True Interest Cost Net Interest Cost All-In TIC Average Coupon Average Life Par amount of refunded bonds Average coupon of refunded bonds Average life of refunded bonds PV of prior debt to 12/07/2012 @ 1.978879% Net PV Savings Percentage savings of refunded bonds Percentage savings of refunding bonds 12/07/2012 12/07/2012 1.978879% 0.237690% 9,190,000.00 2.204807% 2.309297% 2.255443% 2.991898% 12.237 9,045,000.00 5.000000% 12.555 12,068,505.74 1,877,822.16 20.760886% 20.433321% Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 1 Date 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06/01/2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020 06/01/2021 12/01/2021 06/01/2022 12/01/2022 06/01/2023 12/01/2023 06/01/2024 12/01/2024 06/01/20.25 12/01/2025 06/01/2026 12/01/2026 06/01/2027 12/01/2027 SAVINGS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Present Value Prior Refunding Annual to 12/07/2012 Debt Service Debt Service Savings Savings @ 1.9788789% 226 125.00 226 125.00 226 125.00 226 125.00 226 125.00 226 125.00 226.125.00 226.125.00 226.125.00 226.125.00 226,125.00 286,125.00 224,625.00 409,625.00 220,000.00 465,000.00 213,875.00 478,875.00 207,250.00 487,250.00 200,250.00 1,650,250.00 164,000.00 1,684,000.00 126,000.00 1,726,000.00 86,000.00 1,766,000.00 44,000.00 1,804,000.00 132 119.17 176 675.00 136 275.00 171 275.00 135 925.00 170 925.00 135 575.00 170 575.00 135 225.00 170 ~25.00 134 g75.00 234 g75.00 133 375.00 353 375.00 130 350.00 410 350.00 126,150.00 421,150.00 121,725.00 426,725.00 117,150.00 1,587,150.00 95,100.00 1,610,100.00 72,375.00 1,632,375.00 48,975.00 1,658,975.00 24,825.00 1,679,825.00 94,005.83 93,115.37 49,450.00 143,455.83 48,501.69 89,850.00 87,263.52 54,850.00 144,700.00 52,749.13 90,200.00 85,895.27 55,200.00 145,400.00 52,050.61 90,550.00 84,547.20 55,550.00 146,100.00 51,359.28 90,900.00 83,219.05 55,900.00 146,800.00 50,675.11 91,250.00 81,910.55 51,250.00 142,500.00 45,553.83 91,250.00 80,313.38 56,250.00 147,500.00 49,023.19 89,650.00 77,366.58 54,650.00 144,300.00 46,700.05 87,725.00 74,229.16 57,725.00 145,450.00 48,365.89 85,525.00 70,956.53 60,525.00 146,050.00 49,723.09 83,100.00 67,600.26 63,100.00 146,200.00 50,827.73 68,900.00 54,955.94 73,900.00 142,800.00 58,366.53 53,625.00 41,938.30 93,625.00 147,250.00 72,503.56 37,025.00 28,391.39 107,025.00 144,050.00 81,264.50 19,175.00 14,417.00 124,175.00 143,350.00 92,448.07 14,730,500.00 12,554,594.17 2,175,905.83 2,175,905.83 1,876,231.76 Savings Summary PV of savings from cash flow Plus: Refunding funds on hand 1,876,231.76 1,590.40 Net PV Savings 1,877,822.16 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 2 SOURCES AND USES OF FUNDS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Dated Date 12/07/2012 Delivery Date 12/07/2012 Sources: Bond Proceeds: Par Amount 9,190,000.00 Premium 809,905.90 9,999,905.90 Uses: Refunding Escrow Deposits: Cash Deposit SLGS Purchases 1.50 9,904,340.00 9,904,341.50 Delivery Date Expenses: Cost of Issuance Underwriter’s Discount 51,700.00 42,274.00 93,974.00 Other Uses of Funds: Additional Proceeds 1,590.40 9,999,905.90 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 3 Bond Component Serial Bonds (BQ): Maturity Date BOND PRICING City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Yield to Call Call Premium Amount Rate Yield Price Maturity Date Price (-Discount) 12/01/2013 12/01/2014 12/01/2015 12/01/2016 12101/2017 12/01/2018 12/01/2019 12/01/2020 12/01/2021 12/01/2022 12/01/2023 12/01/2024 12/01/2025 12/01/2026 12/01/2027 40,000 2.000%0.400%101.568 627.20 35,000 2.000%0.480%102.996 1,048.60 35,000 2.000%0.620%104.072 1,425.20 35,000 2.000%0.720%105.017 1,755.95 35,000 2.000%0.870%105.499 1,924.65 100,000 3.000%1.050%111.279 11,279.00 220,000 2.750%1.230%110.141 22,310.20 280,000 3.000%1.430%111.804 33,051.20 295,000 3.000%1.620%111.493 33,904.35 305,000 3.000%1.800%110.920 33,306.00 1,470,000 3.000%1.860%110.342 C 1.949%12/01/2022 100.000 152,027.40 1,515,000 3.000%1.940%109.578 C 2.092%12/01/2022 100.000 145,106.70 1,560,000 3.000%2.060%108.442 C 2.247%12/01/2022 100.000 131,695.20 1,610,000 3.000%2.150%107.600 C 2.359%12/01/2022 100.000 122.360.00 1,655,000 3.000%2.200%107.135 C 2.429%12/01/2022 100.000 118,084.25 9,190,000 809.905.90 Dated Date 12/07/2012 Deliveq: Date 12/07/2012 First Coupon 06/01/2013 Par Amount 9,190,000.00 Premium 809,905.90 Production 9,999,905.90 Underwfiter’s Discount -42,274.00 Purchase Price 9,957,631.90 Accrued Interest Net Proceeds 9,957,631.90 108.812904% -0.460000% 108.352904% Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...kRENTON:RENTON-R04WS_BQ,R04WS_.BQ) Page 4 Period Ending 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06/01/2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020. 06/01/2021 12/01/2021 06/01/2022 12/01/2022 06/01/2023 12/01/2023 06/01/2024 12/01/2024 06/01/2025 12/01/2025 06/0i/2026 12/01/2026 06/01t2027 12/01/2027 BOND DEBT SERVICE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Principal Coupon Interest Debt Service Annual Debt Service 132,119.17 132,119.17 40,000 2.000%136,675.00 176,675.00 308,794.17 136,275.00 136,275.00 35,000 2.000%136,275.00 171,275.00 307,550.00 135,925.00 135,925.00 35,000 2.000%135,925.00 170,925.00 306,850.00 135,575.00 135,575.00 35,000 2.000%135,575.00 170,5t75.00 306,150.00 135,225.00 135,225.00 35,000 2.000%135,225.00 170,225.00 305,450.00 134,875.00 134,875.00 100,000 3.000%134,875.00 234,875.00 369,750.00 133,375.00 133,375.00 220,000 2.750%133,375.00 353,375.00 486,750.00 130,350.00 130,350.00 280,000 3.000%130,350.00 410,350.00 540,700.00 -126,150.00 126.. 150.00 295,000 3.000%126,150.00 421,150.00 547,300.00 121,725.00 121,725.00 305,000 3.000%121,725.00 426,725.00 548,450.00 117,150.00 117,150.00 1,470,000 3.000%117,150.00 1,587,150.00 1,704,300.00 95,100.00 95,100.00 1,515,000 3.000%95,100.00 1,610,100.00 1,705,200.00 72,375.00 72,375.00 1,560,000 3.000%72,375.00 1,632,375.00 1,704,750.00 48,975.00 48,975.00 1,610,000 3.000%48,975.00 1,658,975.00 1,707,950.00 24,825.00 24,825.00 1,655,000 3.000%24,825.00 1,679,825.00 1,704,650.00 9,190,000 3,364,594.17 12,554,594.17 12,554,594.17 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 5 Period Ending 12/01/2013 12/01/2014 12/01/2015 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 12/01/2026 12/01/2027 AGGREGATE DEBT SERVICE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Water & Sewer Revenue Refunding Bonds, 2012 (BQ) ~Pmia~ Ref04)1998 Bonds 2003 Bonds 2007 Bonds 2008A Bonds 2008B Bonds 308 794.17 307 550.00 306 850.00 306 150.00 305 450.00 369 750.00 486 750.00 540 700.00 547 300.00 548 450.00 1,704 300.00 1,705 200.00 1,704 750.00 1,707 950.00 1,704 650.00 369,180 422,677.50 425,650 1,229,850 1,221,850 1,212,850 1,224,100 1,532,600 1,436,200 1,331,600 1,314,200 1,315,600 415,507.50 415,507.50 415,507.50 895,507.50 1,091,307.50 933,507.50 985,257.50 1,034,457.50 1,045,657.50 1,045,257.50 1,203,657.50 1,203,477.50 1,201,147.50 1,201,627.50 1,204,665.00 Unrefunded Bonds 710,137.50 260,230.00 671,467.50 .282,952.50 672,367.50 289,375.00 205,237.50 290,000.00 287,000.00 73,500.00 Aggregate Debt Service 2,912,176.67 2,907,327.50 2,905.950.00 2,909,745.00 2,907,857.50 2,909,357.50 2,908,207.50 2,906,757.50 2,907,157.50 2,909,307.50 2,907,957.50 2,908,677.50 2,905,897.50 2,909,577.50 2,909,315.00 12.554,594.17 369,180 422,677.50 12,244,500 14,292,050.00 2,259,210.00 1,483,057.50 43,625,269.17 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 6 BOND SUMMARY STATISTICS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial FINAL NUMBERS Dated Date 12/07/2012 Delivery Date 12/07/2012 Last Maturity 12/01/2027 Arbitrage Yield 1.978879% True Interest Cost (TIC)2.204807% Net Interest Cost (NIC)2.309297% All-In TIC 2.255443% Average Coupon 2.991898% Average Life (years)12.237 Duration of Issue (years)10.399 Par Amount 9,190,000.00 Bond Proceeds 9,999,905.90 Total Interest 3,364,594.17 Net Interest 2,596,962.27 Total Debt Service 12,554,594.17 Maximum Annual Debt Service 1,707,950.00 Average Annual Debt Service 837,903.95 Underwfiter’s Fees (per $1000) Average Takedown 3.750000 Management Fee 0.500000 Other Fee 0.350000 Total Underwriter’s Discount 4.600000 Bid Price 108.352904 Ref04) Bond Componem Serial Bonds (BQ) Par Average Average Value Price Coupon Li~ 9,190,000.00 108.813 2.992%12.237 9,190,000.00 12.237 Par Value + Accrued Interest + Premium (Discount) - Underwriter’s Discount - Cost of Issuance Expense - Other Amounts TIC 9,190,000.00 809,905.90 -42,274.00 All-In Arbitrage TIC Yield 9,190,000.00 9,190,000.00 809,905.90 -42,274.00 -51,700.00 809,905.90 Target Value 9,957,631.90 9,905,931.90 9,999,905.90 Target Date 12/07/2012 12/07/2012 12/07/2012 Yield 2.204807%2.255443%1.978879% Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...~RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 7 PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Date Debt Service Present Value to 12/07/2012 @ 1.9788789% 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06101/2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020 06/01/2021 12/01/2021 06101/2022 12/01/2022 132 119.17 176 675.00 136 275.00 171 275.00 135 925.00 170 925.00 135 575.00 170 575.00 135 225.00 170 225.00 134 875.00 234 875.00 133 375.00 353 375.00 130 350.00 410 350.00 126,150.00 421,150.00 121,725.00 8,236,725.00 130,867.68 173,286.89 132,352.10 164,714.81 129,438.08 161,173.02 126,587.38 157,706.73 123,798.64 154,314.33 121,070.52 208,769.85 117,389.56 307,974.59 112,490.06 350,656.25 106,742.76 352,867.80 100,990.16 6,766,714.69 11,837,744.17 9,999,905.90 Proceeds Summary Delivery date Par Value Premium (Discount) Target for yield calculation 12/07/2012 9,190,000.00 809,905.90 9,999,905.90 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 8 PROOF OF ARBITRAGE YIELD City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Assumed Call/Computation Dates for Premium Bonds Bond Maturity Call Call Component Date Rate Yield Date Price SERIALBQ 12/01/2023 3.000%1.860%12/01/2022 100.000 SERIALBQ 12/01/2024 3.000%1.940%12/0112022 100.000 SERIALBQ 12/01/2025 3.000%2.060%12/01/2022 100.000 SERIALBQ 12/01/2026 3.000%2.150%12/01/2022 100.000 SERIALBQ 12/01/2027 3.000%2.200%12/01/2022 100.000 Net Present Value (NPV) to 12/07/2012 1.9788789% -16,648.09 -5,583.12 11,972.64 25,912.58 34,332.59 Reiected Call/Computation Dates for Premium Bonds Bond Maturity Call Call Componem Date Rate Yield Date Price SERIALBQ 12/01/2023 3.000%1.860% SERIALBQ 12/01/2024 3.000%1.940% SERIALBQ 12/01/2025 3.000%2.060% SERIALBQ 12/01/2026 3.000%2.150% SERIALBQ 12/01/2027 3.000%2.200% Net Present Value (NPV) to 12/07/2012 Increase @ 1.9788789%to NPV -4,497.17 12,150.92 19,218.47 24,801.59 49,907.80 37,935.16 77,608.36 51,695.78 100,117.22 65,784.63 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 9 FORM 8038 STATISTICS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Dated Date 12/07/2012 Delivery Date 12/07/2012 Bond Component Serial Bonds (BQ): Redemption Date Principal Coupon Price Issue Price at Maturity 12/01/2013 40,000.00 2.000%101.568 40,627.20 40,000.00 12/01/2014 35,000.00 2.000%102.996 36,048.60 35,000.00 12/01/2015 35,000.00 2.000%104.072 36,425.20 35,000.00 12/01/2016 35,000.00 2.000%105.017 36,755.95 35,000.00 12/01/2017 35,000.00 2.000%105.499 36,924.65 35,000.00 12/01/2018 100,000.00 3.000%111.279 111,279.00 100,000.00 12/01/2019 220,000.00 2.750%110.141 242,310.20 220,000.00 12/01/2020 280,000.00 3.000%111.804 313,051.20 280,000.00 12/01/2021 295,000.00 3.000%111.493 328,904.35 295,000.00 12/01/2022 305,000.00 3.000%110.920 338,306.00 305,000.00 12/01/2023 1,470,000.00 3.000%110.342 1,622,027.40 1,470,000.00 12/01/2024 1,515,000.00 3.000%109.578 1,660,106.70 1,515,000.00 12/01/2025 1,560,000.00 3.000%108.442 1,691,695.20 1,560,000.00 12/01/2026 1,610,000.00 3.000%107.600 1,732,360.00 1,610,000.00 12/01/2027 1,655,000.00 3.000%107.135 1,773,084.25 1,655,000.00 9,190,000.00 9,999,905.90 9,190,000.00 Stated Weighted Maturity Interest Issue Redemption Average Date Rate Price at Maturity Maturity Yield Final Maturity 12/01/2027 3.000%1,773,084.25 1,655,000.00 - Entire Issue 9,999,905.90 9,190,000.00 12.2205 1.9789% Proceeds used for accrued interest Proceeds used for bond issuance costs (including underwriters’ discount) Proceeds used for credit enhancement Proceeds allocated to reasonably required reserve or replacement fund Proceeds used to currently refund prior issues Proceeds used to advance refund prior issues Remaining weighted average maturity of the bonds to be currently refunded Remaining weighted average maturity of the bonds to be advance refunded 0.00 93,974.00 0.00 0~00 0.00 9,9~J4,341.50 0.0000 12.5419 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 10 FORM 8038 STATISTICS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Refunded Bonds Bond Component Date Principal Coupon Price Issue Price 2004 Water & Sewer Revenue Bonds (11/1/04): SERIALS 12/01/2025 1,600~000.00 5.000%103.848 1,661,568.00 SERIALS 12/01/2026 1,680,000.00 5.000%103.194 1,733,659.20 SERIALS 12/01/2027 1,760,000.00 5.000%102.625 1,806,200.00 TERM2024 12/01/2018 60,000.00 5.000%104.591 62,754.60 TERM2024 12/01/2019 185,000.00 5.000%104.591 193,493.35 TERM2024 12/01/2020 245,000.00 5.000%104.591 256,247.95 TERM2024 12/01/2021 265,000.00 5.000%104.591 277,166.15 TERM2024 12/01/2022 280,000.00 5.000%104.591 292,854.80 TERM2024 12/01/2023 1,450,000.00 5.000%104.591 1,516,569.50 TERM2024 12/01/2024 1,520,000.00 5.000%104.591 1,589,783.20 9,045,000.00 9,390,296.75 Remaining Last Weighted Call Issue Average Date Date Maturity 2004 Water & Sewer Revenue Bonds (11/1/04)12/01/2014 11/01/2004 12.5419 All Refunded Issues 12/01/2014 12.5419 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 11 ESCROW DESCRIPTIONS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Type of Maturity First Int Par Max SLGS Date Pmt Date Amount Rate Rate Dee 7, 2012: SLGS Certificate 06/01/2013 06/01/2013 SLGS Certificate 12/01/2013 12/01/2013 SLGS Note 06/01/2014 06/01/2013 SLGS Note 12101/2014 06/01/2013 215,047 0.130%0.130% 214,472 0.160%0.160% 214,809 0.190%0.190% 9,260,012 0.240%0.240% 9,904,340 SLGS Summary SLGS Rates File Total Certificates of Indebtedness Total Notes Total original SLGS 07NOV12 429,519.00 9,474,821.00 9,904,340.00 Nov 7, 2012 9:29 am Prepared by S~attle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 12 ESCROW COST DETAIL City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Type of Maturity Par Total Security Date Amount Rate Cost Global Proceeds Escrow: SLGS 06/01/2013 215,047 0.I30%215,047.00 SLGS 12/01/2013 214,472 0.160%214,472.00 SLGS 06/01/2014 214,809 0.190%214,809.00 SLGS 12/01/2014 9,260,012 0.240%9,260,012.00 9,904,340 9,904,340.00 Purchase Cost of Cash Total Date Securities Deposit Escrow Cost Yield Global Proceeds Escrow: 12/07/2012 9,904,340 1.50 9,904,341.50 0.237690% 9,904,340 1.50 9,904,341.50 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 13 ESCROW CASH FLOW City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) F1NAL NUMBERS Present Value Net Escrow to 12/07/2012 Date Principal Interest Receipts @ 0.2376897% 06/01/2013 215,047.00 11,077.82 226,124.82 225,865.34 12/01/2013 214,472.00 11,653.59 226,125.59 225,598.00 06/01/2014 214,809.00 11,316.08 226,125.08 225,329.70 12/01/2014 9,260,012.00 11,112.01 9,271,124.01 9,227,546.96 9,904,340.00 45,159.50 9,949,499.50 9,904,340.00 Escrow Cost Summary Purchase date Purchase cost of securities Target/’or yield calculation 12/07/2012 9,904,340.00 9,904,340.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...~RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 14 ESCROW SUFFICIENCY City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Escrow Net Escrow Excess Excess Date Requirement Receipts Receipts Balance 12/07/2012 1.50 1.50 06/01/2013 226,125.00 226,124.82 -0.18 12/01/2013 226,125.00 226,125.59 0.59 06/01/2014 226,125.00 226,125.08 0.08 12/01/2014 9,271,125.00 9,271,124.01 -0.99 9,949,500.00 9,949,501.00 1.00 1.50 1.32 1.91 1.99 1.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 15 ESCROW STATISTICS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Modified Yield to Yield to Perfect Value of Total Duration Receipt Disbursement Escrow Negative Cost of Escrow Cost (years)Date Date Cost Arbitrage Dead Time Global Proceeds Escrow: 9,904,341.50 1.913 0.237690%0.237690%9,581,410.02 322,931.42 0.06 9,904,341.50 9,581,410.02 322,931.42 0.06 Delivery date 12/07/2012 Arbitrage yield 1.978879% Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 16 PROOF OF COMPOSITE ESCROW YIELD City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS All restricted escrows funded by bond proceeds Present Value Security to 12/07/2012 Date Receipts @ 0.2376897% 06/01/2013 226,124.82 225,865.34 12/01/2013 226,125.59 225,598.00 06/01/2014 226,125.08 225,329.70 12/01/2014 9,271,124.01 9,227,546.96 9,949,499.50 9,904,340.00 Escrow Cost Summary Purchase date Purchase cost of securities Target for yield calculation 12/07/2012 9,904,340.00 9,904,340.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...kRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 17 PRIOR BOND DEBT SERVICE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Annual Period Debt Debt Ending Principal Coupon Interest Service Service 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06/01/2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020 06/01/2021 12/01/2021 06/01/2022 12/01/2022 06/01/2023 12/01/2023 06/01/2024 12/01/2024 06/01/2025 12/01/2025 06/01/2026 12/01/2026 06/01/2027 12/01/2027 60,000 5.000% 185,000 5.000% 245,000 5.000% 265,000 5.000% 280,000 5.000% 1,450,000 5.000% 1,520,000 5.000% 1,600,000 5.000% 1,680,000 5.000% 1,760,000 5.000% 226,125 226,125 226,125 226,125 226,125 226 125 226 125 226 125 226.125 226 125 226 125 226.125 224. 625 22~ 625 220. 000 220. 000 213,875 213,875 207,250 207,250 200,250 200,250 164,000 164,000 126,000 126,000 86,000 86,000 44,000 44,000 226,125 226,125 226,125 226,125 226,125 226,125 226,125 226,125 226,125 226,125 226,125 286,125 224,625 40~625 220,000 465,000 213,875 478,875 207,250 487,250 200,250 1,650,250 164,000 1,684,000 126,000 1,726,000 86,000 1,766,000 44,000 1,804,000 9,045,000 5,685,500 14,730,500 452,250 452,250 452,250 452,250 452,250 512,250 634,250 685,000 692,750 694,500 1,850,500 1,848,000 1,852,000 1,852,000 1,848,000 14,73~500 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 18 ESCROW REQUIREMENTS City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref04) FINAL NUMBERS Period Principal Ending Interest Redeemed Total 06/01/2013 226,125.00 226,125.00 12/01/2013 226,125.00 226,125.00 06/01/2014 226,125.00 226,125.00 12/01/2014 226,125.00 9,045,000.00 9,271,125.00 904,500.00 9,045,000.00 9,949,500.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 19 SUMMARY OF BONDS REFUNDED City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Maturity Interest Par Call Bond Date Rate Amount Date 2004 Water & Sewer Revenue Bonds (11/1/04), 04WS: TERM2024 12/01/2018 5.000%60,000.00 12/01/2014 12/01/2019 5.000%185,000.00 12/01/2014 12/01/2020 5.000%245,000.00 12/01/2014 12/01/2021 5.000%265,000.00 12/01/2014 12/01/2022 5.000%280,000.00 12/01/2014 12/01/2023 5.000%1,450,000.00 12/01/2014 12/01/2024 5.000%1,520,000.00 12/01/2014 SERIALS 12/01/2025 5.000%1,600,000.00 12/01/2014 12/01/2026 5.000%1,680,000.00 12/01/2014 12/01/2027 5.000%1,760,000.00 12/01/2014 9,045,000.00 Call Price 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...hRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 20 Period Ending UNREFUNDED BOND DEBT SERVICE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Annual Principal Coupon Interest Debt Service Debt Service 06/01/2013 27,615.00 27,615.00 12/01/2013 205,000 3.550%27,615.00 232,615.00 260,230.00 06/01/2014 23,976.25 23,976.25 12/01/2014 235,000 3.650%23,976.25 258,976.25 282,952.50 06/01/2015 19,687.50 19,687.50 - 12/01/2015 250,000 3.750%19,687.50 269,687.50 289,375.00 06/01/2016 15,000.00 15,000.00 12/01/2016 260,000 5.000%15,000.00 275,000.00 290,000.00 06/01/2017 8,500.00 8,500.00 - 12/01/2017 270,000 5.000%8,500.00 278,500.00 287,000.00 06/01/2018 1,750.00 1,750.00 12/01/2018 70,000 5.000%1,750.00 71,750.00 73,500.00 1,290,000 193,057.50 1,483,057.50 1,483,057.50 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 21 COST OF ISSUANCE City of Renton Water & Sewer Revenue Refunding Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS Cost of Issuance $/1000 Amount Bond Counsel Financial Advisor S&P rating fee Escrow Agent Escrow Verification P/OS distribution 3.26442 30,000.00 0.81610 7,500.00 1.14255 10,500.00 0.11970 1,100.00 0.27203 2,500.00 0.01088 100.00 5.62568 51,700.00 Nov 7, 2012 9:29 am Prepared by Seattle-Northwest Securities Corp.(k:\...LRENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 22 CERTIFICATE OF MANUAL SIGNATURE STATE OF WASHINOTON ) COUNTY OF KING ) I, the und~’sign~ affiant, being first duly ~wom, on oath depose and say: My name is Denis Law have bcmn duly cho~ and am qualified and ~ting ~ The signature appearing abovs is my trae manual signature. This affidavit is made to comply with Ch. 86, Wash, Seas. Laws of 1969. SUBSCRIBED AND SWORN TO b~fore me this .L~day of January, 2008. Not~y PFbl~c [Pfint~ N~e] ~ERTIFI~AT~ ~F MAILING th¢ duly ¢5osen of the ..................law Qi~ .......... of ....K~L Preston Gates Ellis LLP DO HEREBY CERTIFY that on the 7~ day of’Jammry, 20081 mailed to the Secretory of State of -theSm~ of W~shinSt~ postage p~.paid, c~.ificat~s of manual sisnature in the form ~ hereto executed by the foHow~n8 officials: ~ame Po$tth~n Denis Law Mayor, City of Renton, WashinBton Dated ,1/710S CERTIFICATE OF MANUAL SIGNATURE STATE OF WASHINGTON ) )~: COUNTY OF K!NO ) the undersigned s/~isnt, bein8 first duly sworn, on oath d~os~ and say:. l~nl;lje I. Walton ........_ . , I hsve been dubd chosen end mn qualifial and acting as This ~Edavit is msde to comply with Cb. ~, Wesh. Sess. Lsws of’ 1969. CERTIFlCAT~ OF MAILING , the duly chosen of the .......law finn of DO HEREBY CEIq.TIFY that on the 6* day of November, 2007 I mailed to the Secmm7 of State of ~he State of Washington, postage prepaid, cetq~catu of msnual signature in the form ~ hereto executed by the. followin~ officiO: Po~itio~ Bom~e 1. Walton City Clerk City ofRenton,_ Washir~m Mayor Kathy Keolker City of Rcaton. Washington CERTIFICATE OF AUTHORIZATION OF AUTHORIZED SIGNER FOR THE BANK OF NEW YORK MELLON ~d_ , certify that I am the ,~,~ THE BANK OF NEW YORK MELLON, New York, New York, fiscal agency for the State of Washington and Bond Registrar for the City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 2012; and I further certify that-~)%~ ,~./~,, ~ ~,z.~e,q,~.is a c,d ,,z_~_/5, ,.~’x.. of The Bank of New York Mdlon and is authorized by the Bank to sign the above b~nds 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 7th day of December, 2012. Authorized Signer CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 - $9,190,000 CERTIFICATE OF AUTHENTICATION, REGISTRATION AND DELIVERY OF BONDS The Bank of New York Mellon of 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: Bond Issue City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $9,190,000 Number of Unauthenticated Bonds Received 15 (2) On the date hereof the Registrar authenticated and registered the City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 2012 in the aggregate principal amount of $9,190,000 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(s). 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) CUSIP Numbers have been assigned to the Bonds as follows: Maturity Years Principal Interest CUSIP (December 1)Amounts Rates Nos. 2013 $40,000 2.00% 2014 35,000 2.00 2015 35,000 2.00 2016 35,000 2.00 2017 35,000 2.00 2018 100,000 3.00 2019 220,000 2.75 2020 280,000 3.00 2021 295,000 3.00 2022 305,000 3.00 2023 1,470,000 3.00 2024 1,515,000 3.00 2025 1,560,000 3.00 2026 1,610,000 3.00 2027 1,655,000 3.00 760167UH7 760167UJ3 760167UK0 760167UL8 760167UM6 760167UN4 760167UP9 760167UQ7 760167UR5 760167US3 760167UT1 760167UU8 760167UV6 760167UW4 760167UX2 Dated at New York, New York, as of this 7th day of December, 2012. THE BANK OF NEW YORK MELLON, of New York, New York, as Registrar By ~~: .................... ~"~ Authorized Signer -2- 8038-G I Information Return for Tax-Exempt Governmental Obligations (Rev. September 2011) Department of the Treasury I Internal Revenue Service I~r~il Reporting Authority 1 Issuer’s name City of Renton, Washington 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instructions) ¯Under Internal Revenue Code section 149(e)OMB No. 1545-0720¯ See separate instructions. Caution: ff the issue price is under $100,000, use Form 8038-GC. IfAmended Return, check here ¯ [] 2 Issuer’s employer identification number (EIN) 91-6001271 3b Telephone number of other person shown on 3a 5 Report number (ForlRS Use Only) 7 Date of issue 12107/2012 9 CUSIP number 760167UX2 10b Telephone number of officer or other employee shown on 10a 425-430-6858 4 Number and street (or P.O. box if mail is not delivered to street address)Room/suite 1055 South Grady Way 6 City, town, or post office, state, and ZIP code Renton, Washington 98055 8 Name of issue Water and Sewer Revenue Refunding Bonds, 2012 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information (see instructions) Iwen Wang, Administrative Services Administrator I=,el~|ll Type of Issue (enter the issue price). See the instructions and attach schedule. 11 Education .............................. 12 Health and hospital .......................... 13 Transportation ............................ 14 Public safety ............................. 15 Environment (including sewage bonds) .................... 16 Housing .............................. 17 Utilities .............................. 18 Other. Describe ¯ 19 If obligations are TANs or RANs, check only box 19a .............¯ [] If obligations are BANs, check only box 19b ................¯ [] 20 If obligations are in the form of a lease or installment sale, check box ........¯ [] I1 12 13 14 15 16 17 18 I=,~-111111 Description of Obligations. Complete for the entire issue for which this form is being filed. 21 I t (c)Stated redempti°n I (d) weighted[-I-maturity ~- (a) Final maturity date |b) Issue price price at maturity /average / 1210112027 $9,999,906 $9,190,000/12.2205 years/ I=,~r~=Lvl Uses of Proceeds of Bond Issue (including underwriters’ discount) 22 Proceeds used for accrued interest ..................... 23 Issue price of entire issue (enter amount from line 21, column (b)) ........... 24 Proceedsusedforbondissuancecosts(includingunderwriters’discount)., 24 93,974 25 Proceeds used for credit enhancement ............ 28 25 26 Proceeds allocated to reasonably required reserve or replacement fund .26 27 Proceeds used to currently refund prior issues .........27 28 Proceeds used to advance refund prior issues .........9,904,342 29 Total (add lines 24 through 28) ....................... 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) |-.Rr~ivl 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 ....¯ 32 Enter the remaining weighted average maturity of the bonds to be advance refunded ....¯ 33 Enter the last date on which the refunded bonds will be called (MM/DD/YYYY) ......¯ 34 Enter the datels) the refunded bonds were issued ¯ (MM/DD/YYYY)11117/2004 For Paperwork Reduction Act Notice, see separate instructions, cat. No. 63773S 9,999,906 (e) Yield 1.9789 % 9,999,906 9,998,316 1,590 NIA years 12.5419 years 12/01/2014 Form 8038-G (Rev. 9-2011) Form 8038-G (Rev. 9-2011) I¢~’~iVjl Miscellaneous b b d 39 4O 41a b c d 42 b Page 2 0 0 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) ....1351 Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC) (see instructions) ......................... Enter the final maturity date of the GIC ¯ Enter the name of the GIC provider ¯ Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other govemmantal units ........................0 If this issue is a loan made from the proceeds of another tax-exempt issue, check box ¯[] and enter the following information: Enter the date of the master pool obligation ¯ Enter the EIN of the issuer of the master pool obligation ¯ Enter the name of the issuer of the master pool obligation ¯ If the issuer has designated the issue under section 265(b)(3)(B)(~(lll) (small issuer exception), check box ....¯[] If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box .............¯[] If the issuer has identified a hedge, check here ¯[] and enter the following information: Name of hedge provider ¯ Type of hedge ¯ Term of hedge ¯ If the issuer has supedntegrated the hedge, check box .....................¯[] If the issuer has established wdtten procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructions), check box ........¯ If the issuer has established written procedures to monitor the requirements of section 148, check box .....¯ If some portion of the proceeds was used to reimburse expenditures, check here ¯ [] and enter the amount of reimbursement ......... ¯ Enter the date the official intent was adopted ¯ Signature and Consent Paid Preparer Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and tothe best of my knowledge and belief, they are true, correct; and complete. I further declare that I consent to the IRS’s disclosure of the issuer’s return information, as necessary to process this return, to the person that I have aut.,I)e~ above. ~ /~’~~~.~ .~~~Z~/~/Z. )Iwen Wang, Admin Services Administrator ¯Signature of issu ’e~s.aut~ed re~-~’~ive f Date /Type or pdnt name and title Print/Type preparer’s name Date Che~,k [] if [PTIN self-er~)loy~. ~.,~ P01066582 Firm’s name ¯Pacifica Law Firm’s EIN I~45-1446871 Firm’s address ¯1191 Second Ave, Suite 2100, Seattle, WA 98101 Phone no.(206) 245-1"/00 Form 8038-G (Rev. 9-2011) AFFIDAVIT OF MAILING STATE OF WASHINGTON ) COUNTY OF KING ) Kristin Patterson, being duly sworn, deposes and says that she is a citizen of the United States and over the age of eighteen years; that she is a resident of Snohomish County, Washington. That on February 12, 2013, at ~:~(1~lth e~’~’~’~ta~~oShe caused IRS Form 8038-G, completed by the City of Renton, Washington, w" .c~t,~.t t~and Sewer Revenue Refunding Bonds, 2012, to be mailed by depositing the same States mail, in a sealed envelope, certified delivery, first class, postage addressed to the Department of the Treasury, Internal Revenue Service Utah, 84201-0074. I certify that I know or have satisfactory evidence that Kristin Patterson is the person who appeared before me, and ~d person acknowledged that ~ signed this instrument, and acknowledged it to be~ free and voluntary act for the uses and purposes mentioned in the instrument. Print Name ~,’l{ /- My commission expires (Use this space for notarial stamp/seal) rrl nJ r-i r7 r-1 Certified Fee (Endorsement Required) Restricted Delivery Fee(Endorsement Required) Total Po~tage & Fees ¯ Complete Items 1, 2, and 3. Also complete ¯Pdnt your name and address on the reverse so that we can retum the card to you. ¯Attach this card to the back of the mailplece, A. Signature X [] Addresese B. Received I~Date of Delivery Yes ’ 0 F.xpre~ M~ [] P, eglst~m~l [] Retmn Receipt for Memhaedlse [] Insured Mail [] C.O.D. Ps Form 3811, Feb~.~y 2o04 7011 0470 0002 0880 ~8293 RECEIPT FOR BOND PROCEEDS I, Iwen Wang, Administrative Services Administrator of the City of Renton, Washington (the "City"), have received fi’om Seattle-Northwest Securities Corporation, as the underwriter (the "Underwriter"), the City’s Water and Sewer Revenue Refunding Bonds, 2012, in the aggregate principal mount of $9, t 90,000 (the "Bonds"). Source of Funds Principal Amount of Bonds Plus: Original Issue Premium Less: Underwriter’s Discount Less: Official Statement Costs to Underwriter Total Funds transferred by Underwriter Plus: City Contribution Total Sources of Funds $ 9,190,000.00 809,905.90 (42,274.00) . (100.00) $ 9,957,531.90 2,909,745.00 $~. 12.867.276.90 Distribution of Funds ¯To: City of Renton Deposit to Reserve Fund Deposit to Bond Fund To: U.S. Bank, National Association Deposit to Refunding Account Deposit to Costs of Issuance Fund Total Funds Disbursed Dated this 7t~ day of December, 2012. $2,909,745.00 1,590.40 $ 2,911,335.40 $ 9,904,341.50 51,600.00 $9,955,941.50 CITY OF RENTON, WASHINGTON RECEIPT FOR BONDS Receipt of the City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 2012, dated as of the date hereof, in the aggregate principal amount of $9,190,000, is hereby acknowledged on behalf of the Purchaser. Dated this 7th day of December, 2012. SEATTLE-NORTHWEST SECURITIES CORPORATION Seattle, Washington !!!SNW Closing Memorandum Re:City of Renton, Washington $9,190,000 Water and Sewer Revenue Refunding Bonds, 2012 Dated: December 7, 2012 From:Justin Mon Wai, Assistant Vice President Seattle-Northwest Securities Corporation Date:November 30, 2012 1420 Fifth Avenue Suite 4300 Seattle, WA, 98101 Closing Closing will occur at 9 a.m. on Friday, December 7th via conference call initiated by Pacifica Law Group LLP. Please use the following conference call instructions: Dial-in: 1-888-909-7654 Moderator Pass Code: 7466612 Participant Pass Code: 242243 Funds Seattle-Northwest Securities Corporation will initiate the following transactions: Transaction #1: Transfer Amount: To: ABA Number: Account Number: Account Name: Attention: $1,590.40 (Federal Funds) US Bank Washington 125000105 153500698326 City of Renton Iwen Wang, (425) 430-6858 Transaction #2: Transfer Amount: BBK: BNF: OBI: Reference: Attention: $9,955,941.50 (Federal Funds) U.S. Bank ABA #091000022 U.S. Bank National Association/AC #180121167365 Corporate Trust City of Renton, Water & Sewer Revenue Ref. Bonds, 2012 Carolyn Morrison, (206) 344-4678 Page 2 The following is a summary of the sources of funds for the Bonds and how the City and Escrow Agent will apply those funds: Sources of Funds Bond Proceeds Principal .Amount Plus: Premium Less: (P)OS Printing and Mailing Less: Underwriter’s Discount Total Sources of Funds 9,190,000.00 809,905.90 (100.00) (42,274.00) 9.957..531.90 Distribution of Funds .City of Renton Additional Proceeds (Deposit to Bond Fund)1,590.40 U.S. Bank National Association, Escrow Agent Deposit to Escrow Account to buy U.S. Government securities (1) Escrow Beginning Cash Deposit Costs of Issuance (2) Total to the Escrow Agent: Total Funds Disbursed 9,904,340.00 1.50 51,600.00 9,955,941.50 9.957.531.90 (1)A list of the United States government securities to be purchased by the Escrow Agent is shown in Exhibit A. (2)See Exhibit B for a list of the costs of issuance to be paid at closing by the Escrow Agent. Note: The City intends to deposit $2,909,745.00 from available funds of the City into their Reserve Fund at closing. Such amounts will be sufficient to satisfy the Reserve Requirement on the closing date ($2,909,745.00). The final debt service schedule and pricing report for the Bonds are attached as Exhibits C and D. Debt service payments for the non-callable portion of the Refunded Bonds are shown as Exhibit E. If you have any questions, please contact Lindsay Sovde at (206) 628-2875 or Justin Mon Wai at (206) 689-2784. Attachments cc:Iwen Wang, City of Renton Jamie Thomas, City of Renton Deanna Gregory, Pacifica Law Group LLP Stacey Lewis, Pacifica Law Group LLP Jon Jurich, Pacifica Law Group LLP Kristin Patterson, Pacifica Law Group LLP Jane Towery, Piper Jaffray & Co. Carolyn Morfison, U.S. Bank National Assodation Sadie Richards, The Bank of New York Mellon Lindsay Sovde, Seattle-Northwest Securities Corporation Dorothy Michak, Seattle-Northwest Securities Corporation Joan Roddy, Seattle-Northwest Securities Corporation Lisa Krulish, Seattle-Northwest Securities Corporation Laura Westphal, Seattle-Northwest Securities Corporation EXHIBIT A ESCROW COST DETAIL City of Rent~ Water & Sewer Revenu~ Refunding Bonds, 2012 (BQ) (partial Ref 04) FINAL NUMBERS Type of Maturity Per Total Security Date Amount Rate Cost Global Proceeds Escrow: SLGS 06/01/2013 215,047 0.130%215,047.00 SLGS 12/01/2013 214,472 0.160%214,472.00 SLGS 06/01/2014 214,809 0.190%214,809.00 SLGS 12/01/2014 9,260,012 0.240%9,260,012.00 9,904,340 9,904,340.00 Purchase Cost of Cash Total Date Secmilies D~3osit Escrow Cost Yield Global Pr~eeds Escrow: 12/07/2012 9,904,340 1.50 9,904,341.50 0.237690% 9,904,340 1.50 9,904,341.50 Nov7,2012 9:29mn PmperedbySeattle-NorthwestSevta’itiesCorp.(k:\..?uRENTON:RENTON-R04WS_BQ,R04WS_BQ) Pagel3 EXHIBIT B City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 Dated: December 7, 2012 Costs of issuance to be paid by the Escrow Agent upon receipt of invoice: Description Bond and Disclosure Counsel Financial Advisor Rating Fee Escrow Verification Escrow Agent Subtotal Firm Pacifica Law Group LLP Piper Jaffray & Co. Standard & Poor’s Grant Thornton LLP U.S. Bank National Association Costs of issuance to be paid directly at closing: Description Official Statement Printing and Mailing Combined Total Firm Seattle-Northwest Securities Corporation Total $ 30,000.00 7,500.00 10,500.00. 2,500.00 11100.00 51,600.00 Total 100.00 EXHIBIT C BOND DEBT SERVICE City of Rent~m Water & Sewer Revenue Refunding Bonds, 2012 (BO.) (Partial Ref 04) FINAL NUMBERS Period Ending 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/’2016 06/01,v2017 12/01/2017 06/01/2018 12/01/2018 06/01/2019 12/01/2019 06/01/2020 12/01/2020 06/01/2021 12/01/2021 06/01/2022 12/01/2022 06/01/2023 12/01/2023 06/01/2024 12/01/2024 06/01/2025 12/01/2025 06/01Y2026 12/01/2026 06/01/2027 12/01/2027 Annual Pdncipel Coupoa Interest Debt Se~ice Debt Service 40,000 35,000 35,000 35,000 35,000 1oo, ooo 22o,ooo 280,000 295,000 3o5,000 1,470,000 1,515,000 1,560,000 1,610,000 1,655,000 9,190,000 2.000% 2.000% 2.000% 2.000% 2.000% 3.000% 2.750% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 132,119.17 132,119.17 136,675.00 176,675.00 136,275.00 136,275.00 136,275.00 171,275.00 135,925.00 135,925.00 135,925.00 170,925.00 135,575.00 135,575~00 135,575.00 170,575.00 135,225.00 135,225.00 135,225.00 170,225.00 134,875.00 134,875.00 134,875.00 234,875.00 133,375.00 133,375.00 133,375.00 353,375.00 130,350.00 130,350.00 130,350.00 410,350.00 126,150.00 126,150.00 126,150.00 421,150.00 121,725.00 121,725.00 121,725.00 426,725.00 I17,150.00 I17,150.00 117,150.00 1,587,150.00 95,100.00 95,100.00 95,100.00 1,610,100.00 72,375.00 72,375.00 72,375.00 1,632,375.00 48,975.00 48,975.00 48,975.00 1,658,975.00 24,825.00 24,825.00 24,825.00 1,679,825.00 3,364,594.17 12,554,594.17 308,794.17 307,550.00 306,850.00 306,150.00 305,450.00 369,750.00 486,750.00 540,700.00 547,300.00 548,450.00 1,704,300.00 1,705,200.00 1,704,750.00 1,707,950.00 1,704,650.00 12,554,594.17 Nov7, 2012 9:29 am PzqmredbySeattle-Noahwest Seeurilies Corp.(k:\...\RENTON:RENTON-R04WS_BQ,R04WS_BQ) Page 5 EXHIBIT D Date BOND PRICING City of P,.e~ton Water & Sewer Revenu~ Refun~ng Bonds, 2012 (BQ) (Partial Ref 04) FINAL NUMBERS 12/01/2014 12/01/2016 12/01/2018 12/01/2019 12/01/2022 12/01/2026 12/01/2027 40,000 2.0009%0.400~101.568 627.20 35,000 2.000%0.480%102.996 1,048.60 35,000 2.000%0.620%104.072 1,425.20 35,000 2.000%0.720%105.017 1,755.95 35,000 2.000~0.870%105.499 1~24.65 100,000 3.000%1.050%111.279 11,279.0@ 220,000 2.750%1.230%110.141 22,310.20 280,000 3.000~1.430%111.804 33,051.20 295,000 3.000%1.620%111.493 33,904.35 305,000 3.000%1.80~1 110.920 33,306.00 1,470,000 3.000%1.860%110.342 C 1.949%12/01/2022 100.000 152,027.40 1,~15,000 3.000%1.940%109.578 C 2.092%12/01/2022 100.000 145,106.70 1 ~60,000 3.000~2.060~I08.442 C 2.247%12/01/2022 100.000 131,695.20 1,610,000 3.000%2.150e~107.600 C 2.359%12/01/2022 100.000 I22~360.00 .1,655,000 3.000%2.200~107.135 C 2.429%12/01/2022 104).000 118,084.2~ 9,190,000 809505.90 lrl~~e COWpOa 06/01/2013 Par Amount 9’190,000.00 l~chase Price Ac~ued Inter~t 9~99~)5.90 108.812904% -42,274.00 .0.460000% 9,957,63L90 108.352904% Nov7,2012 9:29am PreparedbySeattle.NorthwestSecuri~esCo~.(k:\...’~,.ENTON:RENTON-R04WS_BQ,R04WS_BQ) Page4 EXHIBIT E UNREFUNDED BOND DEBT SERVICE City of R~nt(m Water & Sewe~ I~.evcnu~ R~fun~ing Bonds, 2012 (BQ) (PaPal Ref 04) FINAL NUMBERS Period Ending 06/01/2013 12/01/2013 06/01/2014 12/01/2014 06/01/2015 12/01/2015 06/01/2016 12/01/2016 06/01/2017 12/01/2017 06/01/2018 12/01/2018 Annual Principal Coupon Interest Debt Service Debt Service 205,000 235,000 250,000 260,000 270,000 70,000 27,615.00 27,615.00 3.550%27,615.00 232,615.00 260,230.00 23,976.25 23,976.25 3.650%23,976.25 258,976.25 282,952.50 1~687.50 19,687.50 3.750%19,687.50 269,687.50 289,375.00 15,000.00 15,000.00 5.000%15,000.00 275,000.00 290,000.00 8,500.00 8,500.00 5.000%8,500.00 278,500.00 287,000.00 1,750.00 1,750.00 5.000%1,750.00 71,750.00 73,500.00 1,290,000 193,057.50 1,483,057.50 1,483,057.50 Nov7,2012 9:29am l~paredbySeatfle-NorthwestSecta’itiesCorp.(k:\...W, ENTON:RENTON-R04WS_BQ,R04WS_BQ) Page21 STATE OF WASHINGTON DEPARTMENT OF COMMERCE 906 Columbia Street SW P.O. Box 42525 Olympia, WA 98504-2525 Phone: 360/725-5021 Fax: 360/586-4162 BOND 101 REPORT FORM Issue ID: 1301-019 Date Submitted: 01/10/2013 Name of Issuer:City of Renton Address of Issuer:1055 S. Grady Way Renton, WA 98055 Issue Type:City/Town Principle User, if different than issuer: Counties in which the entity using King the bond proceeds is located:[]Various Counties - More than four []Statewide Was this bond voter approved?[]Yes ¯No Exact title of issue:Water and Sewer Revenue Refunding Bonds, 2012 Issue Sale Method:Negotiated Sale If Competitive Bid, number of bids: Debt Type:Revenue Bond Debt Category:Bond Series:2012 New/Refund/Combo:Refund Dated Date of Issue: 12/07/2012 Issue Closing Date: 12/07/2012 Date of Issue Sale: 11/07/2012 Issue Maturity Date: 12/01/2027 Purpose of Proceeds:Refunding a portion of the City’s Water and Sewer Revenue Bonds, 2004 Purpose Type:Other Is thisa Bond Cap issuance?[] Yes ¯No If yes: Bond Cap Use Category: Project Title: Bond Cap Amount: Tax-Exempt Par Value: $9,190,000.00 INet Tax-Exempt Interest Rate: 2.309297%[] Variable Taxable par Value: $0.00 Net Taxable Interest Rate: 0%[] Variable Total Par Value: $9,190,000.00 Discount: $0.00 Premium: $809,905.90 Printed on 1/10/2013 10:46:59 AM Page 1 of 3 STATE OF WASHINGTON DEPARTMENT OF COMMERCE 906 Columbia Street SW P.O. Box 42525 Olympia, WA 98504-2525 Phone: 360/725-5021 Fax: 360/586-4162 Underlying security that supports the debt (e.g. taxes or other revenue streams Gross Underwriting Spread: Underwriting Spread per $1,000: Bond Counsel Fee: Legal/Underwriter’s Counsel Fee: Ad minsitrative/Commission Fee: Feasiblity Study Cost: Rating Agency Fee: Trustee Fee: Credit Enhancement: Escrow Costs: Financial Advisor Fee: Bond Insurance: Printing, inc. Office Statement: Out-of-State Travel: Miscellaneous: Name of Financial Advisor: Name of Bond Counsel: Name Of Lead Underwiter(s): Name Of Company Insuring Bond: Name of Bond Registrar: Name of Trustee: water and sewer revenues $42,274.00 $4.60 $20,0O0.00 $o.oo $o.oo $o.oo $10,500.00 $0.00 $0.00 $3,600.00 $7,50O.0O $0.00 $100.00 $o.oo $10,000.00 [] Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate []Estimate Piper Jaffray & Co. Pacifica Law Group LLP Seattle-Northwest Securities Corporation N/A The Bank of New York Mellon N/A Standard & Poor’s:AA+ Moody’s:N/A Fitch:N/A Are bond covenants available?¯Yes [] No Is an Official Statement available?¯Yes [] No Reporter Name:Kristin Patterson Title:Paralegal Affiliation:Pacifica Law Group LLP Printed on 1/10/2013 10:46:59 AM Page 2 of 3 STATE OF WASHINGTON DEPARTMENT OF COMMERCE 906 Columbia Street SW P.O. Box 42525 Olympia, WA 98504-2525 Phone: 360/725-5021 Fax: 360/586-4162 Address: Email: Phone: 1191 2nd Ave, Suite 2100 Seattle, WA 98101-1758 kristin.patterson@pacificalawgroup.com (206) 245-1704 Printed on 1/10/2013 10:46:59 AM Page 3 of 3 UNITED STATES OF AMERICA R-I ~ ’~ $40,000 STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 INTEREST RATE:MATURITY DATE:CUSIP NO.: 2.00%DECEMBER 1, 2013 760167UH7 REGISTERED OWNER: CEDE & Co. PRINCIPAL AMOUNT: FORTY THOUSAND AND NO 100/DOLLARS 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 June 1, 2013, 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 p_’,r~,, ipal shall be paid’as provided in the Blanket Issuer ~L~,t,t, er 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. 5672 of the City adopted on October 15, 2012 (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 fun&~ 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, rote of interest and date of maturity in the aggregate principal amount of $9,190,000. The bonds of this issue are being issued for the purpose of refunding certain outstanding water’ and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds of this isueares b" "t ede t ............s u 9ect o r mp ~on prior to me~r scneomeo maturities as provinea in the Bond Ordinance and in the Bond Purchase Contract. The bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial.institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund 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. Page 1 of 2 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 dmes provided by the Bond Ordinance. To th~ 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 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 Parity 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 bonds of this issue are issued under and in accordance ~vith 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. 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 7th day of December, 2012. CITY OF RENTON, WASHINGTON Mayor ATTEST: BONNIE I. WALTON, City Clerk CERTIFICATE OF AUTHENTICATION Date of Authentication:,2012 This bond is one of the bonds described in the within-mentioned Bond Ordinance and is one of the Water and Sewer Revenue Refunding Bonds, 2012 of the City of Renton, Washington, dated December 7, 2012. WASHINGTON STATE FISCAL AGENCY, Registrar Authorized Signer Page 2 of 2 PACIFICA LAW GROUP December 7, 2012 T 206.245.1700 1191 2nd Avenue, Suite 2100 Seattle, WA 98101-2945 pa¢ificalawgroup.com City of Renton, Washington Renton, Washington City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $9,190,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City"), in connection with the issuance of its Water and Sewer Revenue Refunding Bonds, 2012, in the aggregate principal amount of $9,190,000 (the "Bonds"). The Bonds are being issued pursuant to Ordinance No. 5672 of the City adopted on October 15, 2012 (the "Bond Ordinance"), to refund certain water and sewer revenue bonds and to pay costs of issuance of the Bonds. Capitalized terms used in this opinion have the meanings given such terms in the Bond Ordinance. In connection therewith, we have examined duly certified copies of certain proceedings of the City Council relating to the authorization and issuance of the Bonds, including the Bond Ordinance, the Preliminary Official Statement dated October 31, 2012, and the Official Statement dated November 7, 2012, and such other documents as we deemed necessary to render this opinion. In our capacity as bond counsel, we also have examined originals or reproduced or certified copies of all such other records, agreements, communications, certificates of officers and other instruments of the City, as well as such certificates of public officials and other documents as we have deemed relevant and necessary as a basis for the opinions set forth below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or reproduced copies. As to various questions of fact and material to such opinions, we have relied upon certificates of officers of the City and upon the representations and warranties of the City set forth in the Bond Ordinance and related documents. City of Renton December 7, 2012 Page 2 Based upon such examination, and subject to the qualifications and assumptions set forth herein, it is our opinion that: 1. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Ordinance is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. 2. The statements contained in the Official Statement (except for information regarding The Depository Trust Company and its book-entry only system) under the captions "INTRODUCTION," "THE BONDS," "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," "CONTINUING DISCLOSURE UNDERTAKING," "TAX MATTERS" and in "APPENDIX A - COPY OF THE BOND ORDINANCE," insofar as such statements purport to summarize provisions of the Bonds, the Bond Ordinance and the continuing disclosure undertaking set forth in the Bond Ordinance and to describe the treatment of interest on the Bonds under Federal income tax laws, present a fair and accurate summary of such provisions. 3.We also have examined information made available to us in the course of our participation in the preparation of the Preliminary Official Statement and the Official Statement as Bond Counsel, including legal matters and certain records, documents and proceedings, and we have participated in telephone conferences with, among others, representatives of the City’s financial advisor and the City, at which conferences the contents of the Preliminary Official Statement and the Official Statement were discussed; however, our examination of information and participation in such conferences does not necessarily constitute such diligence as may be specified, required or implied in Sections 12(b) and 17 of the Securities Act of 1933, as amended, Section 10(b) of the Securities Exchange Act of 1934, as amended, and similar provisions under state securities or "blue sky" laws or regulations promulgated pursuant thereto, to the extent such provisions and regulations may be applicable (and no opinion is expressed as to such applicability). Without undertaking to determine independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, we have no reason to believe that the Official Statement as of its date or as of this date contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading (except that we express no opinion or belief with respect to any information relating to The Depository Trust Company and its book- entry only system or financial, operating, accounting or statistical data contained in or incorporated into the Official Statement or any information under the headings "FINANCIAL ADVISOR" or "UNDERWRITING"). QUALIFICATIONS AND ASSUMPTIONS The opinions expressed above are subject to the following qualifications and assumptions: bankruptcy, All opinions are subject to qualification in respect of: (a) the effects of insolvency, conservatorship, receivership, reorganization, an’angements, City of Renton December 7, 2012 Page 3 moratorium, fraudulent conveyance and transfer, forfeiture and other similar laws applicable to or affecting creditors’ rights; and (b)the effects of principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and rules governing specific performance, injunction relief, and other equitable remedies, regardless of whether raised in a proceeding in equity, at law, or otherwise. 2. By stating that an agreement is enforceable in accordance with its terms, it is our opinion that while enforceability of certain provisions, remedies, and waivers contained in such agreement may be limited by applicable constitutional and other law, there exist legally adequate remedies for the practical realization of the principal benefits intended to be provided thereby, subject to the economic consequences of any delay which may result from such applicable constitutional or other law. 3. Our opinions that agreements are enforceable in accordance with their terms are subject to the context rule interpretation of contracts under the laws of the State of Washington. Under such rule, even though terms of a contract may be unambiguous, courts will admit extrinsic evidence to interpret the contract. 4. Without limiting other qualifications contained herein, we express no opinion with respect to the enforceability of contractual provisions: (a) waiving broadly or vaguely stated rights or unknown future rights; (b)waiving defenses or waiving rights conferred by constitution or statute; (c) purporting to fix evidentiary standards; (d) allowing a third party to take action as attorney-in-fact or otherwise for the City; (e) providing for a penalty or liquidated damages; (f) allowing for severability of clauses or provisions; (g) stating that the determination of a party shall be final, binding or conclusive; and (h)making ineffective oral waivers or modifications. 5. We have assumed: (a) that each party to the Bond Ordinance and the Bond Purchase Agreement (the "Transaction Documents"), other than the City, validly exists and has and had all necessary legal and corporate authority to execute, deliver and perform the Transaction Documents to which it is a party and the execution and performance of the Transaction Documents and such other documents as may be executed in connection therewith by such parties other than the City will not violate or breach any corporate or other document or instrument to which such person is party or by which it is bound; and (b) the genuineness of all signatures, the authenticity and completeness of all documents submitted to us as originals, the legal competence of all natural persons who are signators thereto, and the conformity to original documents of all documents submitted to us as copies. 6. Rights to indemnification may be limited by considerations of public policy, by restrictions on municipal corporations, and by provisions of securities and other applicable laws. 7. We express no opinion as to matters to title, ownership, security interests or priorities of security interest or liens with respect to the real property. 8. If the Transaction Documents were deemed by a Washington court not to qualify as a "credit agreement" as defined at RCW 19.36.100 through .900, provisions of the Transaction City of Renton December 7, 2012 Page 4 Documents stating that prior or contemporaneous oral agreements are superseded by, merged into and may not vary the Documents will not be enforceable under the laws of the State of Washington. 9. When we use the phrase "to the best of our knowledge," we mean that nothing has actually come to the attention of the attorneys serving as Bond Counsel and Disclosure Counsel to the City during the course of our representation of the City in connection with the Transaction Documents that is inconsistent with the statement so qualified, but we have not undertaken any independent investigation with respect thereto. 10. We express no opinion with respect to any laws other than the laws of the State of Washington and the laws of the United States (as interpreted in the Ninth Circuit if there is a split among circuit courts of appeal). This opinion speaks only as of the date hereof and we assume no obligation to update or supplement this opinion should such laws change by legislative action, judicial decision or otherwise. This opinion is solely for your benefit and may not be relied upon by, nor copies delivered to, any other person (other than your legal and professional advisors, but only for purposes of their representations of and advice to you in connection with the Transaction Documents) without our prior written consent. We consent to references to us contained in the Official Statement. Very truly yours, PACIFICA LAW GROUP LLP PACIFICA LAW GROUP December 7, 2012 T 206.245.1700 1191 2nd Avenue, Suite 2100 Seattle, WA 98101-2945 pa¢ificalawgroup.¢orn City of Renton Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington U.S. Bank National Association Seattle, Washington City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $9,190,000 Ladies and Gentlemen: We are bond counsel to the City of Renton, Washington (the "City"), and have acted as such in connection with the issuance and sale by the City of its Water and Sewer Revenue Refunding Bonds, 2012, in the aggregate principal amount of $9,190,000 (the "Bonds"), issued for the purpose of refunding certain outstanding bonds of the City (the "Refunded Bonds"). The Bonds are issued pursuant to Ordinance No. 5672 passed by the City Council on October 15, 2012 (the "Bond Ordinance"). Capitalized terms used in this opinion which are not otherwise defined shall have the meanings given to such terms in the Bond Ordinance. A portion of the proceeds of the Bonds will be used by U.S. Bank National Association (the "Escrow Agent"), to acquire certain noncallable U. S. Government Obligations ("Escrowed Securities"), described in the Escrow Deposit Agreement, dated as of December 7, 2012, between the City and the Escrow Agent (the "Escrow Agreement"), the proceeds of which shall mature in amounts sufficient to pay to the date of maturity thereof all remaining outstanding principal and interest on the Refunded Bonds. The sufficiency of such escrow and the Escrowed Securities maintained pursuant to the Escrow Agreement has been verified by Grant Thornton LLP. For purposes of the opinions rendered herein, we have relied, without independent investigation, on the verification set forth therein and on the performance under the terms of the Escrow Agreement by the Escrow Agent, respectively. City of Renton, Washington Seattle-Northwest Securities Corporation U.S. Bank National Association December 7, 2012 Page 2 Based upon the foregoing, we are of the opinion that the Refunded Bonds have been defeased and discharged in accordance with the ordinance authorizing their issuance, are deemed paid and no longer outstanding and have no further claim of any kind or under any circumstances to be paid from any funds or money of the City. Very truly yours, PAC]FICA LAW GROUP LLP PACIFICA LAW GROUP December 7, 2012 T 206.245.1700 1191 2nd Avenue, Suite 2100 Seattle, WA 98101-2945 pa¢ificalawgroup.com City of Renton, Washington Renton, Washington Seattle-Northwest Securities Corporation Seattle, Washington Re:City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 -- $9,190,000 Ladies and Gentlemen: We have acted as bond counsel to the City of Renton, Washington (the "City"), and have examined a certified transcript of all of the proceedings taken in the matter of the issuance by the City of its Water and Sewer Revenue Refunding Bonds, 2012, in the principal amount of $9,190,000 (the "Bonds") issued pursuant to Ordinance No. 5672, passed by the Council on October 15, 2012 (the "Bond Ordinance"), to refund certain water and sewer revenue bonds and to pay costs of issuance of the Bonds. Capitalized terms used in this opinion 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 and the Bond Purchase Contract. 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. 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 payable solely out of special funds of the City known as the Bond Fund and the Reserve Fund, except to the extent that the enforcement of the rights and remedies of the holders of the Bonds may be limited by laws relating to bankruptcy, reorganization, insolvency, moratorium or other similar laws of general application affecting the rights of creditors, 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 l~imited 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 December 7, 2012 Page 2 3. The City has irrevocably bound itself to set aside and pay into said Bond Fund out of Gross Revenue of the Waterworks Utility certain fixed amounts necessary to pay and secure the payment of the principal of and interest on the Bonds as the same become due. The City has further pledged that the payments to be made into the Bond Fund out of Gross Revenue of the Waterworks Utility shall constitute a lien and charge upon such Gross Revenue superior to all other charges of any kind or nature whatsoever, except for Maintenance and Operation Expense of the Waterworks Utility, and equal in rank to the lien and charge on such Gross Revenue to pay and secure the payment of the principal of and interest on the City’s Outstanding Parity Bonds and any Future Parity Bonds that may be issued after this date on a parity with such bonds and the Bonds. The City has reserved the right to issue Future Parity Bonds on the terms and conditions set forth in the Bond Ordinance. 4. Interest on the Bonds is excludable from gross income for federal income tax purposes under existing law 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. The City has designated the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code. 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. 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, PACIFICA LAW GROUP LLP � /� � /,1��/,,�� J �i'�f�F RENTON ��7 i��Q �"✓�""'`� � � � �IAR 2 6 2013 C� ��os45��r �-- �'"'' PACI FICA 7191 2nd Avenue,Suite 2100 LAW GROUP RECEIVE� seatt�e.wA 98�0�-2945 �I'f�CIERIC'S OFFICE R.EC]EIVED pacificalawgroup.com ii March 14, 2013 MAR 1 � 2013 �` ��z"^�^-`� BY: C � 'f-Z� �j� � VIA US MAIL �� City of Renton Seattle-Northwest Securities Corporation � �� Piper Jaffray & Co. , The Bank of New York Mellon U.S. Bank National Association Re: City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012 —$9,190,000 Dear Finance Team: �,,, Enclosed is the final bond transcript with respect to the above-referenced issue. It was a pleasure working with you. Best regards, , PACI CA LAW GRO L P � � By Kristin Pa terson Paralegal Enclosure–CD Transcript � L d[Z ��nd ��1�. STATE OF WASHINGTON, COUNTY OF KING } ciTY oF xENTON AFFIDAVIT OF PUBLICATION NOTnno�F D BY[THEC�S RENTON CITY COUNCIL Fotlowing is a summary of the ordinances adopted by the PUBLIC NOTICE Renton City Council on October Linda M Mills bein first dul sworn on oath that she is the Le al �s,zo�2: � g y g ORDINANCE NO.5671 Advertising Representative of the An Ordinance of the City of Renton, Washington, amending the City of Renton fiscal years 2011/2012 Biennial Budget as Renton Ren orter adopted by Ordinance No. 5583, r and ' thereafter amended by Ordinance Nos. 5595, 5616, � 5638, and 5656 in the amount of $8>496,583, for an amended total a weekly newspaper, which newspaper is a legal newspaper of of$540,ois,�os over the bienni- general circulation and is now and has been for more than six months °"' Effective: 10/24/2012 � prior to the date of publication hereinafter referred to, published in ORDINANCE NO.5672 the English language continuously as a weekly newspaper in King an Ordinance or cne c�ty of Count , Washin ton. The Renton Re orter has been a roved as Re�to�, Washington, authorizing y g P PP the issuance of water and sewer a Legal Newspaper by order of the Superior Court of the State of revenue refunding bonds �n cne Washington for King County. agg�egace principal amount of not to exceed $(0,000,000 for The notice in the exact form annexed was published in regular issues the purpose of refunding a por- of the Renton Reporter (and not in supplement form) which was tion of the City's water and sewer revenue bonds, 2004; providing re ularl distributed to its subscribers durin the below stated eriod. g Y g l� the form, terms and covenants The annexed notice, a: of the bonds; authorizing the Public Notice appoindnent of an escrow agent and execution of an escrow agreement; delegating certain authority to approve the final terms of the bonds; and authoriz- was published on October 19, 2�12. ing the cash redemption of the City's water and sewer revenue The full amount of the fee char ed for said fore oin ublication is ��``"a��`��t��",� refunding bonds, 1998. g g g p . ��. H�C� 'r,, E�ee�c��e: ivisr�o�a t�"10 SUTll Of�l 12.�� ,,.��»��U�� /� �//� Complete text of these ordinanc- j � ,�`:��\{?� �J�'��4�r`�t��/��/ es is available at Renton City ) � �. ^ �T-_�� q[.�r �Q��` �� Hall, 1055 South Grady Way; � ��lG�( ,�. �� . �, �� y and posted at the King Counry � � ,� �-� , - � ` Libraries in Renron, ]00 Mill �=�Linda M. Mills � °.�y� '" s� p Avenue South and 2902 NE 12th Legal Advertising Representative,Renton Reporter ; % R �`� =a= Street. Upon request to the c�ri �i ��- �� 43 q �= Clerk's office, 425 430-6 510, Subscribed and sworn to me this 19t h da o f October, 2012. ;. ,'��, �_ �s '� ,= � - � � � � copies will also be mailed for a f��j.�,��s��`�ti%'�,� fee. � ' �r�!i��y�'t�.?F\�'Po�� Bonnie I.Walton,City Clerk � Published in Renton Reporter: � '��" `^- ��`��'"- �� u'""�l''�— on October 19, 2012. #692182 Kathleen C. Sherman,Notary Public for the State of Washington, Residing in Buckley, Washington � �� .¢ �^�SJ 1 I , `"wrr►' 'w.r+ CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 ORDINANCE N0. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZ[NG THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CtTY'S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTNORIZING THE CASH REDEMPTION OF THE CITY'S WATER AND SEWER REVENUE REFUNDING BONDS, 1998. PASSED: Octoberl5th, 2012 PREPARED BY: PACIFICA LAW GROUP LLP Seattle, Washington � � � r ORDINANCE N0. 56�2 TABLE OF CONTENTS` Section1. Definitions..................................................................................................................... 3 Section 2. Findings Regarding Parity Provisions.......................................................................... 14 Section 3. Authorization and Description of Bonds..................................................................... 14 Section 4. Registration of Bonds and Book-Entry System ........................................................... 15 Section 5. Redemption; Purchase of Bonds................................................................................. 21 Section 6. Priority and Payment from the Waterworks Utility Fund........................................... 25 Section7. Funds and Accounts.................................................................................................... 27 Section8. Covenants.................................................................................................................... 29 Section9. Tax Covenants............................................................................................................. 33 Section 10. Future Parity Bonds................................................................................................... 36 Section11. Form of Bonds........................................................................................................... 39 Section 12. Execution of Bonds....................................................................................................42 Section 13. Lost,Stolen or Destroyed Bonds...............................................................................42 Section14. Sale of Bonds.............................................................................................................43 Section 15. Appiication of Bond Proceeds; Plan of Refunding.................................................... 45 Section 16. Bond Insurance .........................................................................................................48 Section 17. Undertaking to Provide Continuing Disclosure.........................................................48 Section 18. Defeasance of the Bonds .......................................................................................... 53 Section19. Amendments............................................................................................................. 53 Section 20. Call for Redemption of 1998 Bonds.......................................................................... 56 Section 21. Contract; Savings Clause...........................................................................................56 Section 22. General Authorization, Ratification of Prior Acts ..................................................... 57 Section 23. Effective Date of Ordinance..................................................... ........... 57 ...................... ` This Table of Contents is provided for convenience only and is not a part of this ordinance. -i- V � �` CITY OF RENTON,WASHINGTON ORDINANCE N0. 5672 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $10,000,000 FOR THE PURPOSE OF REFUNDING A PORTION OF THE CITY'S WATER AND SEWER REVENUE BONDS, 2004; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; DElEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS; AND AUTHORIZING THE CASH REDEMPTION OF THE CITY'S WATER AND SEWER REVENUE REFUNDING BONDS, 1998. WHEREAS, the City of Renton, Washington (the "City") has created and operates a waterworks utility of the City, including the water, sewer, wastewater and storm drainage systems (the "Waterworks Utility"); and WHEREAS, the City issued and now has outstanding the following series of water and sewer revenue bonds, each being payable on parity from the revenues of the Waterworks Utility: Authorizing Original Outstanding Series Ordinance Principal Amount Principal Amount 1998 4709 $ 6,120,000 $ 1,045,000 2002 4976 11,980,000 1,025,000 2003 5019 8,035,000 415,000 2004 5098 10,335,000 10,335,000 2007 5313 9,750,000 9,705,000 2008A 5313 9,975,000 9,975,000 2008B 5313 2,035,000 2,035,000 (collectively, the "Outstanding Parity Bonds"); and � ORDINANCE N0. 5672 `�" � WHEREAS, the Outstanding Parity Bonds issued under date of November 1, 2004 mature in principal amounts and bear interest as follows: Maturity Date Principal Interest (December 1) Amount Rate 2013 $ 205,000 3.55% 2014 235,000 3.65 2015 250,000 3.75 2024� 4,605,000 5.00 2025 1,600,000 5.00 2026 1,680,000 5.00 2027 1,760,000 5.00 � Term Bond (the "2004 Bonds"); and WHEREAS, the 2004 Bonds maturing on and after December 1, 2015 (the "Refunding Candidates"), are subject to optional redemption, in whole or in part, on any date on and after December 1, 2014, at a price of par plus interest accrued to the date of redemption; and � WHEREAS, after due consideration it appears to this Council that all or a portion of the Refunding Candidates (the "Refunded Bonds") may be defeased and refunded by proceeds of water and sewer revenue refunding bonds authorized herein (the "Bonds") at a substantial savings to the City and its ratepayers; and WHEREAS, the respective ordinances authorizing the issuance of the Outstanding Parity Bonds permit the issuance of additional bonds on a parity with the Outstanding Parity Bonds for refunding purposes if certain conditions are met; and WHEREAS, the City has received a proposal from Seattle-Northwest Securities Corporation, Seattle, Washington (the "Underwriter') and now desires to issue and sell the Bonds to the Underwriter as set forth herein; and -2- � � ORDINANCE N0. 5672 ''� WHEREAS, the Outstanding Parity Bonds issued under date of March 1, 1998 (the "1998 Bonds") maturing on December 1, 2012 and December 1, 2013 are subject to optional redemption, in whole or in part, on any date on and after December 1, 2008, at a price of par plus interest accrued to the date of redemption; and WHEREAS, the City now desires to use available funds of the City refund in whole the outstanding 1998 Bonds on December 1, 2012; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES ORDAIN AS FOLLOWS: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: Acquired Obligations means the Government Obligations acquired by the City under the terms of this ordinance and the Escrow Agreement to effect the defeasance and refunding of the Refunded Bonds. Annual Debt Service for any year means 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. Base Period means any consecutive 12-month period selected by the City out of the 24-month period next preceding the date of issuance of an additional series of Future Parity Bonds. -3- �"' ORDINANCE NO. 5672 `'�` r Beneficiol Owner means 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). eond Fund means that special fund of the City known as the Waterworks Revenue Bond Fund, 2012 created by this ordinance for the payment of the principal of and interest on the Bonds. Bond lnsurance Policy means the municipal bond insurance policy, if any, issued by the Insurer insuring the payment when due of the principal of and interest on all or a portion of the Bonds as provided therein. eond Purchase Contract means the contract for the purchase of the Bonds between the Underwriter and City, executed pursuant to Section 14 of this ordinance. 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. eond Registrar means, initially, 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 interest on and principal of the Bonds. • Bond Year means each one-year period that ends on the date selected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier of the final maturity date of the Bonds or the date that is five years after the date of issuance of the Bonds, Bond Years end on each anniversary of the date of issue and on the final maturity date of the Bonds. -4- � `�'` ORDINANCE NO. 567Z '�+'� Bonds mean the City's Water and Sewer Revenue Refunding Bonds, 2012, authorized to be issued by this ordinance. Call Date for the Refunded Bonds means December 1, 2014. City means the City of Renton, Washington, a municipal corporation duly organized and existing by virtue of the laws of the State of Washington Code means the Internal Revenue Code of 1986, as amended, and shall include all applicable regulations and rulings relating thereto. Commission means the Securities and Exchange Commission. Council means the City Council as the general legislative authority of the City, as duly and regularly constituted from time to time. Coverage Requirement prior to the New Covenant Date means in any calendar year 1.25 times the Maximum Annual Debt Service. From and after the New Covenant Date. the term Coverage Requirement means in any calendar year 1.25 times the Annual Debt Service for such year. Credit Facility means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee or other financial instrument or any combination of the foregoing, which obligates a third party to make payment or provide funds for the payment of tinancial obligations of the City. There may be one or more Credit Facilities outstanding at any time. Designated City Representative means the Mayor, the Chief Administrative Officer and the Finance Director of the City and any successor to the functions of such offices. The signature of one Designated City Representative shall be sufficient to bind the City. -5- �' ORDINANCE NO. 5672 `''� Y 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 between the City and the Escrow Agent to be dated as of the date of closing and delivery of the Bonds. Finance Director means the City's Finance and Information Services Administrator or the successor to such officer. 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 means 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 Outstanding Parity Bonds and the Bonds. Government Obligations means those obligations now or hereafter defined as such in chapter 39.53 RCW. Gross Revenue means 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 -6- � "''� ORDINANCE N0. 5672 �+'` 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. Insurer means the municipal bond insurance company, .if any, selected and designated by the Designated City Representative, pursuant to Section 16 of this ordinance, as issuer of a Bond Insurance Policy for all or a portion of the Bonds. Letter of Representations means the Blanket Issuer Letter of Representations from the City to DTC. Maintenance and Operation Expense means 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. -7- �'` ORDINANCE N0. 5672 � r MaximumAnnual DebtService 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 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. MSRB means the Municipal Securities Rulemaking Board or any successors to its functions. 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 means Gross Revenue less Maintenance and Operation Expense. New Covenant Date means from and after the date when all Outstanding Parity Bonds issued prior to 2007 are no longer Outstanding. 1998 Bond Ordinance means Ordinance No. 4709 adopted by the City Council on March 9, 1998 authorizing the issuance of the 1998 Bonds. 1998 Bonds mean the Outstanding City of Renton, Washington, Water and Sewer Revenue Refunding Bonds, 1998, with a dated date of March 1, 1998. 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 -8- � '�✓ ORDINANCE N0. 5672 `� 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. Outstanding Pority Bond Ordinances mean the ordinances authorizing the issuance of the Outstanding Parity Bonds identified in the recitals to this ordinance. Outstanding Parity Bonds means the parity water and sewer revenue bonds of the City identified in the recitals to this ordinance. Parity Bonds means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. Parity Bond Fund means any fund created for the payment and redemption of Parity Bonds. Parity Requirement means Net Revenues equal to or greater than: (a) 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued; and (b) 100% of Maximum Annual Debt Service for all subordinate lien evidences of indebtedness secured by Gross Revenue. Private Person means any natural person engaged in a trade or business or any trust, estate, partnership, association, company or corporation. -9- �IIi�M'` ORDINANCE N0. 5672 �` • 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 use by all such community groups on an equal basis and such community graups are charged only a de minimis fee to cover custodial expenses. Professiona/ Utility Consultant means 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. Qualified ►nsurance 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 -10- � � ORDINANCE N0. 5672 �` such policy or surety bond, are currently rated in the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. 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 the two highest rating categories by any Rating Agency but no lower than the highest then-existing rating for any of the Parity Bonds. Rate Stabilization Fund means the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. Rating Agency means Moody's, S&P or Fitch. Refunded Bonds means the 2004 Bonds designated by the Designated City Representative pursuant to Section 15. Refunding Account means the account by that name established pursuant to Section 15. Refunding Condidates mean the outstanding 2004 Bonds maturing on and after December 1, 2015. 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 means that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4709. Reserve Requirement prior to the New Covenant Date means Maximum Annual Debt Service. From and after the New Covenant Date the term Reserve Requirement means with -11- �I+' ORDINANCE N0. 5672 �' , 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 means the SEC's Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time. S&P means Standard & Poor's rating Services, a Standard & Poor's Financial Services LLC business, 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. State means the State of Washington. Term Bonds mean any Parity Bonds identified as such in the Bond Purchase Contract or 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 Parity Bonds in accordance with a mandatory sinking fund requirement. Term eond Moturity Year means any calendar year in which Term Bonds are scheduled to mature. 2004 Bond Ordinance means Ordinance No. 5098 adopted by the City Council on November 1, 2004 authorizing the issuance of the 2004 Bonds. -12- � i'r"'` ORDINANCE N0. 5672 �"' 2004 Bonds means the Water and Sewer Revenue Bonds, 2004, of the City issued under date of November 1, 2004, as more particularly described in the recitals of this ordinance. Underwriter means Seattle-Northwest Securities Corporation,Seattle, Washington. Waferworks Utility means 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 means 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 -13- � ORDINANCE N0. 5672 `'�` � 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. Section 2. Findin�s Re�arding Paritv Provisions. 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 the Parity Bond Ordinances for the Outstanding Parity Bonds, and that the issuance of the Bonds will result in a debt service savings for the Waterworks Utility and does not require an increase of more than $5,000 in any year for principal of and interest on the Bonds over and above the payments that were required to be made for the Refunded Bonds. The conditions contained in the Parity Bond Ordinances for the Outstanding Parity Bonds having been complied with or assured, the payments required herein to be made out of the Waterworks Utility Fund into the Bond Fund and the Reserve Fund to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in the Waterworks Utility Fund equal in rank with the tien and charge thereon for the payments required to be made for the Outstanding Parity Bonds. Section 3. Authorization and Description of Bonds. The City is hereby authorized to issue water and sewer revenue refunding bonds(the "Bonds") in an aggregate principal amount of not to exceed $10,000,000 for the purpose of providing the funds necessary to refund the -14- • �' ORDINANCE N0. 5672 �•++ Refunded Bonds and pay all or a portion of the costs incidental to the foregoing and to the issuance of the Bonds. The Bonds shall be designated the "City of Renton, Washington Water and Sewer Revenue Refunding Bonds, 2012" with any additional series designation, if necessary; shall be dated as of their initial date of delivery; shall be fully registered as to both principal and interest; shall be in the denomination of$5,000 each, or any integral multiple thereof within a maturity, provided that no Bond shall represent more than one maturity; shall be numbered separately in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification; shall bear interest from their date, payable semiannually on the interest payment dates set forth in the Bond Purchase Contract; and shall mature on December 1 in the years and principal amounts set forth and approved in the Bond Purchase Contract executed by the Designated City Representative pursuant to Section 14 of this ordinance. The Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall not be general obligations of the City. Section 4. Re�istration of Bonds and Book-Entry System. (a) Bond Registror/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 -15- '�'` ORDINANCE NO. 5672 � • at the option of the Finance Director upon prior notice to the Bond Registrar and a successor Bond Registrar appointed by the Finance Director. No resignation or removal of the Bond Registrar shall be effective until a successor shall have been appointed and until the successor Bond Registrar shall have accepted the duties of the Bond Registrar hereunder. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar's powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication of the Bonds. (b) Registered OwnersFiip. 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 17 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 4(h), but such Bond may be transferred as herein provided. All such payments made as described in Section 4(h) 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 Acceptonce/Letters of Representations. The Bonds initially shall be held 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 -16- � `"�+�' ORDINANCE N0. 5672 �'" 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 by a depository, 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. (dj 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 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 Finance Director pursuant to subsection (2) below -17- �►'' ORDINANCE N0. 5672 `'�` . or such substitute depository's successor; or (C) to any person as provided in subsection (4) below. (2) 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 Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the 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. (3) In the case of any transfer pursuant to clause (A) or (B) of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the 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 Finance Director. (4) 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 Finance Director determines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain physical 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 by a depository. The Finance Director shall deliver a written request to the Bond Registrar, together with a supply of physical 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 on behalf of the Finance Director to the -18- � �'" ORDINANCE NO. 5672 �`�" 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 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 cancef 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 soch Bond is to be redeemed. (f) Bond Registror'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 -19- � ORDINANCE N0. 5672 � • officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registrotion 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. (h) Place ond Medium of Poyment. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be calculated on the basis of a year of 360 days and twelve 30-day months. For so long as all Bonds are held by a depository, 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 held by a depository, 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 $1,000,000 of Bonds (received by the Bond Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Bond Registrar by wire transfer to the account within the 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. -20- • '`'�'' ORDINANCE N0. 5672 ``r' Section S. Redemption; Purchase of Bonds. (a) Mandatory Redemption of Term Bonds and Optionol Redemption, if any. The Bonds shall be subject to optional redemption on the dates, at the prices and under the terms set forth in the Bond Purchase Contract approved by the Designated City Representative pursuant to Section 14. The Bonds shall be subject to mandatory redemption to the extent, if any, set forth in the Bond Purchase Contract and as approved by the Designated City Representative pursuant to Section 14. (b) Purchase of Bonds. The City further reserves the right to use at any time any surplus Net Revenue available after providing for the payments required by paragraphs (i) through (vi) of Section 6(b) of this ordinance, or other available funds, to purchase any of the Bonds that are offered to the City at any price deemed appropriate by the City. (c) Selection of Bonds for Redemption. 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 subsection (c). 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 the Bond 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 -21- �'`` ORDINANCE NO. 5672 '`� • such Bond by $5,000. In the event that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations herein authorized. (d) Notice of Redemption. (1) Official Notice. For so long as the Bonds are held in uncertificated form, notice of redemption (which notice may be conditional) 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(if the Bonds are no longer held in uncertificated form), notice of redemption shall be given in the manner hereinafter provided. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. All official notices of redemption shall be dated and shall state: (A) the redemption date, (B) the redemption price, -22- • `''��' ORDINANCE NO. 5672 `�` (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} any conditions precedent to redemption; (E) that if all of the conditions to redemption are met, 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 Registra r. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. If the conditions to redemption have not been met prior to the date scheduled for redemption, then the City may revoke the redemption by giving notice in the same manner as set forth above. (2) Effect of Notice: Bonds Due. If an unconditional notice of redemption has been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to -23- "�'' ORDINANCE N0. 5672 �`�'' • the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled by the Bond Registrar and shall not be reissued. (3) Additional Notice. In addition to the foregoing notice, 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 catl 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 20 days before the redemption date to each party entitled to receive notice pursuant to Section 17 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. (4) Amendment of Notice Provisions. The foregoing notice provisions of this Section 5, including but not limited to the inforrnation to be included in redemption notices and the persons designated to receive notices, may be amended by additions, deletions and changes in order to maintain compliance with duly promulgated regulations and recommendations regarding notices of redemption of municipal securities. -24- • '�+'` ORDINANCE NO. 5672 � Section 6. Prioritv and Pavment from the Waterworks Utilitv Fund. (a) Waterworks Utility Fund. A special fund of the City known as the "Waterworks Utility Fund" has heretofore been established by the City, into which shall be deposited all Gross Revenues as collected. Moneys in the Waterworks Utility Fund shall be trust funds and shall be held separate and apart from all other funds and accounts of the City. (b) Priority of Payments from the Waterworks Utility Fund. 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: (i) To pay Maintenance and Operation Expense; (ii) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iii) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of principal on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iv) 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; -25- �` ORDINANCE N0. 5672 ''� - (v) To make all payments required to be made into the Reserve Fund, including any reimbursements required for Qualified Insurance or Qualified Letter of Credit; (vi) 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 (vii) To retire by optional redemption or purchase 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. (c) Rate Stabilizorion 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 subsection (b) of this section, 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 -26- • `'�` ORDINANCE N0. 5672 '�•✓ the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement. Section 7. Funds and Accounts. (a) Bond Fund. There is hereby created in the City Treasury the Waterworks Revenue Bond Fund, 2012 (the "Bond Fund"), which shall be a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund. The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain 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. (b) Reserve Fund. 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 Parity Bonds. 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. Except for withdrawals therefrom as authorized herein, the Reserve Fund shall be maintained at the Reserve Requirement at all times so (ong as any Parity Bonds are -27- +IMII�'° ORDINANCE NO. 5672 "� • 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 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the Qualified Insurance or Qualified Letter of Credit 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 -28- � '�"''" ORDINANCE NO. 5672 °�'' 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 Registered Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. (c) Pledge of Revenue and Lien Position. The Net Revenue is hereby 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. (d) Regarding Sufficiency of Revenues. The Council hereby finds that in fixing the amounts to be paid into the Bond Fund out of the Gross Revenues, it has exercised due regard for the Maintenance and Operation Expense and has not obligated the City to set aside and pay into such Fund a greater amount of such Gross Revenues than in its judgment will be available over and above the Maintenance and Operation Expense. Section 8. Covenants. The City covenants and agrees with the Registered Owner of each Bond at any time outstanding as follows: (a) Rote 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: -29- �'` ORDtNANCE N0. 5672 "'� - (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) Mointenonce 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 Utiliry. 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: -30- � "�✓ ORDINANCE N0. 5672 "�'' (1) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding(defined as the total amount of those bonds less the amount of cash and investments in the Reserve Fund and any Parity Bond Funds) that Gross Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Gross Revenue for that period; (2) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above} that the Net Revenue from the portion of the Waterworks Utility sold or disposed of for the preceding year bears to the total Net Revenue for that period; or (3) An amount which will be in the same proportion to the net amount of any Parity Bonds then outstanding (as defined above) that the depreciated cost value of the facilities sold or disposed of bears to the depreciated cost value of the entire Waterworks Utility immediately prior to such sale or disposition. Notwithstanding any other provision of this subsection, (1)the City in its discretion may sell or otherwise dispose of any of the works, plant, properties or facilities of the Waterworks Utility or any real or personal property comprising a part of the same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the Waterworks Utility, or no longer necessary, material to or useful to the operation of the Waterworks Utility, without making any deposit into the Bond Fund, and (2j 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 -31- � ORDINANCE N0. 5672 '� � 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. (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 -32- � �"" ORDINANCE NO. 5672 '"r"' 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 Registered Owners of the Parity Bonds against loss. (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 9. 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 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 Bonds. (a) Arbitroge 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 Bonds or any other funds of the City which may be deemed to be proceeds of the 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 Bonds to the initial purchasers thereof, would have caused the Bonds as "arbitrage bonds" within the meaning of such term as used in Section 148 of the Code. -33- '�✓ ORDINANCE N0. 5672 "'� � 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 Bonds. (b) Privote Person Use Limitation for Bonds. The City covenants that for as long as the Bonds are outstanding, it will not 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 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 (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 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 -34- � � ORDINANCE NO. 5672 '`✓ (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 refinanced with the Bonds, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the 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 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 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 Bonds. (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 investment by financial institutions. The City reasonably does not expect to issue more than $10,000,000 in qualifying tax-exempt debt during calendar year 2012. -35- �'" ORDINANCE NO. 5672 � - Section 10. 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) Qualified Letter of Credit or Qualified Insurance or an amount plus Qualified Letter of Credit or Qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance on or prior to the date of issuance of such Future Parity Bonds. (dj 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. -36- • `'r"'' ORDINANCE N0. 5672 "'�"'' (e) There shall be on file with the City either: (1) a certificate of the Finance Director demonstrating that Net Revenue for the Base Period, without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (2) prior to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, 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 the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one year's Net Revenue from those customers; (Cj Income from any customers to be connected to the Waterworks Utility who have paid the required connection charges; -37- ''� ORDINANCE N0. 5672 `"� - (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. (f) Refunding Obligations. 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 -38- � �"""'` ORDINANCE N0. 5672. `'�+'' 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 Parity Bonds, money for the payment of which is not otherwise available. (g) Subordinate Lien Obligations. Nothing contained herein shail 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 11. Form of Bonds.The Bonds shall be in substantially the following form: [DTC LANGUAGE] UNITED STATES OF AMERICA N0. $ STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 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 -39- `�"' ORDINANCE NO. 5672 � - 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. of the City adopted on , 2012 (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 $ . The bonds of this issue are being issued for the purpose of refunding certain outstanding water and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance and in the Bond Purchase Contract. The bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund. 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 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 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 Parity 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 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 -40- • � ORDINANCE N0. 5672 '`�"'' performed, and reference is hereby made to the Bond Ordinance for a complete statement of such covenants. This bond shail 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 , 2012. CITY OF RENTON, WASHINGTON [SEALJ 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 foflowing 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 Refunding Bonds, 2012 of the City of Renton, Washington, dated , 2012. WASHINGTON STATE FISCAL AGENCY, Registrar By Authorized Signer -41- �` ORDINANCE NO. 5672 � - Section 12. Execution of Bonds. The Bonds shall be executed on behalf of the City by the facsimi(e or manual signatures of the Mayor and the City Clerk and shall have the seal of the City impressed or a facsimile thereof imprinted, or otherwise reproduced 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. Only such Bonds as shall bear thereon a Certificate of Authentication manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 13. Lost, Stolen or Destroved 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 Registered Owner thereof upon the Registered Owner's paying -42- • � ORDINANCE N0. 5672 '"""'� 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 14. Sale of Bonds. (a) Bond Sale. The Bonds shall be sold at negotiated sale to the Underwriter pursuant to the terms of the Bond Purchase Contract. The Underwriter has advised the Council that market conditions are fluctuating and, as a result, the most favorable market conditions may occur on a day other than a regular meeting date of the Council. The Council has determined that it would be in the best interest of the City to delegate to the Designated City Representative for a limited time the authority to approve the final interest rates, aggregate principal amount, principal amounts of each maturity of the Bonds, selection of the Refunded Bonds, and redemption rights. The Designated City Representative is hereby authorized to approve the final interest rates, aggregate principal amount, principal maturities, selection of the Refunded Bonds, and redemption rights for the Bonds in the manner provided hereafter so long as (i) the aggregate principal amount of the Bonds does not exceed $10,000,000, (ii) the final maturity date for the Bonds is no later than December 1, 2027, (iii)the Bonds are sold (in the aggregate) at a price not less than 98%and not greater than 120%, (iv)the Bonds are sold for a price that results in a minimum net present value debt service savings over the Refunded Bonds of 10%, and (v)the true interest cost for the Bonds (in the aggregate) does not exceed 3.25%. -43- �' ORDINANCE N0. 5672 �` - In determining whether or not to acquire a Bond Insurance Policy and determining the final interest rates, aggregate principal amounts, principal maturities and redemption rights, the Designated City Representative shall take into account those factors that, in his or her judgment, will result in the lowest true interest cost on the Bonds to their maturity, including, but not limited to current financial market conditions and current interest rates for obligations comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in this section, the Designated City Representative is hereby authorized to execute the Bond Purchase Contract. The signature of one Designated City Representative shall be sufficient to bind the City. Following the execution of the Bond Purchase Contract, the Designated City Representative shall provide a report to the Council describing the final terms of the Bonds approved pursuant to the authority delegated in this section. The authority granted to the Designated City Representative by this Section 14 shall expire 120 days after the effective date of this ordinance. If a Bond Purchase Contract for the Bonds has not been executed within 120 days after the effective date of this ordinance, the authorization for the issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale approved unless such Bonds shall have been re-authorized by ordinance of the Council. The ordinance re-authorizing the issuance and sale of such Bonds may be in the form of a new ordinance repealing this ordinance in whole or in part or may be in the form of an amendatory ordinance approving a bond purchase contract or establishing terms and conditions for the authority delegated under this Section 14. -44- � � ORDINANCE N0. 5672 � (b) Delivery of Bonds; Documentation. Upon the passage and approval of this ordinance, the proper officials of the City including the Designated City Representative, are authorized and directed to undertake all action necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to execute all closing certificates and documents required to effect the closing and delivery of the Bonds in accordance with the terms of the Bond Purchase Contract. (c) Preliminary and Final Official Statements. The Finance Director is hereby authorized to ratify and to deem final the preliminary Official Statement relating to the Bonds for the purposes of the Rule. The Finance Director is further authorized to ratify and to approve for purposes of the Rule, on behalf of the City, the Officia! Statement relating to the issuance and sale of the Bonds and the distribution of the Official Statement pursuant thereto with such changes, if any, as may be deemed by her to be appropriate. Section 15. �plication of Bond Proceeds: Plan of Refundin�. (a) Refunding Plon. For the purpose of realizing a debt service savings and benefiting the City's ratepayers, the Council proposes to refund and defease the Refunded Bonds as set forth herein. The Refunded Bonds shall include those Refunding Candidates designated by the Designated City Representative when the Bonds are sold pursuant to the Bond Purchase Contract. Proceeds of the Bonds shall be deposited with the Escrow Agent pursuant to the Escrow Deposit Agreement to be used immediately upon receipt thereof to defease the Refunded Bonds as authorized by the 2004 Bond Ordinance and to pay costs of issuance of the Bonds. -45- `�`` ORDINANCE N0. 5672 � - The net proceeds deposited with the Escrow Agent shafl be used to defease the Refunded Bonds and discharge the obligations thereon by the purchase of 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: (1) interest on the Refunded Bonds due and payable on and prior to the Call Date; and (2) the redemption prices of the Refunded Bonds on the Call Date. 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. (b) Escrow Agent/Escrow Agreement. The City hereby appoints U.S. Bank National Association, Seattle, Washington, as the Escrow Agent for the Refunded Bonds (the "Escrow Agent"). A beginning cash balance, if any, and the Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining 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 Bonds. In order to carry out the purposes of this Section 15, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement. -46- � � ORDINANCE N0. 5672 � (e) Call for Redemption of Refunded Bonds. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the payments described in Section 15(d). The City hereby irrevocably calls the Refunded Bonds for redemption on their Call Date in accordance with the provisions of the 2004 Bond Ordinance authorizing the redemption and retirement of the 2004 Bonds prior to their fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be irrevocable after the issuance of the Bonds 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 the 2004 Bond Ordinance. 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 Finance Director, or, at the direction of the Finance Director, to the paying agent for the Refunded Bonds, sums sufficient to pay, when due, the payments specified in Section 15. All such sums shall be paid from the moneys and Acquired Obligations deposited with the Escrow Agent, and the income therefrom and proceeds thereof. All such sums so paid to said Finance Director shall be credited to the Refunding Account. All moneys and Acquired Obligations deposited with the Escrow Agent and any income therefrom shall be held, invested (but only at the direction of the 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. -47- `�'`' ORDINANCE N0. 5672 `"� - The City will take such actions as are found necessary to see that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. Section 16. Bond Insurance. The Finance Director is hereby further authorized to solicit proposals fro.m municipal bond insurance companies for the issuance of a Bond Insurance Policy. In the event that the Finance Director receives multiple proposals in response to a solicitation, the Finance Director may select the proposal having the lowest cost and resulting in an overall lower interest cost with respect to the Bonds to be insured. The Finance Director may execute a commitment received from the Insurer selected by the Finance Director. The Council further authorizes all proper officers, agents, attorneys and employees of the City to cooperate with the 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. Section 17. Undertakin�to Provide Continuin� Disclosure. (a) Contract/Undertaking. This section constitutes the City's written undertaking for the benefit of the Registered Owners and Beneficial Owners of the Bonds required by subsection (b)(5) of the Rule. (b) Financiol Statements/Operating Data. The City hereby agrees to provide or cause to be provided to the Municipal Securities Rulemaking Board ("MSRB"), the following annual financial information and operating data for the prior fiscal year, commencing in 2013 with the calendar year ending December 31, 2012: -48- � � ORDINANCE N0. 5672 ``� (1) 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"j; (2} A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3} Debt service coverage ratios; and (4) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds and identified in a closing certificate executed by the Designated City Representative and referencing this section. Items (2) through (4) shall be required only to the extent that such information is not included in (1). The information and data described above shall be provided on or before nine months after the end of the City's 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 the MSRB. In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB's internet website or filed with the Commission. If not provided as part of the annual financial information discussed above, the City shall provide the City's audited annual financial statement prepared in accordance with the -49- �' ORDINANCE NO. 5672 `�' - Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the MSRB. (c) Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: • Principal and interest payment delinquencies; • Non-payment related defaults, if material; • Unscheduled draws on debt service reserves reflecting financial difficulties; • Unscheduled draws on credit enhancements reflecting financial difficulties; • Substitution of credit or liquidity providers, or their failure to perform; • Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events afFecting the tax status of the Bonds; • Modifications to the rights of Bondholders, if material; • Bond calls, if material, and tender offers; • Defeasances; • Release, substitution, or sale of property securing repayment of the Bonds, if material; • Rating changes; • Bankruptcy, insolvency, receivership or similar event of the City; -50- • '"� ORDINANCE N0. 5672 ''�' • The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and • Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall promptly determine whether the events described above are material. (d) Format for Filings wirh the MSRB. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. (e) Notification Upon Failure to Provide Finoncial Data. The City agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described in Subsection (b) above on or prior to the date set forth in Subsection (b} above. (f) Termination/Modification. The City's obligations to provide annual financial information and notices of certain listed 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 (i) 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 -51- "� ORDINANCE NO. 5672 `wr�'` - otherwise does not apply to the Bonds and (ii) notifies the MSRB of such opinion and the cancellation of this section. The City may amend this section with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment of this section, the City shall describe such amendment in the next annual report, and shall include, a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (A) notice of such change shall be given in the same manner as for a listed event under Subsection (c), and (B) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. (g) Bond Owner's Remedies Under This Section. The right of any bondowner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to a 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 an event of default with respect to the Bonds. (h) No Default. Except as otherwise disclosed in the City's Official Statement relating to the Bonds, the City is not and has not been in default in the performance of its obligations of any prior undertaking for ongoing disclosure with respect to its obligations. -52- • � ORDINANCE N0. 5672 "''� Section 18. Defeasance of the Bonds. In the event that money and/or Government Obligations maturing or having guaranteed redemption prices at the option of the holder at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to redeem and retire part or all of the Bonds in accordance with the their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Bond Fund or any account therein for the payment of the principal of and interest on the certain Bonds so provided for and such Bonds shall then cease to be entitled to any lien, benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds shall no longer be deemed to be Outstanding hereunder, or under any ordinance authorizing the issuance of bonds or other indebtedness of the City. Within 30 days of any defeasance of Bonds the Bond Registrar shall provide notice of defeasance of Bonds to Registered Owners of the Bonds being defeased and to each party entitled to receive notice in accordance with Section 17. Section 19. 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. -53- �'` ORDINANCE N0. 5672 � - (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 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 Registered 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 -54- � � ORDINANCE NO. 5672 "'� amendments under this subsection (b), the Insurer shail 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. (f) eonds 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 -55- �"' ORDINANCE N0. 5672 � - 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 20. Call for Redemption of 1998 Bonds. For the purpose of realizing a debt service savings and benefiting the ratepayers of the City, the City Council hereby authorizes the refunding of the 1998 Bonds identified in the recitals to this ordinance. Available funds of the City in the amount necessary to refund the 1998 Bonds, in whole, shall be used on or before December 1, 2012 for the payment of interest on and the redemption price of the 1998 Bonds on such date. The City hereby irrevocably calls the 1998 Bonds for redemption on December 1, 2012 in accordance with the provisions of the 1998 Bond Ordinance authorizing the redemption and retirement of the 1998 Bonds prior to their fixed maturities. The City's Finance and Administrative Services Administrator is hereby authorized and directed to provide for the giving of notice of the redemption of the 1998 Bonds in accordance with the applicable provisions of the 1998 Bond Ordinance. The costs of such notice shall be an expense of the City. Section 21. Contract; Savings Clause. The covenants contained in this ordinance and in the Bonds shall constitute a contract between the City and the Registered 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 -56- ;�,. ORDINANCE N0. 5672 ,�, 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 22. General Authorization; Ratification of Prior Acts. The Mayor, the Chief Administrative Officer, the 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 23. Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval, and thirty (30) days after publication. PASSED by the City Council this 15th day of October, 2012. ��it�/1 w�� \!1. (�l/C�.�/(-07ti� Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this 15th day of October, 2012. Denis Law, Mayor Approved as to form: . � Y ��- -<�` . ^' . Pa ica Law Group LL � � � -� ' f. �� a., . ,. a Bond Counsel �: �= ;�_�; '� f. .t � ,,� Date of Publication: 10/19/2012 (Summary) .�.*` ��} Y:`�'� . � ;,�. '<-:.. .�< -57- '� ORDINANCE N0. 5672 `'�` • CERTIFICATE I, the undersigned, City Clerk of the City Council of the City of Renton, Washington (the "City"j, DO HEREBY CERTIFY: 1. The attached copy of Ordinance No. (the "Ordinance") is a full, true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on October_, 2012, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect after publication in the City's official newspaper as provided by law; and 2. A quorum of the members of the City Council was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this day of October, 2012. Bonnie I. Walton, City Clerk October 1,2012 '� Renton City Council Minutes "'� Page 289 APPEAL Planning and Development Committee Chair Prince presented a report ' Appeal: Galloway at the recommending that the full Council find that the Hearing Examiner committed Highland Final Plat, Campbell no errors of fact or law in this matter and that his decision be affirmed. Dille Barnett&Smith PLLC, MOVED BY PRINCE,SECONDED BY CORMAN,COUNCIL CONCUR IN THE LUA-07-128 COMMITTEE REPORT. CARRIED. AUDIENCE COMMENT Beth Asher(Rentonj asked what the next steps will be regarding the Cedar Citizen Comment:Asher— River Library now that the City has completed the first library workshop. Library Next Steps Councilmember Briere explained that the City will be using the information . received from citizens at the workshop to formulate the agendas for upcoming workshops. She remarked the information received was reduced to four main topics that will be discussed during the next two meetings. Citizen Comment: Clark— Beatrice Clark(Renton)stated that she has appeared before Council at previous Emails& Racism meetings to address concerns dealing with racism at the King County Library System. She remarked that she has yet to receive a response to her concerns. She also expressed concern regarding an email she wrote to Councilmember Corman that was forwarded to the City Attorney. Ms.Clark stated that when she received a copy of the email some of the text was blotted out. She questioned whether the comments were blotted out because they may be racist or biased. CONSENT AGENDA Items listed on the consent agenda are adopted by one motion which folfows the listing. At the request of Council President Zwicker, Item 7.f. was removed for separate consideration. Council: Meeting Minutes of Approval of Council meeting minutes of 9/24/2012. Council concur. 9/24/2012 CAG: 12-126,Stevens Ave City Clerk reported bid opening on 9/25/2012 for CAG-12-126; Stevens Ave. NW/Lind Ave NW Storm NW/Lind Ave. NW Storm System Improvement Project; engineer's estimate System Improvement, Rodarte $241,580; and submitted staff recommendation to award the contract to the Construction low bidder, Rodarte Construction, Inc., in the amount of$189,765. Council concur. Finance: 3rd Quarter 2012 Administrative Services Department recommended approval of the third Budget Amendment quarter 2012 Budget Amendment increasing appropriations by$8,496,583. Refer to Finance Committee. Finance: Refinance 2004 Administrative Services Department requested approval of an ordinance Water and Sewer Revenue authorizing the issuance of revenue bonds in the amount of$9.35 million to Bonds& Redeem 1998 Bonds refinance existing 2004 Water and Sewer Revenue Bonds and redemption of 1998 Water and Sewer Revenue Bonds one year early. Refer to Finance Committee. Police:Target Zero Teams,WA Police Department requested approval of a memorandum of understanding to Traffic Safety Commission accept$16,320 in grant funds from the Washington Traffic Safety Commission Grant for Target Zero Teams project participation,a high-visibility traffic safety emphasis program. Council concur. MOVED BY ZWICKER,SECONDED BY PALMER, COUNCIL APPROVE THE CONSENT AGENDA MINUS ITEM 7.f. CARRIED. - October 8,2012 �;r Renton City Council Minutes �'" Page 298 The Committee further recommended that the ordinance regarding this matter be presented for first reading. MOVED BY BRIERE, SECONDED BY PERSSON,COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) ,Finance: Bond Refinancing, Finance Committee Chair Briere presented a report recommending 2004 Water&Sewer Revenue concurrence in the staff recommendation to approve the refinancing plan to issue around$9.35 million in new bonds to refinance approximately$9.015 million of the outstanding 2004 Water Sewer Revenue Bonds,and to accelerate the final payment of the 1998 bonds in the amount of$360,000. The Committee further recommended that the ordinance with all the associated documents be presented for first reading. MOVED BY BRIERE,SECONDED BY PERSSON,COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. (See later this page for ordinance.) RESOLUTIONS& The following ordinances were presented for first reading and referred to the ORDINANCES 10/15/2012 Council meeting for second and final reading: Budget: 2012 Third Quarter An ordinance was read amending the City of Renton Fiscal Years 2011/2012 Amendment Biennial Budget as adopted by Ordinance No. 5583,and thereafter amended by Ordinance Nos. 5595, 5616, 5638, and 5656 in the amount of$8,496,583, with the total amended budget to be $540,018,705 for the biennium. MOVED BY BRIERE,SECONDED BY CORMAN, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/15/2012. CARRIED. Finance: Bond Refinancing, An ordinance was read authorizing the issuance of Water and Sewer Revenue 2004 Water&Sewer Revenue Refunding Bonds in the aggregate principal amount of not to exceed $10,000,000 for the purpose of refunding a portion of the City's Water and Sewer Revenue Bonds,2004; providing the form, terms and covenants of the bonds; authorizing the appointment of an escrow agent and execution of an escrow agreement; delegating certain authority to approve the final terms of the bonds; and authorizing the cash redemption of the City's Water and Sewer Revenue Refunding Bonds, 1998. MOVED BY BRIERE,SECONDED BY CORMAN, COUNCIL REFER THE ORDINANCE FOR SECOND AND FINAL READING ON 10/15/2012. CARRIED. The following ordinance was presented for second and final reading and adoption: ORDINANCE#5670 An ordinance was read amending Section 4-1-190 of Chapter 1,Administration CED: Impact Fees Updates and Enforcement,of Title IV(Development Regulations), of City Code, by repealing Section 4-1-190 and replacing it with a new Section 4-1-190,entitled "Impact Fees,"authorizing the collection of impact fees for Transportation, Parks,and Fire Protection; providing findings and definitions; providing for the time of payment; providing for exemptions and credits; providing for the establishment of impact fee accounts, refunds and the use of funds providing for reviews, and adjustments to impact fees; authorizing independent fee calculations; and setting a fee for appeals. MOVED BY PRINCE,SECONDED BY BRIERE,COUNCIL ADOPTTHE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. � - - , -. - � . . - , , . . / - ' �✓'' _ _ ' '`� ; � , ; : � , , . �PPRC��1�D B`� � � FINANCE COMMITTEE - ,; ��',��.UI'�CIL , � ._ . , C�MMITTEE REPORT.... - -. ` . � - �Dat� �/��.5 a0�2 - - • . �- . October 8, 2012 . ,' ' _ _- Refunding of 2004 Water Sewer Revenue_B,onds � � �� . ; _ _ _ . � October,1,,2012 _ � ' The Finance Comrnittee recommends concurrence in.the staff recommendation to approve the ` � ref'inanci.ng plan to. issu� ara,und $9.35 m.illion in new bonds to refinance approximately`$9:015 -' � million: of_ the, o:utstanding .2004'.Wat'er�Sewer Reven.ue. Bonds,�" a'nd to acceler.afe the final ` payment�of the 1998:bontls:in the amount of$360,000. `. - The Comrriittee�further recommends the a�tactred ordinance with all.the associated documents • be presented for first resding .;�_�"'� � •i .�,a�+�g. . . ' , . �. , , . , � \- - . ,� - � Terri Briere, Ghair . ' , . . . - ��o+- � ��-�e _ _ . . ' . _ �,r� �Cl a,��e, . . , ' Greg�Taylar Vice Chair � : ' . ,. i�,,;.-=."""� r=� _ , . . �1 �' , �� J� '. �' . _' . . � . ' . ' . . ' . .. � . . . .. �f V ' .L . , � ... .. � � ... � ' � . .� - .. � .. ' � - . , . Don Petssor�,.1Vl,ember " - , � . � Iwen ' _ , . _ � . � Wang '_ ,. , . - .. i '` October 15, 2012 ��rr Renton City Council Minutes �' Page 308 Transportation(Aviationl Transportation (Aviation)Committee Vice-Chair Persson presented a report Committee recommending concurrence in the staff recommendation to approve an Lease: Rate Increase, addendum to the airport lease with Acuwings, LLC for the 756 building(pilot Acuwings, LLC, LAG-08-007 loungej, the 760 building and tiedown aircraft storage,to increase the total lease revenue by$2,203.86 per year plus leasehold excise tax. The Committee further recommended that the Mavor and Citv Clerk be . authorized to sign the lease addendum. MOVED BY PERSSON, SECONDED BY PALMER,COUNCIL CONCUR IN THE COMMITTEE REPORT. CARRIED. Citizen Comment: Parsons— MOVED BY PERSSON, SECONDED BY PALMER,COUNCIL REFER TO THE Post Office Box at The Landing ADMINISTRATION CORRESPONDENCE FROM DOROTHY PARSONS REGARDING PLACING A POST OFFICE BOX AT THE LANDING. CARRIED. Human Resources:September MOVED BY PERSSON, SECONDED BY BRIERE,COUNCIL REFER THE (SEPTEMBER 2012 WCIA Claims 2012)WCIA CLAIMS REPORTTO THE FINANCE COMMITTEE. CARRIED. Community Event: Ron Nelson Councilmember Persson remarked that Ron Nelson, long-time City Building Memorial Service Director, had passed away. He announced that Mr. Nelson's memorial service is being held at Greenwood Memorial on Friday,October 19, at 11 a.m. RESOLUTIONS AND The following resolution was presented for reading and adoption: ORDINANCES RESOLUTION#4162 A resolution was read authorizing the redemption of the City's Limited Tax Finance: Retirement of 2002 General Obligation Bonds,2002,and the transfer of interfund loans; and General Obligation Bonds authorizing the execution of certain documents related thereto. MOVED BY BRIERE,SECONDED BYTAYLOR,COUNCILADOPTTHE RESOLUTION AS READ. CARRIED. The following ordinances were presented for second and final reading: ORDINANCE#5671 An ordinance was read amending the City of Renton Fiscal Years 2011/2012 Budget: 3rd Quarter 2012 Biennial Budget as adopted by Ordinance No.5583, and thereafter amended by Budget Amendment Ordinance Nos.5595, 5616, 5638, and 5656 in the amount of$8,496,583,with the total amended budget to be$540,018,705 for the biennium. MOVED BY BRIERE,SECONDED BY TAYLOR,COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. ORDINANCE#5672 An ordinance was read authorizing the issuance of Water and Sewer Revenue Finance: Refinancing 2004 Refunding Bonds in the aggregate principal amount of not to exceed Water and Sewer Revenue $10,000,000 for the purpose of refunding a portion of the City's Water and Bonds and Redeem 1998 Sewer Revenue Bonds, 2004; providing the form, terms and covenants of the Bonds bonds;authorizing the appointment of an escrow agent and execution of an escrow agreement; delegating certain authority to approve the final terms of the bonds; and authorizing the cash redemption of the City's Water and Sewer Revenue Refunding Bonds, 1998. MOVED BY BRIERE,SECONDED BY TAYLOR, COUNCIL ADOPT THE ORDINANCE AS READ. ROLL CALL. ALL AYES. CARRIED. NEW BUSINESS Councilmember Taylor remarked that Council had received a letter from the Council: Puget Sound Regional Puget Sound Regional Council inviting them to a luncheon celebrating the Council Luncheon Invitation career of Congressman Norm Dicks. He asked if Councilmembers were planning to attend the event. Mayor Law and Council President Zwicker each remarked that they were not currently aware of such plans. ` � � � ,� CIlY OF RENTON COUNCIL AGENDA BILL �, �': , Subject/Title: Meeting: Refinance 2004 Water Sewer Revenue Bond Regular Council - Ol Oct 2012 Exhibits: Submitting Data: Dept/Div/Board: Bond Ordinance Administrative Services Issue Paper Staff Contact: lamie Thomas x6929 Recommended Action: Refer to Finance Committee Fiscal Impact: Expenditure Required: $ Transfer Amendment: $ Amount Budgeted: $ Revenue Generated: $ Total Project Budget: $ City Share Total Project: $ SUMMARY OF ACTIQN: Refund a portion of$10.335 million 2004 Water Sewer Revenue Bonds with;the issuance of$9.35 million of bonds, plus an estimated $650k premium.The total amount subject to optional redemption is $9.895 million, however the interest rate would be higher if the City issued more than $10 million in tax exempt bonds, including premium, per year. After premiums and interest due are calculated,the City is limited to refunding approximately$9.015 million to maximize savings. Principal maturing on and after December 1, 2015 is subject to optional redemption without penalty on or after December 1, 2014. Because the bonds will be issued more than 90 days prior to the redemption date, this is considered an advanced refunding issue. The proceeds from the new bonds will pay for issuance costs and with $9.87 million deposited into an escrow accaunt to pay ioterest when due until December 1, 2014.; at which time the principle amount of$9.015 million will be paid. The$9.35 million bond issue (with $9.99 million in total proceeds) will have an estimated true interest cost of 3.27�0, which would replace the current interest of 5.00%. Depending upon the actual interest rates at the time of pricing, the refunding is expected to generate estimated interest savings of$857k or, a cumulative net present value savings of$687k(7.6%). In addition to the refinancing of the 2004 bonds, we also recommend to pay off a minor balance ($360k) remaining on the 1998 Water/Sewer refunding revenue bonds carrying 5.1% interest rate due on December 1, 2013. STAFF RECOMMENDATION: Approve the proposed refinancing plan and adopt the ordinance authorizing issuance of$9.35 million o bonds to refund $9.015 million of the 2004 Water Sewer Revenue Bonds and redemption of the 1998 bonds one year early. ✓ � � f ADMINISTRATIVE SERVlCES DEPARTMENT M E M O R A N D U M DATE: October 1, 2012 TO: Rich Zwicker, Council President Members of the Renton City Council VIA: Denis Law, Mayor FROM: iwen Wang,Admin. Services Administrator SUBIECT: Refunding 2004 Water-Sewer Revenue Bonds ISSUE Should the City refinance the 2004 Water-Sewer Bonds issued in 2004 to fund projects identified the Waterworks Utility Capital Improvement Plan? RECOMMENDATION Staff recommends approval of the proposed refinancing plan and adoption of the necessary ordinance authorizing the issuance of $9.35 million of bonds at a true interest cost of approximatefy 3.27%, which will replace the existing $9.015 million of bands carrying an average interest rate of 5.00% and generate an estimated savings of $857k in interest cost, or $687k in net present value savings (7.6%) on the refunded bonds. In addition, we also recommend to pay off a minor balance ($360k) remaining on the 1998 Water/Sewer refunding revenue bonds carrying 5.1%interest rate due on December l, 2013. BACKGROUND The City issued $10.335 million of Water and Sewer Revenue Bonds in 2004: 1) $5 million towards the $12 millicn new water filtrati�n facility at the Maplewood booster pump station; 2) $2 million to install 7,000 linear feet of 18-24 inch sewer main on NE Sunset Blvd to accommodate growth in the eastern area of the City;and 3) $3 million to replace 3,500 linear feet of 24 inch storm pipe along SW 7th Street to address water drainage issues. Principal maturing on and after December 1, 2015_is subject to optional redemption without penalty on or after December 1, 2014. Because the bonds will be issued more than 90 days prior to the redemption date, this is considered an advanced refunding issue. The proceeds of the $9.35 million new bonds issued plus the projected issue premium of $650k, will pay for � issuance costs and the remaining $9.87 million will be deposited into an escrow account to pay interest when due until December 1, 2014; at which time the principle amount of$9.015 million will be fulfy paid. The total amount subject to optional redemption is $9.895 million, however the interest rate woufd be higher if the City issued more than $10 miliion in tax exempt bonds, including premium, per year. After premiums and interest due are calculated,the City is limited to .` _. ; �,; � refunding approximately$9.015 million. This partial refunding will leave a $1.32 million �fnrefunded portion of the 2004 bonds maturing 2018 or sooner,which can either be refinanced later or prepaid with Utility revenues on or after December 1, 2014. To include this portion in the current refunding, they would have to be refunded as taxable bonds and would only generate an approximate savings of$20,000. The projected savings of the refunding bonds assumes the interest rate will be 0.5%higher than current rate. Depending upon the actual interest rate at the time of the pricing,the total interest cost saving could be as high as$1.5 million if the rates remains unchanged. The 1998 water-sewer revenue bonds are scheduled to be paid off December 1, 2013,with total outstanding principal of$360k. By paying off the bonds one year early the City will save 5.1% on the outstanding principal. CONCLUSION Staff recommends the Council approve the refinancing ordinance and the assaciated documents necessary to issue the new bonds, including the escrow agreement, and the redemption of a portion of the outstanding 2004 Water Sewer Revenue Bonds and earfy payment of the remaining 1998 Water Sewer Revenue Bonds. Attachment: Refunding Savings Calculation Date August 22, 2012. � `�r . SLTMMARY OF REFUNDING RESULTS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Dated Date 12/07/2012 Delivery Date 12/07/2012 Arbitrage yield 3.041757% Escrow yield 0.257427% Bond Par Amount 9,350,000.00 True Interest Cost 3.274522% Net Interest Cost 3398384% Average Coupon 3.906090% Average Life 12_27� Par amount of refunded bonds 9,015,000.00 Average coupon of refunded bonds 5.0000�0% Average life of refunded bonds 12.577 PV of prior debt to 12/07/2012 @ 3.041757% 10;848,691.14 Net PV Savings 687,006.98 Percentage savings of refunded bonds 7.620710% Percentage savings of refunding bonds 7.347668% Aug 22,2012 11:29 am Preparedby Seattle-Northwest Securities Corp.-JMW (Finance 7•001 RE...:RENtON-R04WS BQ,R04WS B� Page 1 ` t � � SAVINGS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) . Assumes current AA+interest rates plus 54 basis points Present Value Prior Refunding Annual to 12/07/2012 Date Debt Service Debt Service Savings Savings @ 3.0417573% 06/0112013 225,375:00 173,613.33 51,761.67 51,011.89 12/O1/2013 225,375.00 219,600.00 5,775.00 57,536.67 5,606.09 06/Ol/2014 225,375.00 179,200.00 46,175.00 44,152.91 12/Ol/2014 225,375.00 214,200.00 11,175.00 57,350.00 10,525.54 06/Ol/2015 225,375.00 178,850.00 46,525.00 43,164.63 12/O1/2015 225,375.00 213,850.00 11,525.00 58,050.00 10,532.40 06/O1/2016 225,375.00 178,500.00 46,875.00 42,196.Q9 12/O1/2016 225,375.00 213,500.00 11,875.00 58,750.00 10,529.53 �6/01/2017 225,375.00 177,975.00. 47,400.00 41,399.83 12/Ol/2017 225,375.00 217,975.00 7,400.00 54,800.00 6,366.44 06/Oi/2018 225,375.00 177,375.00 48,000.00 40,677.17 12/O1/2018 255,375.00 247,375.00 8,000.00 56,000.00 6,677.96 06/O1/2019 224,625.00 176,325.00 48,300.00 39,714.20 12/61/2019 409,625.00 401,325.00 8,300.00 56,600.00 6,72236 06/01/2020 220,000.00 172,950.00 47,050.00 37,535.97 12/Oi/2020 465,000.00 452,950.00 12,050.00 59,100.00 9,469.34 06/O1/2021 213,875.00 168,750.00 45,125.00 34,429.67 12/O1/2021 478,875.00 468,750.00 10,125.00 55,250.00 7,714.99 06/Ol/2022 207,250.00 164,250.00 43,000.00 32,294.48 12/Ol/2022 487,250.00 474,250.00 13,0�0.00 56,000.00 9,617_33 06/Oi/2023 200,250.00 159,600.00 40,650.00 29,622.13 12/O1/2023 1,650,250.00 1,634,600.00 15,650.00 56,300.00 11,233.49 06/O1/2024 164,000.00 130,100:00 33,900.00 23,968.71 12/O1(2024 1,684,000.00 1,660,100.00 23,900.00 57,800.00 16,645.15 06{O1/2025 126,000.00 99,500.00 26,500.00 18,179.43 12/O1/2025 1,726,000.00 1,694,500.00 31,500.00 58,000.00 21,285.78 06/Ol/2026 86,000.00 67,600.00 18,400.00 12,247.33 12/O1/2026 1,766,000.00 1,727,600.00 38,400.00 56,800.00 25,176.74 06/OI/2027 44,000.00 34,400.00 9,600.00 6,199.89 12/O1/2027 1,804,000.00 1,754,400.00 49,600.00 59,200.00 31,552.89 14,691,500.00 13,833,963.33 857,536.67 857,536.67 686,955.86 Savines Summarv PV of savings from cash flow 686,955.86 Plus:Refunding funds on hand 51.12 Net PV Savings 687,006.48 Aug 22,2012 1129 am Prepared by Seattle-Northwest Securities Corp.-JMW (Finance 7.001 RE...:RENTON-R04VJS_BQ,R04WS_BQ) Page 2 � � 1 SOURCES AND USES OF FUNDS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Dated Date 12/07/2012 Delivery Date 12/07/2012 Sources: Bond Proceeds: Par Amount 9,350,000.00 Premium 648,266.70 9,998,266.70 Uses: Refunding Escrow Deposits: Cash Deposit 1..58 SLGS Purchases 9,867,764.40 9,867,765.58 Delivery Date Expenses: Cost of Issuance 65,000.00 Underwriter's Discount 65,450.00 130,450.00 Other Uses of Funds: Additional Proceeds 51.12 � 9,998,266.70 Au.g 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-JMW (Finance 7.001 RE._._REN'I'ON-R04WS_BQ,R04VJS_BQ) Page 3 . ` � �wr�' BOND PRICING City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Manmry Yield W Call Calt Call Daze Ca1]p�ice premiym Bond Compooent Datc Amouot Rate Yidd Price Matvriry Date Price For fvb Yield for fvb Yield (-Discount) Serial Bo�s(B(U: . 12IO1R013 40,000 2000% 1.250% 100.730 Z9Z 00 12/01R014 35,000 2.000% 1.240'/ 101.a84 519.40 12/01/2015 35,000 2.000°/. 1.3807e 101.805 631]5 77J01/2016 35,000 3.000% 1.a80�/o 105.858 20�� . ]Z/012017 40,000 3.000'/ 1.680Yo 106.284 . 2,513.60 17J01/2018 70,000 3.000% 1.990% 105.6)0 3,969.00 12/012019 225,000 3.000% 2.280% ]04.623 10.401.75 1L01l2020 260,000 3.000% 2.540% ]03.304 9,251.20 12/O1R021 300,000 3.000% 2.730% ]02.137 6,411.00 12/012022 310,000 3.00DY 2.780% 101.906 5,908.60 I71Ot2023 1,475,000 4.00OYo 2910% 109384 C 2.991% 12/Ol/2022 100.000 72�(112022 ]00.000 138,a14.00 1�1l2024 ],530,OW 4.000'/0 2.990% 108.661 C 3.I28% 12/01/2032 100.000 1Z/Ol/2022 100.000 13Z51330 11/012025 1,595,000 4.000^/0 3.100°,G ID7.676 C 3.270% 17J012022 100.000 12/01/2022 100.000 122,43220 12/012026 1,660,000 4.000% 3.220°h 106b13 C 3.402% 12/Ol/3022 100.000 12/01/2022 100.000 109,775.80 " � 1?JOl/202� 1,72Q000 4.000'/, 3.290°h 105.999 C 3.483% IZJOI/2022 100.000 12/Ol/2022 ]00.00p ]03,182.80 9�� . 6asz�.�o Dated Date 12/01lZ012 Delivay Date ]2/072012 F"vstCoupon � 06/01/2013 � � Paz fvnount 9.3SO,OOO.OD �� 648,26b.70 �� 9,998,266.70 106.933334% _ � Undernitds Diuount 65,450.00 -0J00000% �P��u 9,932,816.70 I Ob.233334% Accrued Intaest NetProceedt 9,932,816J0 � . Aug 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-I1vIW (Finance 7.001 RE...:RENTON-R04VJS_BQ,R04WS_B� Page 4 / � � � , BOND DEBT SERVICE City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Period � Annual Ending Principal Coupon Interest Debt Service Debt Service 06/O 1/2013 173,613.33 173,613.33 12/01/2013 40,000 2.000% 179,600.00 219,600.00 393,21333 06/O 1l2014 179,200.00 179,200.00 12/O1/2014 35,000 2.000% 179,200.00 214,200.OQ 393,400.00 06/O1/2015 178,850.00 178,850.00 12/O1/2015 35,000 2.000% 178,850.00 213,850.00 392,700.00 06/O l/2016 178,500.00 178,500.00 12/O1/2016 35,000 3.000% 178,500.00 213,500.00 392,000.00 06/O1/2017 177,975.00 177,975.00 12/O1/2017 40,000 3.000% 177,975.00 217,975.00 395,950.00 06/O 1/2018 177,375.00 177,375.00 12/O1/2018 70,000 3.000% 177,375.00 247,375.00 424,750.00 06/01/2019 176,325.00 176,325.00 12/O1/2019 225,000 3.000% 176,325.00 401,325.�0 577,650.00 06/O 1/2020 t 72,950.00 172,950.00 12/O1/2020 280,000 3.00Q% 172,950.00 452,950.00 625,900.00 06/O1/2021 168,750.00 I 68,750.00 12/O1/2021 300,000 3.000% 168,750.00 468,750.00 637,500.00 06/O il2022 164,250.00 164,250.00 12/O1/2022 310,000 3.000% 164,250.00 474,250.00 638,50�.00 06/O1/2023 159,600.00 159,600.00 12/O1/2023 1,475,000 4.000% 159,600.Od 1,634,600.00 1,794,200.00 06/O 1/2024 130,100.00 130,]00.00 12/O1/2024 1,530,000 4.000% 130,100.00 1,660,100.00 1,790,200.00 06lO1/2025 99,500.00 99,500.00 12/O1/2025 1,595,000 4.000% 99,500.00 1,694,500.00 1,794,000.00 06/O1/2026 67,600.00 67,600.00 12/O1/2026 1,660,000 4.000% 67,600.00 1,727,600.00 1,795,200.00 06/O1/ZQ27 34,400.00 34,400.00 12/O1/2027 1,720,000 4.000% 34,400.00 1,754,400.00 1,788,800.00 9,350,000 4,483,96333 13,833,963.33 13,833,96333 Aug 22,2012 1129 am Pregared by Seattle-Northwest Securities Corp.-7MW (Finance 7.001 RE._.:RENTON-R04WS BQ,R04WS_BQ) Page 5 � --- - - ` �, . � BOND SUMIvfARY STATISTICS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+�terest rates plus 50 basis points Aated Date 12/07/2012 Delivery Date 12/07/2012 Last Mahuity 12/Ol/2027 Arbitrage Yield 3.041757% True Ihterest Cost(TIC) 3.274522% Net Interest Cost(iVIC) 3398384% All-In TIC 3341817% Average Coupon 3.906�90% Average Life(years) 12_2'7'7 Par Amount 9,350,000.00 Bond Proceeds 9,998,266.70 Total Interest 4,483,963.33 Net Interest 3,901,146.63 Total Debt Service 13,833,963.33 M�imum Annual Debt Service 1,795,200.00 Average Annual Debt Service 923 290.10 Underwrite�s Fees(per$10�0) Average Takedown Qther Fee 7.000000 Total Underwrite�s Discount 7.000000 Bid Price 106.233334 Par Avenge Average Bond Component Value Price Coupon Life Serial Bonds(BQ) 9,350,000.00 106.933 3.906% 12.277 9,350,000.00 12.277 All-In Arbitrage TIC T'IC Yieid Par Value 9,350,000.00 9,350,000.00 9,350,000.00 +Accrued Interest +Premium(Discount) 648,266.70 648,266.70 648,266.70 -Underwriter s Discount -65,450.00 -65;450.00 -Cost of Issuance Expense -65,000.00 -Other Amounts Target Value 9,932,816.70 9,867,816.70 9,998,266.70 Tazget Date. 12/07/2012 12/07/2012 12/07/2012 Yield 3.274522% 3341817% 3.041757% Aug 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-JMW (Finance 7.001 RE...:RENTON-R04WS BQ,R04WS_B� Page 6 �;, „� , PROOF OF ARBITRAGE I'IELD City of Renton Proposed Refunding of 20Q4 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Present Value to 12/07/2012 Date Debt Service @ 3.0417573% 06/O 1/2013 173,613.33 171,098.50 12/Ol/2013 219,600.00 213,176.89 06/01/2014 179,200.00 171,352.49 12/Ol/2014 214,200.00 201,751.38 06lO 1/2015 178,850.00 165,932.18 12/Ol/2015 213,850.00 195,431.95 06/O 1/2016 178,500.00 160,682.71 12/O1/2016 213,500.00 189,309.95 06/O 1/2017 177,975.00 155,445.88 12/Ol/2017 217,975.00 187,530.33 06/O 1 l2018 177,3 75.00 15 a,314.85 12/Ol/2018 247,375.00 206,495.17 �6/0112019 176,325.00 144,981.51 12/OU2019 401,325.00 325,042.07 06/O 1/2020 172,950.00 I 3 7,977.59 12/O1/2020 452,950.00 355,944.99 06/O 1/2021 168,750.00 130,623.42 12/O1/2021 468,750.00 357,407.10 06/O 1/2022 164,250.00 123,359.30 12/O1/2022 8,454,250.00 6,254,408.45 12,851,563.33 9,998,266.70 Proceeds Summarv Delivery date 12/07/2012 Par Value 9,350,000.00 Premium(Discount) 648,266.70 Target for yield calculation 9,998,266.70 Aug 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-JMW (Finance 7•001 RE...:RENTON-R04WS BQ,R04VJS_B� Page 7 t � "� PROOF OF ARBITR.AGE I'IELD City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+�terest rates plus 50 basis points Assuu►ed CalUComDutation Dates for Premium Bonds Net Present Value(NP� Bond Maturity Call Call to 12/07/2012 Component Date Rate Yie]d Date Price @ 3.0417573% SERIALBQ 12/Ol/2023 4.000% 2.910% 12/O1/2022 100.000 . -17,497.73 SERIALBQ 12/Ol/2024 4.000% 2.990% 12/O1/2022 100.000 -7,088.29 SERIALBQ 12/O1/2025 4.000% 3.100% 12/Ol/2022 100.000 8,32132 SERIALBQ 12/Ol/2026 4.000% 3.220% 12/O1/2022 100.000 26,306.24 SERIALBQ 12/Ol/2027 4.000% 3.290% 12/Ol/2022 100.000 37,817.86 Reiected CalllComnutation Dates for Premium Bonds Net Present Value(NP� Bond Maturity Call Call to 12/07/2012 Increase Component Date Rate Yield Date Price @ 3.0417573% to NPV SERIAI.BQ 12/O1/2023 4.000% 2.910% -7,275.21 10,222.52 SERIALBQ 12/O1/2024 4.000% 2.990% 13,803.78 20,892.07 SERIAI.BQ 12/Ol/2025 4.000% 3.100% 40,507.48 32,186.16 SERIALBQ 12/O1/2026 4.000% 3.220% 70,312.58 44,006.34 SERIALBQ 12/O1/2027 4.000% 3.290% 93,9?9.36 56,161_50 Aug 22,2012 11:29 am Prepazed by Seattie-Northwest Securities Corp.-JMW (Finance 7.001 RE...:RENTON-R04WS_BQ,R04WS_B� Page 8 � ''�II+ , PRIOR BOND DEBT SERVICE City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points 2004 Water&Sewer Revenue Bonds(11/1/041(04WS1 Annual Period Debt Debt Ending Principal Coupon Interest Service Service 06/O1/2013 225,375 225,375 12/O1/2013 225,375 225,375 450,750 06/Q1/2014 225,375 225,375 12/O1/2014 225,375 225,375 450,750 06/O1/2015 225,375 225,375 12/O1/2015 225,375 225,375 450,750 06/O1/2016 225,375 225,375 12/O1/2016 225,375 225,375 450,750 06/O1/2017 225,375 225,375 � 12/O1/2017 225,375 225,375 450,75Q 06/O1/2018 225,375 225,375 12/O1/2018 30,000 5.000% 225,375 255,375 480,750 06/O1/2019 224,625 224,625 1Z/O1/2019 185,000 5.000% 224,625 409,625 634,250 06/O1/2020 220,000 220,000 12/01/2020 245,000 S.00Q% 220,000 465,000 685,OOQ 06/O1/2021 213,875 213,875 12/O1/2021 265,000 5.000% 213,875 478,875 692,750 06/O1/2622 207,250 207,250 12/O1/2022 280,000 5.000% 207,250 487,250 694,500 06/O1/2023 200,250 200,250 12/O1/2023 1,450,000 5.000% 200,250 1,650,250 1,850,500 06/O1/2024 164,000 164,000 12/O1/2024 1,520,000 5.000% 164,000 1,684,000 1,848,000 06/O1/2025 126,000 126,000 12/O1/2025 1,600,000 5.000% 126,000 1,726,0�0 1,852,000 06/Oi/2026 86,000 86,000 12/O1/2026 1,680,000 5.000% 86,000 1,766,000 1,852,000 06/O1/2027 44,000 44,000 12/O1/2027 1,760,000 5.000% 44,000 1,804,000 1,848,000 9,015,000 5,676,500 14,691,500 14,691,500 Aug 22,2012 11:29 am Prepazed by Seattle-Northwest Securities Corp.-JMW (Finance 7-001 RE...:RENTON-R04WS_BQ,R04WS_BQ) Page 9 i � � ESCROW REQUIREMENTS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes cuirent AA+interest rates plus 50 basis points Period Principal Ending Interest Redeemed Total 06/O1/2013 225,375.00 225,375.00 12/O1/2013 225,375.00 225,375.00 06/O1/2014 225,375.00 225,375.00 12/O1/2014 225,375.00 9,015,000.00 9,240,375.00 901,500.00 9,015,000.00 9,916,500.00 Aug 22,2012 11_29 am Prepared by Seattle-Northwest Securities Corp.-JMW(Finance 7.001 RE...:RENTON-R04WS_BQ,R04WS_BQ) Page 10 � � + SUMMARY OF BONDS REFUNDED City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Maturity Interest Par Call Call Bond Date Rate Amount Date Price 2004 Water&Sewer Revenue Bonds(11/1/(34),04WS: TERM2024 12/Ol/2018 5.000% 30,000.00 12/O1/2014 100.000 12/01/2019 5.000% 185,000.00 12/Ol/2014 100.000 12/O1l2020 5.000% 245,000.00 12/01/2014 100.000 12/O1/2021 5.000% 265,000.00 12/O1/2014 100.000 12/Ol/2022 5.000% 280,000.00 12/O1/2014 100.000 12/O1/2023 5.000% 1,450,000.00 12/O1/2014 100.000 12/O1/2024 5.000% 1,520,000.00 12/O1/2014 100.000 SERIALS 12/Ql/2025 5.000% 1,600,000.00 12/O1/2014 100.000 12/O1/2026 5.000% 1,680,000.00 12/O1/2014 100.000 12lO1/2027 5.000% 1,760,000.00 12lO1/2014 100.000 9,015,000.00 Aug 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-IMRT(Finance 7.001 RE...:RENTON-R04WS BQ,R�4WS_BQ) Page ll � � � � ESCROW DESCRIPTIONS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Type of Type of Maturity First Int Par Ivlax Security SLGS Date Pmt Date Amount Rate Rate Dec 7,2012: SLGS Certificate 06/Ol/2013 06/O1/2013 213,434 0.120% 0.120% SLGS Certificate 12/O1/2013 12/O1/2013 212,798 d.170% 0.170% SLGS Note 06/O1/2014 06/Ol/2013 213,154 0.210% 0.210% SLGS Note 12/O1/2014 06/Ol/2013 9,228,378 0.260% 0.260% 9,867,764 SLGS Summarv SLGS Rates File 22AUG12 Total Certificates of Indebtedness 426,232.00 Total Notes 9,441,532.00 Total original SLGS 9,867,764.00 Aug 22,2012 11:29 am Prepared by Seattle-Northwest Securities Corp.-JMW(Finance 7.001 RE...:RENTON-R04VJS_BQ,R04WS_BQ) Page 12 ,�`, ,`� , ESCROW STATISTICS City of Renton Proposed Refunding of 2004 WS Bonds(BQ) Assumes current AA+interest rates plus 50 basis points Modified Yield to Yield to Perfect Value of Total Duration Receipt Disbursement Escrow Negative Cost of Escrow Cost (years) Date Date Cost Arbi�age Dead Time Glohal Proceeds Escrow: 9,867,765.58 1.912 0.257427% 0.257427% 9,359,753.48 508,012.02 0.08 9,867,765.58 9,359,753.48 508,012.02 0.08 Delivery date 12/07/2012 Arbi�age yield 3.041757% Aug 22,2012 1129 am Preparedby Seattle-Northwest Securities Corp.-JMW(Finance 7.001 RE...:REN'TON-R44WS_BQ,R04WS_BQ) Page 13 � � � CITY OF RENTON, WASHINGTON WATER AND SEWER REVENUE REFUNDING BONDS, 2012 ORDINANCE N0. AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT �F NOT TO EXCEED $f 1 FOR THE PURPOSE OF REFUNDING CERTAIN OUTSTANDING WATER AND SEWER REVENUE REFUNDING BONDS OF THE CITY; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZING THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; AND DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS. PASSED: October , 2012 PREPARED BY: � PACIFICA LAW GROUP LLP Seattle, Washington � � � r ORDINANCE NO. TABLE OF CONTENTS" Section 1. Definitio ns............................................................. 5 Section 2. Findings Regarding Parity Provisions..................................... 15 Section 3. Authorization and Description of Bonds, ,.., 15 .............. .............. Section 4. Registration of Bonds and Book-Entry System............................ 16 Section 5. Redemption; Purchase of Bonds........................................ 21 Section 6. Priority and Payment from the Waterworks Utility Fund,,,,,,,,,,,,,,,,,, 25 Section 7. Funds and Accounts........................................ ............ 26 Section 8. Covenants............................................................. 29 Section 9. Tax Covenants......................... ................................ 32 Section 10. Future Parit� Bonds................................................... 35 Sectio n 11. Form of Bo nds........................................................ 3 8 Section 12. Execution of Bonds.................................................... 40 Section 13. Lost, Stolen or Destroyed Bonds ,, 41 ........................ ............. Sectio n 14. Sale of Bo nds....... .................................................. 41 Section 15. Application of Bond Proceeds; Plan of Refunding........:.............. 44 Section 16. Bond Insurance........................................ ............... 46 Section 17. Undertaking to Provide Continuing Disclosure.......................... 46 Section 18. Defeasance of the Bonds.............................................. 5Q Section 19. Am e nd me nts......................................................... S 1 Section 20. Contract; Savings Clause............................................... 53 Section 21. General Authorization, Ratification of Prior Acts........................ 54 Section 22. Effective Date of Ordinance........................................ 54 54 -i - . �,, �' CiTY OF RENTON, WASHINGTON ORDINANCE NO. AN ORDINANCE OF THE CITIf OF RENTON, WASHINGTON, AUTHORIZING THE ISSUANCE OF WATER AND SEWER REVENUE REFUNDING BONDS IN THE AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $( � FOR THE PURPOSE OF REFUNDIN6 CERTAIN OUTSTANDING WATER AND SEWER REVENUE REFUNDING BONDS OF THE CITY; PROVIDING THE FORM, TERMS AND COVENANTS OF THE BONDS; AUTHORIZtNG THE APPOINTMENT OF AN ESCROW AGENT AND EXECUTION OF AN ESCROW AGREEMENT; AND DELEGATING CERTAIN AUTHORITY TO APPROVE THE FINAL TERMS OF THE BONDS. WHEREAS, the City of Renton, Washington (the "City"} has created and operates a waterworks utility of the City, inciuding the water, sewer, wastewater and storm drainage systems (the "Waterworks Utility"); and WHEREAS, the City issued and now has outstanding the following series of water and sewer revenue bonds, each being payable on parity from the revenues of the Waterworks Utility: [to be confirmed] Authorizing Original Outstanding Series Ordinance Pnncipal Amount Principal Amount 2002 4976 11,980,000 2003 5019 8,035,000 2004 5098 10,335,000 2007 5313 9,750,000 2008A 5313 9,975,000 20086 5313 2,035,000 (collectively,the "Outstanding Parity Bonds"); and � � f WHEREAS, the Outstanding Parity Bonds issued under date of November 1, 2004mature in principal amounts and bear interest as follows: Maturity Date Principal Interest (December 1) Amount Rate 2013 205,000 3.55% 2014 235,000 3.65 2015 250,000 3.75 2024* 4,605,000 5.00 2025 1,600,000 5.00 . 2026 1,680,000 5.00 2027 1,760,000 5.00 � Term Bond (the "2004 Bonds"); and WHEREAS, the 2004 Bonds maturing on and after December 1, 2015 (the "Refunding Candidates"), are subject to optional redemption, in whole or in part, on any date on and after December 1, 2014, at a price of par plus interest accrued to the date of redemption; and WHEREAS, after due consideration it appears to this Council that all or a portion of the Refunding Candidates (the "Refunded Bonds") may be defeased and refunded by proceeds of water and sewer revenue refunding bonds authorized herein (the "Bonds") at a substantial savings to the City and its ratepayers; and WHEREAS, the respective ordinances authorizing the issuance of the Outstanding Parity Bonds permit the issuance of additional bonds on a parity with the Outstanding Parity Bonds for refunding purposes if certain conditions are met; and WHEREAS, the City has received a proposal from Seattle-Northwest Securities Corporation, Seattle, Washington (the "Underwriter"} and now desires to issue and sell the Bonds to the Underwriter as set forth herein; - 2 - � � � NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON DOES ORDAIN AS FOLLOWS: Section 1. Definitions. As used in this ordinance, the following words shall have the following meanings: Acquired Obligations means the Government Obligations acquired by the City under the terms of this ordinance and the Escrow Agreement to effect the defeasance and refunding of the Refunded Bonds. Annual Debt Service for any year means 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. ease Period means any consecutive 12-month period selected by the City out of the 24-month period next preceding the date of issuance of an additional series of Future Parity Bonds. Beneficial Owner means 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 means that special fund of the City known as the Waterworks Revenue Bond Fund, 2012 created by this ardinance for the payment of the principal of and interest on the Bonds.] Bond Insurance Policy means the municipal bond insurance policy, if any, issued by the Insurer insuring the payment when due of the principal of and interest on all or a portion of the Bonds as provided therein. - 3 - �, ,� . Bond Purchase Conrract means the contract for the purchase of the Bonds between the Underwriter and City, executed pursuant to Section 14 of this ordinance. eond 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, initially, 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 interest on and principal of the Bonds. eond Yeor means each one-year period that ends on the date selected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier af the final maturity date of the Bonds or the date that is five years after the date of . issuance of the Bonds, Bond Years end on each anniversary of the date af issue and on the final maturity date of the Bonds. Bonds mean the City's Water and Sewer Revenue Refunding Bonds, 2012, authorized to be issued by this ordinance. Call Date means December l, 2014. City means the City of Renton, Washington, a municipal corporation duly organized and existing by virtue of the laws of the State of Washington Code means the Internal Revenue Code of 1986, as amended, and shall include all applicable regulations and rulings relating thereto. Commission means the Securities and Exchange Commission. Council means the City Council as the general legislative authority of the City, as duly and regufariy constituted from time to.time. -4- a � � Coveroge Requirement prior to the New Covenant Date means in any calendar year 1.25 times the Maximum Annua) Debt Service. From and after the New Covenant Date the term Coverage Requirement means in any calendar year 1.25 times the Annual Debt Service for such year. [question for the finance teom—should we rename this the "Rate Covenant'� Credit facility means a policy of municipal bond insurance, a letter of credit, surety bond, line of credit, guarantee or other financial instrument or any combination of the foregoing, which obligates a third party to make payment or provide funds for the payment of financial obligations of the City. There may be one or more Credit Facilities outstanding at any time. Designoted City Representotive means the Mayor, the Chief Administrative Officer and the Finance Director of the City and any successor to the functions of such offices. The signature of one Designated City Representative shall be sufficient to bind the City. 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 ordinan,ce. EscrowAgent means U.S. Bank National Association,Seattle, Washington. Escrow Agreement means the Escrow Deposit Agreement between the City and the Escrow Agent to be dated as of the date of closing and delivery of the Bonds. Finance Director means the Cit�s Finance and Information Services Administrator or the successor to such ofFicer. Fitch means Fitch, Inc., organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such organization shafl be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be deemed to refer to -5 - � ,� • any other nationally recognized securities rating agency designated by the City. Future Parity Bonds means 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 Outstanding Parity Bonds and the Bonds. Government Obligations means those obligations now or hereafter defined as such in chapter 39.53 RCW. Gross Revenue means 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. Insurer means the municipal bond insurance company, if any, selected and designated by the Designated City Representative, pursuant to Section 16 of this ordinance, as issuer of a Bond Insurance Policy for all or a portion of the Bonds. Letter of Representations means the Blanket Issuer Letter of Representations from the City to DTC. Maintenance and Operation Expense means all reasonable expenses incurred by the - 6 - , � _ ' �r '�' 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 disposa! 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 Annua!Debt Service means, at the time of calculation, the maximum amount of Annual Debt Service that will mature or come due in the current calendar year or any future calendar year on the Parity Bonds. Mnody's means Moody's Investors Service, its successors and their assigns, and, if such corporation shalf be dissolved or liquidated or shall no longer perForm the functions af a securities rating agehcy, Moody's shall be deemed to refer to any other nationally recognized securities rating agency designated by the City. MSRB means the Municipal Secur.ities Rulemaking Board or any successors to its ' functions. Net Proceeds,when used with reference with the Bonds, means the principal arnount of the Bonds, plus accrued interest and original issue premium, if any, and less original issue discount, if any. Net Revenue means Gross Revenue less Maintenance and Operation Expense. New Covenant Date means from and after the date when all Outstanding Parity Bonds issued prior to 2007 are no longer Outstanding. - 7 - � ,� • 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 e�ent 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. Outstanding Parity eond Ordinances mean the ordinances authorizing the issuance of the Outstanding Parity Bonds identified in the recitals to this ordinance. Outstanding Parity Bonds means the parity water and sewer revenue bonds of the City identified in the recitals to this ordinance. Parity Bonds means the Outstanding Parity Bonds, the Bonds and any Future Parity Bonds. (Parity Bond Fund means any fund created for the payment and redemption of Parity Bonds.] [does the City currently or does it prefer to have a combined eond Fund for all Pariry Bonds?] ° Parity Requirement means Net Revenues equal to or greater than: (a) 1.25 times the Maximum Annual Debt Service for all Parity Bonds plus the Future Parity Bonds proposed to be issued;and (b) 100% of Maximum Annual Debt Service for all subordinate lien evidences of - 8 - � � � � indebtedness secured by Gross Revenue. Privote Person means any natural person engaged in a trade or business or any trust, estate, partnership, association,company or corporation. Privote 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 Persan 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-ta-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 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. Professionol Urility Consultant means 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. Qualifred 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 - 9- �` ,� . 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 the highest rating category by any Rating Age n cy. Quali�ed 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 (etter of credit, is currently rated in the highest rating category by any Rating Agency. � Rate Stabilizotion Fund means the Waterworks Rate Stabilization Fund created by the City pursuant to Ordinance No. 4709. Rating Agency means Moody's, S&P or Fitch. Refunded eonds means the 20�4 Bonds designated by the Designated City Representative pursuant to Section 15. Refunding Account means the account by that name established pursuant to Section 15. Refunding Candidates mean the outstanding 2004 Bonds maturing on and after December l, 2015. Registered Owner means the person named as the registered owner of a Bond in the Bond Register. For so long as the Bonds are he{d in book-entry only form, DTC shall be deemed to be the sole Registered Owner. Reserve Fund means that special fund of the City known as the Waterworks Revenue Bond Reserve Fund created by Ordinance No. 4704. Reserve Requirement�rior to the New Covenant Date means Maximum Annual Debt - 10- , � � I 2004 Bonds rr�eans the Water and Sewer Revenue Bonds, 2004, of the City issued under date of November 1, 2004,as more particularly described in the recitals of this ordinance. Underwriter means Seattle-Northwest Securities Corporation, Seattle,Washington. Waterworks Utility means 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 Utifity Fund means 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 Interr�retation. 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 so{ely for convenience of reference and shall not constitute a part of this ordinance, nor shall they affect - 12- . * .. � �. 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 (fl Words importing the singular number include the plural number and vice versa. Section 2. Findines Re�ardin� Parity Provisions. The City Council hereby finds that there is no deficiency in any Parity Bond Fund, that provisions bereinafter meet the conditions for the issuance of Future Parity Bonds as set forth in the Parity Bond Ordinances for the Outstanding Parity Bonds, and that the issuance of the Bonds will result in a debt service savings for the Waterworks Utility a.nd does not require an increase of inore than $5,000 in a,ny year for principal of and interest on the Boncls over and above the payments that were required to be made for the Refunded Bonds. The conditions contained in the Parity Bond Ordinances for the Outstanding Parity Bonds having been complied with or assured, the payments required herein to be made out of the Waterworks Ufility Fund into the Bond Fund and the Reserve Fund to pay and secure the payment of the principal of and interest on the Bonds shall constitute a lien and charge upon the money in the Waterworks Utility Fund equal in rank with the lien and charge thereon for the payments required to be made for the Outstanding Parity Bonds. Section 3 Authorization and Description of Bonds. The City is hereby authorized to issue water and sewer revenue refundi.ng bonds (the "Bonds") in an aggregate principal amount of not to exceed$( � for the purpose of providing the funds necessary to refund the Refunded Bonds and pay all or a portion of the costs incidenta.l to the foregoing and to the issuance of the Bonds. The Bonds shall be designated the "City of Renton,Washington Water and Sewer - 13- �', „� . Revenue Refunding Bonds, 2012" with any additional series designation, if necessary; shall be dated as of their initial date of delivery; shall be fully registered as to both principal and interest; shall be in the denomination of $5,000 each, or any integral multiple thereof within a maturity, provided that no Bond shall represent more than one maturity; shall be numbered separately in such manner and with any additional designation as the Bond Registrar deems necessary for purposes of identification; shall bear interest from their date, payable semiannually on the interest payment dates set forth in the Bond Purchase Contract; and shall mature on December 1 in the years and principal amounts set forth and approved in the Bond Purchase Contract executed by the Designated City Representative pursuant to Section 14 of this ordinance. The Bonds shall be payable solely out of the Bond Fund and the Reserve Fund and shall not be general obligations of the City. Section 4. ReQistration of Bonds and Book-Entrv Svstem. (a) Bond Registror/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 Finance Director upon prior notice to the Bond Registrar and a successor Bond Registrar appointed by the Finance Director. No resignation or removal of the Bond Registrar shall be effective until a successor shall have been appointed and until the successor Bond Registrar shall have accepted the duties of the Bond Registrar hereunder. The Bond - 14- 1 _ -- -. , �� Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of such Bonds and this ordinance and to carry out all of the Bond Registrar's powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication of the Bonds. (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 17 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 4(h), but such Bond may be transferred as herein provided. All such payments made as described in Section 4(h) 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 Representotions. The Bonds initially shall be held 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) �r 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 - 15- � �+` ''� . the Registered Owner. For so long as any Bonds are held in by a depository, 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. (1) 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 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 appo�nted by the Finance Director pursuant to subsection (2) below or such substitute depository's successor, or (C) to any person as provided in subsection (4) below. (2) Upon the resignation of DTC or its successor(or any substitute depository or its successor} from its functions as depository or a determinat"ion by the Finance Director to discontinue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the Finance Director may hereafter appoint a substitute depository. Any such substitute depository shall be qualified under any applicab{e laws to - 16- � - , '�rr� �,r provide the services proposed to be provided by it. (3) In the case of any transfer pursuant to clause (A) or (B) of subsection (1) above, the Bond Registrar shall, upon receipt of all outstanding Bonds, together with a written request on behalf of the 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 Finance Director. (4) 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 Finance Director deterrnines that it is in the best interest of the beneficial owners of the Bonds that such owners be able to obtain physical 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 by a depository. The Finance Director shalt deliver a written request to the Bond Registrar, together with a supply of physical 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 on behalf of the Finance Director to the Bond Registrar, new Bonds shall be isst�ed in the appropriate.denominations and registered in the names of such persons as are cequested in such written request. (e) Registration of Transfer of Ownership or Exchange; Change in Denominations. 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 Owners 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 - 17- - � � � , 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 prir�cipal 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. (fl Bond Registror'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 a member of, or in any other capacity with respect to, any committee formed to protect the right of the Registered Owners of Bonds. (g) Registrotion Covenont. The City covenants that, untit 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. (h) Ploce and Medium of Poyment. Both principal of and interest on the Bonds shafl be payable in lawful money of the United States of America. Interest on the Bonds shall be calculated on the basis of a year of 360 days and twelve 30-day months. For so long as all Bonds are held by a depository, payments of principal and interest thereon shafl be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of - 18- ' �,, � Representations. In the event that the Bonds are no longer held by a depository, interest on the Bonds shail 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 $1,000,000 of Bonds (received by. the Bond Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Bond Registrar.by wire transfer to the account within the 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. Section 5. Redemption: Purchase of Bonds. (a) Mandotory Redemption of Term Bonds ond Optionol Redemption, if any. The Bonds shall be subject to optional redemption on the dates, at the prices and under the terms set forth in the Bond Purchase Contrad approved by the Designated City Representative pursuant to Section 14. The Bonds shafl be subject to mandatory redemption to the extent, if any, set forth in the Bond Purchase Contract and as approved by the Designated City Representative pursuant to Section.l4. . (b) Purchose of Bonds. The City further reserves the right to use at any time any surplus Net Revenue available after providing for the payments required by paragraphs (i) through (vi) of Section 6(b} of this ordinance, or other available funds, to purchase any of the Bonds that are offered to the City at any price deemed appropriate by the City. (c) Selection of Bonds for Redemption. For as long as the Bonds are held in book-entry onfy 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 - 19- �'" � . 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 subsection (c). 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 the Bond 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 that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Bond Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations herein authorized. (d) Notice of Redemption. (1) Official Notice. For so long as the Bonds are held in uncertificated form, notice of redemption (which notice may.be conditional) shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the City nor the Band Registrar will provide any notice of redemption to any Beneficial Owners. Thereafter (if the Bonds are no longer held in uncertificated form), notice of redemption shall be given in the manner hereinafter provided. Unless waived by any owner of Bonds to be redeemed, ofFicial notice of any such redemption (which redemption may be conditioned by the Bond Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Bond Registrar on behalf of the City by mailing a copy of an official redemption notice by first class mail at least -20- � � � . 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. 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) any conditions precedent to redemption; (E) that if all of the canditions to redemption are met, on the redemption date the redemption price will become due and payable upon each such Bond ar 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 shal! be the principal office of the Bond Registrar. On or prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. If the conditions to redemption have not been met prior to the date scheduled for redemption, then the City may revoke the redemption by giving notice in the same manner as set forth above. (2) Effect of Notice: Bonds Due. If an unconditional notice of redemption has been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the -21- � � � redemption date, become due and payable at the redemption price therein specified, and from and after such date such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled by the Bond Registrar and shall not be reissued. (3) Additional Notice. In addition to the foregoing notice,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 20 days before the redemFtion date to each party entitled to receive notice pursuant to Section 17 and with such additional information as the City shall deem appropriate, but such mailings shall not be a condition p�ecedent to the redemption of such Bonds. (4) Amendment of Notice Provisions. The foregoing notice provisions of this Section 5, including but not limited to the information to be included in redemption notices and the persons designated to receive notices, may be amended by additions, deletions and changes in order to maintain compliance with duly promufgated regulations and -22- � � � recommendations regarding notices of redemption of municipal securities. Section 6. Prioritv and Pavment from the Waterworks Utilitv Fund. (a) Woterworks Utility Fund. A special fund of the City known as the "Waterworks Utility Fund" has heretofore been established by the City, into which shall be deposited all . Gross Revenues as collected. Moneys in the Waterworks Utility Fund shall be trust funds and shall be held separate and apart from all other funds and accounts of the City. (b) Priority of Payments from the Waterworks Utility fund. Gross Revenue on deposit in the Waterworks Utility Fund (other than in any bond redemption or federal rebate account)shafl be used in the following order of priority: (i) To pay Maintenance and Operation Expense; (ii) To pay the interest on the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of interest on Parity Bonds and the ordinance authorizing such Parity Bonds provides for such reimbursement; (iii) To pay the principal of the Parity Bonds, including reimbursements to the issuer of a Credit Facility if the Credit Facility secures the payment of principa� on Parity Bonds and. the ordinance authorizing such Parity Bonds provides for such reimbursement; (iv) 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; (vj To make all payments required to be made into the Reserve Fund, including any reimbursements required for Qualified Insurance or Qualified Letter of -23- �+''` � . Credit; (vi} To make all payments requ.ired 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 warrant5 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 (vii) To retire by optional redemption or purchase 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. (c) Rote Stobilization 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 subsection (b) of this section, 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 7. Funds and Accounts. (a) Bond Fund. [There is hereby created in the City Treasury the Waterworks -24- ,i • • � '� Revenue Bond Fund, 2012 (the "Bond Fund"), which shall be a "Parity Bond Fund" and a subaccount of the Waterworks Utility Fund.) [does the City currently or does it prefer to i►ave a combined bond fund for the purpose of paying debt service on all water and sewer bonds?J The Bond Fund shall be maintained for the purpose of paying the principal of and interest on the Bonds. As long as any Bonds remain 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 Band 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 an or before each date on which an installment af interest or principal and interest falls due on the Bonds equal to the installment of interest or principal and interest. (b) Reserve Fund. 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 Parity Bonds. [The City hereby irrevocably covenants and agrees that on or prior to the date of issua�ce of the Bonds, the amount on deposit in the Reserve Fund will be at least equat to the Reserve Requirement.j 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 a(I 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 -ZS- � , � `'� . 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 Reserve Fund by the withdrawal of cash therefrom for that purpose and after all cash has been depleted, then by draws on the qualified Insurance or Qualified Letter of Credit 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 Bor►ds from becoming "arbitrage bonds" under -26- • ''�r�+' �v the Code. If the City faiis to set aside and pay into the Bond Fund or the Reserve Fund the amounts set forth above, the Registered Owner of any of the outstanding Bonds may bring an action against the City to compel that setting aside and payment. (c) Pledge of Revenue and Lien Position. The Net Revenue is hereby 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. (d) Regording Sufficiency of Revenues. The Council hereby finds that in fixing the amounts to be paid into the Bond Fund out of the Gross Revenues, it has exercised due regard for the Maintenance and Operation Expense and has not obiigated the City to set aside and pay into such Fund a greater amount of such Gross Revenues than in its judgment will be available over and above the Maintenance and Operation Expense. Section 8. Covenants. The City covenants and agrees with the Registered Owner of each Bond at any time outstanding as follows: (a) Rote Covenont. It will establish, maintain and co{lect 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 there�f 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 -27- �II✓' '� • (2) Net Revenue in each calendar year will be at least equal to the Coverage Requirement. (b) Mointenonce and Repoir. 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) Disposo�of Woterworks 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 Waterworks Utility so(d or disposed of for the preceding year bears to the total Net Revenue for that period;or -28- � � � (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 Utifity 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 Watenvorks Utifity 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 UtiEity as of the cfose 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, repfacements and capital -29- � � � additions to the Waterworks Utility. (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 Fn 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. (fl 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 Registered Owners of the Parity Bonds against loss. (g) Maintenonce 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 9. Tax Covenants. The City covenants that it will not ta.ke or permit to be taken on its behalf any action that would adversely affect the exemption from federal income taxation - 30- � , • �'` �/ of the interest on the Bonds and will take or require to be taken such acts as may reasonably be within its ability a.nd as may from time to time be required under applicable law to continue the exemption from federal income taxation of the interest on the 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 Bonds or any other funds of the City which may be deemed to be proceeds of the 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 Bonds to the initial purchasers thereof, would have caused the 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 Bonds. (b) Privote Person Use Limitation for Bonds. The City covenants that for as long as the Bonds are outstanding, it will not 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 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. - 31- � ;'� . 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 (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 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 (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 refinanced with the Bonds, and (ii) any Private Person Use will not exceed the amount of Net Proceeds of the 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 Bonds. (c) Modification of Tox Covenants. The covenants of this section are specified solely to assure the continued exemption from regular income taxation of the interest on the Bonds. To that end, the provisions of this section may be modified or eliminated without any -32- � . . �,,, � requirement for formal amendment thereof upon receipt of an opinion of the City's bond counsel that such modification ar elimination will not adversely affect the tax exemption of interest on any Bonds. (d) Quolified Tax=Exempt Obligation. The City hereby designates the Bonds as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code for investment by financial institutions. The City reasonably does not expect to issue more than $10,000,000 in qualifying tax-exempt debt during calendar year 201Z. Section 10. 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) Qualified Letter of Credit or Qualified Insurance or an amount plus qualified letter of Credit or qualified Insurance 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 Qualified Letter of Credit or Qualified Insurance 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 -33- � "'� • 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 Finance Director demonstrating that Net Revenue for the Base Period; without regard to deposits into or withdrawals from the Rate Stabilization Fund, is equal to at least the Parity Requirement; or (2) prior to the New Covenant Date, 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 at least the Parity Requirement. After the New Covenant Date, this section shall be amended to read as folfows: a certificate of a Professional Utility Consultant that in such � Consultant's opinion Net Revenue for the Base Period, as adjusted, without regard to deposits into or withdrawals from the Rate Stabilization Fund, shall be equal to at least the Parity Requirement. The Professional Utility Consultant, in estimating Net Revenue available for debt services, may adjust Net Revenue to reflect: (A) Any changes in rates in effect and being charged or expressly committed by ordinance to be made in the future; (B) Income derived from customers of the Waterworks Utility who have become customers during the 12 consecutive month period or thereafter adjusted to reflect one years Net Revenue from those customers; (C) Income from any customers to be connected to the Waterworks - -34- �✓ _ ��,' + . . _.. .. . . _ . . . . ♦ � � 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; (Fj 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. (fl Refunding Obligotions. 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 - 35- � '"� ' maturities of the bonds to be refunded thereby. Nothing contained herein shall prevent the City from issuing Future Parity Bonds to refund maturing Parity Bonds, money for the payment of which is not otherwise available. (g) Subordinote Lien Obligations. 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 11. Form of Bonds. The Bonds shall be in substantially the following form: [DTC LANGUAGE] UNITED STATES OF AMERICA NO. S STATE OF WASHINGTON CITY OF RENTON WATER AND SEWER REVENUE REFUNDING BOND, 2012 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 Amaunt 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 principat 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. of the City adopted on , 2012 -36- � ► . �,; � (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 $ . The bonds of this issue are being issued for the purpose of refunding certain outstanding water and sewer revenue refunding bonds of the City and paying costs of issuance of the bonds of this issue. The bonds of this issue are subject to redemption prior to their scheduled maturities as provided in the Bond Ordinance and in the Bond Purchase Contract. The bonds of this issue have been designated as "qualified tax-exempt obligations" for investment by financial institutions under Section 265(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are payable solely from the Bond Fund and the Reserve Fund. The City has irrevocably obligated and bound itself to pay into the Bond Funcl 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 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 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 Parity 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 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. 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. - 37- � � . 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 WITNE55 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 , 2012. CITY QF RENTON, WASHINGTON [SEAL] 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 Refunding Bonds, 2012 of the City of Renton, Washington, dated , 2012. WASHINGTON STATE�ISCAL AGENCY, Registrar By Authorized Signer Section 12. Execution of Bonds. The Bonds shall be executed on behalf of the City by the facsimile or manual signatures of the Mayor a.nd the City Clerk and shall have the seal of the City impressed or a facsimile thereof imprinted, or otherwise reproduced thereon. In the event any officer who shall have signed or whose facsimile signatures appear on -38- �, w . � � 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 sucli Bond such persons were not such officers of the City. Only such Bonds as shall bear thereon a Certificate of Authentication manually executed by an authorized representative of the Bond Registrar shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance. Such Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this ordinance. The Bond Registrar shall be responsible for its representations contained in the Certificate of Authentication on the Bonds. Section 13. 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, da.te and tenor to the Registered Owner thereof upon the Registered Owner's paying the expen.ses 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 fiunishing the City and the Registrar with indemnity sarisfactory to both. Section 14. Sale of Bonds. (a) Bond Sole. The Bonds shall be sold at negotiated sale to the Underwriter -39- ,�, ,,� . pursuant to the terms of the Bond Purchase Contract. The Underwriter has advised the Council that market conditions are fluctuating and, as a result, the most favorable market conditions may occur on a day other than a regular meeting date of the Council. The Council has determined that it woufd be in the best interest of the City to delegate to the Designated City Representative for a limited time the authority to approve the final interest rates, aggregate principal amount, principal amounts of each maturity of the Bonds, selection of the Refunded Bonds, and redemption rights. The Designated City Representative is hereby authorized to approve the final interest rates, aggregate principal amount, principal maturities, selection of the Refunded Bonds, and redemption rights for the Bonds in the manner provided hereafter so long as (i) the aggregate principal amount of the Bonds does not exceed [$ 1, (ii) the final maturity date for the Bonds is no later than [December 1, _], (iii) the Bonds are sold (in the aggregate) at a price not less than [_%] and not greater than [_%], (iv) the Bonds are sold for a price that results in a minimum net present value debt service savings over the Refunded Bonds of L_�o], and (v) the true interest cost for the Bonds (in the aggregate) does not exceed �—��• In determining whether or not to acquire a Bond Insurance Policy and determining the final interest rates, aggregate principal amounts, principal maturities and redemption rights,the Designated City Representative shall take into account those factors that, in his or her judgment, will result in the lowest true interest cost on the Bonds to their maturity, including, but not limited to current financial market conditions and current interest rates for obligations comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in this section, the Designated City Representative is hereby authorized to execute the Bond -40- ;�' - � � � Purchase Contract. The signature of one Designated City Representative shall be sufficient to bind the City. Following the execution of the Bond Purchase Contract, the Designated City Representative shall provide a report to the Council describing the final terms of the Bonds approved pursuant to the authority delegated in this section. The authority granted to the Designated City Representative by this Section 14 shall expire 120 days after the effective date ' of this ordinance. If a Bond Purchase Contract for the Bonds has not been executed within 120 days after the effective date of this ordinance, the authorization for the issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale approved unless such Bonds shall have been re-authorized by ordinance of the Council. The ordinance re-authorizing the issuance and sale of such Bonds may be in the form of a new ordinance repealing this ordinance in whole or in part or may be in the form of an amendatory ordinance approving a bond purchase contract or establishing terms and conditions for the authority delegated under this Section 14. (b) Delivery of Bonds; Documentation. Upon the passage and approval of this ordinance, the proper officials of the City including the Designated City Representative, are authorized and directed to undertake all action necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to execute all closing certificates and documents required to effect the closing and delivery of the Bonds in accordance with the terms of the Bond Purchase Contract. (c} Preliminary ond Finol Offrciol Stotements. The Finance Director is hereby authorized to ratify and to deem final the preliminary OfFicial Statement relating to the Bonds for the purposes of the Rule. The Finance Director is further authorized to ratify and to approve -41- � � / for purposes of the Rule, on behalf of the City, the Official Statement relating to the issuance and sale of the Bonds and the distribution of the Official Statement pursuant thereto with such changes, if any, as may be deemed by her to be appropriate. Section 15. �plication of Bond Proceeds: Plan of Refundin�. (a) Refundinq Plon. For the purpose of realizing a debt service savings and benefiting the City's ratepayers, the Council proposes to refund and defease the Refunded - Bonds as set forth herein. The Refunded Bonds shall include those Refunding Candidates designated by the Designated City Representative when the Bonds are sold pursuant to the Bond Purchase Contract. Proceeds of the Bonds shall be deposited with the Escrow Agent pursuant to the Escrow Deposit Agreement to be used immediately upon receipt thereof to defease the Refunded Bonds as authorized by the 2004 Bond Ordinance and to pay costs of issuance of the Bonds. The net proceeds deposited with the Escrow Agent shall be used to defease the Refunded Bonds and discharge the obligations thereon by the purchase of 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: (1) interest on the Refunded Bonds due and payable on and prior to the Call Date; and (2) the redemption prices of the Refunded Bonds on the Call Date. 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 connectian with refunding bond issues. -42- � . . � �� (b) Escrow Agent/Escrow Agreement. The City hereby appoints U.S. Bank National Association, Seattle, Washington, as the Escrow Agent for the Refunded Bonds (the "Escrow Agent"). A beginning cash balance, if any, and the Acquired Obligations shall be deposited irrevocably with the Escrow Agent in an amount sufficient to defease the Refunded Bonds. The proceeds of the Bonds remaining 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 Bonds. In order to carry out the purposes of this Section 15, the Finance Director is authorized and directed to execute and deliver to the Escrow Agent, an Escrow Deposit Agreement. (e) Coll for Redemption of Refunded Bonds. The City hereby irrevocably sets aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to make the payments described in Section 15(d): The City hereby irrevocably calls the Refunded Bonds for redemption on their Call Date in accordance with the provisions of the 2004 Bond Ordinance authorizing the redemption and retirerrient of the 2004 Bonds prior to their fixed maturities. Said defeasance and call for redemption of the Refunded Bonds shall be irrevocable after the issuance of the Bonds 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 the 2004 Bond Ordinance. 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 Finance Director, or, at the direction of the Finance Director, to the paying agent for the Refunded Bonds, sums sufficient to pay, when due,the payments specified in Section 15. All such sums shall be paid -43- i� �i` `"�' • . from the moneys and Acquired Obligations deposited with the Escrow Agent, and the income therefrom and proceeds thereof. All such sums so paid to said Finance Director shall be credited to the Refunding Account. All moneys and Acquired Obligations deposited with the Escrow Agent and any income therefrom shall be held, invested (but only at the direction of the Finance Directorj 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 see that all necessary and proper fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid when due. Section 16. Bond Insurance. The Finance Director is hereby further authorized to solicit proposals from municipal bond insurance companies for the issuance of a Bond Insurance Policy. In the event that the Finance Director receives multiple proposals in response to a solicitation, the Finance Director may select the proposal having the lowest cost and resulting in an overall lower interest cost with respect to the Bonds to be insured. The Finance Director may execute a commitment received from the Insurer selected by the Finance Director. The Council further authorizes all proper officers, agents, attomeys and employees of the City to coope�ate with the Insurer in prepari.ng 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. . Section 17. Undertakin�to Provide Continuing Disclosure. (a) Contract/Undertoking. This section constitutes the City's written undertaking for the benefit of the Registered Owners and Beneficial Owners of the Bonds required by subsection (b)(5) of the Rule. -4-4- ,� ' __ _ � . . _ _. . • �' ,� (b) Financial Stotemenrs/Operotinq Data. The City hereby agrees to provide or cause to be provided to the Municipal Securities Rulemaking Board ("MSRB"}, the following annual financial information and operating data for the prior fiscal year, commencing in 2013 with the calendar year ending December 31, 2012: (1) 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 "Annu�l Financial Statements"); (2) A statement of authorized, issued and outstanding bonded debt secured by Net Revenue; (3) Debt service coverage ratios;and (4) General customer statistics for the Waterworks Utility contained in the final official statement for the Bonds and identified in a closing certificate executed by the Designated City Representative and referencing this section. Items (2) through (4) shall be required only to the extent that such information is not included in (1). The information and data described above shall be provided on or before nine months after the end of the City's 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 the MSRB. - In lieu of providing such annual financial information and operating data, the City may cross-reference to other documents available to the public on the MSRB's internet website or -45- : �r„ `� ' filed with the Commission. If not provided as part of the annual financial information discussed above, the City shall provide the City's audited annual financial statement prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute) when and if available to the MSRB. (c) Listed Events. The City agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds: • Principal and interest payment delinquencies; • Non-payment related defaults, if material; • Unscheduled draws on debt service reserves reflecting financial difficulties; • Unscheduled draws on credit enhancements reflecting financial difficulties; • Substitution of credit or liquidity providers, or their failure to perform; • Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations �f taxability, Notices of Proposed Issue (IRS �Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; • Modifications to the rights of Bondholders, if material; • Bond calls, if material, and tender offers; • Defeasances; • Release, substitution, or sale of property securing repayment of the Bonds, if material; -46- . . ,� ,;,�; • Rating changes; • Bankruptcy, insolvency, receivership or similar event of the City; • The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially a11 of the assets of the City; other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and • Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall promptly determine whether the events described above are material. (d) Format for Filings with the MSRe. All notices, financial informati�n and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. (e) Notification Upon Foilure to Provide Financiol Doto. The City agrees to provide or cause to be provided, in a timely manner, to the MSRB notice Qf its failure to provide the annual financial information described in Subsection (b) above on or prior to the date set forth in Subsection (b)above. (fl Terminotion/Modification. The City's obligations to provide annual financial information and notices of certain listed 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 (i) 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 -47- . �• � � � otherwise does not apply to the Bonds and (ii) notifies the MSRB of such opinion and the cancellation of this section. The City may amend this section with an opinion of nationally recognized bond counsel in accordance with the Rule. In the event of any amendment of this section, the City shall describe such amendment in the next annual report, and shall include, a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (A) notice of such change shall be given in the same manner as for a listed event under Subsection (c), and (B) the annual report for the year in which the change is made shall present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. (g) Bond Owner's Remedies Under This Sedion. The right of any bondowner or Beneficial Owner of Bonds to enforce the provisions of this section shall be limited to a 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 an event of default with respect to the Bonds. (h) No Defau/t. Except as otherwise disclosed in the City's Official Statement relating to the Bonds, the City is not and has not been in defauft in the performance of its obligations of any priar undertaking far ongoing disclosure with respect to its obligations. Section 18 Defeasance of the Bonds. In the event that money and/or Government . Obligations matvring or having guaranteed redemption prices at the option of the holder at such -48- � - - , � ' `'+�r�' �rr� time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to redeem and retire part or all of the Bonds in accordance with the their terms, are hereafter irrevocably set aside in a special account and pledged to effect such redemption and retirement,then no further payments need be made into the Bond Fund or any account therein for the payment of the pri.ncipal of and interest on the certain Bonds so provided for and such Bonds shall then cease to be entitled to any lien,benefit or security of this ordinance, except the right to receive the funds so set aside and pledged, and such Bonds shall no longer be deemed to be Outstanding hereunder, or under any ordi.nance authorizing the issuance of bonds or other indebtedness of the City. Within 30 days of any defeasance of Bonds the Bond Registrar shall provide notice of defeasance of Bonds to Registered Owners of the Bonds being defeased and to each party entitled to receive notice in accordance with Section 17. Section 19. 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 desirable and not inconsistent with such ordinances and which shall not adversely -49- � ' � �1✓ ;w■r+� • 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 pravisions 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 therean, 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 Registered 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 -50- ` . - R ♦ � t�r all owners of Bonds outstanding hereunder shali 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 supp{emental 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 defivered without cost to the owners of any affected Bonds then outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. (e) Excfusron 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. � (fl 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 20. Contract: Savings Clause. The covenants contained in this ordinance and in the Bonds sha11 constitute a contract between the City and the Registered Owner of ea.ch and . every Bond. If any one or more of the covenants or agreements provided in this ordi.nance to be - Sl- , . �° � � • performed on the part of the City shall be declared by any court of competent jurisdiction and after fmal 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 21. General Authorization: Ratification of Prior Acts. The Mayor, the Chief Admi.nistrative O�cer, the Finance Director and other appropriate officers of the City aze � 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 22 Effective Date of Ordinance. This ordinance shall be effective upon its passage, approval,and thirty(30) days after publication. PASSED by the City Council this day of October, 2012. Bonnie I. Walton, City Clerk APPROVED BY THE MAYOR this day of October, 2012. Denis Law, Mayor Approved as to form: Pacifica Law Group LLP Bond Counsel - 52- �� + +vrr� `rrrr" Date of Publication: - 53- � � � _ '� e , CERTI FICATE I, the undersigned, City Clerk of the City Council of the City of Renton, Washington (the "Cit�'), DO HEREBY CERTIFY: 1. The attached copy of Ordinance No. (the "Ordinance") is a full,true and correct copy of an ordinance duly passed at a regular meeting of the City Council of the City held at the regular meeting place thereof on October J 2012, as that ordinance appears on the minute book of the City; and the Ordinance will be in full force and effect after publication in the City's official newspaper as provided by law; and 2. A quorum of the members of the City Council was present throughout the meeting and a majority of those members present voted in the proper manner for the passage of the Ordinance. IN WITNESS WHEREOF, I have hereunto set my hand this day of October, 2012.