HomeMy WebLinkAbout5011
CITY OF BREMERTON, WASHINGTON
WATER AND SEWER REVENUE AND REFUNDING BOND, 2007
ORDINANCE NO. 5011
AN ORDINANCE of the City of Bremerton, Washington,
authorizing the issuance of a water and sewer revenue and refunding
bond in the principal amount of $5,375,000 to obtain funds for certain
capital improvements ~o the City's water and sewer system and to
provide a portion..of the funds necessary to defease the City's
outstanding water and sewer revenue bonds; providing the form,
terms and covenants of the Bond; and approving the sale of the Bond.
Passed: June 6, 2007
PREPARED BY:
K&L PRESTON GATES ELLIS LLP
Seattle, Washington
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
Section 8.
Section 9.
Section 10.
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
Section 24
Section 25.
Section 26.
Section 27.
Section 28.
Section 29.
Section 30.
Section 31.
Section 32.
Section 33.
TABLE OF CONTENTS
. Page
Definitions............................................................................................................... 2
Plan of Improvements.............................................................................................. 9
Authorization of the Bond..................................................................................... 10
Prepayment.......................................................;.................................................... 11
Combined Utility System Fund............................................................................. 12
Rate Stabilization Account.................................................................................... 13
Bond Account ..... ............ ........................... ....... ........ ......... ......... .................. ......... 14
Adequacy of Revenue ................. ............... ............ ............................. ..... .............. 17
General Covenants................................................................................................. 18
Tax Covenants; Special Designation........... ............... .............. ......... ............... ..... 22
Payment Agreements............................................................................................. 22
Future Parity Bonds........................ ~...................................................................... 24
Bond Deemed to Be No Longer Outstanding........................................................ 28
Form of the Bond................................................................................................... 29
Execution and Authentication of the Bond............................................................ 31
Lost or Stolen Bond............................................................................................... 32
Sale of the Bond...... .......... ....... ....... ..... ..... ............. ........ .......... .............. ............... 32
Application of Bond Proceeds............................................................................... 32
Events of Default................................................................................................... 33
Bondowners' Trustee............................................................................................. 34
Suits a Law or in Equity ..........................................................................................35
Application of Money Collected by Bondowners' Trustee ...................................37
Duties and Obligation of Bondowners' Trustee ....................................................37
Suits by Individual Bondowners Restricted........................................................... 38
Refunding Account........................................................................ ~....................... 39
Redemption of Refunded Bonds............................................................................ 41
Finding of Defeasance........................................................................................... 43
Ongoing Disclosure; Reporting Requirements............................................:......... 43
Authorization to Officials and Agents................................................................... 44
Supplements and Amendments............................................................................. 44
Severabili ty ............................................................................................................ 46
Ratification ...................... ..... ...................... ........ .......................... ........... ......... ..... 46
Effective Date ........... ..... .............. ........ .......... .......................... ........ ............. ......... 46.
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06/06/07
CITY OF BREMERTON, WASHINGTON
ORDINANCE NO. 5011
AN ORDINANCE of the City of Bremerton, Washington,
authorizing the issuance of a water and sewer revenue and refunding
bond in the principal amount of $5,375,000 to obtain funds for certain
capital improvements to the City's water and sewer system and to
provide a portion of the funds necessary to defease the City's
. .
outstanding water and sewer revenue bonds; providing the form,
terms and covenants of the Bond; and approving the sale of the Bond.
WHEREAS, the City of Bremerton, Washington (the "City") owns, operates and
maintains a combined waterworks and sewerage system (the "System"); and
WHEREAS, it is in the best interest of the City that the City undertake various capital
improvements at the System; and
WHEREAS, the City now has outstanding its Water and Sewer Revenue Bonds, 1994
issued under the date of March 1, 1994 (the" 1994 Bonds"); and
WHEREAS, there is currently outstanding $2,655,000 of the 1994 Bonds maturing on
September 1, 2007 (the" 1994 Refunded Bonds"); and
WHEREAS, the City now also has outstanding its Water and Sewer Revenue Bond, 2005
issued under the date of August 31, 2005 (the "2005 Bond"); and
WHEREAS, Ordinance No. 4944 authorizing the 2005 Bond (the "2005 Ordinance")
provides that the 2005 Bond may be prepaid in whole or in part of any date, together with a
prepayment fee, plus accrued interest to the date of redemption upon three days notice to Bank of
America, N.A., as owner of the 2005 Bond; and
WHEREAS, there is currently outstanding $365,928.30 of the 2005 Bond (the "2005
Refunded Bond," and together with the 1994 Refunded Bonds, the "Refunded Bonds"); and
WHEREAS, in order to finance capital improvements to the System and to refund the
Refunded Bonds, it is hereby found necessary and advisable that the City issue a water and sewer
revenue and refunding bond (the "Bond") with a lien on the revenues of the System; and
WHEREAS, the Council has received a proposal from Bank of America, N.A., to purchase
the Bond on the terms and conditions that are acceptable to the Council;
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF BREMERTON,
WASHINGTON, DOES ORDAIN as follows:
Section 1.
Definitions. As used in this ordinaJ)ce the following words shall have the
following meanings:
"Acquired Obligations" means the obligations acquired pursuant to Section 25 hereof to
refund the Refunded Bonds.
"Annual Debt Service" for any fiscal year or calendar year means the sum of:
(a) the interest due in such year on all outstanding Parity Bonds excluding,
however, interest to be paid from the proceeds of Parity Bonds, and any Payment Agreement
Payments due in such year,
(b) the principal of all outstanding Serial Bonds due in such year, and
(c) the Sinking Fund Requirement, if any, for such year.
If the interest rate on any such bonds is other than a fixed rate, the rate applicable at the
time of the computation shall be used.
Notwithstanding the foregoing, debt service on Parity Bonds with respect to which a
Payment Agreement is in force shall be calculated by the City to reflect the net economic effect
on the City intended to be produced by the terms of such Parity Bonds and the terms of such
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Payment Agreement, III accordance with the requirements applicable to such Payment
Agreement.
"Assessments" means assessments (including interest and penalties) levied in any utility
local improvement district of the City for the acquisition or construction of additions and
improvements to and extension of the System, if such assessments are pledged to be paid into the
Bond Account, including UUD No. 2002-01.
"Average Annual Debt Service" means the amount. determined by dividing (a) the sum of
all interest and principal to be paid on all Parity Bonds from the date of determination to the last
maturity date of such Parity Bonds, by (b) the number of fiscal years or calendar years from and
including the fiscal year or calendar year in which the determination is made to the last fiscal
year or calendar year in which any of such Parity Bonds will be outstanding.
"Bank" means Bank of America, N.A., its successors or assigns.
"Bond" means the $5,375,000 principal amount of "Water and Sewer Revenue and
Refunding Bond, 2007" authorized to be issued by the City pursuant to this ordinance.
"Bond Account" means that special fund of the City to be known as the "Utility Debt
Service Account," created for the purpose of paying and securing the principal of and interest on
the Bond and any Future Parity Bonds.
"Bond Register" means the registration records for the Bond maintained by the Bond
Registrar.
"Bond Registrar" means the Director of Financial Services of the City.
"City" means the City of Bremerton, Washington, a first class city of the State of
Washington.
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"Code" means the federal Internal Revenue Code of 1986, as amended, and applicable
regulations thereunder.
"Council" means the City Council of the City, the general legislative authority of the
City, as the same shall be duly and regularly constituted from time to time.
"Combined Utility System Fund" means both the water system revenue fund and the
sewer system revenue fund (and sub-funds and accounts therein) of the City heretofore created
into which fund shall be paid the Gross Revenue of the System.
"Director of Financial Services" means the duly qualified, appointed and acting Director
of Financial Services of the City or any other officer who succeeds to the duties now delegated to
that office.
'.'Escrow Agent" means the bank or trust company appointed by the Director of Financial
Services pursuant to Section 25 hereof.
"Escrow Agreement" means the agreement between the City and the Escrow Agent
entered into pursuant to Section 26 hereof.
"Future Parity Bonds" means all revenue bonds or other revenue obligations of the City
issued after the date of the issuance of the Bond and having a lien upon Gross Revenue for the
payment of the principlil thereof and interest thereon equal to the lien upon Gross Revenue for
the payment of the principal of and interest on the Bond.
"Government Obligations" has the meaning given to such term in RCW Chapter 39.53, as
the same may be amended from time to time.
"Gross Revenue" means all earnings and revenue, except Assessments, received by the
System from any source whatsoever, including proceeds from the sale of forest products from
System-owned lands, except general ad valorem taxes, grants from the state, federal or local
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govemrrients, earnings in any refunded bond escrow account or fund, gifts to the System for
capital purposes, proceeds from the sale of City or System property, and proceeds of City or
System obligations.
"Maximum Annual Debt Service" means the maximum amount of Annual Debt Service
which shall become due in any future year on any outstanding Bond or Future Parity Bonds.
"Moody's" means Moody's Investors Services or its comparably recognized business
successor.
"Net Revenue"means Gross Revenue less the Operating and Maintenance Expenses.
"1994 Bonds" means the City' s "Water and Sewer Revenue Bonds, 1994" issued under
date of March 1, 1994, pursuant to Ordinance No. 4451.
"1994 Refunded Bonds" means the $2,655,000 of 1994 Bonds maturing on September 1,
2007.
"Operating and Maintenance Expenses" means all reasonable expenses incurred by the
City in causing the System to be operated and maintained in good repair, working order and
condition, including without limitation payments (other than payments out of proceeds of the
Bond or Future Parity Bonds) of premiums for insurance on the System, and any State-imposed
taxes, and also including all payments made to another agency for treatment or disposal of
sewerage or acquisition of water, but excluding depreciation and amortization, and any City-
imposed utility taxes or payments in lieu of taxes payable from the Gross Revenue of the System.
"Parity Bonds" means the Bond and any Future Parity Bonds.
"Payment Agreement" means, to the extent permitted from time to time by applicable
law, a written agreement entered into by the City (i) in connection with or incidental to the
issuance, incurring or carrying of any Parity Bonds; (ii) for the purpose of managing or reducing
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the City's exposure to fluctuations or levels of interest rates, currencies or commodities or for
other interest rate, investment, asset or liability management purposes; (iii) with a Qualified
Counterparty; and (iv) which provides, on either a current or forward basis, for an exchange of
payments determined in accordance with a formula specified therein.
"Payment Agreement Payments" means the amounts periodically required to be paid by
the City to the Qualified Counterparty pursuant to a Payment Agreement. The term "Payment
Agreement Payments" does not include any termination payment required to be paid with respect
to a Payment Agreement.
"Payment Agreement Receipts" means the amounts periodically required to be paid by
the Qualified Counterparty to the City pursuant to a Payment Agreement.
"Permitted Investments" means any investments or investment agreements permitted for
cities under the laws of the State of Washington as amended from time to time.
"Principal and Interest Account" means the account of that name created in the Bond
Account for the payment of the principal of and interest on the Bond and any Future Parity
Bonds.
"Professional Utility Consultant" means the independent person(s) or firm(s) selected by
the City having a favorable reputation for skill and experience with water and wastewater
systems of comparable size and character to the System in such areas as are relevant to the
purposes for which they are retained.
"Project" means the improvements to the System identified in Section 2 hereof.
"Qualified Counterparty" means with respect to a Payment Agreement an entity (i) whose
senior long term debt obligations, other senior unsecured long term obligations or claims paying
ability or whose payment obligations under a Payment Agreement are guaranteed by an entity
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whose senior long term debt obligations, other senior unsecured long term obligations or claims
paying ability are rated (at the time the Payment Agreement is entered into) at least as high as A3
by Moody's and A- by S&P, or the equivalent thereof by any successor thereto, and (ii) who is
otherwise qualified to act as the other party to a Payment Agreement under any applicable laws
of the State.
"Qualified Insurance" means any unconditional 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 service corporation, as of the time of issuance of such
policy or surety bond, is currently rated in one of the two highest rating categories by Moody's
and S&P.
"Qualified Letter of Credit" means any irrevocable letter of credit issued by a financial
institution for the account of the City on behalf of the owners of any Parity Bonds, which
institution maintains an office, agency or branch in the United States and as of the time of
issuance of such letter of credit, is currently rated in one of the two highest rating categories by
Moody's or S&P.
"Rate Stabilization Account" means the account of that name authorized to be created
within the Combined Utility System Fund pursuant to Section 5 of this ordinance.
"Refunded Bonds" means the 1994 Refunded Bonds and the 2005 Refunded Bond.
"Refunding Account" means the City of Bremerton 2007 Water and Sewer Revenue
Bond Refunding Account established by Section 25 hereof.
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"Reserve Account" means the account of that name authorized to be created in the Bond
Account pursuant to Section 7 hereof to secure the payment of principal of and interest on t~e
Parity Bonds.
"Reserve Account Requirement" means with respect to all outstanding Parity Bonds the
lesser of (a) 125% of Average Annual Debt Service or (b) maximum Annual Debt Service;
provided, however, that at the time of issuance of any series of Parity Bonds, the Reserve
Account Requirement allocable to a series of Parity, Bonds shall not exceed 10% of the initial
principal amount of that series of Parity Bonds.
. "Resource Obligation" means an obligation of the City to pay the following costs
associated with a resource from Gross Revenue as (a) Operating and Maintenance Expenses for
any month in which any Resources were made available to the System during such month
(regardless of whether or not the System actually scheduled or received Resources during such
month) and (b) at all other times as an indebtedness of the System payable from Gross Revenue
on a parity of lien with Parity Bonds:
(i) costs associated with the System and any Resources hereafter acquired,
purchased or constructed by the City and declared by the Council to be a separate system, which
such costs shall include but are not limited to costs of normal operation and maintenance,
renewals and replacements, additions and betterments and debt service on the bonds or other
obligations of such separate system but shall exclude costs paid or to be paid from the proceeds
of the sale of bonds or other obligations of such separate system, and
(ii) costs associated with the purchase of Resources under a contract.
"Resources" means facilities or resources ofthe System.
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"S&P" means Standard & Poor's Rating Services, a Division of the McGraw-Hill
Companies, or its comparably recognized business successor.
"Serial Bonds" means Parity Bonds other than Term Bonds.
"Sinking Fund Requirement" means, for any fiscal year or calendar year, the principal
amount of Term Bonds required to be purchased, redeemed or paid at maturity in such year as
established by the ordinance of the City authorizing the issuance of such Term Bonds.
"System" means the existing combined water and sewerage system of the City, together
with any storm drainage system or refuse disposal system or other utility system now or hereafter
combined therewith, as the same may be added to, improved and extended for as long as the
Bond and any Future Parity Bonds are outstanding, but shall not include any separate utility
system established by the City.
"Term Bonds" means any Future Parity Bonds identified as Term Bonds in the ordinance
authorizing the issuance thereof, the payment of the principal of which is provided for by a
mandatory schedule of deposits of money equal (in the aggregate) to the full principal amount of
such Term Bonds, into the Bond Account, and by a mandatory redemption schedule
corresponding (as to time and amounts) to such mandatory schedule of deposits.
"2005 Bond" means the City's "Water and Sewer Revenue Bond, 2005" issued under
date of August 31, 2005, pursuant to Ordinance No. 4944.
"2005 Refunded Bond" means all of the $365,928.30 currently outstanding 2005 Bond.
"UUD No. 2002-01" means Utility Local Improvement District No. 2002-01 established
by the City pursuant to Ordinance No. 4837.
Section 2.
Plan of Improvements. The City hereby specifies and adopts a system or
plan of additions to and betterments and extensions of the System, consisting of the following
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capital improvements (collectively, the "Project"): the southwest Bremerton sewer expansion
project, which includes construction of a sewer main and pump station in southwest Bremerton
to pump and convey sewage from the southwest Bremerton area to the City's wastewater
treatment plant, and any other capital improvements to the System. The Project will be
undertaken in accordance with specifications and contracts for acquisition and construction
approved by the Council from time to time. It is hereby provided that the Project shall be subject
to such changes as to details as may be authorized by the Council either prior to or during the
actual course of construction. The City may proceed with the construction and installation of the
Project as herein authorized, either alone or in conjunction with the construction of other
facilities of the System, and in whole, or in successive parts from time to time as may be found
advisable.
The estimated cost of the Project is declared to be approximately$4,480,000.
Section 3. Authorization of the Bond. The City shall now issue and sell its water and
sewer revenue and refunding bond to provide funds to pay costs of the Project and to refund the
Refunded Bonds. The Bond shall be designated as the "City of Bremerton, Washington, Water
and Sewer Revenue and Refunding Bond, 2007," shall be dated as of the date of its initial
delivery to the Bank; shall be in fully registered form in the denomination of $5,375,000, and
shall bear interest on unpaid principal from its date at a per annum rate of 4.28% (computed on
the basis of a 360-day year of twelve 30-day months), payable on the first days of June anc:t
December, commencing December 1, 2007. The principal of the Bond shall be payable in the
amounts as shown in Exhibit B to this ordinance with final maturity on December 1, 2021. If
there occurs (i) any nonpayment of principal, interest, fee or other amounts when due under the
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Bond or this ordinance, or (ii) any failure to maintain the tax-exempt status of the Bond, then the
interest rate under the Bond shall increase by two (2.0) percentage points.
The Bond shall not be a general obligation of the City. The Bond shall be an obligation
only of the Bond Account and shall be payable and secured as provided herein. The Bond does
not constitute an indebtedness of the City within the meaning of the constitutional provisions and
limitations ofthe State of Washington.
The Director of Financial Services shall act as transfer agent, paying agent and registrar
for the Bond (the "Bond Registrar"). Both principal of and interest on the Bond shall be payable
in lawful money of the United States of America. Upon final payment of all principal and
interest thereon, the Bond shall be submitted to the Bond Registrar for cancellation and
surrender.
The Bond Register shall be maintained by the Bond Registrar, and shall contain the name
and mailing address of the registered owner ofthe Bond or nominee of such registered owner.
The Bond may be transferred only on the Bond Register maintained by the Bond
Registrar for that purpose upon the surrender thereof by the registered owner or nominee or his or
her duly authorized agent and only if endorsed in the manner provided thereon and thereupon a
new fully registered Bond of like principal amount, maturity and interest rate shall be issued to
the transferee in exchange therefore. Such exchange or transfer shall be without cost to the
owner or transferee.
Section 4.
Prepavment. The City reserves the right to prepay the Bond in whole or
in part at any time by paying the principal amount thereof to be prepaid together with accrued
interest to the date of prepayment. If the Bond is prepaid, the prepayment shall be accompanied
by the amount of accrued interest on the amount prepaid, and a prepayment fee. The prepayment
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fee shall be in an amount sufficient to compensate the Bank for any loss incurred by it as a result
of the prepayment, as documented by the Bank, including any loss arising from the liquidation or
reemployment of funds obtained by it to maintain the funds used to purchase the Bond or from
fees payable to terminate the deposits from which such funds were obtained.' For purposes of this
paragraph, the Bank shall be deemed to have funded the purchase of the Bond by a matching
deposit or other borrowing in the applicable interbank market, whether or not the Bond was in
fact so funded. In no case shall a prepayment fee apply if the Bank's internally derived cost of
funds is higher on the date of prepayment than it was on the date the fixed rate of the Bond was
set
Section 5.
Combined Utility System Fund. The City pledges to pay all of the Gross
Revenues of the System as collected into the Combined Utility System Fund. . The Gross
Revenue deposited in the Combined Utility System Fund shall be used only for the following
purposes and in the following order of priority:
FIRST, to pay the Operating and Maintenance Expenses and costs associated with
a Resource Obligation (to the extent payable as Operating and Maintenance Expenses);
SECOND, to make all required payments into the Principal and Interest Account
for all Parity Bonds and to make Payment Agreement Payments;
THIRD, to make all required payments into the Reserve Account for all Parity
.
Bonds and to make all payments required to be made pursuant to a reimbursement agreement in
connection with a Qualified Insurance or Qualified Letter of Credit, except that if there is not
sufficient money to make all payments under reimbursement agreements, the payments will be
made on a pro rata basis;
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FOURTH, to make all required payments into any revenue bond redemption fund
created to pay and secure the payment of the principal of and interest on any revenue bonds or
short-term obligations of the City having a lien and charge upon the Gross Revenue of the
System subordinate and inferior to the lien thereon for the payment of principal of and interest on
any Parity Bonds; and
FIFTH, to redeem and retire any water and sewer revenue bonds of the City then
outstanding or to purchase any or all of those bonds in the open market at a price not in excess of
the price at which those bonds could be redeemed at the next call date; to make necessary
additions, betterments, repairs, extensions and replacements of the System or other purposes
proper to its maintenance and operation, including the payment of any City-imposed utility taxes
or payments in lieu of taxes payable from Gross Revenue of the System, or for any other lawful
City purpose.
The City may transfer from any funds or accounts of the City legally available therefore,
except bond redemption funds, any money therein to meet the required payments to be made into
the Bond Account.
Section 6. . Rate Stabilization Account. A special account of the City to be designated
the "Water and Sewer Rate Stabilization Account" (the "Rate Stabilization Account") may be
created within the Combined Utility System Fund, at the discretion of the Director of Financial
Services, to cope with future increases in revenue requirements of the System. In accordance
with the provisions of Section 5 of this ordinance, the City may from time to time appropriate or
budget amounts in the Combined Utility System Fund for deposit in the Rate Stabilization.
Account and may from time to time withdraw amounts therefrom to prevent or mitigate water
and sewer rate increases or for other lawful purposes of the City related to the System. Amounts
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withdrawn from the Rate Stabilization Account shall increase Gross Revenue for the period for.
which they are withdrawn, and amounts deposited in the Rate Stabilization Account shall reduce
Gross Revenue for the period for which they are deposited. Credits to or from the Rate
Stabilization Account that occur within 90 days after the end of a fiscal year may be treated as
occurring within such fiscal year. Earnings on the Rate Stabilization Account shall be credited to
the Combined Utility System Fund.
Section 7.
Bond Account. There has heretofore been created in the office of the
Director of Financial Services a fund of the City known as the "Utility Debt Service Account"
(the "Bond Account"), which fund shall be drawn upon for the sole purpose of paying the
principal of, premium ifany, and interest on the Parity Bonds. The money in the Bond Account
shall be kept separate and apart from all other funds and accounts of the City.
A. Debt Service Account. A special account known as the Debt Service
Account is hereby authorized to be created in the Bond Account for the purpose of paying the
principal of, premium, if any, and interest on the Parity Bonds.
As long as the Bond remains outstanding, the City hereby irrevocably obligates and binds
itself to set aside and pay from the Combined Utility System Fund into the Debt Service
Account, on or before the date due, those amounts necessary, together with Gross Revenue
collected and deposited and such other money as is on hand and available therefor in the Debt
Service Account, to pay the interest or principal and interest next coming due on the outstanding
Parity Bonds.
The City covenants and agrees that in the event it issues any Future Parity Bonds that are
Term Bonds, it will provide in each ordinance authorizing the issuance of the same for annual
payments to be made from the Combined Utility System Fund into the Debt Service Account
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sufficient together with Gross Revenue collected and deposited and such other money as is on
hand and available therefor in such account to satisfy the Sinking Fund Requirement with respect
to such Term Bonds.
B. Reserve Account. A Reserve Account has been created in the Bond
Account for the purpose of securing the payment of the principal of and interest on the Bond and
any Future Parity Bonds. The City hereby covenants and agrees that it will transfer into the
Reserve Account from the reserve accounts within the City's Water and Sewer Construction and
Refunding Revenue Bond Fund, 1974 or other available funds, a sum equal to the Reserve
Account Requirement for the Bond.
The City further covenants and agrees that in the event it issues any Future Parity Bonds
it will provide in each ordinance authorizing the issuance of such Future Parity Bonds for the
payment into the Reserve Account out of Future Parity Bond proceeds, Gross Revenue or
Assessments (or, at the option of the City, out of any other funds on hand and legally available
therefor) approximately equal additional annual installments so that by five years from the date
of issuance of such Future Parity Bonds there will have been paid into the Reserve Account an
amount that, together with money already on deposit therein, will be at least equal to the Reserve
Account Requirement. The City may substitute Qualified Insurance or a Qualified Letter of
Credit for amounts required to be deposited into the Reserve Account. Such Qualified Letter of
Credit or Qualified Insurance shall not be cancellable on less than five years' notice. In the event
of any cancellation, the Reserve Account shall be funded in accordance with the provisions of
this section providing for payment in the event of a deficiency therein, as if the Parity Bonds that
remain outstanding had been issued on the date of such notice of cancellation. The City may
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create a separate reserve account for a series of Future Parity Bonds, in which case the Reserve
Account shall not secure Future Parity Bonds.
The City further covenants and agrees that when the required deposits have been made
into the Reserve Account, it will at all times maintain therein an amount at least equal to the
Reserve Account Requirement, as redetermined in each calendar year with respect to the Parity
Bonds secured by such Reserve Account. Whenever there is a sufficient amount in the Bond
Account, including all accounts therein, to pay the principal of, premium, if any, and interest on
all outstanding Parity Bonds, the money in the Reserve Account may be used to pay the principal
of, premium, if any, and interest on the Parity Bonds secured thereby. Money in the Reserve
Account may also be withdrawn to redeem and retire, and to pay the premium, if any, and interest
due to such date of redemption, on the outstanding Parity Bonds secured by such Reserve
Account, as long as the money remaining on deposit in such Reserve Account is at least equal to
the Reserve Account Requirement determined with respect to the Parity Bonds then outstanding.
In the event the Bond outstanding are ever refunded, the money set aside in the Reserve
Account to secure the payment thereof may be used to retire Bond or may be transferred to any
other reserve account that may be created to secure the payment of any bonds issued to refund the
Bond.
In the event there shall be a deficiency in the Debt Service Account to meet maturing
installments of either interest on or principal of and interest on the outstanding Parity Bonds
payable out of such Account, such deficiency shall be made up from the Reserve Account by the
withdrawal of money therefrom and by the sale or redemption of obligations held in the Reserve
Account, if necessary, in such amounts as will provide cash inthe Reserve Account sufficientto
make up any such deficiency, and if a deficiency still exists immediately prior to an interest
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payment date and after the withdrawal of cash, the City shall then draw from any Qualified Letter
of Credit, Qualified Insurance, or other equivalent credit facility in sufficient amount to make up
the deficiency. Such draw shall be made at such times and under such conditions as the
agreement for such Qualified Letter of Credit or such Qualified Insurance shall provide. If more
than one Qualified Letter of Credit or Qualified Insurance is available, draws shall be made
ratably thereon to make up the deficiency. Any deficiency created in the Reserve Account by
reason of any such withdrawal shall then be made up from money in the Combined Utility
System Fund first available after making the payments required to be made under paragraphs
"FIRST" through "FOURTH" of Section 5 of this ordinance.
C. Lien of Bond Account. The Bond, together with the interest thereon, shall
be payable from Assessments, if any, and Gross Revenue, and such Assessments and Gross
Revenue are hereby pledged and set aside out of the Combined Utility System Fund into the
Bond Account. The amounts so pledged are hereby declared to be a lien and charge upon
Assessments, if any, and Gross Revenue equal to the lien and charge thereon to secure and pay
the principal of and interest on any Future Parity Bonds and superior to all other charges of any
kind or nature, except the Operating and Maintenance Expenses.
D. Investment of Money in Bond Account. All money in the Debt Service
Account or Reserve Account may be kept in cash or invested in Permitted Investments maturing
not later than the maturity of the Bond outstanding at the time of such purchase. Interest earned
on or profits made from the sale of such investments shall be deposited in and become a part of
the Bond Account or the Combined Utility System Fund.
Section 8.
Adequacy of Revenue. The Council hereby declares that in fixing the
amounts to be paid into the Bond Account it has considered and has due regard for the Operating
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and Maintenance Expenses and payments associated with Resource Obligations in any month in
which any Resources were made available to the System during such month (regardless of
whether or not the System actually scheduled or received energy from such Resources during
such month) and has not obligated the City to set aside and pay into the Bond Account more
money from the Combined Utility System Fund than in its judgment will be available over and
above such Operating and Maintenance Expenses.
Section 9.
General Covenants. The City hereby covenants with the owner of the
Bond for as long as the same remains outstanding as follows:
A. Rates and Charges. The City will establish, maintain and collect lawful
rates and charges for the use of the services and facilities of the System, and shall adjust such
rates and charges from time to time so that:
(i) Gross Revenue will at all times be sufficient (a),to pay all
Operating and Maintenance Expenses and to pay all taxes, assessments or other goverrimental
charges lawfully imposed on the System or the revenue therefrom or payments in lieu thereof and
all other amounts that the City may now be and hereafter become obligated to pay from Gross
Revenue ~y law or contract, and, together with Assessments actually collected, (b) to pay the
principal of and interest on all outstanding Parity Bonds as and when the same become due and
payable, to make all payments required to be made into the Bond Account to satisfy the Sinking
Fund Requirement, and to make when due all payments required to be made into the Reserve
Account; and
(ii) the Net Revenue in each calendar year will equal at least 1.30 times
Annual Debt Service for such year (after deducting Assessments actually collected for such year).
For the purpose of meeting the requirement of this paragraph there may be added to Net Revenue
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for any calendar year any amount withdrawn from the Rate Stabilization Account and credited to
Gross Revenue as provided in Section 6 of this ordinance. There shall be subtracted from Net
Revenue for any calendar year any amounts in such year withdrawn from the Combined Utility
System Fund and deposited into the Rate Stabilization Account in such calendar year.
The failure to collect Gross Revenue in any fiscal year sufficient to comply with the
covenant contained in this subsection shall not constitute an event of default if the City, before
the 90th day of the following fiscal year, both. (1) employs a Professional Utility Consultant to
recommend changes in the City's rates which are estimated to produce Gross Revenue sufficient
(once the rates recommended by the Professional Utility Consultant have been imposed by the
City) to meet the requirements of this subsection; and (2) imposes rates at least as high as those
recommended by such Professional Utility Consultant at the time or times so recommended.
B. Maintenance of System. The City will at all times keep and maintain the
System in good repair, working order and condition, and will at all times operate the same and
the business in connection therewith in an efficient manner and at a reasonable cost.
C. Sale or Disposition of the System. The City will not sell, mortgage, lease
or otherwise dispose of or encumber all or any portion of the System, except as follows:
(i) The City may sell, mortgage, lease or otherwise dispose of all or
substantially all of the System if, simultaneously with such sale, mortgage, lease or other
disposition or encumbrance, provision is made for the payment into the Bond Account of cash or
Government Obligations sufficient, together with interest to be earned thereon, to pay the
principal of and interest on all then outstanding Parity Bonds.
(ii) Except as provided in subsection (iii) below, the City will not sell,
mortgage, lease or otherwise dispose of or encumber any part of the useful operating properties
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of the System in excess of 5% of the value of the net utility plant of the System unless prior to
such sale, mortgage, lease or other disposition or encumbrance:
(a) there shall have been filed with the Director of Financial
Services a certificate of a Professional Utility Consultant stating that such sale, mortgage, lease
or other disposition or encumbrance will not impair the ability of the City to comply with the rate
covenants set forth in Section 9.A of this ordinance; or
(b) provision is made for the payment, redemption or other
retirement of a principal amount of outstanding Parity Bonds equal to the greater of the following
amounts: (Y) an amount that will be in the same proportion to the net principal amount of Parity
Bonds then outstanding (defined as the total principal amount of the Parity Bonds less the
amount of cash and investments in the Bond Accoupt and accounts therein) that the Net Revenue
from the portion of the System sold or disposed of for the 12 preceding months bears to the total
Net Revenue for such period; or (Z) an amount that will be in the same proportion to the net
principal amount of Parity Bonds then outstanding that the book value of the part of the System
sold or disposed of bears to the book value of the entire System immediately prior to such sale or
disposition.
(iii) The City may sell or otherwise dispose of any of the works, plant,
properties and facilities of the System or any real or personal property comprising a part of the
same with a value less than 5% of the net utility plant of the System or which shall have become
unserviceable, inadequate, obsolete or unfit to be used in the operation of the System, or no
longer necessary, material to or useful in such operation, without making any deposit into the
Bond Account.
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D.
Collection of Assessments.
The City shall promptly collect all
Assessments levied in any utility local improvement district now or hereafter created to secure
the payment of the principal of and interest on any Parity Bonds and shall pay the same into the
Bond Account without allocation of such Assessments to any particular series of Parity Bonds. It
is hereby provided further, however, that nothing in this ordinance or in this subsection shall be
construed to prohibit the City from issuing revenue bonds having a lien on Gross Revenue junior
to the lien on such revenue for the payment of the principal of and interest on Parity Bonds and
pledging as security for the payments of such junior lien bonds assessments levied in any utility
local improvement district that may have been created to pay part or all the cost of improvements
to the System for which such junior lien revenue bonds were specifically issued.
E. Books and Accounts. The City will maintain complete books and records
relating to the operation of the System and its financial affairs, and will' cause such books and
records to be audited annually, and cause to be prepared an annual financial and operating
statement.
F. Insurance. The City will carry fire and extended coverage insurance on the
System as is ordinarily carried on the property of similar public utilities by other municipal
corporations engaged in the operation of the same if such insurance can be obtained at a
reasonable cost, to the full insurable value thereof, and will also carry adequate public liability
insurance and other kinds of insurance as under good practices are ordinarily carried on the
properties of similar public utilities by private companies engaged in the operation of the same;
provided, however, that the City may if deemed necessary and advisable by the Council, institute
or continue a self-insurance program with respect to any or all of the aforementioned risks. The
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premmms paid for all such msurance shall be regarded and paid as an Operating and
Maintenance Expense.
G. Delinquencies. The City will promptly collect all service charges and
Assessments, determine in a timely manner all delinquencies, and take all necessary legal action
to enforce collection of such delinquencies.
H. No Free Service. Except as permitted by law, the City will not furnish any
service of the System to any customer free of charge.
Section 10. Tax Covenants; Special Designation. The City covenants to undertake all
actions required to maintain the tax-exempt status of interest on the Bond under Section 103 of
the Code as set forth in the Federal Tax Certificate that will be executed upon the issuance of the
Bond.
The City hereby designates the Bond as a "qualified tax-exempt obligations" under
Section 265(b)( c) of the Code for banks, thrift institutions and other financial institutions. The
City does not expect to issue more than $10,000,000 in qualified tax-exempt obligations during
2007.
. Section 11.
Payment Agreements.
General. To the extent and for the purposes permitted from time to time
A.
by Chapter 39.96 RCW and other applicable provisions of State law, the City may enter into
Payment Agreements with respect to any Parity Bonds, subject to the conditions set forth in this
section and in other provisions of this ordinance.
B. Manner and Schedule of Payments. Each Payment Agreement shall set
forth the manner m which the Payment Agreement Payments and the Payment Agreement
Receipts shall be calculated and a schedule of payment dates.
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C. Authorizing Ordinance. Prior to entering into a Payment Agreement, the
Council shall pass an ordinance authorizing such agreement and setting forth such provisions as
the Council deems necessary or desirable and are not inconsistent with the provisions of this
ordinance.
D. Calculation of Payment Agreement Payments and Debt Service on Junior
Lien Obligations with Respect to which a Payment Agreement is in Force. It is the intent of the
City, for purposes of the rate coverage requirement set forth in Section 9.A(ii) of this ordinance
and the Future Parity Bonds test set forth in Section 12.A(v) of this ordinance, that debt service
on Parity Bonds with respect to which a Payment Agreement is in force shall be calculated to
reflect the net economic effect on the City intended to be produced by the terms of the Parity
Bonds and the terms of the Payment Agreement. In calculating such amounts, the City shall be
guided by the following requirements:
(i) The amount of interest deemed to be payable on any Parity Bonds
with respect to which a Payment Agreement is in force shall be an amount equal to the amount of
interest that would be payable at the rate or rates stated in those Parity Bonds plus Payment
Agreement Payments minus Payment Agreement Receipts.
(ii) For any period during which Payment Agreement Payments are not
taken into account in calculating interest on any outstanding Parity Bonds because the Payment
Agreement is not then related to any outstanding Parity Bonds, Payment Agreement Payments on
that Parity Payment Agreement shall be calculated based upon the following assumptions:
(a) City Obligated to Make Payments Based on Fixed Rate. If
the City is obligated to make Payment Agreement Payments based on a fixed rate and the
Qualified Counterparty is obligated to make payments based on a variable rate index; payments
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by the City will be based on the assumed fixed payor rate, and payments by the Qualified
Counterparty will be based on a rate equal to the average rate determined by the variable rate
index specified by the Payment Agreement during the fiscal quarter preceding the quarter in
which the calculation is made; and
(b) City Obligated to Make Payments Based on Variable Rate
Index. If the City is obligated to make Payment Agreement Payments based on a variable rate
index and the Qualified Counterparty is obligated to make payments based on a fixed rate,
payments by the City will be based on a rate equal to the average rate determined by the variable
rate index specified by the Payment Agreement during the fiscal quarter preceding the quarter in
which the calculation is made, and the Qualified Counterparty will make payments based on the
fixed rate specified by the Payment Agreement.
Section 12. Future Parity Bonds. The City hereby further covenants with the owner of
the Bond for as long as the same remains outstanding as follows:
A That it will not issue any bonds with a lien on Gross Revenue superior to
the lien on such revenues of the Bond. The City may issue Future Parity Bonds and to incur
Resource Obligations and obligations under reimbursement agreements related to the provision
of credit enhancement devices that secure any Parity Bonds for:
FIRST, the purpose of acquiring, constructing and installing additions and
improvements to and extensions of, acquiring necessary equipment for, or making necessary
replacements or repairs and capital improvements to the System, or for any other lawful purpose;
or
SECOND, the purpose of refunding or purchasing and retiring at or prior to their
maturity any outstanding revenue bonds or other obligations payable out of Gross Revenue; and
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to pledge that payments be made into the Bond Account for the payment of the principal thereof
and interest thereon 'out of the Combined Utility System Fund sufficient to pay the principal of
and interest on such Future Parity Bonds and to maintain the reserves required therefor, which
such payments may rank equally with the payments out of such Combined Utility System Fund
into the Bond Account and the Reserve Account to pay and secure the payment of the principal
of and interest on any Parity Bonds then outstanding, upon compliance with the following
conditions:
(i) That at the time of the issuance of such Future Parity Bonds there
is no deficiency in the Bond Account.
(ii) If there are Assessments levied in any utility local improvement
district in which additions and improvements to and extensions of the System will be constructed
from the proceeds of such Future Parity Bonds, the ordinance authorizing such Future Parity
Bonds shall require that such Assessments be paid into the Bond Account.
(iii) If there are Assessments pledged to be paid into a warrant or bond
redemption fund for revenue bonds or warrants being refunded by Future Parity Bonds, the
ordinance authorizing such Future Parity Bonds shall require such Assessments to be used for the
refunding or paid into the Bond Account.
(iv) The principal of and interest on the Future Parity Bonds shall be
payable out of the Bond Account, and the ordinance authorizing their issuance shall further
provide for payments into the Bond Account to satisfy the Sinking Fund Requirement and
payments into the Reserve Account to satisfy the Reserve Account Requirement, all- as required
by Section 7 of this ordinance.
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(v) Prior to the delivery of any Future Parity Bonds, the City shall have
on file in the office of the Director of Financial Services either:
(a) a certificate of the Director of Financial Services showing
that the Net Revenue determined as hereafter p'i-ovided for each calendar or fiscal year after the
issuance of such Future Parity Bonds will equal at least 1.30 times the Annual Debt Service (after
deducting Assessments, allocated to the years in which they would be received if the unpaid
balance of each assessment roll were paid in the remaining number of installments with interest
on the declining balance at the times and at the rate provided in the ordinance confirming the
assessment roll) for each such calendar or fiscal year for all Parity Bonds plus the Future Parity
Bonds proposed to be issued. For purposes this certificate, "Net Revenue" shall be the Net
Revenue for a period of any 12 consecutive months (which may include amounts withdrawn
from the Rate Stabilization Account, as provided in Section 6 of this ordinance) out of the 24
months immediately preceding the date of delivery of such proposed Future Parity Bonds.
(b) a certificate of a Professional Utility Consultant showing
that the Net Revenue determined and adjusted as hereafter provided for each calendar or fiscal
year after the issuance of such Future Parity Bonds (the "Adjusted Net Revenue") will equal at
least 1.30 times the Annual Debt Service (after deducting Assessments, allocated to the years in
which they would be received if the unpaid balance of each assessment roll were paid in the
remaining number of installments with interest on the declining balance at the times and at the
rate provided in the ordinance confirming the assessment roll) for each such calendar or fiscal
year for all Parity Bonds plus the Future Parity Bonds proposed to be issued.
The Adjusted Net Revenue shall be the Net Revenue for a period of any 12 consecutive
months (which may include amounts withdrawn from the Rate Stabilization Account, as
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provided in Section 6 of this ordinance) out of the 24 months immediately preceding the date of
delivery of such proposed Future Parity Bonds as adjusted by such Professional Utility
Consultant to take into consideration changes in Net Revenue estimated to occur under the
following conditions for each year after such delivery for so long as any Parity Bonds, including
the Future Parity Bonds proposed to be issued, shall be o,utstanding:
(a) the additional Net Revenue that would have been received
if any change in rates and charges adopted prior to the date of such certificate and subsequent to
the beginning of such 12-month period, had been in force during the full 12-month period;
(b) the additional Net Revenue that would have been received
if any facility of the System that became fully operational after the beginning of such 12-month
period had been so operating for the entire period; and
(c) the additional Net Revenue estimated by such Professional
Utility Consultant to be received as a result of any additions, betterments and improvements to
and extensions of any facilities of the System that are (a) under construction at the time of such
certificate or (b) will be constructed from the proceeds of the Future Parity Bonds to be issued.
Such Professional Utility Consultant may rely upon, and his or her certificate shall have
attached thereto, financial statements of the System certified by the Director of Financial
Services showing income and expenses for the period upon which the same is based.
B. Notwithstanding the foregoing requirement, if Future Parity Bonds are to
be issued for the purpose of refunding at or prior to their maturity any part or all of the then
outstanding Parity Bonds and the issuance of such refunding Future Parity Bonds will result in a
debt service savings and does not require an increase of more than $5,000 in any fiscal or
calendar year for principal of arid interest on such refunding Future Parity Bonds over and above
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the amount required in such year for the principal of and interest on the bonds being refunded
thereby, the condition stated in subsection A(v) of this section need not be met.
C. Nothing herein contained shall prevent the City from issuing any revenue
bonds, warrants or other obligations that are a charge upon the money in the Combined Utility
System Fund junior or inferior to the payments required by this ordinance to be made into the
Bond Account and the Reserve Account.
Section 13. Bond Deemed to Be No Longer Outstanding. In the event that the City, to
effect the payment, retirement or redemption of the Bond, sets aside in the Bond Account or in
another special account, held in trust by a trustee, cash or noncallable Government Obligations,
or any combination of cash and/or noncallable Government Obligations, in amounts and
maturities that, together with the known earned income therefrom, are sufficient to redeem or pay
and retire such Bond in accordance with its terms and to pay when due the interest and
redemption premium, if any, thereon, and such cash and/or noncallable Government Obligations
are irrevocably set aside and pledged for such purpose, then no further payments need be made
into the Bond Account for the payment of the principal of and the interest on such Bond. The
owner of the Bond so provided for shall cease to be entitled to any lien, benefit or security of this
ordinance except the right to receive payment from such special account of the principal of,
premium, if any, and interest on such Bond, and suqh Bond shall be deemed not to be
outstanding under this ordinance.
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Section 14. Form of the Bond. The Bond shall be in substantially the following form:
No.1. $5,375,000
UNITED STATES OF AMERICA
STATE OF WASHINGTON
CITY OF BREMERTON
WATER AND SEWER REVENUE AND REFUNDING BOND, 2007
REGISTERED OWNER:
INTEREST RATE:
MA TURITY DATE:
PRINCIP AL AMOUNT:
Bank of America, N.A.
4.28%
December 1, 2021
Five Million Three Hundred Seventy-Five Thousand and Noll 00
Dollars
The City of Bremerton, Washington (the "City"), for value received, hereby promises to
pay 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 June 14,
2007, or the most recent date to which interest has been paid or duly provided for until payment
of this Bond at the Interest Rate set forth above, payable on December 1, 2007, and semiannually
thereafter on the first days of each June and December. The principal of and interest on this
Bond are payable solely out of the special account of the City known as the "Utility Debt Service
Account" (the "Bond Account").
Principal and interest are payable solely out of the Bond Account, into which fund the
City hereby irrevocably binds itself to pay certain fixed amounts out of the Gross Revenue of the
System, as the same is defined in Ordinance No. 5011 of the City (the "Bond Ordinance"),
without regard to any fixed proportion, namely, amounts sufficient to pay the principal of and
interest on the outstanding Bond and any additional and/or refunding water and sewer revenue
bonds issued on a parity of lien with the Bond and to accumulate a reserve, all at the times and in
the manner set forth in the Bond Ordinance. Reference is made to the Bond Ordinance for
definitions of capitalized terms not otherwise defined herein.
This Bond is issued by the City under and pursuant to the laws of the State of Washington
and the Bond Ordinance for the purpose of providing funds to pay the cost of certain capital
improvements to the water and sewer system of the City and to refund certain outstanding bonds
all as specified in the Bond Ordinance.
The Bond is subject to prepayment as provided in the Bond Ordinance.
The Gross Revenue is hereby pledged to the payment of principal of and interest on the
Bond, and the Bond constitute a charge or lien upon such revenues prior and superior to any
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other charges whatsoever, excluding charges for Operating and Maintenance Expenses of the
System and payments associated with Resource Obligations, if any, and equal to the lien and
charge thereon of any Future Parity Bonds. The Bond is not a general obligation of the City.
The City has designated the bond as a qualified tax-exempt obligations for purposes of
Section 265(b) of the Internal Revenue Code of 1986.
The City hereby covenants and agrees with the owners of the Bond to carry out fully all
covenants and meet all obligations of the City as set forth herein and in the Bond Ordinance, and
reference is hereby made to the Bond Ordinance for a complete statement of such covenants.
This Bond shall not become valid or obligatory for any purpose until the registration
certificate set forth hereon has been signed by the Bond Registrar.
It is hereby certified and declared that the Bond is issued pursuant to and in strict
compliance with the Constitution and laws of the State of Washington and the ordinances of the
City and that all acts, conditions and things required to be done precedent to and in the issuance
of this Bond have happened, have been done and have been performed as required by law.
IN WITNESS WHEREOF, the City has caused this Bond to be signed by the manual or
facsimile signature of its Mayor and attested by the manual or facsimile signature of its City
Clerk, and its corporate seal to be impressed or a facsimile thereof imprinted hereon this 14th day
of June, 2007.
CITY OF BREMERTON, WASHINGTON
By:
Isl
Mayor
ATTEST:
Isl
City Clerk
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REGISTRATION CERTIFICATE
This Bond is registered in the name of the Registered Owner on the books of the City, in
the office of the Director of Financial Services (the "Bond Registrar"), as to both principal and
interest, as noted in the registration blank below. All payments of principal of and interest on
this Bond shall be made by the City with full acquittance by the Bond Registrar's wire transfer,
made payable to the last Registered Owner as shown hereon and on the registration books of the
Bond Registrar at his/her address noted hereon and on the registration books of the Bond
Registrar.
Date of
Registration
Name and Address of
Registered Owner
Bank of America, N.A.
800 Fifth Avenue, Floor 34
. Seattle, WA 98104
Signature of
Bond Registrar
June 14, 2007 .
Director of Financial Services
Section 15.
Execution and Authentication of the Bond. The Bond shall be signed on
behalf of the City by the manual or facsimile signature of the Mayor and attested by the manual
or facsimile signature of the City Clerk and shall have the seal of the City impressed or a
facsimile thereof imprinted thereon.
Only such Bond as shall bear thereon a Registration Certificate in the form hereinbefore
recited, manually executed by the Bond Registrar, shall be valid or obligatory for any purpose or
entitled to the benefits of this ordinance. Such Registration Certificate shall be conclusive
evidence that the Bond so authenticated has been duly executed, authenticated and delivered
hereunder and are entitled to the benefits of this ordinance.
In case either of the officers who shall have executed the Bond shall cease to be an officer
or officers of the City before the Bond so signed shall have been authenticated or delivered by the
Bond Registrar, or issued by the City, such Bond may nevertheless be authenticated, delivered
and issued and upon such authentication, delivery and issuance, shall be as binding upon the City
as though those who signed the same had continued to be such officers of the City. The Bond
may also be signed and attested on behalf of the City by such persons as at the actual date of
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execution of such Bond shall be the proper officers of the City although at the original date of
such Bond any such person shall not have been such officer of the City.
Section 16. Lost or Stolen Bond. In case the Bond shall be lost, stolen or destroyed,
the Bond Registrar may deliver a new bond of like amount, date, maturity, interest rate, tenor,
and effect to the registered owner or nominee thereof upon the owner paying the expenses and
charges of the City in connection therewith and upon filing with the Bond Registrar evidence
satisfactory to the Bond Registrar that such bond was actually lost, stolen or destroyed and or
ownership thereof, and upon furnishing the City with indemnity satisfactory to both.
Section 17. Sale of the Bond. The Bond shall be sold to Bank of America, N.A. (the
"Bank") in accordance with its proposal to purchase the Bond attached as Exhibit A (the
"Proposal") and the acceptance of such proposal is hereby ratified and confirmed. The City shall
pay the Bank an origination fee of not to exceed $5,375.00 and the Bank's legal fees of $900.00,
upon the closing and delivery of the Bond. Banc of America Securities LLC shall act as the
structuring agent and shall arrange the placement of the Bond with Bank of America, N.A. The
City shall pay a fee of $26,875.00 to Banc of America Securities LLC upon the closing and
delivery of the Bond to Bank of America, N.A.
Section 18. Application of Bond Proceeds. The proceeds of the Bond shall be applied
as follows:
(A) The amount (together with available Gross Revenues) required to refund
the Refunded Bonds shall be deposited into the Refunding Account and used to accomplish the
refunding of the Refunded Bonds in accordance with the provisions of Section 25 of this
ordinance.
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(B) The amount necessary to satisfy the Reserve Account Requirement shall
be deposited into the Reserve Account.
(C) The balance of the Bond proceeds shall be deposited into the Combined
Utility System Funds and applied to pay costs of the Project and costs of issuing the Bond.
Section 19 Events of Default. The City hereby covenants and agrees with the owners
of the Bond, in order to protect and safeguard the covenants and obligations undertaken by the
City securing the Bond, that the following shall constitute "Events of Default":
(A) If default shall be made in the due and punctual payment of the principal
of and premium, if any, on any of the Parity Bonds when the same shall become due and payable,
either at maturity or by proceedings for mandatory redemption or otherwise;
(B) If default shall be made in the due and punctual payment of any
installment of interest on any Parity Bond;
(C) If the City shall fail to purchase or redeem any Term Bonds, if any, in an
aggregate principal amount at least equal to the SInking Fund Requirement for the applicable
Fiscal Year;
(D) If the City shall default in the observance and performance of any other of
the covenants, conditions arid agreements on the part of the City contained in this ordinance and
the default or defaults shall have continued for a period 90 days after the City shall have received
from the Bondowners' Trustee (hereinafter defined) or from the owners of not less than 20% in
principal amount of Parity Bonds outstanding, a written notice specifying and demanding the
cure of such default;
(E) If an order, judgment or decree shall be entered by any court of competent
jurisdiction: (i) appointing a receiver, trustee or liquidator for the City or the whole or any
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substantial part of the System; (ii) approving a petition filed against the City seeking the
bankruptcy, arrangement or reorganization of the City under any applicable law of the United
States or the State; or (iii) assuming custody or control of the City or of the whole or any
substantial part of the System under the provisions of any other law for the relief or aid of debtors
and such order, judgment or decree shall not be vacated or set aside or stayed (or, in case custody
or control is assumed by said order, such custody or control shall not be otherwise terminated)
".
within 60 days from the date of the entry of such order, judgment or decree; or
(F) If the Ci~y shall: (i) admit in writing its inability to pay its debts generally
as they become due; (ii) file a petition in bankruptcy or seeking a composition of indebtedness
under any state or federal bankruptcy or insolvency law; (iii) make an assignment for the benefit
of its creditors; (iv) consent to the appointment of a receiver of the whole or any substantial part
of the System; or (v) consent to the assumption by any court of competent jurisdiction under the
provisions of any other law for the relief or aid of debtors of custody or control of the City or of
the whole or any substantial part of the System.
Section 20
Bondowners' Trustee. So long as an Event of Default has not been
remedied, a bondowners' trustee (the "Bondowners' Trustee") may be appointed by the
registered owners of 25% in principal amount of the Parity Bonds, by an instrument or
concu~ent instruments in writing signed and acknowledged by such registered owners of the
Parity Bonds or by their attorneys-in-fact duly authorized and delivered to such Bondowners'
Trustee, notification thereof being given to the City. That appointment shall become effective
immediately upon acceptance thereofby the Bondowners' Trustee. Any Bondowners' Trustee
appointed under the provisions of this section shall be a bank or trust company organized under
the laws of the State of Washington or the State of New York or a national banking association.
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The bank or trust company acting as Bondowners' Trustee may be removed at any time, and a
successor Bondowners' Trustee may be appointed, by the registered owners of a majority in
principal amount of the Parity Bonds, by an instrument or concurrent instruments in writing
signed and acknowledged by such registered owners of the Bond or by their attorneys-in-fact
duly authorized. The Bondowners' Trustee may require security and indemnity as may be
reasonable against the costs, expenses and liabilities that may be incurred in the performance of
its duties.
In the event that any Event of Default in the sole judgment of the Bondowners' Trustee is
cured and the Bondowners' Trustee furnishes to the City a certificate so stating, that Event of
Default shall be conclusively deemed to be cured and the City, the Bondowners' Trustee and the
registered owners of the Parity Bonds shall be restored to the same rights and position which they
would have held if no Event of Default had occurred.
The Bondowners' Trustee appointed in the manner herein provided, and each successor
thereto, is declared to be a trustee for the registered owners of all the Parity Bonds and is
empowered to exercise all the rights and powers herein conferred on the Bondowners' Trustee.
Section 21
Suits at Law or in Equity. Upon the happening of an Event of Default and
during the continuance thereof, the Bondowners' Trustee may, and upon the written request of
the registered owners of not less than 25% in principal amount of the Parity Bonds outstanding
shall, take such steps and institute such suits, actions or other proceedings, all as it may deem
appropriate for the protection and enforcement of the rights of the registered owners of the Parity
Bonds, to collect any amounts due and owing to or from the City, or to obtain other appropriate
relief, and may enforce the specific performance of any covenant, agreement or condition
contained in this ordinance or in any of the Parity Bonds.
~35-
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Nothing contained in this section shall, in any event or under any circumstance, be
deemed to authorize the acceleration of maturity of principal on the Parity Bonds, and the remedy
of acceleration is expressly denied to the registered owners of the Parity Bonds under any
circumstances including, without limitation, upon the occurrence and continuance of an Event of
Default.
Any action, suit or other proceedings instituted by the Bondowners' Trustee hereunder
shall be brought in its name as trustee for the registered owners of the Parity Bonds and all such
rights of action upon or under any of the Parity Bonds or the provisions of this ordinance may be
enforced by the Bondowners' Trustee without the possession of any of those Parity Bonds and
without the production of the same at any trial' or proceedings relative thereto except where
otherwise required by law. Any such suit, action or proceeding instituted by the Bondowners'
Trustee shall be brought for the ratable benefit of all of the registered owners of those Parity
Bonds, subject to the provisions of this ordinance and the ordinances authorizing the issuance of
other outstanding Parity Bonds. The respective registered owners of the Parity Bonds, by taking
and holding the same, shall be conclusively deemed irrevocably to appoint the Bondowners'
Trustee the true and lawful trustee of the respective registered owners of those Parity Bonds, with
authority to institute any such action, suit or proceeding; to receive as trustee and deposit in trust
any sums becoming distributable on account of those Parity Bonds; to execute any paper or
documents for the receipt of money; and to do all acts with respect thereto that the registered
owner himself or herself might have done in person. Nothing herein shall be deemed to
authorize or empower the Bondowners' Trustee to consent to accept or adopt, on behalf of any
registered owner of the Parity Bonds, any plan of reorganization or adjustment affecting the
Parity Bonds or any right of any registered owner thereof, or to authorize or empower the
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Bondowners' Trustee to vote the claims of the registered owners thereof in any receivership,
insolvency, liquidation; bankruptcy, reorganization or other proceeding to which the City is a
party.
Section 22
Application of Money Collected by Bondowners' Trustee. Any money
collected by the Bondowners' Trustee at any time shall be applied in the following order of
priority:
(A) first, to the payment of the charges, expenses, advances and compensation
of the Bondowners' Trustee and the charges, expenses, counsel fees, disbursements and
compensation of its agents and attorneys; and
(B) second, to the payment to the persons entitled thereto first of required
interest and then of unpaid principal amounts on any Parity Bonds which shall have become due
(other than Parity Bonds previously called for redemption for the payment of which money is
held pursuant to the provisions hereto), whether at maturity or by proceedings for redemption or
otherwise, in the order of their due dates and, if the amount available shall not be sufficient to
pay in full the principal amounts due on the same date, then to the payment thereof ratably,
according to the principal amounts due thereon to the persons entitled thereto, without any
discrimination or preference.
Section 23
Duties and Obligation of Bondowners' Trustee. The Bondowners' Trustee
shall not be liable except for the performance of such duties as are specifically set forth herein.
During an Event of Default, the Bondowners' Trustee shall exercise such of the rights and
powers vested in it hereby, and shall use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of his or her own
affairs. The Bondowners' Trustee shall have no liability for any act or omission to act hereunder
-37-
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except for the Bondowners' Trustee's own negligent action, its own negligent failure to act or its
own willful misconduct. The duties and obligations of the Bondowners' Trustee shall be
determined solely by the express provisions of this ordinance, and no implied powers, duties or
obligations of the Bondowners' Trustee shall be read into this ordinance.
The Bondowners' Trustee shall not be required to expend or risk its own funds or
otherwise incur individual liability in the performance of any of its duties or in the exercise of
any of its rights or powers as the Bondowners' Trustee, except as may result from its own
negligent action, its own negligent failure to act or its own willful misconduct.
The Bondowners' Trustee shall not be bound to recognize any person as a registered
owner of any Parity Bond until his title thereto, if disputed, has been established to its reasonable
satisfaction.
The Bondowners' Trustee may consult with counsel and the opinion of such counsel shall
be full and complete authorization and protection in respect of any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel. The Bondowners'
Trustee shall not be answerable for any neglect or default of any person, firm or corporation
employed and selected by it with reasonable care.
Section 24
Suits by Individual Bondowners Restricted. Neither the registered owner
nor the beneficial owner of anyone or more of Parity Bonds shall have any right to institute any
action, suit or proceeding at law or in equity for the enforcement of same unless:
(a) an Event of Default has happened and is continuing; and
(b) a Bondowners' Trustee has been appointed; and
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P:INMNINMN2YS
(c) such owner previously shall have given to the Bondowners' Trustee written notice
of the Event of Default on account of which such suit, action or proceeding is to be instituted;
and
(d) the registered owners of 25% in principal amount of the Parity Bonds, after the
occurrence of such Event of Default, have made written request of the Bondowners' Trustee and
have afforded the Bondowners' Trustee a reasonable opportunity to institute such suit, action or
proceeding; and
(e) there have been offered to the Bondowners' Trustee security and indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby; and
(f) the Bondowners' Trustee has refused or neglected to comply with such request
within a reasonable time.
No registered owner or beneficial owner of any Parity Bond shall have any right in any
manner whatever by his action to affect or impair the obligation of the City to pay from the Net
Revenue the principal of and interest on such Parity Bonds to the respective owners thereof when
due.
Section 25. Refunding Account There is hereby established a special account or
accounts of the City to be maintained with the Escrow Agent (as hereinafter defined) to be
known as the "City of Bremerton 2007 Water and Sewer Revenue Bond Refunding Account"
(the "Refunding Account"), which account shall be drawn upon for the sole purpose of paying
the principal of and interest on the 1994 Refunded Bonds and of paying costs related to issuance
of the Bond and refunding the 1994 Refunded Bonds.
Money in the Refunding Account shall be used immediately upon receipt thereof to
defease the 1994 Refunded Bonds and discharge the other obligations of the City relating thereto
-39-
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under Ordinance No. 4451 of the City, by providing for the payment of the principal of and
interest on the 1994 Refunded Bonds as set forth. below. The City shall defease such bonds and
discharge such obligations by the use of Gross Revenues deposited into the Refunding Account
to purchase certain "Government Obligations," as such obligations are defined in Chapter 39.53
RCW as now or hereafter amended (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:
(A) interest on and principal of the 1994 Refunded Bonds due and payable
until and on September 1,2007; and
(B) the redemption prIce (100% of the principal amount) payable on
September 1,2007, of the 1994 Refunded Bonds.
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.
The 2005 Refunded Bond will be paid in full on the closing date ofthe Bond.
To carry out the refunding and defeasance of the 1994 Refunded Bonds, the Director of
Financial Services is hereby authorized to appoint as escrow agent a bank or trust company
qualified by law to perform the duties described herein (the "Escrow Agent"). Any beginning
cash balance and the Acquired Obligations shall be irrevocably deposited with the Escrow Agent
in an amount sufficient to defease the 1994 Refunded Bonds. Any amounts described above that
are not provided for in full by such beginning cash balance and the purchase and deposit of the
Acquired Obligations described in this section shall be provided for by the irrevocable deposit of
-40-
P:INMNINMN2YS
the necessary amount out of the proceeds of sale of the Bond or any other money of the City
legally available therefor with the Escrow Agent. The amounts remaining in the Refunding
Account after acquisition of the Acquired Obligations and provision for the necessary beginning
cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the Acquired
Obligations and the costs of issuing the Bond. The City may, from time to time, transfer, or
cause to be transferred, from the Refunding Account any money not thereafter required for the
purpose set forth in subparagraphs (A) - (B) above or for the payment of expenses. The City
reserves the right to substitute other securities for the Acquired Obligations in the event it may do
so pursuant to Section 148 of the Code, upon compliance with the conditions set forth in the
Escrow Agreement.
Section 26. Redemption of Refunded Bonds. The City hereby irrevocably sets aside
sufficient funds through the purchase of Acquired Obligations and an initial cash deposit to make
the payment specified in subparagraphs (A) - (B) of Section 25 above.
The City hereby irrevocably calls for redemption on September 1, 2007, the 1994
Refunded Bonds in accordance with the provisions of Ordinance No. 4451. The City hereby also
irrevocably calls for redemption on the closing date for the Bond, the 2005 Refunded Bond in
accordance with the provisions of Section 5 of Ordinance No. 4944.
Said defeasance and call for redemption of the 1994 Refunded Bonds shall be irrevocable
after the firial establishment of the Refunding Account and delivery of the Acquired Obligations
and the requisite cash deposit, if any, to the Escrow Agent, except as provided herein relating to
the substitution of securities.
The Escrow Agent is hereby authorized and directed to notify the paying agent for the
1994 Refunded Bonds to give notice of the redemption of the 1994 Refunded Bonds in
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P:INMNINMN2YS
accordance with the applicable provisions of Ordinance No. 4451. The Director of Financial
Services is authorized and requested to provide whatever assistance is. necessary to accomplish
such redemption and the giving of notice therefor. The costs of publication of such notice shall
be an expense of the City.
The Escrow Agent is hereby authorized and directed to pay to the fiscal agency or
agencies of the State of Washington, as paying agent for the 1994 Refunded Bonds, and the City
as paying agent for the 2005 Refunded Bond, sums sufficient to pay, when due, the payment
specified in subparagraphs (A) - (B) of Section 25 above. All such sums shall be paid from the
money and Acquired Obligations deposited with the Escrow Agent pursuant to Section 25 of this
ordinance, and the income therefrom and proceeds thereof. All such sums so paid shall be
credited to the Refunding Account. All money and Acquired Obligations deposited with the
Escrow Agent and any income therefrom shall be held, invested 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 the owners of the 1994 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 shall be paid when due. The proper
officers and agents of the City are directed to obtain from the Escrow Agent an agreement setting
forth the duties, obligations and responsibilities of the Escrow Agent in connection with the
redemption and retirement of the 1994 Refunded Bonds as provided herein and making provision
for payment of the fees, compensation and expenses of such Escrow Agent as may be satisfactory
to it. To carry out the purposes of this section of this ordinance, the Mayor or Director of
Financial Services are authorized and directed to execute and deliver to the Escrow Agent such
an escrow agreement in form approved by bond counsel to the City.
-42-
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Section 27. Finding of Defeasance. The Council hereby finds and determines that the
issuance and sale of the Bond permits the City to comply with covenants contained in the
ordinances that authorized issuance of the 1994 Refunded Bonds and permits the City to satisfy
its defeasance obligations under such ordinances.
The Council hereby also finds and determines that the Acquired Obligations to be
deposited with the Escrow Agent and the income therefrom, together with any necessary
beginning cash balance, are sufficient to redeem the 1994 Refunded Bonds and will discharge
and satisfy the obligations of the City under Ordinance No. 4451 authorizing the issuance of the
1994 Refunded Bonds and the pledge of the City therein. Immediately upon the delivery of such
Acquired Obligations to the Escrow Agent and the deposit of any necessary beginning cash
balance, the 1994 Refunded Bonds shall be deemed not to be outstanding under
Ordinance No. 4451 and shall cease to be entitled to any lien, benefit or security under such
ordinance except the right to receive payment from the Acquired Obligations and beginning cash
balance so set aside and pledged.
Section 28.
Ongoing Disclosure: Reporting Requirements. The City is exempt from
the ongoing disclosure requirements of Securities and Exchange Commission Rule 15c2-12 by
reason of the exemption set forth in subsection (d) (i) of that rule with respect to the issuance of
securities in authorized denominations of $100,000 or more.
The City hereby covenants and agrees for as long as the Bond remains outstanding that it
will provide annually to the Bank copies of (a) its audited financial statements for each fiscal
year, within 10 days of receipt thereof; (b) the City's internally-prepared, unaudited annual
financial statement, within 180 days of the end of the fiscal year, (c) the City's budget for the
new period within 90 days of commencement of the new budget cycle and (d) certificate signed
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P:INMNINMN2YS
by the Director of Financial Services affirming compliance with all terms of this ordinance,
including the calculation of debt service coverage requirement, annually within 180 days of fiscal
year end.
Section 29.
Authorization to Officials and Agents. The proper City officials are
hereby authorized and directed to approve an official statement or other disclosure document, and
to do everything necessary and proper for the prompt issuance, execution and delivery of the
Bond in conformance with the provisions of this ordinance and for the proper use and application
of the proceeds of the sale thereof as provided in this ordinance.
Section 30. Supplements and Amendments.
A. The Council from time to time and at any time may adopt an ordinance or
ordinances supplementing or amending this ordinance, which ordinance or ordinances thereafter
shall become a part of this ordinance, for anyone or more or all of the following purposes:
(i) 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 Parity Bonds in any material respect, or to surrender any
right or power herein reserved to or conferred upon the City.
(ii) 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 such matters or questions as the Council may deem necessary or desirable and not
inconsistent with this ordinance and which shall not adversely affect the interests of the owners
of any Parity Bonds in any material respect.
(iii) To amend or supplement any provision contained in this ordinance
for the purpose of obtaining or maintaining a rating on the Bond so long as such amendment or
-44-
P:INMNINMN2YS
supplement is not inconsistent with this ordinance and will not adversely affect the interests of
the owners of any Parity Bonds in any material respect.
Any such supplemental ordinance of the Council may be adopted without the consent of
the owners of any Parity Bonds at any time outstanding, notwithstanding any of the provisions of
subsection B of this section; provided, however, that the City shall obtain an opinion of
nationally recognized bond counsel to the effect that such supplemental ordinance complies with
this subsection A and will not adversely affect the interests of the owners of any Parity Bonds in
any material respect.
B. With the consent of the owners of not less than a majority in aggregate
principal amount of the Parity Bonds at the time outstanding, the Council may adopt an
ordinance or ordinances supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this ordinance or of any
supplemental ordinance; provided, however, that no such supplemental ordinance shall:
(i) Extend the fixed maturity of any Parity Bond, or reduce the rate of
interest thereon, or extend the time of payments of interest from their due date, or reduce the
amount of the principal thereof, or reduce any premium payable on the redemption thereof,
without the consent of the owner of each Parity Bond so affected; or
(ii) Reduce the aforesaid percentage of owners of Parity Bonds
required to approve any such supplemental ordinance, without the consent of the owners of all
Parity 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.
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C. Upon the adoption of any supplemental ordinance pursuant to the
provisions of this section, this ordinance shall be deemed modified and amended in accordance
therewith, and the respective rights, duties and obligations of the City under this ordinance and
the owner of the Bond outstanding hereunder shall thereafter be determined, exercised and
enforced thereunder, subject in all respects to such modification and amendments, and all the
terms and conditions of any such supplemental ordinance shall be deemed to be part of the terms
and conditions of this ordinance for any and all purposes.
Section 31.
Severability. If anyone 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 to be contrary to law, then such covenant or covenants, agreement or
agreements shall be null and void and shall be deemed separable from the remaining covenants
and agreements of this ordinance and shall in no way affect the validity of the other provisions of
this ordinance or of the Bond.
Section 32.
Ratification. Any action consistent with the authority but prior to the
effective date of this ordinance is hereby ratified and confirmed.
Section 33. Effective Date. This ordinance shall take effect ten days after its passage,
approval and publication as required by law.
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P:INMNINMN2YS
APPROVED by the City Council of the City of Bremerton, Washington the 6th day of
June, 2007.
PASSED by the City Council of the City of Bremerton, Washington this 6th day of June,
2007.
APPROVED this f::H,2 day of June, 2007. ~
Cary Bozeman, Mayor
~
ATTEST:
APPROVED AS TO FORM:
11a..~ 0\ ~v;o
Na~y . Neraas, Bond Counsel
PUBLISHED t, - f ~ () 7
EFFECTIVE DATE &, -I P - () 7
ORDINANCE NO. SO 1/
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P:INMNINMN2YS
EXHIBIT A
BANK OF AMERICA, N.A. PROPOSAL
BankofAmerica .~
+"?
Nancy Nuerenberg
Senior Vice President
Government Banking
WA1.501-34-03
800 5th A venue, 34th Floor
Seattle, W A 98104
Tel 206.358.6279
Fax 206.358.8818
nancy. d.nuerenberg@bankofamerica.com
May 2, 2007
Ms. Laura Lyon
Director of Financial Services
City of Bremerton
345-6th Street Suite 600
Bremerton, WA 98337-1873
Re: $5,375,000 (estimated) Water & Sewer Revenue Bond, 2007
Dear Laura:
Bank of America, N. A. is pleased to provide the attached proposal for a Bond for the City of
Bremerton. The Bond will finance various improvements to the water and sewerage system and
defease and retire outstanding water and sewer revenue bonds.
The rates and terms for the Bond are attached to this letter, as Exhibit A, Summary of Terms and
Conditions. The terms and -conditions are not all-inclusive, but generally describe the proposal
offered to the City.
We appreciate the opportunity to present you with this proposal and look forward to working with you
to complete the transaction. Please call me either me at (206) 358-6279, or Dave Trageser at
(206) 358-8922 to discuss any questions or comments you may have regarding this proposal.
Sincerely,
Bank of America, N.A.
r~? /rt~~
Nancy D. Nuerenberg, SVP
Senior Credit Products Officer
cc: Nancy Neraas, K&L Preston Gates Ellis LLP
Stacie Amasaki, K&L Preston Gates Ellis LLP
Dave Trageser, Banc of America Securities LLC
Suzanne Eide, Banc of America Securities LLC
Tana Aardal, Bank of America
Brennan Church, Bank of America
A-2
P:INMNINMN2YS
City of B rem erton
May 2, 2007
Page 2 of6
BORROWER:
LENDER:
BOND:
PURPOSE:
MATURITY DATE:
CLOSING DA TE:
SECURITY:
RESERVE ACCOUNT
REQUIRMENT:
INTEREST RATE:
REPAYMENT:
Bank of America ~
~
Exhibit A
Summary of Terms and Conditions
(For Discussion Purposes Only)
City of Bremerton, Washington (the "Borrower")
Bank of America N A. ("Bank of America ")
$5,375,000 (estimated) Water and Sewer Revenue and
Refunding Bond, 2007. Tax-Exempt Bank Qualified (the "Bond").
Proceeds ofthe Bond will be used to provide funds for certain
capital improvements to the Borrower's water and sewerage
system (the "System"), to defease and retire Borrower's
outstanding water and sewer revenue bonds, and to pay costs
associated with issuing the Bond.
December 1, 2021.
Estimated to close on June 1 , 2007.
Borrower to pledge the following security for repayment of all
outstanding principal, interest and fees due on the Bond:
Pledge of Assessments, if any, and Gross Revenue of the
System. Assessments and Gross Revenue shall have the
meaning as defined per Borrower's Ordinance to be
adopted on May 23, 2007 approving the issuance of the
Bond (the "Ordinance"). This pledge shall constitute a lien
and charge upon such Assessments, if any, and Gross
Revenue of the System equal to the lien and charge
thereon to secure and pay the principal of and interest on
any Future Parity Bonds and superior to all other charges of
any kind or nature, except the Operating and Maintenance
Expenses.
All capitalized terms contained herein shall have the meaning as
defined in the Ordinance.
Borrower to establish and maintain a Reserve Account in
accordance with the terms ofthe Ordinance.
Indicative Fixed Rate 4.06% as of April 25, 2007, calculated on
a 30/360-day basis. Final pricing to be set upon approval of the
Bond Ordinance by Borrower, as mutually agreed by Borrower
and Bank of America. .
Interest on the Bond shall be repaid semi-annually each June 1
and December 1, beginning December 1, 2007.
Principal on the Bond shall be repaid in equal annual
installments on December 1 each year, beginning
December 1, 2007 as outlined in Attachment 1.
A-3
P:INMNINMN2YS
City of Bremerton
May 2, 2007
Page 3 of6
Bank of America ~
~
ORIGINA TION FEE:
Borrower agrees to pay Bank an origination fee capped at
10 bp ($5,375) of the principal amount of the Bond. This fee
shall be deel')1ed fully eamed and payable upon closing.
EXPENSES:
Borrower will pay all reasonable costs and expenses associated
with the preparation and review of all documentation executed in
connection with the Bond, including Bank of America's
attorneys' fees, whether or not the Bond is closed (capped at
$1,200); Borrower's outside legal counsel fees; fees incurred by
Bank of America for structuring services provided by B'anc of
America Securities LLC (capped at 0.5% of the principal
amount of the Bond); and any other costs associated with
documenting and closing the Bond.
PREPAYMENT FEES:
Any prepayment of this Bond prior to its scheduled maturity
may result in the imposition of a prepayment fee, The
prepayment fee shall be in an amount sufficient to compensate
the Bank for any loss incurred bY it as a result of the
prepayment, as documented by the Bank, including any loss
arising from the liquidation or reemployment of funds obtained
by it to maintain the funds used to purchase the Bond or from
fees payable to terminate the deposits from which such funds
were obtained. For purposes of this paragraph, the Bank shall
be deemed to have funded the purchase of the Bond by a
matching deposit or other borrowing in the applicable interbank
market, whether or not the Bond was in fact so funded. In no
case shall a prepayment fee apply if the Bank's intemally
derived cost offunds is higher on the date of prepayment than it
was on the date the fixed rate ofthe Bond was set.
COVENANTS:
Borrower agrees to comply with all covenants outlined in Section
9 of the Ordinance which includes, but is not limited to, the
following:
Borrower will establish, maintain and collect lawful rates and
charges for the use of the services and facilities of the System,
and shall adjust such rates and charges from time to time so
that:
Gross Revenue will at all times be sufficient (a) to pay
all Operating and Maintenance Expenses and to pay
all taxes, assessments or other governmental charges
lawfully imposed on the System or the revenue
therefrom or payments in lieu thereof and all other
amounts that the City may now be and hereafter
become obligated to pay from Gross Revenue by law
or contract, and, together with Assessments actually
collected, (b) to pay the principal of and interest on all
outstanding Parity Bonds as and when the same
become due and payable, to make all payments
required to be made into the Bond Account to satisfy
the Sinking Fund Requirement, and to make when due
all payments required to be made into the Reserve
Account; and
. A-4
P:INMNINMN2YS
City .of Bremerton
May 2, 2007
Page 40f 6
CONDITIONS PRECEDENT
TO CLOSING:
EVENTS OF DEFAULT:
FINANCIAL REPORTING
REQUIREMENTS:
BankofAmerica __
~
the Net Revenue in each calendar year \Mil equal at
least 1.30 times Annual Debt Service for such year
(after deducting Assessments actually collected for
such year). For the purpose of meeting this
requirement there may be added to Net Revenue for
any calendar year any amount \Mthdrawn from the
Rate Stabilization Account and credited to Gross
Revenue as provided in Section 6 of the Ordinance.
There shall be subtracted from Net Revenue for any
calendar year any amounts in such year \lVithdrawn
from the Combined Utility System Fund and deposited
into the Rate Stabilization Account in such calendar
year.
Borrower will at all times keep and maintain the
System in good repair, working order and condition,
and \Mil at all times operate the same and the business
in connection there\lVith in an efficient manner and at a
reasonable cost.
As long as the Bond is outstanding, Borrower
covenants that it \lVi1l not issue any bonds with a lien
on Gross Revenue superior to the lien on such
revenues of the Bond. Borrower may issue Future
Parity Bonds and incur Resource Obligations and
obligations under reimbursement agreements
related to the provision of credit enhancement
devices that secure any Parity Bonds for the
purposes and upon compliance with the conditions
outlined in the Ordinance.
Borrower to obtain a long term, unenhanced debt rating on the
Bond from Moody's (or other rating agency acceptable to Bank)
of at least A3.
Usual and customary in transactions of this type, to include
\Mthout limitation: (i) nonpayment of principal, interest, fees or
other amounts; (ii) violation of covenants; (iii) inaccuracy of
representations and warranties; (iv) bankruptcy and other
insolvency events; (v) creditor or forfeiture proceedings; and (vi)
actual or asserted invalidity of any loan documentation or
security interests.
If an event of default occurs due to (i) nonpayment of principal,
interest, fees or other amounts when due, or Oil failure to
maintain the tax exempt status of the Bond, then Bank of
America may increase the interest rate by two percentage
points.
Annual State Audit Report ofthe Borrowerwithin 10 days of
receipt from State Auditor.
Borrower's internally prepared unaudited annual financial
statement within 180 days of its fiscal year end.
.. Within 90 days of commencement of the new budget cycle,
a copy of Borrower's budget for the new period.
A-5
P:INMNINMN2YS
City of Bremerton
May 2, 2007
Page 5 of6
Bank of America ~
~
Certificate signed by Director of Financial Services affirming
compliance with all terms of the Ordinance and including
calculation of Debt Service Coverage requirement, annually
within 180 days of fiscal year end.
DOCUMENTATION:
All documentation, including the form of legal opinion to be
issued by Borrower's legal counsel, is subject to review and
approval by Bank of America's legal counsel.
Documentation to include:
A legal opinion of nationally recognized bond counsel,
in form and substance acceptable to Bank and its legal
counsel, that (i) the Ordinance and all documents
related to the Bond have been properly adopted,
authorized and executed; and (ii) th e Ordinance and all
documents related to the Bond constitute a legally
binding obligation of the Borrower, enforceable
according to their terms (subject to standard
exceptions); (iii) interest payable on the Bond is
excludable from net income for purposes of federal
income taxes; and (iv) Borrower has designated the
Bond as a "qualified tax-exempt obligation".
A copy of the Ordinance passed by the City Council
authorizing the issuance of the Bond;
Receipt ofthe original signed Bond at closing.
This Summary of Terms and Conditions does not constitute a commitment to lend by Bank of
America or any of its affiliates and is presented for discussion purposes only. The actual terms and
conditions upon which Bank of America may extend credit to Borrower is subject to satisfactory
completion of due diligence, necessary credit approval and such other terms and conditions as
determined by Bank of America, in its sole discretion.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
A-6
P:INMNINMN2YS
City of B rem erton
June 6, 2007
Page 1 of1
ATTACHMENT 1
PRINCIPAL PAYMENT SCHEDULE
12/112007
1211/2008
12/1/2009
12/1/2010
12/1/2011
12/112012
12/1/2013
12/1/2014
12/1/2015
12/1/2016
12/1/2017
12/112018
12/1/2019
12/112020
12/1/2021
$160,000
$305,000
$320,000
$330,000
$335,000
$350,000
$365,000
$375,000
$390,000
$365,000
$380,000
$400,000
$415,000
$435,000
$450.000
$5,375,000
A-7
Bank of America ~
. ~
P:INMNINMN2YS
EXHIBIT B
PRINCIPAL PAYMENT SCHEDULE
BOND DEBT SERVICE
CITY OF BREMER TON
Water & Sewer Ref & Revenue Bond, 2007
Contibuting full 2007 payment
'A2' Rating, BQ
Dated Date 06/1412007
Delivery Date 06/14/2007
Period Annual
Ending Principal Coupon Interest Debt Service Debt Service
12/0112007 160,000 4.280% 106,717.64 266,717.64 266,717.64
06/0112008 111,601.00 111,601.00
12/0112008 305,000 4.280% 111,601.00 416,601.00 528,202.00
06/0112009 105,074.00 105,074.00
12/0112009 320,000 4.280% 105,074.00 425,074.00 530,148.00
06/01/20 10 98,226.00 98,22600
12/0112010 330,000 4.280% 98,226.00 428,226.00 526,452.00
06/0112011 91,164.00 91,164.00
12/01/2011 335,000 4.280% 91,164.00 426,164.00 517,328.00
06/0112012 83,995.00 83,995.00
12/01/2012 350,000 4.280% 83,995.00 433,995.00 517,990.00
06/0112013 76,505.00 76,505.00
[2/0 1120 [3 365,000 4.280% 76,505.00 441,505.00 518,010.00
06/0112014 68,694.00 68,694.00
12/0112014 375,000 4.280% 68,694.00 443,694.00 512,388.00
06/01/20 I 5 60,669.00 60,669.00
]2/0112015 390,000 4.280% 60,669.00 450,669.00 511,338.00
06/0112016 52,323.00 52,323.00
12/0112016 365,000 4.280% 52,323.00 417,323.00 469,64600
06/01/2017 44,512.00 44,S 12.00
12/0112017 380,000' 4.280% 44,512.00 424,512.00 469,024.00
06/0112018 36,380.00 36,380.00
12/0112018 400,000 4.280% 36,380.00 436,380.00 472,760.00
06/0112019 27,820.00 27,820.00
12/01/2019 415,000 4.280% 27,820.00 442,820.00 470,640.00
06/0112020 18,939.00 18,939.00
12/0112020 435,000 4.280% 18,939.00 453,93900 472,878.00
06/0112021 9,630.00 9,630.00
12/0112021 450,000 4.280% 9,630.00 459,630.00 469,260.00
5,375,000 1,877,781.64 7,252,781.64 7,252,781.64
Jun 6, 2007 8:35 am Prepared by Banc of America Securities LLC
(Finance 6.002 BREMRTON:2007) Page 5
AFFIDAVIT OF PUBLICATION
Account # 42742 / Ad # 203094
ST ATE OF WASHINGTON
COUNTY OF KITSAP
I, Christy Moffitt, being first duly sworn on oath, deposes and says: That she is now, and at all times
embraced in the publication herein mentioned was the principal clerk of the printers and publishers of
KITSAP SUN; that said newspaper has been approved as a legal newspaper by order of the Superior Court
of the County of Kitsap, in which County it is published and is now and has been for more than six months
prior to the date of the publication hereinafter referred to, published in the English language continually as
a daily newspaper in Bremerton, Kitsap County, Washington, a weekly newspaper in Kitsap County,
Washington and is now and during all of said time, was printed in an office maintained in the aforesaid
place of publication of said newspaper; that the following is a true text of a legal advertisement as it was
published in regular issues (and not in supplement form) of said newspaper on the following date, to wit: ,
June 8, 2007 and that such newspaper was regularly distributed to its subscribers during all of said period.
That the full amount of the fee charged for the foregoing publication is the sum of $37.67 which amount
has not been paid in full.
~DtA/ 'rn~1:dt
~ ~
(Signature of Principal Clerk)
Subscribed and sworn to before me this day of June 19,2007
~Y:,. ~: ~01t
. ~O . \~\SSION;' ~
Notary Public in and for the State of Washington, Kitsap ~ 'o~ -1"",'.
~ :'~OT,.(\J? '..0 .
:,(:) * j..:.:~
~'. ?USL\C :
ORDINANCE NO. 5011 "~'. P'06-0C?J..' O~
O,.c-o. . 0 0 0 0~
WAS\-l\~
AN ORDINANCE of the City of Bremerton, Washington, authorizing the issuance of a water and sewer
revenue and refunding bond in the principal amount of $5,375,000 to obtain funds for certain capital
improvements to the City's water and sewer system and to provide a portion of the funds necessary to
defease the City's outstanding water and sewer revenue bonds; providing the form, terms and covenants of
the Bond; and approving the sale of the Bond.
PASSED by the City Council the 6th day of June, 2007.
The full text of this ordinance is available from the City Clerk's Office, 345 Sixth Street, Suite 600,
Bremerton, W A 98337.
June 8, 2007..............................AD #20041520