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Ordinance 1719CITY OF EDMONDS, WASHINGTON ORDINANCE NO. 1719 AN ORDINANCE specifying and adopting a system or plan of additions to and betterments and extensions of the waterworks utility of the City of Edmonds, Washington, including the sewerage system as a part thereof; declaring the estimated cost as nearly as may be; providing for the issuance of $2,000,000.00 par value of "Water and Sewer Revenue Bonds, 1974," of the City to obtain the funds with which to pay the cost of carrying out such system or plan of additions to and betterments and extensions of the waterworks utility of the City, including the system of sewerage as a part thereof; fixing the date, form, interest rates, maturities, terms and covenants of such bonds; and confirming the sale and provid- ing for the delivery of the bonds to Seattle Northwest Securities Corporation of Seattle, Washington. WHEREAS, the City of Edmonds, Washington, by Ordinance No. 635, passed June 17, 1953, specified and adopted a system or plan of additions to and betterments and extensions of the waterworks system of the City of Edmonds, including additions to and betterments and extensions of the system of sewerage of the City; provided that the existing system of sewerage, including all additions, betterments and extensions thereto, should become a part of the waterworks utility of the City; provided for the issuance of not to exceed $275,000.00 par value of "Water and Sewer Revenue Bonds, 1953," in one or more series to provide the funds required to pay the cost thereof; and provided for the issuance and sale of $135,000.00 par value of bonds as "Series A" for the purpose of obtaining funds to carry out a portion of said system or plan of additions to and betterments and extensions of the sewerage system of the City, which would become a part of the waterworks utility of the City; and WHEREAS, pursuant to Ordinance No. 695, passed April 16, 1957, an additional $140,000.00 par value of said total authorized issue of "Water and Sewer Revenue Bonds, 1953," were issued as "Series B"; and WHEREAS, the City of Edmonds, Washington, by Ordinance No. 773, passed July 7, 1959, specified and adopted a system or plan of additions to and betterments and extensions of the waterworks utility of the City, including the sewerage system as a part thereof, and issued and sold $240,000.00 par value of "Water and Sewer Revenue Bonds, 1959" (hereinafter referred to as the "Outstanding 1959 Bonds") , to obtain the funds with which to pay the cost thereof, the lien and charge upon the gross revenues from the combined water and sewer systems comprising the waterworks utility of the City for such bonds and any parity bonds thereafter issued being junior and inferior to the prior lien and charge upon such gross revenues for the then outstanding "City of Edmonds Water Revenue Bonds, 1949" (all of which bonds have now been retired), "Water and Sewer Revenue Bonds, 1953, Series A," and "Water and Sewer Revenue Bonds, 1953, Series B"; and WHEREAS, by Section 13 of said Ordinance No. 773, the City of Edmonds reserved the right to issue additional and/or refunding water and sewer revenue bonds which would constitute a lien and charge upon the gross revenues.of the waterworks utility, including the sewerage system as a part thereof and including all additions thereto and betterments, replacements and extensions thereof at any time made, on a parity with said Outstanding 1959 Bonds if certain conditions should be met and complied with at the time of the issuance of such additional and/or refunding water and sewer revenue bonds; and WHEREAS, the City by Ordinance No. 814, passed May 3, 1960, heretofore issued and sold $150,000.00 par value of "Water and Sewer Revenue Bonds, 1960" (hereinafter referred to as the "Outstanding 1960 Bonds"), and by Ordinance No. 909, passed November 21, 1961, heretofore issued and sold $100,000.00 par value of "Water and Sewer Revenue Bonds, 1961" (hereinafter referred to as the "Outstanding 1961 Bonds"), both of said bond issues having been issued on a parity of lien with the outstanding "Water and Sewer Revenue Bonds, 1959," -2- and with each other pursuant to the provisions of Section 13 of Ordinance No. 773; and WHEREAS, pursuant to Ordinance No. 1042, passed March 3, 1964, the City issued and sold $215,000.00 par value of "Water and Sewer Refunding Revenue Bonds, 1964" (hereinafter referred to as the "Outstanding 1964 Bonds"), to obtain the funds with which to pay, retire and cancel on July 1, 1964, all of the outstanding "Water and Sewer Revenue Bonds, 1953, Series A," and on May 1, 1964, all of the outstanding "Water and Sewer Revenue Bonds, 1953, Series B," all of which bonds were called, paid and retired on said respective call dates and which Outstanding 1964 Bonds were issued on a parity of lien with the Outstanding 1959 Bonds, the Outstanding 1960 Bonds and the Outstanding 1961 Bonds in accordance with the provisions of Section 13 of Ordinance No. 773; and WHEREAS, pursuant to Ordinance No. 1141, passed September 21, 1965, the City issued and sold $125,000.00 par value of "Water and Sewer Revenue Bonds, 1965" (hereinafter referred to as the "Outstanding 1965 Bonds"), pursuant to Ordinance No. 1207, passed May 17, 1966, the City issued and sold $1,000,000.00 par value of "Water and Sewer Revenue Bonds, 1966" (hereinafter referred to as the "Outstanding 1966 Bonds"), pursuant to Ordinance No. 1314, passed July 5, 1967, the City issued and sold $400,000.00 par value of "Water and Sewer Revenue Bonds, 1967" (hereinafter referred to as the "Outstanding 1967 Bonds"), and pursuant to Ordinance No. 1506, passed October 20, 1970, the City issued and sold $1,000,000.00 par value of "Water and Sewer Revenue Bonds, 1970" (hereinafter referred to as the "Outstanding 1970 Bonds") , all of which bond issues were issued on a parity of lien with the Outstanding 1959 Bonds and all subsequent issues of parity bonds above referred to and with each other in accordance with the provisions of Section 13 of Ordinance No. 773; and =-a WHEREAS, pursuant to Ordinance No. 1603, passed June 20, 1972, the City issued and sold $1,035,000.00 par value of "Water and Sewer Revenue Refunding Bonds, 1972" (hereinafter referred to as the "Outstanding 1972 Bonds") , for the purpose of providing funds to redeem and retire on December 1, 1982, all of the Outstanding 1970 Bonds, which Outstanding 1972 Bonds, after the payment and retirement of the Outstanding 1970 Bonds, were issued on a parity of lien with the Outstanding 1959 Bonds and all subsequent issues of parity bonds above referred to and with each other in accordance with the provisions of Section 13 of Ordinance No. 773; and WHEREAS, the City Council hereby finds and declares that the public health and welfare require and it is in the best interests of the inhabitants of the City that certain water improvements be made as hereinafter described; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, DO ORDAIN, as follows: Section 1. The following words as used in this ordinance shall have the following meanings: a. "City" shall mean the City of Edmonds, Washington. b. "Bonds shall mean the "Water and Sewer Revenue Bonds, 1974," the issuance of which is provided for in this ordinance. C. "Prior Lien Parity Bonds" shall mean the outstanding "Water and Sewer Revenue Bonds, 1959" (hereinafter called the "Outstanding 1959 Bonds"), the outstanding "Water and Sewer Revenue Bonds, 1960" (hereinafter called the "Outstanding 1960 Bonds"), the outstanding "Water and Sewer Revenue Bonds, 1961" (hereinafter called the "Outstanding 1961 Bonds"), the outstanding "Water and Sewer Refunding Revenue Bonds, 1964" (hereinafter called the "Outstanding 1964 Bonds"), the outstanding "Water and Sewer Revenue Bonds, 1965" (hereinafter called the "Outstanding 1965 Bonds"), the outstanding "Water and Sewer Revenue Bonds, 1966" (hereinafter called the "Outstanding 1966 Bonds"), the outstanding "Water and Sewer Revenue Bonds, 1967" (hereinafter called the "Outstanding 1967 Bonds"), the -4- outstanding "Water and Sewer Revenue Bonds, 1970" (hereinafter called the "Outstanding 1970 Bonds")(prior to their payment and retirement on December 1, 1982), and the outstanding "Water and Sewer Revenue Refunding Bonds, 1972" (hereinafter called the "Outstanding 1972 Bonds ") (after the payment and retirement of the Outstanding 1970 Bonds on December 1, 1982) , heretofore issued on a parity of lien with the Outstanding 1959 Bonds under the conditions and pursuant to the requirements provided in Section 13 of Ordinance No. 773 of the City. d. "Waterworks Utility of the City" shall mean the combined sanitary sewerage system and waterworks system of the City, together with all additions thereto or betterments thereof at any time made or constructed. e. "Bond Fund" shall mean the special fund of the City created by this ordinance and known as the "Water and Sewer Revenue Bond Redemption Fund, 1974," for the payment of the Bonds and any Future Parity Bonds. f. "Future Parity Bonds" shall mean any bonds hereafter issued on a parity of lien with the outstanding Bonds under the conditions and pursuant to the requirements provided in Section 13 of this ordinance. h. "Term Bond Maturity Year" shall mean any calendar year in which the Bonds or any issue or series of Future Parity Bonds are scheduled to mature (regardless of any reservation of prior redemption rights) in which the amount of such bonds scheduled to mature is more than 1.25 times the average annual principal maturity of the bonds of such issue or series for the three years immediately preceding such Term Bond Maturity Year. Section 2. The City, in conformance with the 1973 Comprehensive Water System Plan, hereby specifies and adopts a system or plan for making additions to or betterments and extensions of the Waterworks Utility of the City consisting of the following: -5- 1. The City shall replace approximately 100,000 feet of existing water mains 4-inches and under in size with larger cast iron or equivalent mains and add fire hydrants at the following locations: 75th Pl. W. from 164th St. S.W. north; 72d Ave. W. from Meadowdale Rd. north; 68th Ave. W. from 164th St. S.W. to 160th St. S.W.; 68th Ave. W. from 160th St. S.W. north; 160th St. S.W. from 68th Ave. W. to 70th Ave. W.; 70th Ave. W. from 160th St. S.W. north; north of 160th St. S.W. between 70th Ave. W. and 72d Ave. W.; 173d St. S.W.; 74th P1. W.; 94th Ave. W.; 94th Ave. W. south of cul-de-sac; Olympic View Dr. and Forest Dell Dr.; Euclid Ave. from Olympic View Dr. to loth Pl. N.; loth P1. N. from Euclid north; loth P1. N. from Euclid south; vacated road between Euclid and Grandview St.; Driftwood Lane; Puget Dr. from 9th Ave. N. to 8th Ave. N.; Melody Lane; Viewland and 12th Ave. N.; llth Ave. N. from Viewland to blow -off; 77th Pl. W. north of 242d St. S.W.; 241st St. S.W. and 74th Ave. W. to 236th St. S.W.; 78th Pl. W. north of 242d St. S.W.; 244th St. S.W. east of existing 6-inch; Meadowdale Rd. north of 164th St. S.W.; Fredrick Pl.; Cyprus P1.; Talbot Rd.; 76th Ave. W. from 171st St. to Bertola Rd,; Meadowdale Beach Rd.; Olympic Ave. north of Puget Dr. and Excelsior Pl.; 190th P1. S.W. from 92d Ave. to 94th Ave.; 94th Ave. W. from 191st St. to 187th St.; 190th St. S.W. from 92d Ave. to 94th Ave. W.; 187th St. S.W. from 92d Ave. to 94th Ave. W.; 92d Ave. W. from 190th St. to 184th St.; 196th St. S.W. west of 88th Ave. W.; 194th St. S.W. west of 88th Ave. W.; 192d St. S.W. from 92d Ave. to 83d Ave. W.; 191st Pl. S.W. west of 92d Ave. W.; 184th St. S.W. from 92d Ave. to 88th Ave. W.; 187th P1. S.W. east of 88th Ave. W.; 86th Ave. W. from 196th St. to 192d St. S.W.; 84th Ave. W. from 196th St. to 188th St. S.W.; 84th Ave. W. from 184th St. S.W. north; 187th St. S.W. east of 84th Ave. W.; 83d Ave. W. from 192d St. to 188th St. S.W.; 81st St. W. from 188th St. to 190th St. S.W.; Andover St.; Sunset Way from Olympic View Dr. south; 195th St. S.W. west of 76th Ave. W.; 194th St. S.W. west of 76th Ave. W.; 191st St. S.W. west of Dellwood Dr.; 184th St. S.W. from Olympic View Dr. to 80th Ave. W.; 80th Ave. W. from 184th St. to 180th St. S.W.; 180th St. S.W. from Olympic View Dr. to 80th Ave. W.; 7th Ave. N. from Bell to Daley; 91st P1. W. from Main St. north; 200th St. S.W. from 91st Ave. to 88th Ave. W.; Traction right-of-way south of 242d St. S.W.; 88th Ave. W. from 200th to 202d St. S.W.; 202d St. S.W. from 88th Ave. to 84th Ave. W.; 84th Ave. W. from 202d St. to 200th St. S.W.; 86th P1. W. north of Main St.; 207th St. S.W. and 85th Pl. W.; .Maplewood Road; 198th St. S.W. and 83d P1. W.; 84th Ave. W. north of 198th St. and 197th P1.; 84th Ave. W. and 83d Ave.W. north of Main St.; 80th Ave. W. from 196th St. to 199th St. S.W.; 201st St. S.W. west of 76th Ave. W.; 220th St. S.W. from 92d Ave. W. to 76th Ave. W.; 83d Ave. W. from 220th St. north; 220th St. from 76th Ave. W. to P.S.H. No. 1; 242d St. S.W. from P.S.H. No. 1 to 76th Ave. W.; 78th P1. W. south of 242d St. S.W.; 77th P1. W. south of 242d St. S.W.; 79th Pl. W.; 238th St. S.W. from P.S.H. No. 1 to 78th Ave. W.; 80th Ave. W. south of 238th St. S.W.; 79th Ave. W. south of 238th St. S.W.; 78th Pl. W. north of 238th St. S.W.; 78th Ave. W. from 240th St. to 236th St.; 78th Ave. W. from 236th St. to 234th St.; 234th St. S.W. from P.S.H. No. 1 to 76th Ave. W.; 237th St. S.W. south of 74th Ave. W.; 74th Ave. W. east of 76th Ave. W.; 75th Ave. W. from 74th Ave. to Bradley Rd.; 229th St. S.W. from 75th Ave. W. to 74th Ave. W. 2. The City will replace approximately 18,000 feet of existing water mains 6-inches or larger diameter with cast iron or equivalent water mains and add fire hydrants at the following locations: 76th Ave. W. from Bertola Rd. to 164th St. S.W.; Olympic View Dr. from 88th Ave. to 85th Pl. W.; 88th Ave. W. from 196th St. to Olympic View Dr.; 196th St. S.W. from 80th Ave. W. to 77th Ave. W.; Olympic View Dr. from 76th Ave. W. to 180th St. S.W.; Casper St. 3d Ave. to 7th Ave. N.; 88th Ave. W. from 200th St. to 196th St. S.W.; 244th St. S.W. east of 76th Ave. W.; 240th St. S.W. from P.S.H. No. 1 to 78th Ave. W.; 79th Pl. W. from 240th St. S.W. to F.H.; 75th Ave. W. from 228th St. to 230th St. S.W.; 229th St. S.W. from 75th Ave. to 74th Ave. W.; 74th Ave. W. from 229th St. to 230th St. S.W. 3. The City will install approximately 15,000 feet of new water mains where none exists or where required for looping the system and fire hydrants will be added to these lines at the following locations: Meadowdale Rd. from 75th P1. W. north; intersection of 70th Ave. W. and 160th St. S.W. south to Meadowdale Rd.; between 173d St. S.W. and Cyprus Pl.; 166th P1. S.W. from 72d Ave. W. to 76th Ave. W.; Maple Manor; loth P1. N. Grandview to Euclid; Olympic View Dr. 85th Pl. to Andover; 77th Pl. W. from 193d St. to 195th St. S.W.; 192d St. S.W. from 80th Ave. W. to 81st Ave. W.; Puget Dr. from llth Ave. to 12th Ave.; Hindley Lane from 8th Ave. to 9th Ave.; 8th Ave. from Hindley Lane to Melody Lane; 84th Ave. W. from 204th St. to 202d St. S.W.; 204th St. S.W. from 88th Ave. to 84th Ave. W.; 88th Ave. W. from 202d St. S.W. to 212th St. S.W.; MacAleer Way from 76th Ave. to 74th Ave. 4. The City will construct a 1,500,000 gallon water tank to serve the north end of the City. 5. The City will purchase land, right-of-way and easements as necessary to construct the aforementioned facilities. 6. The City will construct a telemetering system for monitoring the major elements of the City's water system. There shall be included in the foregoing the acquisition and installation of all necessary valves, fittings, couplings, connections, wyes, manholes, equipment and appurtenances. There shall -7- be included the performance of any work which may be necessary to the foregoing construction and installation. The City Council expressly reserves the right to make changes in the items listed as a part of the plan providing for additions and betterments where such changes will not substantially alter such plan, such as to make reasonable modifications in locations and in sizes of water supply facilities including water supply and transmission mains which would, in the opinion of the City Council, be in the best interest of the City and to proceed with the construction and installation of said improvement in whole or in successive parts or units from time to time as may be advisable and as funds for the same become available. Section 3. The life of the foregoing additions to and betterments and extensions of the Waterworks Utility of the City is hereby declared to be at least twenty-five years. Section 4. The estimated cost, as near as may be, of the acquisition, construction and installation of the above -described additions to and betterments and extensions of the Waterworks Utility of the City is hereby declared to be $2,000,000.00 to be met and defrayed from the proceeds to be received from the issuance of $2,000,000.00 par value of water and sewer revenue bonds. Section 5. The gross revenues and benefits to be derived from the operation and maintenance of the Waterworks Utility of the City, at the rates to be charged for water and for sanitary sewage disposal service on the entire utility will, in the judgment of the City Council, be more than sufficient to meet all expenses of maintenance and operation thereof and to permit the setting aside into a special fund out of the gross revenues of the Waterworks Utility of the City of sufficient amounts to pay the interest on the bonds herein authorized to be issued and on all outstanding Prior Lien Parity Bonds as such interest becomes due and payable and to pay and redeem all of the said bonds at maturity. Section 6. For the purpose of obtaining the funds necessary to carry out the system or plan of additions to and betterments and extensions of the Waterworks Utility of the City, as specified and adopted in Section 2 and hereby ordered to be carried out, there shall be issued and sold $2,000,000.00 par value of "Water and Sewer Revenue Bonds, 1974" (hereinafter designated as the "Bonds"). The Bonds shall be dated July 1, 1974; shall be in denominations of $5,000.00 each; shall be numbered from 1 to 400, inclusive; shall bear interest payable semiannually on January 1 and July 1 of each year up through the bond maturity dates with full obligation on the part of the City to pay interest at the bond rate from and after the bond maturity dates until the Bonds with interest are paid in full, or sufficient moneys are on deposit in the Bond Fund for such payment in full and the Bonds have been duly called for redemption. 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 Treasurer of the City solely out of the Bond Fund. The Bonds shall be issued in coupon form and shall be registrable as to principal only or as to both principal and interest at the office of the Treasurer of the City. The Bonds shall be a valid claim of the holder thereof only as against the Bond Fund and the fixed amount of the revenues of the Waterworks Utility of the City, including any utility local improvement district assessments, pledged to such fund and shall not be a general obligation of the City. The Bonds shall mature and shall bear interest in accordance with the following schedule, to -wit: Bond Numbers Interest (Inclusive) Amounts Rates Maturities 1 to 41 $205,000 6.60% July 1, 1992 42 to 84 215,000 6.70% July 1, 1993 85 to 131 235,000 6.75% July 1, 1994 132 to 180 245,000 6.80% July 1, 1995 181 to 233 265,000 6.90% July 1, 1996 234 to 290 285,000 6.90% July 1, 1997 291 to 351 305,000 6.90% July 1, 1998 352 to 400 245,000 6.90% July 1, 1999 Section 7. The City reserves the right to redeem the outstanding Bonds as a whole, or in part in inverse numerical order, highest numbers first, on July 1, 1986, or on any semiannual interest WE payment date thereafter, at 101% of par, plus accrued interest to the date of redemption, which redemption price shall reduce 1% annually to par on or after July 1, 1988. Notice of such call for redemption shall be published once not less than 30 nor more than 45 days prior to the call date in the official newspaper of the City and shall also be mailed to Seattle - Northwest Securities Corporation at its principal place of business in Seattle, Washington, or its successor, within the same period. In addition, such redemption notice shall be sent to Moody's Investors Service, Inc., and Standard & Poor's Corporation, at their offices in New York, New York, but the mailing of such notice to such corporations shall not be a condition precedent to the redemption of the Bonds. Interest on any Bonds so called for redemption shall cease on the date fixed for such redemption upon payment of the redemption price into the Bond Fund. Section 8. There is hereby created and established in the office of the City Treasurer a special bond redemption fund to be known and designated as the "Water and Sewer Revenue Bond Redemption Fund, 1974" (herein called the "Bond Fund"). The Bond Fund is hereby divided into a "Principal and Interest Account" and a "Reserve Account." So long thereafter as Bonds are outstanding against the Bond Fund the Treasurer of the Citv shall set aside and pay into the Bond Fund, in addition to any amounts which the City may hereafter covenant to set aside and pay therein for any Future Parity Bonds, out of the gross revenues of the Waterworks Utility of the City and any utility local improvement district assessments hereafter pledged to be paid into the Bond Fund to secure the Bonds and any Future Parity Bonds, a fixed amount without regard to any fixed proportion, namely: (a) Into the "Principal and Interest Account," on or before the first day of each month, beginning with the month of August, 1974, one -sixth of the next ensuing requirements for interest on the Bonds and beginning with the month of August, 1992, one -twelfth of the next ensuing requirements for principal on the Bonds and continuing thereafter until the Bonds, both principal and interest, are paid in full. -10- (b) Into the "Reserve Account," on or before the first day of each month, beginning with August, 1974, not less than a sum equal to one -sixtieth of the average annual debt service requirements for the'Bonds, including the interest but excluding the principal amount payable in any Term Bond Maturity Year, until an amount equal to such average annual debt service requirements is accumulated by no later than July 1, 1979. The "Reserve Account" may be accumulated from any other moneys which the City may have available for such purpose in addition to using said revenues and assessments therefor. The "Reserve Account" shall be maintained in such amount, except for withdrawals therefrom as authorized herein, at all times so long as any Bonds and Future Parity Bonds are outstanding; PROVIDED, that when the total amount in the Bond Fund shall equal the total amount of principal of and interest on all outstanding Bonds and Future Parity Bonds no further payments need be made into the Bond Fund. In the event there shall be a deficiency in the "Principal 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 deficiency created in the "Reserve Account" by reason of such withdrawal shall then be made up from the moneys from the revenues of the Waterworks Utility of the City and said utility local improvement district assessments first available after making necessary provision for the required payments into the "Principal and Interest Account." The moneys in the "Reserve Account" shall otherwise be held intact and may be applied against the outstanding bonds payable out of the Bond Fund. All moneys in the "Reserve Account" above provided for may be kept on deposit in the official bank depository of the City, or in any national bank, or may be invested in United States Government obligations redeemable at a fixed price and maturing not later than the final maturity date of the last outstanding bonds payable out of the Bond Fund. -11- Section 9. The gross revenues from the Waterworks Utility of the City, and all utility local improvement district assessments hereafter collected to secure the Bonds and any Future Parity Bonds, are hereby pledged to such payments and the Bonds and such Future Parity Bonds shall constitute a lien and charge upon such revenues and assessments prior and superior to any other charges whatsoever, excluding charges for maintenance and operation of the Waterworks Utility of the City, except that the lien and charge upon such revenues for the Bonds and such Future Parity Bonds shall be subordinate and junior to the prior lien and charge upon such revenues for the outstanding Prior Lien Parity Bonds. Section' 10. The City Council and corporate authorities of the City hereby declare that in creating the Bond Fund and in fixing the amounts to be paid into the same as aforesaid they have exercised due regard for the cost of operation and maintenance of the Waterworks Utility of the City and the debt service requirements of the presently outstanding Prior Lien Parity Bonds and the City has not bound and obligated itself to set aside and pay into the Bond Fund a greater amount or proportion of the revenues of the said utility than in the judgment of the City Council will be available over and above such costs of maintenance and operation and debt service requirements of said outstanding Prior Lien Parity Bonds and that no portion of the revenues of the Waterworks Utility of the City has been previously pledged for any indebtedness other than the presently outstanding Prior Lien Parity Bonds. Section 11. The City hereby covenants and agrees with the owner and holder of each Bond at any time outstanding, in addition to the covenants heretofore made for the outstanding Prior Lien Parity Bonds, as follows: (a) That it will establish, maintain and collect such rates and charges for water and sanitary sewage -12- disposal service which, together with other revenues available therefor, will produce net revenues available for debt service each calendar year after completion of the improvements constructed from the proceeds of the Bonds, at least equal to: (1) 1.25 times the combined average annual debt service on all Prior Lien Parity Bonds, the Bonds and any Future Parity Bonds actually payable from revenues; and (2) 1.30 times the average annual debt service on all Bonds and Future Parity Bonds actually payable from revenues. The portion of the annual debt service which might not be subject to the 130% and 125% coverage requirements would be that portion of any Future Parity Bond issue which might have utility local improvement district assessments pledged to the security of the bonds. In this case, to determine the portion of that issue not subject to the coverage requirements, divide the original amount of each assessment roll by the original principal amount of each bond issue involving utility local improvement district assessment collections. (This subparagraph shall hereinafter be called the "Coverage Requirement".) (b) If utility local improvement districts are ever established in connection with the issuance of Future Parity Bonds and the assessments therefrom pledged to be paid into the Bond Fund, the City will promptly collect all assessments levied in any subsequent utility local improvement district hereafter created in connection with the issuance of such Future Parity Bonds. Such assessments may be used to pay the principal of and interest on any bonds payable out of the Bond Fund without said assessments being particularly allocated to the payment of principal of and interest on any particular series of bonds or such Future Parity Bonds. (c) That it will at all times maintain and keep the Waterworks Utility of the City in good repair, working order and condition, and also will at all times operate such utility and the business in connection therewith in an efficient manner and at a reasonable cost. (d) That it will not sell, lease, mortgage or in any manner encumber or dispose of all the property of the Waterworks Utility of the City, unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of and interest on all Bonds at any time outstanding, and that it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the property of the Waterworks Utility of the City that is used, useful and material to the operation thereof, unless provision is made for replacement thereof, or for payment into the Bond Fund of the total amount of revenue received which shall not be less than an amount which shall bear the same ratio to the amount of outstand- ing bonds payable out of the Bond Fund as the revenue available for debt service for such outstanding bonds for the twelve months preceding such sale, lease, encumbrance or disposal from the portion of the utility sold, leased, encumbered or disposed of bears to the revenue available -13- for debt service for such bonds from the entire utility for the same period. Any such moneys so paid into the Bond Fund shall be used to retire such outstanding bonds payable out of the Bond Fund at the earliest possible date and until being so used may be invested in the same manner as provided for the investment of the moneys in the "Reserve Account" in the Bond Fund. (e) That 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 the Waterworks Utility of the City and it will furnish the original purchaser or purchasers of the Bonds or any subsequent holder or holders thereof at the written request of such holder or holders complete operating and income statements of said utility in reasonable detail covering any calendar year not more than ninety days after the close of such calendar year and it will grant any holder or holders of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the entire Waterworks Utility of the City and all records, accounts and data of the City relating thereto. Upon request of any holder of any of said 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. (f) That 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. (g) That it will carry the types of insurance on the properties of the Waterworks Utility of the City in the amounts normally carried by private water and sewer companies engaged in the operation of water and sewerage systems, and the cost of such insurance shall be considered a part of operating and maintaining said utility. If, as, and when, the United States of America or some agency thereof shall provide for War Risk Insurance, the City further agrees to take out and maintain such insurance on all or such portions of said system on which such War Risk Insurance may be written in an amount or amounts to cover adequately the value thereof. (h) That it will pay all costs of maintenance and operation of the Waterworks Utility of the City and the debt service requirements for the outstanding Prior Lien Parity Bonds and otherwise meet the obligations of the City as herein set forth. (i) That it 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, if such use had been reasonably expected at the date that the Bonds are issued, would have caused such Bonds to be arbitrage bonds within the meaning of Section 103(d) of the United States Internal Revenue Code of 1954, and for this purpose it further covenants that none of the proceeds of the Bonds or the investment of such proceeds will be used to acquire obligations the adjusted yield on which will exceed the adjusted yield produced by the Bonds, both such adjusted yields being computed pursuant and subject to the requirements and exceptions of Sections 1.103-13 and 1.103-14 of the regulations proposed by the United States -14- Treasury Department published in the Federal Register on May 3, 1973 (except for the refunding bonds portion which is still covered by June 1, 1972, proposed regulations), as the same may be changed from time to time, or any other applicable regulations hereafter adopted. Section 12. In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington to pay the principal of and interest on the Bonds or such portion thereof included in the refunding plan as the same become due and payable and to refund all such then outstanding Bonds and to pay the costs of refunding, and shall have irrevocably set aside for and pledged to such payment and refunding, moneys and/or direct obligations of the United States of America or other legal investments sufficient in amount, together with known earned income from the investment thereof, to make such payments and to accomplish the refunding as scheduled, and shall irrevocably make provisions for redemption of such Bonds, then in that case all right and interest of the owners or holders of the Bonds to be so retired or refunded and the appurtenant coupons in the covenants of this ordinance and in the revenues, funds and accounts obligated to the payment of such Bonds, except the right to receive the funds so set aside and pledged, shall thereupon cease and become void and the City may then apply any moneys in any fund or account established for the payment or redemption of such Bonds or coupons to any lawful purposes as it shall determine. In the event that the refunding plan provides that the refunding bonds be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of those Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevocably pledged for the prior redemption of those Bonds included in the refunding plan, then only the debt service on the Bonds and the refunding bonds payable from revenues shall be included in the computation of coverage for issuance of Future Parity Bonds and the -15- annual computation of coverage for determining compliance with the rate covenants. Section 13. The City agrees that it will not hereafter issue any water and sewer revenue bonds which will constitute a lien and charge against the gross revenues of the Waterworks Utility of the City, including utility local improvement district assessments, prior to or on a parity with the lien and charge against such revenues and assessments required to be made into the Bond Fund for the payment of the Bonds and any Future Parity Bonds, except that it hereby reserves the right to issue such Future Parity Bonds if the following conditions and requirements are met and complied with at the time of the issuance of such Future Parity Bonds: (a) That at the time of issuance of such Future Parity Bonds, there shall not be a deficiency in the Bond Fund or the "Reserve Account" therein. (b) That each ordinance providing for the issuance of such Future Parity Bonds shall require that all assessments levied in any utility local improvement district created in connection with the bonds then being issued will be paid directly into the Bond Fund. (c) That 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 parity bonds, excluding from such average the principal amount of any bonds maturing in a Term Bond Maturity Year included in the parity issue.. (d) That at the time of the issuance of such Future Parity Bonds, the City shall have on file a certificate from an independent licensed professional engineer experienced in the design, construction and operation of municipal utilities, showing that in his professional opinion, the net revenue of the Waterworks Utility of the City which will be available in each succeeding year for the payment of the principal of and interest on all outstanding bonds payable out of the Bond Fund and Future Parity Bonds to be issued, will be equal to the Coverage Requirement. In determining whether the City is able to comply with the terms of the parity conditions, the following adjustments may be made to the historical net operating revenue: (a) Any rate change that has taken place or been approved may be reflected. -16- (b) Revenue may be added from customers actually added to the utility subsequent to the 12-month period. (c) Revenue may be added from customers to be served by the improvements being constructed out of the proceeds of the bonds to be issued. (d) 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. (e) Actual or reasonably anticipated changes in the current expenses subsequent to such 12-month period shall be added or deducted, as is applicable. Section 14. The Bonds shall be in substantially the following form: No. $5,000.00 UNITED STATES OF AMERICA STATE OF WASHINGTON CITY OF EDMONDS WATER AND SEWER REVENUE BOND, 1974 KNOW ALL MEN BY THESE PRESENTS: That the City of Edmonds, Washington (hereinafter called the "City") , for value received, promises to pay to bearer, or to the registered owner hereof if this bond be registered, on the FIRST DAY OF JULY, 19_, the principal sum of FIVE THOUSAND DOLLARS together with interest thereon at the rate of % per annum, payable semiannually on January 1 and July 1 of each year, upon presentation and surrender of the attached interest coupons as they severally mature up to the bond maturity date and with full obligation on the part of the City to pay interest at the same rate from and after the bond maturity date until this bond with interest is paid in full, or funds are available in the "Water and Sewer Revenue Bond Redemption Fund, 1974" (hereinafter called the "Bond Fund"), for payment in full. Both principal of and interest on this bond are payable in lawful money of the United States of America at the office of the Treasurer of the City solely out of the special fund created by Ordinance No. , and referred to herein as the "Bond Fund," into whr ich fund the City hereby irrevocably binds itself to pay certain fixed amounts out of the gross revenues of the waterworks utility of the City, including the sewerage system as a part thereof, now belonging to or which may hereafter belong to the City, including all additions, extensions and betterments thereof now or at any time made or constructed, including assessments collected in any utility local improvement district hereafter created to be paid into the Bond Fund, without -17- regard to any fixed proportion, namely, amounts sufficient to pay the principal of and interest on this issue of bonds and any bonds hereafter issued on a parity of lien with this issue of bonds in accordance with the provisions of Section 13 of Ordinance No. (hereinafter called "Future Parity Bonds") as they respectively become due and to maintain a reserve, all at the times and in the manner set forth in Ordinance No. The gross revenues from the combined water and sewerage systems, comprising the waterworks utility of the City, and such utility local improvement district assessments, if any, are hereby pledged to such payment, and the bonds of this issue and any Future Parity Bonds constitute a lien and charge upon such revenues and assessments prior and superior to any other charges whatsoever, excluding charges for maintenance and operation, except that the lien and charge upon such revenues for this issue of bonds and any Future Parity Bonds shall be subordinate and junior to the prior lien and charge upon such revenues for the outstanding "Water and Sewer Revenue Bonds, 1959," "Water and Sewer Revenue Bonds, 1960," "Water and Sewer Revenue Bonds, 1961," "Water and Sewer Refunding Revenue Bonds, 1964," "Water and Sewer Revenue Bonds, 1965," "Water and Sewer Revenue Bonds, 1966," "Water and Sewer Revenue Bonds, 1967," "Water and Sewer Revenue Bonds, 1970" (prior to their payment and retirement on December 1, 1982), and "Water and Sewer Revenue Refunding Bonds, 1972" (after the payment and retirement of the outstanding "Water and Sewer Revenue Bonds, 1970," on December 1, 1982) . This bond is one of a total issue of $2,000,000.00 par value of bonds, all of like date, tenor and effect, except as to maturities and interest rates, all payable from the Bond Fund and all issued by the City under and in pursuance of the laws of the State of Washington and Ordinance No. of the City, for the purpose of providing the funds to pay the cost of carrying out the system or plan of additions to and betterments and extensions of the waterworks utility of the City, including the system of sewerage as a part thereof, specified and adopted by Ordinance No. Reference to Ordinance No. is hereby made as more fully describing the covenants with and rights of holders of bonds of this issue. The City reserves the right to redeem the outstanding bonds as a whole, or in part in inverse numerical order, highest numbers first, on July 1, 1986, or on any semiannual interest payment date thereafter, at 101% of par, plus accrued interest to the date of redemption, which redemption price shall reduce 1% annually to par on or after July 1, 1988. Notice of such call for redemption shall be published once not less than 30 nor more than 45 days prior to the call date in the official newspaper of the City and shall also be mailed to Seattle -Northwest Securities Corporation at its principal place of business in Seattle, Washington, or its successor, within the same period. In addition, such redemption notice shall be sent to Moody's Investors Service, Inc., and Standard & Poor's Corporation, at their offices in New York, New York, but the mailing of such notice to such corporations shall not be a condition precedent to the redemption of the bonds. Interest on any bonds so called for redemption shall cease on the date fixed for such redemption upon payment of the redemption price into the Bond Fund. This bond is a fully negotiable instrument and is transferable by delivery unless registered at the office of the Treasurer of the City in accordance with the provisions endorsed hereon. The City hereby covenants and agrees with the holders of each and every one of the bonds of this issue to fully carry out all covenants and meet all obligations of the City as herein set forth and as set forth in Ordinance No. It is hereby certified and declared that the bonds of this issue are issued pursuant to and in strict compliance with the Constitution and the 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 facsimile signature of the Mayor and attested by the manual signature of the City Clerk and its corporate seal to be hereto affixed and the interest coupons attached to be signed with the facsimile signatures of said officials this first day of July, 19 74 . CITY OF EDMONDS, WASHINGTON By (facsimile signature) Mayor ATTEST: City Clerk The interest coupons attached to the Bonds shall be in substantially the following form: Coupon No." On the FIRST DAY OF (JANUARY)(JULY), 19 , the CITY OF EDMONDS, WASHINGTON, upon presentation and surrender of this coupon, will pay to the bearer at the office of the City Treasurer the amount shown hereon in lawful money of the United States of America from the special fund of said City, known as the "Water and Sewer Revenue Bond Redemption Fund, 1974," said sum being six months' interest then due on its "Water and Sewer Revenue Bond, 1974," dated July 1, 1974, and numbered CITY OF EDMONDS, WASHINGTON By (facsimile signature) Mayor -19- ATTEST: (facsimile signature) City Clerk The registration certificate to be printed on the Bonds shall be in substantially the following form: This bond may be registered in the name of the holder at the office of the Treasurer of the City of Edmonds, Washington, as to principal only, such registration being noted hereon by the Registrar in the registration blank below, after which no transfer shall be valid unless made by the registered holder or his attorney duly authorized and similarly noted in the registration blank below, but it may be discharged from registration by being transferred to bearer after which it shall be transferable by delivery, but it may again be registered as before. The registration of this bond as to principal shall not restrain the transfer of the coupons by delivery but the coupons may be surrendered and the interest made payable only to the registered holder, in which event the Registrar shall note in the registration blank below that the bond is registered as to interest as well as to principal. With the consent of the holder and of the City, but always at the expense of the holder, this bond when converted into a bond registered as to both principal and interest may be reconverted into a coupon bond and again converted into a bond registered as to principal, or as to both principal and interest, as hereinabove provided. Upon reconversion of this bond, when registered as to principal and interest, into a coupon bond, new coupons representing the interest to accrue hereon to date of maturity shall be attached hereto by the Registrar who shall note in the registration blank below whether the bond is registered as to principal only or payable to bearer. Date of In Whose Name Manner of Signature of Registration Registered Registration Registrar The Bonds shall be printed on lithographed forms, shall be signed by the facsimile signature of the Mayor and attested by the manual signature of the Clerk and shall have the seal of the City affixed thereto and the interest coupons shall bear the facsimile signatures of the Mayor and the Clerk. -20- Section 15. Seattle -Northwest Securities Corporation of Seattle, Washington, heretofore offered to purchase the Bonds at a price of $97.50 per each $100.00 par value, plus accrued interest from the date of issuance to the date of delivery of the Bonds, the City to furnish the printed Bonds and the unqualified approving legal opinion of Messrs. Roberts, Shefelman, Lawrence, Gav & Moch, municipal bond counsel of Seattle, Washington, at the Cit_y`s expense. The City Council, being of the opinion that it was in the best interest of the City to accept the same, duly accepted such offer on May 21, 1974, and such acceptance is hereby ratified and confirmed. The Bonds shall, therefore, immediately upon their execution be delivered to the purchaser upon payment for the Bonds in accordance with such offer. PASSED by the City Council at a regular open public meeting thereof and APPROVED by the Mayor of the City of Edmonds, Washington, this 2 day of July 1974. ATTEST: City Cler' Attorney CITY OF EDMONDS, WASHINGTON By Mayor -21-