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Ordinance 2363CITY OF EDMONDS, WASHINGTON ORDINANCE NO. 2363 AN ORDINANCE relating to the combined water and sewerage systems comprising the waterworks utility of the City; amending Ordinance No. 1957; specifying and adopting a plan or system for the acquisition and construction of certain additions and betterments to and extensions and improvements of such waterworks utility of the City; declaring the estimated cost thereof as nearly as may be; providing for the issu- ance of $1,000,000 par value of "Water and Sewer Revenue Bonds, 1983," for the purpose of providing a part of the funds to carry out the plan or system for the acquisition and construction of certain additions and betterments to and extensions and improvements of the waterworks utility of the City specified and adopted herein; fixing the date, form, denomination, maturities, interest rates, terms and covenants of such bonds; and providing for the sale and delivery of such bonds to Foster & Marshall/American Express Inc of Seattle, Washington. WHEREAS, the City of Edmonds, Washington (the "City"), by Ordinance No. 1957 passed and approved November 15, 1977, speci- fied and adopted a plan or system for the acquisition and con- struction of certain additions and betterments to and extensions and improvements of the combined water and sewerage systems comprising the waterworks utility of the City (the "System"); declared the estimated cost thereof as nearly as may be; and provided for the issuance of $4,805,000 par value of "Water and Sewer Revenue Refunding and Construction Bonds, 1977," for the purpose of providing a part of the funds (a) to carry out the plan or system for the acquisition and construction of certain additions and betterments to and extensions and improvements of the System specified and adopted in such ordinance, and (b) to pay, retire and refund the outstanding "Water and Sewer Revenue Bonds, 1959," the "Water and Sewer Revenue Bonds, 1960," the "Water and Sewer Revenue Bonds, 1961," the "Water and Sewer Revenue Bonds, 1965," the "Water and Sewer Revenue Bonds, 1966," the "Water and Sewer Revenue Bonds, 1967," the "Water and Sewer Revenue Bonds, 1970" (interest only), the "Water and Sewer Revenue Refunding Bonds, 1972," and the "Water and Sewer Revenue Refunding Bonds, 1976," of the City, which bonds were issued under date of November 1, 1977; and WHEREAS, by Section 16 of Ordinance No. 1957, the City reserved the right to issue additional and/or refunding water and sewer revenue bonds (therein called "Future Parity Bonds") which would constitute a lien and charge upon the gross revenue of the System on a parity with such 1977 Bonds if the following conditions are met and complied with at the time of the issuance of such Future Parity Bonds: "(1) At the time of issuance of such Future Parity Bonds, there shall not be any deficiency in the Bond Fund or the Reserve Account therein. "(2) Each ordinance providing for the issuance of such Future Parity Bonds shall require that all Assessments levied in any ULID created in connection with the Future Parity Bonds then being issued will be paid directly into the Bond Fund. "(3) Each ordinance providing for the issuance of such Future Parity Bonds shall provide for the payment of the principal thereof and interest thereon out of the Bond Fund. - 2 - "(4) The ordinance authorizing any Future Parity Bonds shall require that the Reserve Account be increased within a period of five years after the date of issuance of the Future Parity Bonds to an amount equal to the average annual principal and interest requirements on all Future Parity Bonds, including the Bonds and the Future Parity Bonds pro- posed to be issued, excluding from such amount the principal amount of any Term Bonds included in the Future Parity Bonds issue. 11(5) At the time of the issuance of such Future Parity Bonds, the City shall have on file a certifi- cate from an independent licensed professional engi- neer experienced in the design, construction and operation of municipal utilities, showing that in his professional opinion, the annual Revenue of the System, after payment of Operating and Maintenance Expenses, available for debt service on the Bonds, Future Parity Bonds then outstanding and the Future Parity Bonds proposed to be issued for each year shall be at least equal to the Coverage Requirement (1.25 times that amount of debt service to be paid from operating Revenue and not assessments). "In determining whether the City is able to comply with the parity conditions, the Revenue of the System of the City, less Operating and Maintenance Expenses, for any twelve consecutive calendar months out of the immediately preceding twenty-four consecutive months shall be used. The following adjustments may be made to the historical net operating Revenue of the System: "(1) Any rate change that has taken place or been approved, may be reflected; "(2) Revenue may be added from customers actually added to the System subsequent to the 12-month base period; "(3) Revenue may be added from customers to be served by the improvements being constructed out of the proceeds of the Future Parity Bonds to be issued; "(4) A full year's revenue may be included from any customer being served, but who has not been receiving service for the full period of operation used as a basis for the certificate; and - 3 - "(5) Actual or reasonably anticipated changes to the Operating and Maintenance Expenses subsequent to such 12-month period shall be added or deducted, as is applicable . . ."; and WHEREAS, the City Council has determined it is necessary and in the best interests of the City that certain additional improvements be made to the System and there be adopted a system or plan of additions to and betterments and extensions of the System and that $1,000,000 par value of water and sewer revenue bonds be issued on the terms and conditions herein set forth to provide a part of the funds to pay the cost of carrying out such improvements; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, DO ORDAIN, as follows: Section 1. Definitions. As used in this ordinance the following words shall have the following meanings: (a) "Bond Fund" shall mean the special fund of the City known as the "Water and Sewer Revenue Bond Fund, 1977," created by Ordinance No. 1957 for the payment of the principal of and interest on the 1977 Bonds and all Future Parity Bonds of the City hereafter issued, including the Bonds. (b) "Bonds" shall mean the $1,000,000 par value of "Water and Sewer Revenue Bonds, 1983," of the City authorized to be issued by this ordinance. (c) "1977 Bonds" shall mean the outstanding "Water and Sewer Revenue Refunding and Construction Bonds, 1977," of the City issued under date of November 1, 1977, pursuant to Ordinance No. 1957. - 4 - (d) "City" shall mean the City of Edmonds, Washington, a duly organized and existing noncharter code city under the laws of the State of Washington. (e) "Coverage Requirement" shall mean 1.25 times the por- tion of annual debt service, excluding the principal of any Term Bonds if the payment for such Term Bonds is being provided for by a sinking fund, on the 1977 Bonds, the Bonds and any Future Parity Bonds actually paid from the Revenue of the System and not from ULID Assessments. (f) "Future Parity Bonds" shall mean all revenue bonds of the City issued after the date of the issuance of the Bonds and having a lien upon the Revenue of the System for the payment of the principal thereof and interest thereon equal to the lien upon such Revenue for the payment of the principal of and inter- est on the 1977 Bonds and the Bonds. (g) "Operating and Maintenance Expense" shall mean all reasonable expenses incurred by the City in causing the System to be operated and maintained in good repair, working order and condition, but shall not include any depreciation or taxes or charges in lieu of taxes levied or imposed by the City. (h) "Principal and Interest Account" shall mean the account of that name created in the Bond Fund for the payment of the principal of and interest on the 1977 Bonds, the Bonds and all Future Parity Bonds of the City payable out of such fund. - 5 - (i) "Reserve Account" shall mean the account of that name created in the Bond Fund for the purpose of securing the payment of the principal of and interest on the 1977 Bonds, the Bonds and all Future Parity Bonds of the City payable out of such fund. (j) "Revenue of the System" shall mean all the earnings and revenue received by the System from any source whatsoever, except general ad valorem taxes, ULID Assessments, proceeds from the sale of City property and bond proceeds. (k) "System" shall mean the combined water supply and dis- tribution system and sanitary sewage disposal system of the City as the same may be added to, improved and extended for as long as any of the 1977 Bonds, the Bonds and any Future Parity Bonds are outstanding. (1) "Term Bond Maturity Year" shall mean any maturity year in which the outstanding amount of revenue bonds payable out of the Bond Fund are scheduled to mature (regardless of any reser- vation of rights of redemption prior to maturity) is more than 1.25 times the average annual principal maturity of the bonds payable out of such fund for the three years immediately preced- ing such Term Bond Maturity Year. (m) "Term Bonds" shall mean the outstanding bonds payable out of the Bond Fund maturing in any Term Bond Maturity Year. (n) "ULID" shall mean utility local improvement district. (o) "ULID Assessments" shall mean the assessments levied in such ULID of the City which may hereafter be created pursuant - 6 - to state law and shall include installments thereof and interest and any penalties thereon. Section 2. Plan or System Adopted. The City specifies, adopts and orders the carrying out of a system or plan for the acquisition and construction of additions and betterments to and extensions and improvements of the System consisting of the con- struction and installation of various sewer and drainage projects, including the North Meadowdale sewer and drainage project, and various water mains. There shall be included in the foregoing all necessary wyes, valves, couplings, connections and appurtenances, together with all work as may be incidental and necessary to the fore- going construction and installation. The City shall acquire all property, both real and personal or any interest therein, equipment, rights -of -way, easements and franchises necessary to carry out such plan, which is all as more particularly set forth in reports, maps, plans and specifi- cations prepared by the City Engineer. The City Council may make such changes in the details of such plan, either prior to or during the course of actual con- struction, which may be found necessary and desirable as long as such changes do not substantially affect or change the main general part of such plan or the services to be rendered thereby. The life of the improvements comprising the foregoing system or plan of additions to and betterments and extensions of - 7 - the System is declared to be at least 15 years. The estimated cost of the acquisition, construction, installation and financ- ing of the above -described improvements is declared to be approximately $4,225,000. Such cost shall be paid from the proceeds received from the issuance and sale of the Bonds autho- rized by this ordinance, proceeds of grants anticipated to be received from the State of Washington Department of Ecology in the amount of $622,000 and the United States Department of Housing and Urban Development in the amount of $237,000, and other City funds available therefor. Section 3. Amending Ordinance No. 1957. Section 16 of Ordinance No. 1957 is amended to read as follows: Section 16. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will con- stitute a charge and lien upon the Revenue of the System and ULID Assessments hereafter pledged to be paid into the Bond Fund on a parity with the Bonds if the following conditions should be met and complied with at the time of the issuance of such Future Parity Bonds: (1) At the time of issuance of such Future Parity Bonds, there shall not be any deficiency in the Bond Fund or the Reserve Account therein. (2) Each ordinance providing for the issuance of such Future Parity Bonds shall require that all Assessments levied in any ULID created in connection with the Future Parity Bonds then being issued will. be paid directly into the Bond Fund. (3) Each ordinance providing for the issuance of such Future Parity Bonds shall provide for the - 8 - payment of the principal thereof and interest thereon out of the Bond Fund. (4) The ordinance authorizing any Future Parity Bonds shall require that the Reserve Account be increased within a period of five years after the date of issuance of the Future Parity Bonds to an amount equal to the average annual principal and interest requirements on all Future Parity Bonds, including the Bonds and the Future Parity Bonds pro- posed to be issued, excluding from such amount the principal amount of any Term Bonds included in the Future Parity Bonds issue if the payment for such Term Bonds is being provided for by a sinking fund. (5) At the time of the issuance of such Future Parity Bonds, the City shall have on file a certifi- cate from an independent licensed professional engi- neer experienced in the design, construction and operation of municipal utilities, showing that in his professional opinion, the annual Revenue of the System, after payment of Operating and Maintenance Expenses, available for debt service on the Bonds, Future Parity Bonds then outstanding and the Future Parity Bonds proposed to be issued for each year shall be at least equal to the Coverage Requirement. In determining whether the City is able to comply with the parity conditions, the Revenue of the System of the City, less Operating and Maintenance Expenses, for any twelve consecutive calendar months out of the immediately preceding twenty-four consecutive months shall be used. The following adjustments may be made to the historical net operating Revenue of the System: (1) Any rate change that has taken place or been approved, may be reflected; (2) Revenue may be added from customers actually added to the System subsequent to the 12-month base period; (3) Revenue may be added from customers to be served by the improvements being constructed out of the proceeds of the Future Parity Bonds to be issued; - 9 - (4) A full year's revenue may be included from any customer being served, but who has not been receiving service for the full period of operation used as a basis for the certificate; and (5) Actual or reasonably anticipated changes in the Operating and Maintenance Expenses subsequent to such 12-month period shall be added or deducted, as is applicable. Nothing contained in the provisions for parity shall pre- vent the City from issuing revenue bonds having a junior lien on the Revenue of the System or from pledging the payment of ULID Assessments into a bond redemption fund or account created to pay and secure the payment of the principal and interest on such junior lien bonds as long as such ULID Assessments are levied to pay part or all of the cost of improvements being constructed out of the proceeds of the sale of such junior lien bonds. Neither shall anything contained in this ordinance prevent the City from issuing revenue bonds to refund maturing revenue bonds of the City for the payment of which money is not otherwise available. Section 4. Compliance with Parity Provisions. In accord- ance with the provisions of Section 16 of Ordinance No. 1957, the City Council finds and declares that: (1) At the time of issuance of the Bonds there will be no deficiency in the Bond Fund or the Reserve Account therein; (2) No ULID is created in connection with the issuance of the Bonds; (3) Provision is made herein for the payment of the principal of and interest on the Bonds out of the Bond Fund; - 10 - (4) Provision is made herein for the accumula- tion of the required additional amount in the Reserve Account of the Bond Fund for the Bonds; and (5) There shall be on file with the City prior to the issuance and delivery of the Bonds a certifi- cate from Reid, Middleton & Associates,Inc , an indepen- dent, licensed professional engineer experienced in the design, construction and operation of municipal utilities, showing that, in his professional opinion, the annual Revenue of the System, after payment of Operating and Maintenance Expense, available for debt service on the 1977 Bonds then outstanding and the Bonds proposed to be issued for each year shall be at least equal to the Coverage Requirement. Section S. Provision for Issuance of Bonds. For the pur- pose of providing a part of the money required to carry out the plan or system for the acquisition and construction of certain additions and betterments to and extensions and improvements of the System herein specified, adopted and ordered to be carried out, the City shall issue the Bonds in the aggregate principal amount of $1,000,000. The Bonds shall be designated "Water and Sewer Revenue Bonds, 1983" (herein defined as the "Bonds"); shall be in the denomination of $5,000 each; shall be dated May 1, 1983; shall bear interest payable on May 1, 1984, and semiannually there- after on each succeeding November 1 and May 1 as evidenced by coupons to be attached to the Bonds representing interest to maturity. If any Bond is not redeemed upon proper presentment at its maturity or call date thereof, the City shall be obli- gated to pay interest at the coupon rate for each such Bond from and after the maturity or call date until such Bond, both prin- cipal and interest, shall have been paid in full or until suffi- cient money for such payment in full is on deposit in the Bond Fund, and such Bond has been duly called for payment by the City Director of Finance's publishing notice of such call once at least ten days prior to the call date in the official newspaper of the City or, if there is no official newspaper, in a news- paper of general circulation in the City. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America at the office of the City Director of Finance or, at the option of the holder, at either fiscal agency of the State of Washington in Seattle, Washington, or New York, New York. The Bonds shall be payable solely from the Bond Fund and shall be a valid claim of the holders thereof only as against the Bond Fund and the fixed amount of the Revenue of the System and ULID Assessments pledged to such fund and shall not be a general obligation of the City. The Bonds shall be numbered, bear interest and mature on May 1 of each year in accordance with the following schedule: Bond Numbers Interest Maturity (Inclusive) Amounts Rates Years 1 to 7 $ 35,000 8.15% 1985 8 to 15 40,000 8.15 1986 16 to 24 45,000 8.15 1987 25 to 34 50,000 8.10 1988 35 to 45 55,000 8.10 1989 46 to 57 60,000 8.20 1990 58 to 70 65,000 8.40 1991 71 to 84 70,000 8.60 1992 -- 12 - Bond Numbers Interest Maturity (Inclusive) Amounts Rates Years 85 to 99 75,000 8.75 1993 100 to 116 85,000 8.90 1994 117 to 134 90,000 9.00 1995 135 to 154 100,000 9.10 1996 155 to 176 110,000 9.15 1997 177 to 200 120,000 9.15 1998 Section 6. Option for Prior Redemption. The City reserves the right to redeem the Bonds in whole, or in part in inverse numerical order, on May 1, 1993, or on any semiannual interest payment date thereafter, at the following percentages of par if redeemed on the following dates, plus accrued interest to date of redemption: Call Date Call Price On May 1, 1993, or November 1, 1993 1O2o On May 1, 1994, or November 1, 1994 101% On May 1, 1995, and thereafter 1000 (par) Notice of such intended redemption shall be published once in the official newspaper of the City or, if there is no offi- cial newspaper, in a newspaper of general circulation in the City, not less than 30 nor more than 45 days prior to the call date, and a copy of such notice shall be mailed within the same period to the main office of Foster & Marshall/American Express Inc in Seattle, Washington, or its successor. In addition, such redemption notice shall be mailed to Moody's Investors Service, Inc., and Standard & Poor's Corporation at their offices in New York, New York, but the mailing of such notice to such New York firms shall not be a condition precedent to the redemption of - 13 - such Bonds. Interest on any Bonds so called for redemption shall cease on such call date upon payment of the redemption price into the Bond Fund. The City further reserves the right to purchase any or all of the Bonds in the open market at any time at a price not in excess of the call price applicable at the next succeeding call date. Section 7. Deposits to Bond Fund and Bond Fund Considera- tions. So long as Bonds are outstanding against the Bond Fund, the City Director of Finance shall set aside and pay into the Bond Fund out of the Revenue of the System deposited in the Water and Sewer Operating Fund of the City in addition to the amounts to be deposited therein for the 1977 Bonds, a fixed amount without regard to any fixed proportion, namely: (a) Into the Principal and Interest Account, at least 20 days prior to each principal payment date and each interest payment date, an amount sufficient, together with any ULID Assessment collections depos- ited therein in connection with any Future Parity Bonds hereafter issued, to pay the principal amount maturing on each maturity date of the 1977 Bonds, Bonds and any future Parity Bonds hereafter issued and outstanding and an amount sufficient to pay the interest payable on the 1977 Bonds, Bonds and such Future Parity Bonds on such interest payment date; and (b) Into the Reserve Account, in substantially equal annual payments, such amounts so that by no later than May 1, 1988, there shall be on deposit in such Reserve Account a total reserve at least equal to the average annual debt service requirements, both principal and interest, of the 1977 Bonds and the Bonds, excluding the principal of any Term Bonds if the payment for such Term Bonds is being provided for by a sinking fund. - 14 - The Reserve Account shall be maintained in such total average annual debt service required reserve amount, except for withdrawals therefrom as authorized herein, at all times so long as any of the 1977 Bonds and the Bonds is outstanding. When the total amount in the Bond Fund shall equal the total amount of principal and interest for all outstanding bonds payable out of the Bond Fund to the last maturity thereof, no further payment need be made into the Bond Fund, and the amount in such Reserve Account may be reduced at any time to an amount not less than such average annual debt service requirements for the 1977 Bonds, the Bonds and any Future Parity Bonds then outstanding. In the event that there shall be a deficiency in the Prin- cipal and Interest Account in the Bond Fund to meet maturing installments of either principal or interest, as the case may be, such deficiency shall be made up from the Reserve Account by the withdrawal of cash therefrom for that purpose. Any defi- ciency created in the Reserve Account by reason of any such withdrawal shall then be made up from the money from the Revenue of the System and/or ULID Assessments, if any, payable into the Bond Fund first available after making necessary provision for the required payments into the Principal and Interest Account. The money in the Reserve Account shall otherwise be held intact and may be applied against the last outstanding bonds payable out of the Bond Fund. All money in the Bond Fund not needed to meet the payments of principal and interest when due may be kept on deposit in the - 15 - official bank depository of the City or in any national bank or may be invested in any legal investment. Interest on any such investment or on such bank account shall be deposited in and become a part of the Bond Fund. In the judgment of the City Council, the Revenue of the System anticipated to be derived from the operation and mainte- nance of the System will be more than sufficient to pay the Operating and Maintenance Expense and to permit the setting aside into the Bond Fund out of the Revenue of the System of sufficient amounts to pay the interest on the 1977 Bonds and the Bonds as such interest becomes due and payable and to pay and redeem all of such 1977 Bonds and Bonds at maturity. The City Council further declares that in fixing the amounts to be paid into the Bond Fund it has considered and had due regard for the Operating and Maintenance Expense and has not set aside into the Bond Fund a greater amount or proportion of the Revenue of the System than in its judgment will be available over and above the Operating and Maintenance Expense, and that no portion of the Revenue of the System has been previously pledged for any other outstanding indebtedness except for pay- ment of the 1977 Bonds. Section 8. Lien Position of Bonds. All Revenue of the System is pledged to the payments required to be made into the Bond Fund, and the Bonds shall constitute a charge and lien upon such revenue prior and superior to all other charges and liens - 16 - whatsoever, excluding Operating and Maintenance Expense, except that the charge and lien upon such revenue for the Bonds shall be on a parity with the charge and lien upon such revenue and upon any ULID Assessments hereafter pledged to be paid into the Bond Fund for the 1977 Bonds and any Future Parity Bonds. Section 9. Covenants. The City covenants and agrees with the owner and holder of each Bond at any time outstanding as follows: (a) It will establish, maintain and collect such rates and charges for water and sanitary sewage disposal service so long as any 1977 Bonds, Bonds and Future Parity Bonds are outstanding which, together with other miscellaneous Revenue of the System (excluding ULID Assessments), will provide amounts annually at least equal to the Coverage Requirement, after payment of Operating and Maintenance Expense. In determining the amount of debt service subject to coverage, there shall be deducted from the annual principal and interest required to be paid each year an amount equal to the percentage of the debt service for each year on each issue of outstanding 1977 Bonds, Bonds and Future Parity Bonds, equal to the percentage arrived at by dividing the original total amount of the ULID Assessments specifically pledged to the Bond Fund in that issue by the original total principal amount of such issue. To simplify, where ULIDs are involved, only the debt service portion of any Future Parity Bond issue not covered by ULID Assessments must be subject to the Coverage Requirement. (b) It will at all times maintain and keep the System in good repair, working order and condition, and also will at all times operate such System and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the System unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of - 17 - and interest on all bonds payable out of the Bond Fund at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of such System that is used, useful and material to the operation thereof unless provision is made for replacement thereof or for payment into the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of outstanding bonds payable out of the Bond Fund as the revenue available for debt service for such outstanding bonds for the twelve months pre- ceding such sale, lease, encumbrance or disposal from the portion of the System sold, leased, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire System for the same period. Any such money so paid into the Bond Fund shall be used to retire such outstanding bonds at the earliest possible date. (d) It will, while any of the Bonds remains outstanding, keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to its System, and it will furnish any subsequent holder or holders of the Bonds, if the Bonds shall be owned by other_ than a fund of the City, at the written request of such holder or holders, complete operating and income statements of such System in reasonable detail cover- ing any calendar year showing the financial condition of the water and sewer departments and compliance with the terms and conditions of this ordinance not more than 120 days after the close of such calendar year, and it will grant any holder or holders of at least 25% of the outstanding Bonds the right at all reasonable times to inspect the entire System and all records, accounts and data of the City relating thereto. Upon request of any holder of any of such Bonds, it will also furnish to such holder a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington or such other audit as is authorized by law in lieu thereof. (e) It will not furnish water or sanitary sewage disposal service to any customer whatsoever free of charge and will promptly take legal action to enforce collection of all delinquent accounts. (f) It will carry the types of insurance on its System properties in the amounts normally carried by - 18 -- private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of Operating and Maintenance Expense. If, as and when the United States of America or some agency thereof shall provide for War Risk Insurance, the City further agrees to take out and maintain such insur- ance on all or such portions of such System on which such War Risk Insurance may be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all Operating and Maintenance Expense and otherwise meet the obligations of the City as herein set forth. (h) If a ULID is ever established hereafter in connection with the issuance of Future Parity Bonds and the ULID Assessments therefrom pledged to be paid into the Bond Fund, the City will promptly collect all assessments levied therein. Such assessments may be used to pay the principal of and interest on any bonds payable out of the Bond Fund without those assessments being particularly allocated to the pay- ment of principal and interest on any particular series of such Future Parity Bonds, including the 1977 Bonds and the Bonds. (i) It will spend the proceeds of the Bonds with due diligence to completion of the purpose specified herein and will make no use of the proceeds of the Bonds or other funds of the City at any time during the term of the Bonds which will cause such Bonds to be arbitrage bonds within the meaning of Section 103(c) of the United States Internal Revenue Code of 1954, as amended, and applicable regulations thereunder. (j) It will use, pay out and distribute the Revenue of the System, other than money deposited in bond redemption funds, in the following order of priority: (1) To pay Operating and Maintenance Expense. (2) To meet the required debt service payments, including Reserve Account accumulation in the Bond Fund, on the 1977 Bonds, the Bonds and any Future Parity Bonds hereafter issued. - 19 - (3) To meet the required debt service on any water and sewer revenue bonds issued having a charge and lien on the Revenue of the System junior to the 1977 Bonds and the Bonds and any Future Parity Bonds; (4) To redeem and retire any then out- standing water and sewer revenue bonds or to purchase any or all of those bonds in the open market as provided in this ordinance; (5) To make necessary betterments and replacements of or repairs, additions or extensions to the System; (6) For any other lawful purpose. Section 10. Bond Form and Execution of Bonds. The Bonds and coupons shall be printed on lithographed or good bond paper in a form consistent with the provisions of this ordinance. The Bonds shall be signed by the facsimile signature of the Mayor, attested by the manual signature of the City Clerk and a fac- simile reproduction of the seal of the City shall be printed thereon, and the coupons shall bear the facsimile signatures of the Mayor and the City Clerk. Section 11. Provision for Future Parity Bonds. The City reserves the right to issue Future Parity Bonds which will con- stitute a charge and lien upon the Revenue of the System and ULID Assessments hereafter pledged to be paid into the Bond Fund on a parity with the 1977 Bonds and the Bonds if the same condi- tions as set forth in Section 16 of Ordinance No. 1957, as amended by Section 2 of this ordinance, shall be met and com- plied with at the time of the issuance of such Future Parity - 20 - Bonds, which section, as amended, is incorporated herein and made a part of this ordinance. Nothing contained in the provisions for parity shall pre- vent the City from issuing revenue bonds having a junior lien on the Revenue of the System or from pledging the payment of ULID Assessments into a bond redemption fund or account created to pay and secure the payment of the principal of and interest on such junior lien bonds as long as such ULID Assessments are levied to pay part or all of the cost of improvements being con- structed out of the proceeds of the sale of such junior lien bonds. Neither shall anything contained in this ordinance pre- vent the City from issuing revenue bonds to refund maturing revenue bonds of the City for the payment of which money is not otherwise available. Section 12. Defeasance Clause. In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington, or have money available from any other lawful source, to pay the principal of and interest on the Bonds or such portion thereof included in the refunding plan as the same become due and payable and to refund all such then out- standing Bonds and to pay the costs of refunding, and shall have irrevocably set aside in a special fund for and pledged to such payment and refunding money and/or direct obligations of the United States of America or other legal investments sufficient in amount, together with known earned income from the investment - 21 - thereof, to make such payments and to accomplish the refunding as scheduled (hereinafter called the "trust account") and shall irrevocably make provisions for redemption of such Bonds, then in that case all right and interest of the owners or holders of the Bonds to be so retired or refunded and the appurtenant coupons (hereinafter collectively called the "defeased Bonds") in the covenants of this ordinance, in the Revenue of the System, funds and accounts, including ULID Assessments, obli- gated to the payment of such Bonds shall thereafter cease and become void, except such owners and holders shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the princi- pal of and interest on the defeased Bonds from the Revenue of the System and ULID Assessments without any priority of lien or charge against that revenue and assessments or covenants with respect thereto except to be paid therefrom. After the estab- lishing and full funding of such trust account, the City may then apply any money in any other fund or account established for the payment or redemption of the defeased Bonds to any lawful purposes as it shall determine, subject only to the rights of the holders of any other bonds then outstanding. In the event that the refunding plan provides that the Bonds being refunded or the refunding bonds to be issued be - 22 - secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemp- tion of those Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevo- cably pledged for the prior redemption of those Bonds included in the refunding plan, then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds, the pay- ment of which is not so secured by the refunding plan, shall be included in the computation of coverage for determining compli- ance with the rate covenants. Section 13. Sale and Delivery of Bonds. Foster & Marshall/ American Express Inc of Seattle, Washington, has submitted its written offer to purchase the Bonds at a price of $98.00 per each $100.00 of par plus accrued interest to the date of delivery of the Bonds, the City to furnish the printed Bonds and the unqualified approving legal opinion of Roberts & Shefelman, municipal bond counsel of Seattle, Washington. Bond counsel shall not be required to review or express any opinion concern- ing the completeness or accuracy of any official statement, offering circular or other sales material issued or used in connection with the Bonds, and bond counsel's opinion shall so state. The City Council, being of the opinion that it is in the best interests of the City to accept such offer, accepts the same. The Bonds shall, therefore, immediately upon their execu- tion be delivered to the purchaser upon payment for the Bonds in - 23 - accordance with such offer. The principal proceeds received from the issuance and sale of the Bonds shall be deposited in the "Water and Sewer Construction Fund" of the City and the accrued interest received shall be deposited in the Principal and Interest Account in the Bond Fund. Pending the expenditure of such principal proceeds out of the Water and Sewer Construc- tion Fund, the money in such fund may be invested in any legal investment and the investment income may be retained in such fund and used for the purposes of such fund. PASSED by the City Council of the City of Edmonds, Washington, at a regular open public meeting thereof and APPROVED by the Mayor this 26th day of April, 1983. ATTEST: City lerk FORM APPROVED: City Attorney 0002e CITY OF EDMONDS, WASHINGTON By/ Mayor - 24 - AFFIDAVIT OF POSTING ORDINANCE STATE OF WASHINGTON ) ) ss: COUNTY OF SNOHOMISH ) IRENE VARNEY MORAN , being first duly sworn on oath deposes and says that s he is over the age of eighteen (18) years and is competent to testify as to the matter stated herein. There is no official newspaper or other newspaper printed and published within the City. In accordance with RCW 35A.12.160, on the 27 day of April , 1983, affiant posted true and correct copies of the attached Ordinance No. 2363, passed by the City Council on the 26 day of Apri 1 ► 19M, at the official posting places for City notices which are the public bulletin boards at the following locations: Edmonds Civic Center 250 Fifth Avenue North Edmonds, Washington 98020 Edmonds Public Library Civic Center, 250 Fifth Avenue North Edmonds, Washington 98020 Edmonds Branch of United States Post Office 201 Main Street Edmonds, Washington 98020 DATED this 27 day of April 1983. SUBSCRIBED AND SWORN to before me this day of 19P ota Public in and for the State of Wan gton, residing at ��-�' I, IRENE VARNEY MORAN, City Clerk of the City of Edmonds, Washington, certify that the attached copy of Ordinance No.2363 is a true and correct copy of the original ordinance passed on the 26th day of April, 1983, as such ordinance appears on the Minute Book of the City. DATED this 27 day of April, 1983. IRENE VARNEY MORA , City Clerk