HomeMy WebLinkAboutMemo and resolution 4299 for 2010H - final on 10-26.pdfCommission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Anna Rosenberry, Finance Director
Chris Kukulski, City Manager
SUBJECT: RESOLUTION NO. 4299 - . RESOLUTION RELATING TO $9,573,000
SEWER SYSTEM REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE
REVOLVING LOAN PROGRAM), SERIES 2010H; AUTHORIZING THE ISSUANCE AND
FIXING THE TERMS AND CONDITIONS THEREOF.
MEETING DATE: November 1, 2010
AGENDA ITEM TYPE: Consent
RECOMMENDATION: Adopt Resolution No. 4299
BACKGROUND: On November 16, 2009 the Commission adopted the first of numerous
resolutions relating to financing of the Water Reclamation Facility. Since that time, we have
borrowed a total of $16.5 Million, with $775,000 in the form of loan forgiveness upon project
completion. This loan (described as “Loan H”) will bring the total borrowing to $26,150,000.
Depending on the final project costs and use of contingency dollars, we may have one final
borrowing of approximately $2-4 Million around the time of project completion (estimated to be
late 2011.)
Details of the $9.573 Million Bond:
o 20 year loan, evidenced by one bond issued to the DNRC.
o Tax-Exempt Status.
o 3.75% fixed rate of interest.
o First payment due-date of July 1, 2011.
o Payments averaging $680,000/year.
o Required Debt Service Reserve: approx $680,000.
o Pledging of Net Revenues of the Wastewater Fund; no free services, and commitment
to charge a sufficient amount to system users.
o Prepayment of the Bonds is allowed, if prior approval is granted by DNRC.
o Arbitrage Rebate Requirements will be an ongoing compliance issue, handled by the
Finance Department.
Bond Coverage: The bond requires that “Net Revenues of the Wastewater Fund be equal to a
minimum of 125% of the Required Annual Debt Service on all loans” ($1,914,946 x 125%), or
$2,393,683. Our projected net revenues for the current fiscal year are $2,401,573, $7,890 higher
than the minimum requirements of the bond.
Once this resolution is adopted, the bond will be executed and the loan closed by the Mayor, the
City Manager, and the Finance Director.
Department of Natural Resources & Conservation (DNRC) Water Pollution Control State
Revolving Loan Fund (SRF) program: We continue to borrow through the SRF. On October 25,
2010, twenty-year municipal bonds that are AAA rated and insured (lowest risk municipal
bonds) were yielding 3.85%. This loan, at 3.75% annual interest, requires no closing costs,
financial advisor fees, or rating and insurance costs. Utilizing the SRF, we will be able to take
advantage of a lower-than-market interest rate and avoid thousands of dollars in staff time and
other costs-of-issuance that a market sale of bonds would require.
FISCAL EFFECTS: The effect of this bond resolution is to allow the City to borrow
$9.573M for construction of the WRF. Actual funding is scheduled to occur in late November.
This loan will obligate the Wastewater Fund to make additional annual payments of
approximately $680,000 each year for the next 20 years, in addition to the amounts owed on the
other previously approved loans. These payments will come from the wastewater rates that
customers pay each month.
Bond documents and Bond Counsel fees are estimated at $12,000, and will be paid from the
Wastewater Fund.
This borrowing is in accordance with the City's Wastewater Rate Study and the recently adopted
rate increases of 10.2% for FY11.
ALTERNATIVES: As suggested by the City Commission.
Attachments: Resolution No. 4299
Report compiled on: October 25, 2010
CERTIFICATE AS TO RESOLUTION AND ADOPTING VOTE
I, the undersigned, being the duly qualified and acting recording officer of the City of
Bozeman, Montana (the “City”), hereby certify that the attached resolution is a true copy of
Resolution No. 4299, entitled: “RESOLUTION RELATING TO $9,573,000 SEWER SYSTEM
REVENUE BOND (DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN
PROGRAM), SERIES 2010H; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS
AND CONDITIONS THEREOF” (the “Resolution”), on file in the original records of the City
in my legal custody; that the Resolution was duly adopted by the City Commission of the City at
its regular meeting on November 1, 2010, and that the meeting was duly held by the City
Commission and was attended throughout by a quorum, pursuant to call and notice of such
meeting given as required by law; and that the Resolution has not as of the date hereof been
amended or repealed.
I further certify that, upon vote being taken on the Resolution at said meeting, the
following Commissioners voted in favor thereof:
; voted against the same:
; abstained from voting thereon: ; or were
absent: .
WITNESS my hand officially this day of November, 2010.
Clerk of the Commission
SUPPLEMENTAL BOND RESOLUTION
Relating to
$9,573,000
SEWER SYSTEM REVENUE BOND
(DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM)
SERIES 2010H
CITY OF BOZEMAN
Adopted: November 1, 2010
TABLE OF CONTENTS
(For convenience only, not a part of this Supplemental Resolution)
Page
Recitals................................................................................................................................ 1
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES
Section 1.1. Definitions........................................................................................... 2
Section 1.2. Other Rules of Construction................................................................ 7
Section 1.3. Appendices.......................................................................................... 8
ARTICLE II
AUTHORIZATION, FINDINGS, REPRESENTATIONS AND COVENANTS
Section 2.1. Authorization and Findings................................................................. 8
Section 2.2. Representations.................................................................................... 9
Section 2.3. Covenants............................................................................................ 12
Section 2.4. Covenants Relating to the Tax-Exempt Status of the State Bonds...... 14
Section 2.5. Maintenance of System; Liens ............................................................ 15
Section 2.6. Maintenance of Existence; Merger, Consolidation, Etc.;
Disposition of Assets........................................................................... 16
ARTICLE III
USE OF PROCEEDS; THE Water Reclamation Facility Project
Section 3.1. Use of Proceeds................................................................................... 16
Section 3.2. The Water Reclamation Facility Project ............................................. 17
Section 3.3. Project Representations and Covenants............................................... 18
Section 3.4. Completion or Cancellation or Reduction of Costs of the 2010
Project.................................................................................................. 18
ARTICLE IV
THE LOAN
Section 4.1. The Loan; Disbursement of Loan........................................................ 19
Section 4.2. Commencement of Loan Term............................................................ 21
Section 4.3. Termination of Loan Term.................................................................. 21
Section 4.4. Loan Closing Submissions.................................................................. 21
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ARTICLE V
REPAYMENT OF 2010H Loan
Section 5.1. Repayment of 2010H Loan.................................................................. 21
Section 5.2. Additional Payments............................................................................ 23
Section 5.3. Prepayments......................................................................................... 23
Section 5.4. Obligations of Borrower Unconditional.............................................. 23
Section 5.5. Limited Liability.................................................................................. 24
ARTICLE VI
INDEMNIFICATION OF DNRC AND DEQ ................................................................... 24
ARTICLE VII
ASSIGNMENT
Section 7.1. Assignment by Borrower..................................................................... 24
Section 7.2. Assignment by DNRC......................................................................... 24
Section 7.3. State Refunding Bonds........................................................................ 24
ARTICLE VIII
THE SERIES 2010H BOND
Section 8.1. Net Revenues Available...................................................................... 25
Section 8.2. Issuance and Sale of the Series 2010H Bond...................................... 25
Section 8.3. Terms................................................................................................... 25
Section 8.4. Negotiability, Transfer and Registration............................................. 25
Section 8.5. Execution and Delivery....................................................................... 26
Section 8.6. Form..................................................................................................... 26
ARTICLE IX
SECURITY FOR THE SERIES 2010H BOND................................................................. 26
ARTICLE X
TAX MATTERS
Section 10.1. Use of Project.................................................................................... 27
Section 10.2. General Covenant.............................................................................. 27
Section 10.3. Arbitrage Certification...................................................................... 27
Section 10.4. Arbitrage Rebate............................................................................... 27
Section 10.5. Information Reporting ...................................................................... 27
Section 10.6. “Qualified Tax-Exempt Obligations”............................................... 28
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ARTICLE XI
CONTINUING DISCLOSURE.......................................................................................... 28
ARTICLE XII
MISCELLANEOUS
Section 12.1. Notices.............................................................................................. 28
Section 12.2. Binding Effect................................................................................... 29
Section 12.3. Severability....................................................................................... 29
Section 12.4. Amendments..................................................................................... 29
Section 12.5. Applicable Law................................................................................. 29
Section 12.6. Captions; References to Sections...................................................... 29
Section 12.7. No Liability of Individual Officers, Directors or Trustees............... 29
Section 12.8. Payments Due on Holidays............................................................... 30
Section 12.9. Rights of Others To Perform City’s Covenants................................ 30
Section 12.10. Authentication of Transcript............................................................. 30
Section 12.11. Effective Date................................................................................... 30
APPENDIX A Description of the Water Reclamation Facility Project
APPENDIX B Form of Series 2010H Bond
APPENDIX C Additional Representations and Covenants
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RESOLUTION NO. 4299
RESOLUTION RELATING TO $9,573,000 SEWER SYSTEM
REVENUE BOND (DNRC WATER POLLUTION CONTROL
STATE REVOLVING LOAN PROGRAM), SERIES 2010H;
AUTHORIZING THE ISSUANCE AND FIXING THE TERMS
AND CONDITIONS THEREOF
WHEREAS, pursuant to the Montana Water Pollution Control State Revolving Fund Act,
Montana Code Annotated, Title 75, Chapter 5, Part 11, as amended (the “Act”), the State of
Montana (the “State”) has established a revolving loan program (the “Program”) to be
administered by the Department of Natural Resources and Conservation of the State of Montana,
an agency of the State (the “DNRC”), and by the Department of Environmental Quality of the
State of Montana, an agency of the State (the “DEQ”), and has provided that a revolving
wastewater treatment works revolving fund (the “Revolving Fund”) be created within the state
treasury and all federal, state and other funds for use in the Program be deposited into the
Revolving Fund, including, but not limited to, all federal grants for capitalization of a state water
pollution control revolving fund under the Federal Water Pollution Control Act (also known as
the Clean Water Act) (the “Clean Water Act”), all repayments of assistance awarded from the
Revolving Fund, interest on investments made on money in the Revolving Fund and payments of
principal of and interest on loans made from the Revolving Fund; and
WHEREAS, the Act provides that funds from the Program shall be disbursed and
administered for the purposes set forth in the Clean Water Act and according to rules adopted by
the Department of Environmental Quality and the Department of Natural Resources and
Conservation; and
WHEREAS, on February 25, 2010 the City of Bozeman, Gallatin County, Montana (the
“Borrower”) issued its Series 2010D Bond (as hereinafter defined) to pay a portion of the costs
of the Water Reclamation Facility Project (as hereinafter defined); and
WHEREAS, the City has subsequently applied to the DNRC for a loan (the “2010H
Loan”) from the Revolving Fund to enable the Borrower to finance, refinance or reimburse itself
for another portion of the costs of the Water Reclamation Facility Project which will carry out
the purposes of the Clean Water Act; and
WHEREAS, the Borrower is authorized under applicable laws, ordinances and
regulations to adopt this Supplemental Resolution and to issue the Series 2010H Bond to
evidence the 2010H Loan for the purposes set forth herein; and
WHEREAS, the DNRC will fund the 2010D Loan with proceeds of Recycled Money (as
hereinafter defined).
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE
BORROWER, AS FOLLOWS:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES
Section 1.1 Definitions. In this Resolution, unless a different meaning clearly appears
from the context:
“Accountant” or “Accountants” means an independent certified public accountant or a
firm of independent certified public accountants satisfactory to the DNRC.
“Acquisition and Construction Account” means the account within the Fund established
pursuant to Sections 11.1 and 11.2 of the Original Resolution.
“Act” or “State Act” means Montana Code Annotated, Title 75, Chapter 5, Part 11, as
amended from time to time.
“Administrative Expense Surcharge” means a surcharge on the 2010H Loan charged by
the DNRC to the Borrower equal to seventy-five hundredths of one percent (0.75%) per annum
on the outstanding principal amount of the 2010H Loan, payable by the Borrower on the same
dates that payments of interest on each of the 2010H Loan are due.
“Authorized DNRC Officer” means the Director or Deputy Director of the DNRC, and,
when used with reference to an act or document, also means any other individual authorized by
resolution of the Department of Natural Resources and Conservation to perform such act or sign
such document. If authorized by the Department of Natural Resources and Conservation, an
Authorized DNRC Officer may delegate all or a portion of his authority as an Authorized DNRC
Officer to another individual, and such individual shall be deemed an Authorized DNRC Officer
for purposes of exercising such authority.
“Bond Counsel” means any Counsel acceptable to the DNRC which is nationally
recognized as bond counsel. Counsel is nationally recognized as bond counsel if it has rendered
a legal opinion as to the validity and enforceability of state or municipal bonds and as to the
exclusion of interest thereon from gross income for federal income tax purposes (short-term
issues excluded) during the two-year period preceding the date of determination.
“Bonds” means the Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond,
the 2010F Bond, the 2010G Bond, the Series 2010H Bond, and any Sewer Debt to be issued on a
parity therewith pursuant to Sections 10.2 or 10.3 of the Original Resolution; the Series 2010A
Bond and the Series 2010E Bond are not Bonds.
“Borrower” means the City.
“Business Day” means any day which is not a Saturday or Sunday and is not a day on
which banks in Montana are authorized or required by law to close.
“City” means the City of Bozeman, Montana and any permitted successor or assign.
“Clean Water Act” means the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-
1387, as amended, and all regulations, rules and interpretations issued by the EPA thereunder.
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“Closing” means the date of delivery of the Series 2010H Bond to the DNRC.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collateral Documents” means any security agreement, guaranty or other document or
agreement delivered to the DNRC securing the obligations of the Borrower under this Resolution
and the Series 2010H Bond. If no Collateral Documents secure such obligations, any reference
to Collateral Documents in this Resolution shall be without effect.
“Committed Amount” means the amount of the 2010H Loan committed to be lent by the
DNRC to the Borrower pursuant to Section 4.1, as such amount may be reduced pursuant to
Sections 3.2 and 3.4.
“Consultant” means a nationally recognized consultant or firm of consultants, or an
independent engineer or firm of independent engineers, or an Accountant, which in any case is
qualified and has skill and experience in the preparation of financial feasibility studies or
projections for facilities similar to the System or the Water Reclamation Facility Project, selected
by the Borrower and satisfactory to the DNRC.
“Counsel” means an attorney duly admitted to practice law before the highest court of
any state and satisfactory to the DNRC.
“Debt” means, without duplication, (1) indebtedness of the Borrower for borrowed
money or for the deferred purchase price of property or services; (2) the obligation of the
Borrower as lessee under leases which should be recorded as capital leases under generally
accepted accounting principles; and (3) obligations of the Borrower under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clause (1) or (2) above.
“DEQ” means the Department of Environmental Quality of the State of Montana, an
agency of the State, or any successor to its powers, duties and obligations under the Act or the
EPA Agreements.
“DNRC” means the Department of Natural Resources and Conservation of the State of
Montana, an agency of the State, and any successor to its powers, duties and obligations under
the Act.
“Enabling Act” means Montana Code Annotated, Title 7, Chapter 7, Parts 44 and 45, as
amended, which authorizes the Borrower to own and operate the System, to undertake the Water
Reclamation Facility Project and to issue the Series 2010H Bond to finance costs of the Water
Reclamation Facility Project.
“EPA” means the Environmental Protection Agency, an agency of the United States of
America, and any successor to its functions under the Clean Water Act.
“EPA Agreements” means all capitalization grant agreements and other written
agreements between the DEQ and the EPA concerning the Program.
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“EPA Capitalization Grant” means a grant of funds to the State by the EPA under Title
VI of the Clean Water Act and any grant made available by the EPA for deposit in the Revolving
Fund pursuant to Section 205(m) of the Clean Water Act.
“Fund” means the Sewer System Fund established pursuant to Section 11.1 of the
Original Resolution.
“Governmental Unit” means governmental unit as such term is used in Section 145(a) of
the Code.
“Indenture” means the Indenture of Trust, dated as of June 1, 1991, between the Board of
Examiners of the State and the Trustee, as such has been or may be supplemented or amended
from time to time in accordance with the provisions thereof, pursuant to which, among other
things, the State Bonds are to be or have been issued.
“Loan Loss Reserve Surcharge” means a fee equal to one percent (1.00%) per annum on
the outstanding principal amount of the 2010H Loan, payable on the same dates that payments of
interest on the 2010H Loan are due.
“Loan Repayments” means periodic installments of principal and interest by Borrower in
repayment of the 2010H Loan, at the rates and times specified in Article V.
“Loan Term” means that period of time commencing and ending as set in Sections 4.2
and 4.3.
“Net Revenues” means the entire amount of the gross revenues of the System (as
described in Section 11.1 of the Original Resolution) remaining upon each such monthly
apportionment, after crediting to the Operating Account the amount required hereby, including
sums required to maintain the Operating Reserve in the minimum amount herein stated.
“Operating Account” means the account within the Fund established pursuant to Sections
11.1 and 11.3 of the Original Resolution.
“Operating Expenses” means those expenses of the System defined as such in Section
11.3 of the Original Resolution.
“Operating Reserve” means the reserve to be maintained in the Operating Account as
required by Section 11.3 of the Original Resolution.
“Opinion of Counsel” means a written opinion of Counsel.
“Original Resolution” means Resolution No. 4220 of the Borrower adopted on November
16, 2009, as amended and supplemented by Resolution Nos. 4234, 4245, and 4254 adopted on
January 19, 2010, February 16, 2010, and May 3, 2010.
“Outstanding Bonds” shall mean the outstanding Series 2010B Bond, the Series 2010C
Bond, the Series 2010D Bond, the Series 2010F Bond, the Series 2010G Bond, and any
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outstanding additional parity bonds issued in accordance with the Original Resolution and a
resolution supplemental thereto, and shall include, upon the Closing, the Series 2010H Bond.
“Person” means any Private Person or Public Entity.
“Private Person” means an individual, corporation, partnership, association, joint venture,
joint stock company or unincorporated organization, except a Public Entity.
“Program” means the Water Pollution Control State Revolving Loan Program established
by the Act.
“Project” means the acquisition, design, construction and installation of various
improvements and betters to the System, including the Water Reclamation Facility Project.
“Public Entity” means a municipality, city, county, school district, political or
administrative subdivision of State government, irrigation district, drainage district or other
public body established by State law.
“Recycled Money” means payments and prepayments of principal of the 2010D Loan,
and any other amounts transferred to the Principal Subaccount in the Revenue Subaccount in the
State Allocation Account (as such terms are defined in the Indenture).
“Regulations” means the Treasury Regulations, whether final, temporary or proposed,
promulgated under the Code or otherwise applicable to the Series 2010H Bond.
“Replacement and Depreciation Account” means the account within the Fund established
pursuant to Sections 11.1 and 11.6 of the Original Resolution.
“Reserve Account” means the account within the Fund established pursuant to Sections
11.1 and 11.5 of the Original Resolution.
“Reserve Requirement” means, as of the date of calculation, an amount equal to the
maximum amount of principal and interest payable on the Bonds in any future fiscal year (giving
effect to mandatory sinking fund redemption, if any).
“Reserved Amounts” means any undisbursed Committed Amount which will or may be
required to pay any remaining costs of the Water Reclamation Facility Project upon completion
thereof as provided in Section 3.4(a).
“Resolution” means the Original Resolution as supplemented by this Supplemental
Resolution and other supplemental resolutions.
“Revenue Bond Account” means the account within the Fund established pursuant to
Sections 11.1 and 11.4 of the Original Resolution.
“Series 2010 ARRA Project Bonds” means the Series 2010A Bond, the Series 2010B
Bond and the Series 2010C Bond.
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“Series 2010A Bond” means the Borrower’s $390,700 Subordinate Lien Sewer System
Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program), Taxable Series
2010A.
“Series 2010B Bond” means the Borrower’s $359,300 Sewer System Revenue Bond
(DNRC Water Pollution Control State Revolving Loan Program), Series 2010B.
“Series 2010C Bond” means the Borrower’s $1,223,000 Sewer System Revenue Bond
(DNRC Water Pollution Control State Revolving Loan Program), Series 2010C.
“Series 2010D Bond” means the $9,500,000 Sewer System Revenue Bond (DNRC Water
Pollution Control State Revolving Loan Program), Series 2010D.
“Series 2010EFG Bonds” means, collectively, the Series 2010E Bond, the Series 2010F
Bond, and the Series 2010G Bond.
“Series 2010E Bond” means the $384,000 Subordinate Lien Sewer System Revenue
Bond (DNRC Water Pollution Control State Revolving Loan Program), Taxable Series 2010E.
“Series 2010F Bond” means the $816,000 Sewer System Revenue Bond (DNRC Water
Pollution Control State Revolving Loan Program), Series 2010F.
“Series 2010G Bond” means the $3,903,000 Sewer System Revenue Bond (DNRC Water
Pollution Control State Revolving Loan Program), Series 2010G.
“Series 2010H Bond” means the $9,573,000 Sewer System Revenue Bond (DNRC Water
Pollution Control State Revolving Loan Program), Series 2010H, issued to the DNRC to
evidence the 2010H Loan.
“Sewer Debt” means all Bonds and any other Debt incurred to acquire, construct, extend,
improve, add to or otherwise pay expenses of or related to the System, without regard to the
source of payment and security for such Debt (i.e., without regard to whether it is general
obligation or revenue Debt).
“Sewer Revenues” means revenues (gross or net) received by the Borrower from or in
connection with the operation of the System.
“State” means the State of Montana.
“State Bonds” means the State’s General Obligation Bonds (Water Pollution Control
State Revolving Fund Program), issued pursuant to the Indenture.
“Subordinate Obligations” means bonds or other obligations issued pursuant to Section
10.4 of the Original Resolution.
“Supplemental Resolution” means this resolution as it may from time to time be amended
or supplemented in accordance with its terms.
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“Surplus Account” means the account within the Fund established pursuant to Sections
11.1 and 11.7 of the Original Resolution.
“Surplus Net Revenues” means that portion of the Net Revenues in excess of the current
requirements of the Operating Account, the Revenue Bond Account and the Reserve Account.
“System” means the existing sewer system of the Borrower and all extensions,
improvements and betterments thereof hereafter constructed and acquired, including, without
limitation, the Water Reclamation Facility Project.
“Trustee” means United States Bank National Association, or any successor trustee under
the Indenture.
“2010 ARRA Project” means construction of a sewer system administration building and
related improvements financed in part by the proceeds of the Series 2010 ARRA Project Bonds.
“2010 Digester Project” means the construction and installation of a digester, its
supporting building, dewatering facilities, and related improvements financed in part by the
proceeds of the Series 2010EFG Bonds.
“2010H Loan” means the loan made to the Borrower by the DNRC pursuant to the
Program in the maximum amount of the Committed Amount to provide funds to pay a portion of
the costs of the Water Reclamation Facility Project payable under the Program.
“Water Reclamation Facility Project” means the facilities, improvements and activities
financed, refinanced or the cost of which is being reimbursed to the Borrower with proceeds of
the Series 2010D Bond and the Series 2010H Bond, described in Exhibit A hereto.
Section 1.2 Other Rules of Construction. For all purposes of this Supplemental
Resolution, except where the context clearly indicates otherwise:
(a) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted government accounting
standards.
(b) Terms in the singular include the plural and vice versa.
(c) All references to time shall refer to Helena, Montana time, unless
otherwise provided herein.
(d) All references to mail shall refer to first-class mail postage prepaid.
(e) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
(f) “Or” is not exclusive, but is intended to permit or encompass one, more or
all of the alternatives conjoined.
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Section 1.3 Appendices. Attached to this Resolution and hereby made a part hereof
are the following Appendices:
Appendix A: a description of the Water Reclamation Facility Project;
Appendix B: the form of the Series 2010H Bond; and
Appendix C: additional agreements and representations of the Borrower.
ARTICLE II
AUTHORIZATION, FINDINGS, REPRESENTATIONS AND COVENANTS
Section 2.1 Authorization and Findings.
(a) Authorization. Under the provisions of the Enabling Act, the Borrower is
authorized to issue and sell its revenue bonds payable during a term not exceeding forty
years from their date of issue, to provide funds for the reconstruction, improvement,
betterment and extension of the System or to refund its revenue bonds issued for such
purpose; provided that the bonds and the interest thereon are to be payable solely out of
the net income and revenues to be derived from rates, fees and charges for the services,
facilities and commodities furnished by the undertaking, and are not to create any
obligation for the payment of which taxes may be levied except to pay for services
provided by the undertaking to the Borrower.
(b) The System. The Borrower, pursuant to the Enabling Act and other laws
of the State has established and presently owns and operates the System.
(c) The Water Reclamation Facility Project. After investigation of the facts
and as authorized by the Enabling Act, this Commission has determined it to be
necessary and desirable and in the best interests of the Borrower to acquire and construct
the Water Reclamation Facility Project.
(d) Outstanding Bonds. Pursuant to the Enabling Act and the Resolution, the
Borrower has issued its Series 2010 ARRA Project Bonds to finance the 2010 ARRA
Project, its Series 2010D Bond to finance a portion of the costs of the Water Reclamation
Facility Project, and its Series 2010EFG Bonds to finance a portion of the 2010 Digester
Project. The Series 2010B Bond, the Series 2010C Bond, the Series 2010D Bond, the
Series 2010F Bond, and the Series 2010G Bond are payable from Net Revenues of the
System. The Series 2010A Bond and the Series 2010E Bond are payable from the
Surplus Net Revenues and are subject to forgiveness if certain conditions are satisfied.
No other bonds or indebtedness are outstanding that are payable from revenues of the
System.
(e) Additional Parity Bonds. The Borrower reserved the right under Section
10.3 of the Original Resolution to issue additional Bonds payable from the Revenue Bond
Account of the Fund on a parity as to both principal and interest with the outstanding
Bonds, if the Net Revenues of the System for the last complete fiscal year preceding the
date of issuance of such additional Bonds have equaled at least 125% of the maximum
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amount of principal and interest payable from the Revenue Bond Account in any
subsequent fiscal year during the term of the outstanding Bonds, on all Bonds then
outstanding and on the additional Bonds proposed to be issued. For the purpose of the
foregoing computation, the Net Revenues for the fiscal year preceding the issuance of the
additional Bonds shall be those shown by the financial reports caused to be prepared by
the Borrower pursuant to Section 2.2(f) of Resolution No. 4220, except that if the rates
and charges for services provided by the System or finally authorized to go into effect
within 60 days thereafter have been changed since the beginning of such preceding fiscal
year, then the rates and charges in effect at the time of issuance of the additional Bonds
shall be applied to the quantities of service actually rendered and made available during
such preceding fiscal year to ascertain the gross revenues, from which there shall be
deducted to determine the Net Revenues, the actual operation and maintenance cost plus
any additional annual costs of operation and maintenance Consultant estimates will be
incurred because of the improvement or extension of the System to be constructed from
the proceeds of the additional Bonds proposed to be issued. In no event shall any
additional Bonds be issued and made payable from the Revenue Bond Account if the
Borrower is then in default in any payment of principal of or interest on any outstanding
Bonds payable therefrom, or if there then exists any deficiency in the balances required
by the Original Resolution to be maintained in any of the accounts of the Fund, which
will not be cured or restored upon the issuance of the additional Bonds. Based on a
certificate executed or to be executed by the Mayor, the Director of Finance, and the
Clerk of the Commission, or any of them, it is hereby determined that the Borrower is
authorized to issue $9,573,000 in aggregate principal amount of additional Bonds
pursuant to Section 10.3 of the Original Resolution payable from and secured by the Net
Revenues on a parity with the outstanding Series 2010B Bond, the Series 2010C Bond,
the Series 2010D Bond, the Series 2010F Bond, and the Series 2010G Bond.
Section 2.2 Representations. The Borrower represents as follows:
(a) Organization and Authority. The Borrower:
(i) is duly organized and validly existing as a municipal corporation of
the State;
(ii) has all requisite power and authority and all necessary licenses and
permits required as of the date hereof to own and operate the System and to carry
on its current activities with respect to the System, to adopt this Supplemental
Resolution and to enter into the Collateral Documents and to issue the Series
2010H Bond and to carry out and consummate all transactions contemplated by
the Resolution, the Series 2010H Bond and the Collateral Documents;
(iii) is a Governmental Unit and a Public Entity; and
(iv) has taken all proper action to authorize the execution, delivery and
performance of its obligations under this Supplemental Resolution, the Series
2010H Bond and the Collateral Documents and the incurrence of the Debt
9
evidenced by the Series 2010H Bond in the maximum amount of the Committed
Amount.
(b) Pending Litigation. There is no litigation or proceeding pending, or to the
knowledge of the Borrower threatened, against or affecting the Borrower in any court or
before or by any governmental authority or arbitration board or tribunal that, if adversely
determined, would materially and adversely affect the existence, corporate or otherwise,
of the Borrower, or the ability of the Borrower to make all payments and otherwise
perform its obligations under the Resolution, the Series 2010H Bond and the Collateral
Documents, or the financial condition of the Borrower, or the transactions contemplated
by the Resolution, the Series 2010H Bond and the Collateral Documents or the validity
and enforceability of the Resolution, the Series 2010H Bond and the Collateral
Documents. No referendum petition has been filed with respect to any resolution or other
action of the Borrower relating to the Water Reclamation Facility Project, the Series
2010H Bond or any Collateral Documents and the period for filing any such petition will
have expired before issuance of the Series 2010H Bond.
(c) Borrowing Legal and Authorized. The adoption of this Supplemental
Resolution, the execution and delivery of the Series 2010H Bond and the Collateral
Documents and the consummation of the transactions provided for in the Resolution, the
Series 2010H Bond and the Collateral Documents and compliance by the Borrower with
the provisions of the Resolution, the Series 2010H Bond and the Collateral Documents:
(i) are within the powers of the Borrower and have been duly
authorized by all necessary action on the part of the Borrower; and
(ii) do not and will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or assets of
the Borrower pursuant to any resolution, indenture, loan agreement or other
agreement or instrument (other than the Resolution and any Collateral
Documents) to which the Borrower is a party or by which the Borrower or its
property may be bound, nor will such action result in any violation of the
provisions of any laws, ordinances, governmental rules or regulations or court or
other governmental orders to which the Borrower, its properties or operations are
subject.
(d) No Defaults. No event has occurred and no condition exists that, upon
execution and delivery of the Series 2010H Bond and the Collateral Documents, would
constitute a default under the Resolution or the Collateral Documents. The Borrower is
not in violation of any term of any agreement, bond resolution, trust indenture, charter or
other instrument to which it is a party or by which it or its property may be bound which
violation would materially and adversely affect the transactions contemplated hereby or
the compliance by the Borrower with the terms hereof or of the Series 2010H Bond and
the Collateral Documents.
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(e) Governmental Consent. The Borrower has obtained or made all permits,
findings and approvals required to the date of adoption of this Supplemental Resolution
by any governmental body or officer for the making and performance by the Borrower of
its obligations under this Supplemental Resolution, the Series 2010H Bond and the
Collateral Documents (including any necessary sewer rate increase) or for the Water
Reclamation Facility Project, the financing or refinancing thereof or the reimbursement
of the Borrower for the costs thereof. No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority (other than those, if any,
already obtained) is required on the part of the Borrower as a condition to adopting this
Supplemental Resolution, issuing the Series 2010H Bond or entering into the Collateral
Documents and the performance of the Borrower’s obligations hereunder and thereunder.
If a utility board or commission manages or controls the System, such board or
commission has agreed with the DNRC to abide by the terms of the Resolution and the
Collateral Documents, including approving any necessary sewer rate increases.
(f) Binding Obligation. The Resolution, the Series 2010H Bond and any
Collateral Document to which the Borrower is a party are the valid and binding special,
limited obligations and agreements of the Borrower, enforceable against the Borrower in
accordance with their terms, except to the extent that the enforceability thereof may be
limited by laws relating to bankruptcy, moratorium, reorganization, insolvency or similar
laws affecting creditors’ rights and general principles of equity.
(g) The Water Reclamation Facility Project. The Water Reclamation Facility
Project consists and will consist of the facilities, improvements and activities described in
Appendix A, as such Appendix A may be amended from time to time in accordance with
the provision of Article III of this Supplemental Resolution.
(h) Full Disclosure. There is no fact that the Borrower has not specifically
disclosed in writing to the DNRC that materially and adversely affects or (so far as the
Borrower can now foresee), except for pending or proposed legislation or regulations that
are a matter of general public information, that will materially and adversely affect the
properties, operations and finances of the System, the Borrower’s status as a Public
Entity and Governmental Unit, its ability to own and operate the System in the manner it
is currently operated or the Borrower’s ability to perform its obligations under the
Resolution, the Series 2010H Bond and the Collateral Documents and to pledge any
revenues or other property pledged to the payment of the Series 2010H Bond.
(i) Compliance With Law. The Borrower:
(1) is in compliance with all laws, ordinances, governmental rules and
regulations and court or other governmental orders, judgments and decrees to
which it is subject and which are material to the properties, operations and
finances of the System or its status as a Public Entity and Governmental Unit; and
(2) has obtained all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of the System and the operation thereof
and agrees to obtain all such licenses, permits, franchises or other governmental
11
authorizations as may be required in the future for the System and the operation
thereof, which failure to obtain might materially and adversely affect the ability of
the Borrower to conduct the operation of the System as presently conducted or the
condition (financial or otherwise) of the System or the Borrower’s ability to
perform its obligations under the Resolution, the Series 2010H Bond and the
Collateral Documents.
Section 2.3 Covenants.
(a) Insurance. In addition to the requirements of Section 2.2 of the Original
Resolution, the Borrower at all times shall keep and maintain with respect to the System
property and casualty insurance and liability insurance with financially sound and
reputable insurers, or self-insurance as authorized by State law, against such risks and in
such amounts, and with such deductible provisions, as are customary in the State in the
case of entities of the same size and type as the Borrower and similarly situated and shall
carry and maintain, or cause to be carried and maintained, and pay or cause to be paid
timely the premiums for all such insurance. All such insurance policies shall name the
DNRC as an additional insured to the extent permitted under the policy or program of
insurance of the Borrower. Each policy must provide that it cannot be cancelled by the
insurer without giving the Borrower and the DNRC 30 days’ prior written notice. The
Borrower shall give the DNRC prompt notice of each insurance policy it obtains or
maintains to comply with this Section 2.3(a) and of each renewal, replacement, change in
coverage or deductible under or amount of or cancellation of each such insurance policy
and the amount and coverage and deductibles and carrier of each new or replacement
policy. Such notice shall specifically note any adverse change as being an adverse
change. The Borrower shall deliver to the DNRC at Closing a certificate providing the
information required by this Section 2.3(a).
(b) Right of Inspection and Notice of Change of Location. The DNRC, the
DEQ and the EPA and their designated agents shall have the right at all reasonable times
during normal business hours and upon reasonable notice to enter into and upon the
property of the Borrower for the purpose of inspecting the System or any or all books and
records of the Borrower relating to the System.
(c) Further Assurance. The Borrower shall execute and deliver to the DNRC
all such documents and instruments and do all such other acts and things as may be
necessary or required by the DNRC to enable the DNRC to exercise and enforce its rights
under the Resolution, the Series 2010H Bond and the Collateral Documents and to realize
thereon, and record and file and re-record and refile all such documents and instruments,
at such time or times, in such manner and at such place or places, all as may be necessary
or required by the DNRC to validate, preserve and protect the position of the DNRC
under the Resolution, the Series 2010H Bond and the Collateral Documents.
(d) Maintenance of Security, if Any; Recordation of Interest.
(i) The Borrower shall, at its expense, take all necessary action to
maintain and preserve the lien and security interest of the Resolution and the
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Collateral Documents so long as any amount is owing under the Resolution or the
Series 2010H Bond;
(ii) The Borrower shall forthwith, after the execution and delivery of
the Series 2010H Bond and thereafter from time to time, cause the Resolution and
any Collateral Documents granting a security interest in revenues or real or
personal property and any financing statements or other notices or documents
relating thereto to be filed, registered and recorded in such manner and in such
places as may be required by law in order to perfect and protect fully the lien and
security interest hereof and thereof and the security interest in them granted by the
Resolution and, from time to time, shall perform or cause to be performed any
other act required by law, including executing or causing to be executed any and
all required continuation statements and shall execute or cause to be executed any
further instruments that may be requested by the DNRC for such perfection and
protection; and
(iii) Except to the extent it is exempt therefrom, the Borrower shall pay
or cause to be paid all filing, registration and recording fees incident to such
filing, registration and recording, and all expenses incident to the preparation,
execution and acknowledgment of the documents described in subparagraph (ii),
and all federal or state fees and other similar fees, duties, imposts, assessments
and charges arising out of or in connection with the execution and delivery of the
Series 2010H Bond and the Collateral Documents and the documents described in
subparagraph (ii).
(e) Additional Agreements. The Borrower covenants to comply with all
representations, covenants, conditions and agreements, if any, set forth in Appendix C
hereto.
(f) Financial Information. This Section 2.3(f) supplements, and is not
intended to limit, the requirements in Section 2.2(f) of the Original Resolution. The
Borrower agrees that for each fiscal year it shall furnish to the DNRC and the DEQ,
promptly when available, in addition to those matters specified in Section 2.2(f) of the
Original Resolution:
(1) the preliminary budget for the System, with items for the Water
Reclamation Facility Project shown separately; and
(2) when adopted, the final budget for the System, with items for the
Water Reclamation Facility Project shown separately.
(g) Project Accounts. The Borrower shall maintain Project accounts in
accordance with generally accepted government accounting standards, and as separate
accounts, as required by Section 602(b)(9) of the Clean Water Act.
(h) Records. After reasonable notice from the EPA or the DNRC, the
Borrower shall make available to the EPA or the DNRC such records as the EPA or the
13
DNRC reasonably requires to review and determine compliance with Title VI of the
Clean Water Act, as provided in Section 606(e) of the Clean Water Act.
(i) Compliance with Clean Water Act. The Borrower has complied and shall
comply with all conditions and requirements of the Clean Water Act pertaining to the
2010H Loan and the Water Reclamation Facility Project.
(j) Program Covenant. The Borrower agrees that neither it nor any “related
person” to the Borrower (within the meaning of Section 147(a)(2) of the Code) shall,
whether pursuant to a formal or informal arrangement, acquire bonds issued by the State
under the Indenture in an amount related to the amount of the Series 2010H Bond.
Section 2.4 Covenants Relating to the Tax-Exempt Status of the State Bonds.
(a) The Borrower covenants and agrees that it will not use or permit to be
used any of the proceeds of the Series 2010H Bond or any other funds of the Borrower in
respect of the Water Reclamation Facility Project or the Series 2010H Bond, directly or
indirectly, in a manner that would cause, or take any other action that would cause, any
State Bond to be an “arbitrage bond” within the meaning of Section 148 of the Code or
would otherwise cause the interest on the State Bonds to be included in gross income for
purposes of federal income taxation.
(b) The Borrower agrees that it will not enter into, or allow any “related
person” (as defined in Section 147(a)(2) of the Code) to enter into, any arrangement,
formal or informal, for the purchase of the State Bonds or any other obligations of the
DNRC in an amount related to the amount of the 2010H Loan or the portion of the
2010H Loan derived directly or indirectly from proceeds of the State Bonds or that would
otherwise cause any State Bond to be an “arbitrage bond” within the meaning of Section
148 of the Code.
(c) The Borrower shall not use or permit the use of the Water Reclamation
Facility Project directly or indirectly in any trade or business carried on by any Person
who is not a Governmental Unit. For the purpose of this subparagraph, use as a member
of the general public (within the meaning of the Regulations) shall not be taken into
account and any activity carried on by a Person other than a natural person shall be
treated as a trade or business.
(d) Any portion of the Water Reclamation Facility Project being refinanced or
the cost of which is being reimbursed was acquired by and is now and shall, during the
term of the 2010H Loan, be owned by the Borrower and not by any other Person. Any
portion of the Water Reclamation Facility Project being financed shall be acquired by and
shall, during the term of the 2010H Loan, be owned by the Borrower and not by any
other Person. Notwithstanding the previous two sentences, the Borrower may transfer the
Water Reclamation Facility Project or a portion thereof to another Governmental Unit
which is also a Public Entity if such transfer is otherwise permitted under the Resolution
and if such organization agrees with the DNRC to comply with Sections 2.3(h), 2.3(i) and
2.4 of this Supplemental Resolution and if the DNRC receives an Opinion of Bond
14
Counsel that such transfer will not violate the State Act or the Clean Water Act or
adversely affect the exclusion of interest on the Bonds from gross income or purposes of
federal income taxation. In addition, except as otherwise provided in the Resolution or in
any Collateral Documents, the Borrower may sell or otherwise dispose of any portion of
the Water Reclamation Facility Project which has become obsolete or outmoded or is
being replaced or for other reasons is not needed by the Borrower or beneficial to the
general public or necessary to carry out the purposes of the Clean Water Act.
(e) At the Closing of the 2010H Loan the DNRC will, if necessary to obtain
the Opinion of Bond Counsel described in Section 7.05(a) of the Indenture, deliver to the
Borrower instructions concerning compliance by the Borrower with the arbitrage rebate
requirements of Section 148 of the Code (the “Arbitrage Rebate Instructions”). The
Borrower shall comply with the Arbitrage Rebate Instructions, if any, delivered to it by
the DNRC at Closing, as such Instructions may be amended or replaced by the DNRC
from time to time. The Arbitrage Rebate Instructions may be amended or replaced by
new Arbitrage Rebate Instructions delivered by the DNRC and accompanied by an
Opinion of Bond Counsel to the effect that the use of said amended or new Arbitrage
Rebate Instructions will not adversely affect the excludability of interest on the State
Bonds or any Additional State Bonds (except State Bonds the interest on which the State
did not intend to be excluded from gross income for federal income tax purposes) from
gross income of the recipients thereof for federal income tax purposes.
(f) The Borrower agrees that during the term of the 2010H Loan it will not
contract with or permit any Private Person to manage the Water Reclamation Facility
Project or any portion thereof except according to a written management contract and
upon delivery to the DNRC of an opinion of Bond Counsel to the effect that the
execution and delivery of such management contract will not violate the State Act or the
Clean Water Act or adversely affect the exclusion of interest on State Bonds from gross
income or purposes of federal income taxation.
(g) The Borrower may not lease the Water Reclamation Facility Project or
any portion thereof to any Person other than a Nonexempt Person which agrees in writing
with the Borrower and the State not to cause any default to occur under the Resolution;
provided the Borrower may lease all or any portion of the Water Reclamation Facility
Project to a Nonexempt Person pursuant to a lease which in the Opinion of Bond Counsel
delivered to the DNRC will not cause the interest on the State Bonds to be included in
gross income for purposes of federal income taxation.
(h) The Borrower shall not change the use or nature of the Water Reclamation
Facility Project if (i) such change will violate the Clean Water Act, or (ii) so long as the
State Bonds are outstanding unless, in the Opinion of Bond Counsel delivered to the
DNRC, such change will not result in the inclusion in gross income of interest on the
State Bonds for federal income tax purposes.
Section 2.5 Maintenance of System; Liens. The Borrower shall maintain the System,
including the Water Reclamation Facility Project, in good condition and make all necessary
renewals, replacements, additions, betterments and improvements thereto. The Borrower shall
15
not grant or permit to exist any lien on the Water Reclamation Facility Project or any other
property making up part of the System, other than liens securing Debt where a parity or senior
lien secures the Series 2010H Bond; provided that this Section 2.5 shall not be deemed to be
violated if a mechanic’s or contractor’s lien is filed against any such property so long as the
Borrower uses its best efforts to obtain the discharge of such lien and promptly reports to the
DNRC the filing of such lien and the steps it plans to take and does take to discharge of such
lien.
Section 2.6 Maintenance of Existence; Merger, Consolidation, Etc.; Disposition of
Assets. The Borrower shall maintain its corporate existence, except that it may consolidate with
or merge into another Governmental Unit or permit one or more Governmental Units to
consolidate with or merge into it or may transfer all or substantially all of its assets to another
Governmental Unit and then dissolve if the surviving, resulting or transferee entity (if other than
the Borrower) (i) is a Public Entity and (ii) assumes in writing all of the obligations of the
Borrower under the Resolution, the Series 2010H Bond and the Collateral Documents, and (a)
such action does not result in any default in the performance or observance of any of the terms,
covenants or agreements of the Borrower under the Resolution, the Series 2010H Bond and the
Collateral Documents, (b) such action does not violate the State Act or the Clean Water Act and
does not adversely affect the exclusion of interest on the Series 2010H Bond or the State Bonds
from gross income for federal income tax purposes and (c) the Borrower delivers to the DNRC
on the date of such action an Opinion of Bond Counsel that such action complies with this
Section 2.6.
Other than pursuant to the preceding paragraph, the Borrower shall not transfer the
System or any portion thereof to any other Person, except for property which is obsolete,
outmoded, worn out, is being replaced or otherwise is not needed for the operation of the
System, unless the provisions of (a) and (b) of the preceding paragraph are satisfied and the
Borrower delivers to the DNRC an Opinion of Bond Counsel to that effect and, in addition, the
DNRC consents to such transfer.
ARTICLE III
USE OF PROCEEDS; THE WATER RECLAMATION FACILITY PROJECT
Section 3.1 Use of Proceeds. The Borrower shall apply the proceeds of the 2010H
Loan from the DNRC solely as follows:
(a) The Borrower shall apply the proceeds of the 2010H Loan solely to the
financing, refinancing or reimbursement of the costs of the Water Reclamation Facility
Project as set forth in Appendix A hereto and this Section 3.1, funding the Reserve
Account, and associated costs of issuing the Series 2010H Bond. The 2010H Loan will
be disbursed in accordance with Article IV hereof and Article VII of the Indenture. If the
Water Reclamation Facility Project has not been completed prior to Closing, the
Borrower shall, as quickly as reasonably possible, complete the Water Reclamation
Facility Project and expend proceeds of the Series 2010H Bond to pay the costs of
completing the Water Reclamation Facility Project.
16
(b) No portion of the proceeds of the 2010H Loan shall be used to reimburse the
Borrower for costs paid prior to the date of adoption of this Resolution of a project the
construction or acquisition of which occurred or began earlier than March 7, 1985. In
addition, if any proceeds of the 2010H Loan are to be used to reimburse the Borrower for
Project costs paid prior to the date of adoption of this Supplemental Resolution, the
Borrower shall have complied with Section 1.150-2 of the Regulations in respect of such
costs.
(c) Any Debt to be refinanced with proceeds of the 2010H Loan was incurred
after March 7, 1985, for a project the construction or acquisition of which began after
March 7, 1985. No proceeds of the 2010H Loan shall be used for the purpose of
refinancing an obligation the interest on which is exempt from federal income tax or
excludable from gross income for purposes of federal income taxation unless the DNRC
has received an Opinion of Bond Counsel, satisfactory to it, to the effect that such
refinancing will not adversely affect the exclusion of interest on the State Bonds from
gross income for purposes of federal income taxation.
Section 3.2 The Water Reclamation Facility Project. Set forth in Appendix A to this
Supplemental Resolution is a description of the Water Reclamation Facility Project, which
describes the property which has been or is to be acquired, installed, constructed or improved
and the other activities, if any to be funded from the 2010H Loan (the Water Reclamation
Facility Project may consist of more than one facility or activity) and an estimated budget
relating to the Water Reclamation Facility Project. The Water Reclamation Facility Project may
be changed and the description thereof in Appendix A may be amended from time to time by the
Borrower but only after delivery to the DNRC of the following:
(a) A certificate of the Borrower setting forth the amendment to Appendix A
and stating the reason therefor, including statements whether the amendment would cause
an increase or decrease in the cost of the Water Reclamation Facility Project, an increase
or decrease in the amount of Loan proceeds which will be required to complete the Water
Reclamation Facility Project and whether the change will materially accelerate or delay
the construction schedule for the Water Reclamation Facility Project;
(b) A written consent to such change in the Water Reclamation Facility
Project by an Authorized DNRC Officer;
(c) An Opinion or Opinions of Bond Counsel stating that the Water
Reclamation Facility Project, as constituted after such amendment, is, and was at the time
the State Bonds were issued, eligible for financing under the State Act and is, and was at
the time the Series 2010H Bond was issued, eligible for financing under the Enabling
Act, such amendment will not violate the State Act or the Enabling Act and such
amendment will not adversely affect the exclusion of interest on the State Bonds or the
Series 2010H Bond from gross income for purposes of federal income taxation. Such an
Opinion of Bond Counsel shall not be required for amendments which do not affect the
type of facility to be constructed or activity to be financed.
17
The Borrower acknowledges and agrees that an increase in the principal amount of the
2010H Loan may be made only upon an application to the DEQ, the DNRC and the Trustee, in
such form as the DEQ shall specify, which is approved by the DEQ and the DNRC, in their sole
and absolute discretion, and adoption by the governing body of the Borrower of a resolution
amendatory of or supplementary to the Resolution authorizing the additional loan and delivery of
written certifications by officers of the Borrower to the DEQ, the DNRC and the Trustee to the
effect that all representations and covenants contained in the resolution as it may be so amended
or supplemented are true as of the date of closing of the additional loan and compliance with
applicable tests for the incurrence of such Debt. No assurance can be given that any additional
loan funds will be available under the Program at the time of any such application or thereafter.
The Borrower acknowledges and agrees that neither the DEQ, the DNRC, the Trustee nor any of
their agents, employees or representatives shall have any liability to the Borrower and have made
no representations to the Borrower as to the sufficiency of the 2010H Loan to pay Project Costs
or as to the availability of additional funds under the Program to increase the principal amount of
the 2010H Loan.
Section 3.3 Project Representations and Covenants. The Borrower hereby represents
to and covenants with the DNRC that:
(a) all construction of the Water Reclamation Facility Project has complied
and will comply with all federal and state standards, including, without limitation, EPA
regulations and standards;
(b) all future construction of the Water Reclamation Facility Project will be
done only pursuant to fixed price construction contracts. The Borrower shall obtain a
performance and payment bond from the contractor for each construction contract in the
amount of 100% of the construction price and ensure that such bond is maintained until
construction is completed to the Borrower’s, the DNRC’s and the DEQ’s satisfaction;
(c) all laborers and mechanics employed by contractors and subcontractors on
the 2010 Digester Project have been and will be paid wages at rates not less than those
prevailing on projects of a character similar in the locality as determined by the United
States Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40,
United States Code;
(d) all future construction will be done in accordance with plans and
specifications on file with the DNRC and the DEQ, provided that changes may be made
in such plans and specifications with the written consent of an Authorized DNRC Officer
and the DEQ; and
(e) the Water Reclamation Facility Project is a project of the type permitted to
be financed under the Enabling Act, the State Act and the Program and Title VI of the
Clean Water Act.
Section 3.4 Completion or Cancellation or Reduction of Costs of the Water
Reclamation Facility Project.
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(a) Upon completion of the Water Reclamation Facility Project, the Borrower
shall deliver to the DNRC a certificate stating that the Water Reclamation Facility Project
is complete, stating the amount, if any, of the Reserved Amounts, and releasing the
remaining amount, if any, of the Committed Amount. If any Reserved Amount is not
later needed, the Borrower shall so inform the DNRC and release such amount. If
Appendix A describes two or more separate projects as making up the Water
Reclamation Facility Project, a separate completion certificate shall be delivered for each.
(b) If all or any portion of the Water Reclamation Facility Project is cancelled
or cut back or its costs are reduced or for any other reason the Borrower will not require
the full Committed Amount, the Borrower shall promptly notify the DNRC in writing of
such fact and release the portion of the Undisbursed Committed Amount.
ARTICLE IV
THE LOAN
Section 4.1 The Loan; Disbursement of Loan. The DNRC has agreed to lend to the
Borrower, from time to time as the requirements of this Section 4.1 are met, an amount up to
$9,573,000 (the “Committed Amount”) for the purposes of financing, refinancing or reimbursing
the Borrower for all or a portion of the costs of the Water Reclamation Facility Project, funding
the Reserve Account, and paying costs of issuance on the Series 2010H Bond; provided the
DNRC shall not be required to loan any proceeds of the State Bonds to the Borrower after the
Estimated Completion Date. The Committed Amount may be reduced as provided in Sections
3.2 and 3.4. The 2010H Loan shall be disbursed as provided in this Section 4.1. The DNRC
intends to disburse the 2010H Loan through the Trustee.
(a) In consideration of the issuance of the Series 2010H Bond by the
Borrower, the DNRC shall make, or cause the Trustee to make, a disbursement of all or a
portion of the 2010H Loan upon receipt of the following documents:
(1) an Opinion of Bond Counsel as to the validity and enforceability of
each series of the Series 2010H Bond and the security therefor and stating in
effect that interest on each series of the Series 2010H Bond is not includable in
gross income of the owner thereof for purposes of federal income taxation, in
form and substance satisfactory to the DNRC;
(2) the Series 2010H Bond, fully executed and authenticated;
(3) a certified copy of the Original Resolution and this Supplemental
Resolution;
(4) any other security instruments or documents required by the
DNRC or DEQ as a condition to their approval of the 2010H Loan;
(5) if all or part of the 2010H Loan is being made to refinance a
Project or reimburse the Borrower for the costs of a Project paid prior to the
Closing, evidence, satisfactory to the DNRC and the Bond Counsel referred to in
(1) above, (A) that the acquisition or construction of the Water Reclamation
19
Facility Project was begun no earlier than March 7, 1985 or the debt was incurred
no earlier than March 7, 1985, (B) of the Borrower’s title to the Water
Reclamation Facility Project, (C) of the costs of the Water Reclamation Facility
Project and that such costs have been paid by the Borrower and (D) if such costs
were paid before adoption of this Supplemental Resolution that the Borrower has
complied with Section 1.150-2 of the Regulations;
(6) the items required by the Indenture for the portion of the 2010H
Loan to be disbursed at Closing; and
(7) such other certificates, documents and other information as the
DNRC, the DEQ or the Bond Counsel giving the opinion referred to in
subparagraph (1) may require (including any necessary arbitrage rebate
instructions).
(b) In order to obtain a disbursement of a portion of the 2010H Loan to pay
costs of the Water Reclamation Facility Project, the Borrower shall submit to the DNRC
and the Trustee a signed request for disbursement on the form prescribed by the DNRC,
with all attachments required by such form. The Borrower may obtain disbursements
only for costs which have been legally incurred and are due and payable. All Loan
disbursements will be made to the Borrower only upon proof that cost was incurred.
(c) For refinancings, a disbursement schedule complying with the
requirements of the Clean Water Act shall be established by the DNRC and the Borrower
at Closing. If the Borrower should repay all or a portion of the debt to be refinanced
from other sources or should otherwise not need any portion of the loan which was to
have been used to refinance such debt, it shall inform the DNRC and the Trustee of such
fact pursuant to Section 3.4(b) and a new disbursement schedule shall be drawn up by the
DNRC. The DNRC shall obtain a receipt from the holder of the debt being refinanced
for each disbursement made to pay or prepay a portion of such debt.
(d) If all or a portion of the 2010H Loan is made to reimburse a Borrower for
Project costs paid by it prior to Closing, the Borrower shall present at Closing the items
required by Section 4.1(b) relating to such costs. The Trustee shall disburse such
amounts to the Borrower pursuant to a disbursement schedule complying with the
requirements of the Clean Water Act established by the DNRC and the Borrower at the
Closing.
(e) Notwithstanding anything else provided herein, the Trustee shall not be
obligated to disburse the 2010H Loan any faster or to any greater extent than it has
available EPA Capitalization Grants, Bond proceeds and other amounts available therefor
in the Revolving Fund. The DNRC shall not be required to do “overmatching” pursuant
to Section 5.04(b) of the Indenture, but may do so in its discretion. The Borrower
acknowledges that if Project costs are incurred faster than the Borrower projected at
Closing, there may be delays in making disbursements of the 2010H Loan for such costs
because of the schedule under which EPA makes EPA Capitalization Grant money
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available to the DNRC. The DNRC will use its commercially reasonable efforts to obtain
an acceleration of such schedule if necessary.
(f) Upon making each 2010H Loan disbursement, the Trustee shall note such
disbursement on Schedule A to the Series 2010H Bond.
(g) The Borrower agrees that it will deposit in the Reserve Account upon
receipt thereof, on the Closing Date of the 2010H Loan and upon any disbursement date,
any proceeds of the 2010H Loan borrowed for the purpose of increasing the balance in
the Reserve Account to the Reserve Requirement. The Borrower further acknowledges
and agrees that any portion of the 2010H Loan representing capitalized interest shall be
advanced only on Payment Dates and shall be transferred by the Trustee on the Payment
Date directly to the Revenue Bond Account. The amount of any such transfer shall, as
appropriate, be a credit against the interest payments due on the 2010H Loan, and interest
on any such loan so affected shall accrue only from the date of transfer.
Section 4.2 Commencement of Loan Term. The Borrower’s obligations under this
Resolution and the Collateral Documents shall commence on the date hereof unless otherwise
provided in this Resolution. However, the obligation to make payments under Article V hereof
shall commence only upon the first disbursement by the Trustee of the proceeds of the 2010H
Loan.
Section 4.3 Termination of Loan Term. The Borrower’s obligations under this
Resolution and the Collateral Documents shall terminate upon payment in full of all amounts due
under the Series 2010H Bond and this Resolution; provided, however, that the covenants and
obligations provided in Article VI and Section 10.4 shall survive the termination of this
Resolution.
Section 4.4 Loan Closing Submissions. On or prior to the Closing, the Borrower will
have delivered to the DNRC and the Trustee the closing submissions required by Section 7.05 of
the Indenture.
ARTICLE V
REPAYMENT OF 2010H LOAN
Section 5.1 Repayment of 2010H Loan. The Borrower shall repay the amounts lent to
it pursuant to Section 4.1 hereof, plus interest on the unpaid amounts lent at the rate of two
percent (2.00%) per annum, in semiannual Loan Repayments. In addition, the Borrower shall
pay an Administrative Expense Surcharge on the outstanding principal amount of the 2010H
Loan at the rate of seventy-five hundredths of one percent (0.75%) per annum and a Loan Loss
Reserve Surcharge on the outstanding principal amount of the 2010H Loan at the rate of one
percent (1.00%) per annum. For purposes of this Resolution and the Program, the term “interest”
on a Loan shall include the Administrative Expense Surcharge and the 2010H Loan Loss
Reserve Surcharge. The Borrower shall pay all Loan Repayments and the Administrative
Expense Surcharge and Loan Loss Reserve Surcharge in lawful money of the United States of
America to the DNRC. Interest, the Administrative Expense Surcharge, and Loan Loss Reserve
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Surcharge shall be calculated on the basis of a year of 360 days comprising 12 months of 30 days
each.
The Loan Repayments required by this Section 5.1 and the Administrative Expense
Surcharge and Loan Loss Reserve Surcharge shall be due on each January 1 and July 1 (the
“Payment Dates”), as follows:
(1) interest and the Administrative Expense Surcharge and Loan Loss
Reserve Surcharge on the outstanding principal balance of the 2010H Loan shall
be payable on each January 1 and July 1, beginning on July 1, 2011, through and
including January 1, 2031;
(2) the principal of the 2010H Loan shall be repayable on each
Payment Date, beginning on July 1, 2011, through and including January 1, 2031,
and the amount of each principal payment shall be calculated on the basis of
substantially level debt service at a rate of 3.75% per annum.
The payments of principal of and interest and the Administrative Expense
Surcharge and the Loan Loss Reserve Surcharge on the 2010H Loan shall be due on the
dates specified above and on the dates and in the amounts shown in Schedule B to the
Series 2010H Bond, as such Schedule B shall be modified from time to time as provided
below. The portion of each such Loan Repayment consisting of principal and the portion
consisting of interest and the amount of each Administrative Expense Surcharge and the
amount of each Loan Loss Reserve Surcharge shall be set forth in Schedule B to the
Series 2010H Bond. Upon each disbursement of amounts of the 2010H Loan to the
Borrower pursuant to Section 4.1 hereof, the Trustee shall enter or cause to be entered the
amount advanced on Schedule A to the Series 2010H Bond, under “Advances” and the
total amount advanced under Section 4.1, including such disbursement, under “Total
Amount Advanced.”
If the advance was made to pay costs of the Water Reclamation Facility Project
pursuant to Section 4.1(b), interest and Administrative Expense Surcharge and the 2010H
Loan Loss Reserve Surcharge on such advance shall accrue from the date the advance is
made and shall be payable on each Payment Date thereafter. Once the completion
certificate for a Project has been delivered to the DNRC, the Trustee shall revise
Schedule B to the Series 2010H Bond, as appropriate, in accordance with this Section
5.1, and the Trustee shall send a copy of such Schedule B to the Borrower within one
month after delivery of the completion certificate.
Past-due payments of principal and interest and the Administrative Expense
Surcharge and Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent
(10.00%) per annum, until paid.
Any payment of principal, interest or the Administrative Expense Surcharge and
Loan Loss Reserve Surcharge under this Section 5.1 shall also be credited against the
same payment obligation under the Series 2010H Bond.
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Section 5.2 Additional Payments. The Borrower shall also pay, within 30 days after
receipt of a bill therefor, from any legally available funds therefor, including proceeds of the
2010H Loan, if the Borrower so chooses, all reasonable expenses of the DNRC and the Trustee
in connection with the 2010H Loan, the Collateral Documents and the Series 2010H Bond,
including, but not limited to:
(a) the cost of reproducing this Resolution, the Collateral Documents and the
Series 2010H Bond;
(b) the fees and disbursements of Bond Counsel and other Counsel utilized by
the DNRC and the Trustee in connection with the 2010H Loan, this Resolution, the
Collateral Documents and the Series 2010H Bond and the enforcement thereof; and
(c) all taxes and other governmental charges in connection with the execution
and delivery of the Collateral Documents or the Series 2010H Bond, whether or not any
of the Series 2010H Bond is then outstanding, including all recording and filing fees
relating to the Collateral Documents and the pledge of the State’s right, title and interest
in and to the Series 2010H Bond, the Collateral Documents and this Resolution and all
expenses, including attorneys’ fees, relating to any amendments, waivers, consents or
collection or enforcement proceedings pursuant to the provisions hereof or thereof.
Section 5.3 Prepayments. The Borrower may not prepay all or any part of the
outstanding principal amount of the Series 2010H Bond unless (i) it obtains the prior written
consent of the DNRC thereto, and (ii) no Loan Repayment, Administrative Expense Surcharge,
or Loan Loss Reserve Surcharge is then delinquent. Any prepayment permitted by the DNRC
must be accompanied by payment of accrued interest and Administrative Expense Surcharge and
Loan Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If
the Series 2010H Bond is prepaid in part pursuant to this Section 5.3, such prepayments shall be
applied to principal payments in inverse order of maturity.
Section 5.4 Obligations of Borrower Unconditional. The obligations of the Borrower
to make the payments required by this Resolution and the Series 2010H Bond and to perform its
other agreements contained in this Resolution, the Series 2010H Bond and Collateral Documents
shall be absolute and unconditional, except as otherwise provided herein or in such documents.
The Borrower (a) shall not suspend or discontinue any payments provided for in this Resolution
and the Series 2010H Bond, (b) shall perform all its other agreements in this Resolution, the
Series 2010H Bond and the Collateral Documents and (c) shall not terminate this Resolution, the
Series 2010H Bond or the Collateral Documents for any cause, including any acts or
circumstances that may constitute failure of consideration, destruction of or damage to the Water
Reclamation Facility Project or the System, commercial frustration of purpose, any dispute with
the DNRC or the EPA, any change in the laws of the United States or of the State or any political
subdivision of either or any failure of the DNRC to perform any of its agreements, whether
express or implied, or any duty, liability or obligation arising from or connected with this
Resolution. Provided, however, if the 2010H Loan contemplated herein is not made and no
funds are disbursed to the Borrower, this Resolution may be terminated.
23
Section 5.5 Limited Liability. All payments of principal of and interest on the 2010H
Loan and other payment obligations of the Borrower hereunder and under the Series 2010H
Bond shall be special, limited obligations of the Borrower payable solely out of the Net
Revenues or out of the Revenue Bond Account and shall not be payable out of any other funds or
revenues of the Borrower. The obligations of the Borrower under this Resolution and the Series
2010H Bond shall never constitute an indebtedness of the Borrower within the meaning of any
state constitutional provision or statutory limitation and shall never constitute or give rise to a
pecuniary liability of the Borrower or a charge against its general credit or taxing power. The
taxing powers of the Borrower are not pledged to pay principal of or interest on the Series 2010H
Bond, and no funds or property of the Borrower other than the Net Revenues are pledged to pay
principal of or interest on the Series 2010H Bond.
ARTICLE VI
INDEMNIFICATION OF DNRC AND DEQ
The Borrower shall, to the extent permitted by law, indemnify and save harmless the
DNRC, DEQ and their officers, employees and agents (each an "Indemnified Party" or,
collectively, the “Indemnified Parties") against and from any and all claims, damages, demands,
expenses, liabilities and losses of every kind asserted by or on behalf of any Person arising out of
the acts or omissions of the Borrower or its employees, officers, agents, contractors,
subcontractors, or consultants in connection with or with regard or in any way relating to the
condition, use, possession, conduct, management, planning, design, acquisition, construction,
installation or financing of the Water Reclamation Facility Project. The Borrower shall also, to
the extent permitted by law, indemnify and save harmless the Indemnified Parties against and
from all costs, reasonable attorneys’ fees, expenses and liabilities incurred in any action or
proceeding brought by reason of any such claim or demand. If any proceeding is brought against
an Indemnified Party by reason of such claim or demand, the Borrower shall, upon notice from
an Indemnified Party, defend such proceeding on behalf of the Indemnified Party.
ARTICLE VII
ASSIGNMENT
Section 7.1 Assignment by City. The Borrower may not assign its rights and
obligations under the Resolution or the Series 2010H Bond, except as provided in Section 6.3 of
the Original Resolution.
Section 7.2 Assignment by DNRC. The DNRC will pledge its rights under and
interest in the Resolution, the Series 2010H Bond and the Collateral Documents (except to the
extent otherwise provided in the Indenture) as security for the payment of the State Bonds.
Section 7.3 State Refunding Bonds. In the event the State Bonds and Additional State
Bonds are refunded by bonds which are not Additional State Bonds, all references in the
Resolution to State Bonds and Additional State Bonds shall be deemed to refer to the refunding
bonds and any bonds of the State on a parity with such refunding bonds (together, the
“Refunding Bonds”) or, in the case of a crossover refunding, to the State Bonds and Additional
State Bonds and the Refunding Bonds. In the event the State Bonds are refunded by an issue of
Additional State Bonds, all references in the Resolution to the State Bonds shall be deemed to
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refer to such Additional State Bonds or, in the case of a crossover refunding, both the State
Bonds and such Additional State Bonds.
ARTICLE VIII
THE SERIES 2010H BOND
Section 8.1 Net Revenues Available. The Borrower is authorized to charge just and
equitable rates, charges and rentals for all services directly or indirectly furnished by the System,
and to pledge and appropriate to the outstanding Bonds and the Series 2010H Bond the Net
Revenues to be derived from the operation of the System, including improvements, betterments
or extensions thereof hereafter constructed or acquired. The Net Revenues to be produced by
such rates, charges and rentals during the term of the Series 2010H Bond will be more than
sufficient to pay the principal and interest when due on the Series 2010H Bond, and to create and
maintain reasonable reserves therefor and to provide an adequate allowance for replacement and
depreciation, as herein prescribed.
Section 8.2 Issuance and Sale of the Series 2010H Bond. The Commission has
investigated the facts necessary and hereby finds, determines and declares it to be necessary and
desirable for the Borrower to issue the Series 2010H Bond to evidence the 2010H Loan. The
Series 2010H Bond is issued to the DNRC without public sale pursuant to Montana Code
Annotated, Section 7-7-4433(2)(a).
Section 8.3 Terms. The Series 2010H Bond shall be in the maximum principal
amount equal to the original Committed Amount, shall be issued as a single, fully registered
bond numbered R-1, shall be dated as of the date of delivery to the DNRC, and shall bear interest
at the rate charged by the DNRC on the 2010H Loan. The principal of and interest on the Series
2010H Bond shall be payable on the same dates and in the same amounts on which principal and
interest of the 2010H Loan Repayments are payable. Advances of principal of the Series 2010H
Bond shall be deemed made when advances of the 2010H Loan are made under Section 4.1, and
such advances shall be payable in accordance with Schedule B to the Series 2010H Bond as it
may be revised by the DNRC from time to time in accordance with Section 5.1.
The Borrower may prepay the Series 2010H Bond, in whole or in part, only upon the
terms and conditions under which it can prepay the 2010H Loan under Section 5.3.
Section 8.4 Negotiability, Transfer and Registration. The Series 2010H Bond shall be
fully registered as to both principal and interest, and shall be initially registered in the name of
and payable to the DNRC. While so registered, principal of and interest on the Series 2010H
Bond shall be payable to the DNRC at the Office of the Department of Natural Resources and
Conservation, 1625 Eleventh Avenue, Helena, Montana 59620 or such other place as may be
designated by the DNRC in writing and delivered to the Borrower. The Series 2010H Bond shall
be negotiable, subject to the provisions for registration and transfer contained in this Section. No
transfer of the Series 2010H Bond shall be valid unless and until (1) the holder, or his duly
authorized attorney or legal representative, has executed the form of assignment appearing on the
Series 2010H Bond, and (2) the Director of Finance of the Borrower (or successors, the
“Registrar”), as Bond Registrar, has duly noted the transfer on the Series 2010H Bond and
recorded the transfer on the registration books of the Registrar. The Registrar may, prior to
25
noting and recording the transfer, require appropriate proof of the transferor’s authority and the
genuineness of the transferor’s signature. The Borrower shall be entitled to deem and treat the
person in whose name the Series 2010H Bond is registered as the absolute owner of the Series
2010H Bond for all purposes, notwithstanding any notice to the contrary, and all payments to the
registered holder shall be valid and effectual to satisfy and discharge the Borrower’s liability
upon such Bond to the extent of the sum or sums so paid.
Section 8.5 Execution and Delivery. The Series 2010H Bond shall be executed on
behalf of the Borrower by the manual signatures of the Mayor, the Director of Finance and the
Clerk of the Commission. Any or all of such signatures may be affixed at or prior to the date of
delivery of the Series 2010H Bond. The Series 2010H Bond shall be sealed with the corporate
seal of the Borrower. In the event that any of the officers who shall have signed the Series
2010H Bond shall cease to be officers of the Borrower before the Series 2010H Bond is issued or
delivered, their signatures shall remain binding upon the Borrower. Conversely, the Series
2010H Bond may be signed by an authorized official who did not hold such office on the date of
adoption of this Supplemental Resolution. The Series 2010H Bond shall be delivered to the
DNRC, or its attorney or legal representative.
Section 8.6 Form. The Series 2010H Bond shall be prepared in substantially the form
attached as Appendix B.
ARTICLE IX
SECURITY FOR THE SERIES 2010H BOND
The Series 2010H Bond is issued as an additional parity Bond under Section 10.3 of the
Original Resolution and shall, with the Series 2010B Bond, the Series 2010C Bond, Series
2010D Bond, Series 2010F Bond, and the Series 2010G Bond, and any other additional parity
Bonds issued under the provisions of Section 10.3 of the Original Resolution, be equally and
ratably secured by the provisions of the Resolution and payable out of the Net Revenues
appropriated to the Revenue Bond Account of the Fund, without preference or priority, all as
provided in the Resolution, and secured by the Reserve Account, as further provided in Section
11.5 of the Original Resolution. Upon advancement of principal of the Series 2010H Bond, the
Director of Finance of the Borrower shall transfer from available funds of the System or
proceeds of the Series 2010H Bond such amount or amounts to the Reserve Account to cause the
balance therein to equal the Reserve Requirement, treating such principal amount as
Outstanding. Upon the first advance of proceeds of the Series 2010H Bond, the deposit to the
Reserve Account shall be sufficient to cause the balance in the Reserve Account to equal the
Reserve Requirement in respect of the Series 2010B Bond, the Series 2010C Bond, Series 2010D
Bond, Series 2010F Bond, the Series 2010G Bond, and the principal of the Series 2010H Bond
so advanced. The Borrower shall keep, perform and observe each and every one of its covenants
and undertakings set forth in the Resolution for the benefit of the registered owners from time to
time of the Series 2010H Bond.
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ARTICLE X
TAX MATTERS
Section 10.1 Use of Project. The Water Reclamation Facility Project will be owned
and operated by the Borrower and available for use by members of the general public on a
substantially equal basis. The Borrower shall not enter into any lease, use or other agreement
with any non-governmental person relating to the use of the Water Reclamation Facility Project
or the System or security for the payment of the Series 2010H Bond which might cause the
Series 2010H Bond to be considered a “private activity bond” or “private loan bond” within the
meaning of Section 141 of the Code.
Section 10.2 General Covenant. The Borrower covenants and agrees with the owners
from time to time of the Series 2010H Bond that it will not take or permit to be taken by any of
its officers, employees or agents any action which would cause the interest on the Series 2010H
Bond to become includable in gross income for federal income tax purposes under the Code and
the Regulations, and covenants to take any and all actions within its powers to ensure that the
interest on the Series 2010H Bond will not become includable in gross income for federal
income tax purposes under the Code and the Regulations.
Section 10.3 Arbitrage Certification. The Mayor, the Director of Finance and the Clerk
of the Commission, being the officers of the Borrower charged with the responsibility for issuing
the Series 2010H Bond pursuant to the Resolution, are authorized and directed to execute and
deliver to the DNRC a certificate in accordance with the provisions of Section 148 of the Code,
and Section 1.148-2(b) of the Regulations, stating that on the basis of facts, estimates and
circumstances in existence on the date of issue and delivery of the Series 2010H Bond, it is
reasonably expected that the proceeds of the Series 2010H Bond will be used in a manner that
would not cause the Series 2010H Bond to be an “arbitrage bond” within the meaning of Section
148 of the Code and the Regulations.
Section 10.4 Arbitrage Rebate. The Borrower acknowledges that the Series 2010H
Bond is subject to the rebate requirements of Section 148(f) of the Code. The Borrower
covenants and agrees to retain such records, make such determinations, file such reports and
documents and pay such amounts at such times as are required under said Section 148(f) and
applicable Treasury Regulations to preserve the exclusion of interest on the Series 2010H Bond
from gross income for federal income tax purposes, unless the Series 2010H Bond qualify for the
exception from the rebate requirement under the Code and no “gross proceeds” of the Series
2010H Bond (other than amounts constituting a “bona fide debt service fund”) arise during or
after the expenditure of the original proceeds thereof. In furtherance of the foregoing, the
Mayor, the Director of Finance and the Clerk of the Commission are hereby authorized and
directed to execute a Rebate Certificate, substantially in the form to be prepared by Bond
Counsel, and the Borrower hereby covenants and agrees to observe and perform the covenants
and agreements contained therein, unless amended or terminated in accordance with the
provisions thereof.
Section 10.5 Information Reporting. The Borrower shall file with the Secretary of the
Treasury, not later than February 15, 2011, a statement concerning the Series 2010H Bond
containing the information required by Section 149(e) of the Code.
27
Section 10.6 “Qualified Tax-Exempt Obligations.” Pursuant to Section 265(b)(3)(B)(ii)
of the Code, the Borrower hereby designates the Series 2010H Bond as a “qualified tax-exempt
obligation” for purposes of Section 265(b)(3) of the Code. The Borrower has not designated any
obligations in 2010 other than the Series 2010B Bond and the Series 2010C Bond under Section
265(b)(3). The Borrower hereby represents that it does not anticipate that obligations bearing
interest not includable in gross income for purposes of federal income taxation under Section 103
of the Code (including refunding obligations as provided in Section 265(b)(3) of the Code and
including “qualified 501(c)(3) bonds” but excluding other “private activity bonds,” as defined in
Sections 141(a) and 145(a) of the Code) will be issued by or on behalf of the Borrower and all
“subordinate entities” of the Borrower in 2010 in an amount greater than $30,000,000.
ARTICLE XI
CONTINUING DISCLOSURE
The Borrower understands and acknowledges that the DNRC is acquiring the Series
2010H Bond under the Program pursuant to which the State issues from time to time State Bonds
to provide funds therefor. The Borrower covenants and agrees that, upon written request of the
DNRC from time to time, the Borrower will promptly provide to the DNRC all information that
the DNRC reasonably determines to be necessary or appropriate to offer and sell State Bonds or
to provide continuing disclosure in respect of State Bonds, whether under Rule 15c2-12 (17
C.F.R. § 240.15c2-12) promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or otherwise. Such information shall include,
among other things and if so requested, financial statements of the Borrower prepared in
accordance with generally accepted accounting principles promulgated by the Financial
Accounting Standards Board as modified in accordance with the governmental accounting
standards promulgated by the Governmental Accounting Standards Board or as otherwise
provided under Montana law, as in effect from time to time (such financial statements to relate to
a fiscal year or any period therein for which they are customarily prepared by the Borrower, and,
if for a fiscal year and so requested by the DNRC, subject to an audit report and opinion of an
accountant or government auditor, as permitted or required by the laws of the State). The
Borrower will also provide, with any information so furnished to the DNRC, a certificate of the
Mayor and the Director of Finance of the Borrower to the effect that, to the best of their
knowledge, such information does not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein to make the statements made, in light of the
circumstances under which they are made, not misleading.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices or other communications hereunder shall be
sufficiently sent or given and shall be deemed sent or given when delivered or mailed by
certified mail, postage prepaid, to the parties at the following addresses:
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DNRC: Department of Natural Resources and Conservation
1625 Eleventh Avenue
P. O. Box 201601
Helena, Montana 59620-1601
Attn: Conservation and Resource
Development Division
Trustee: U.S. Bank National Association
c/o Corporate Trust Services
1420 Fifth Avenue, 7th Floor
Seattle, Washington 98101
Borrower: City of Bozeman
P.O. Box 1230
Bozeman, Montana 59771-1230
Attn: Director of Finance
Any of the above parties may, by notice in writing given to the others, designate any further or
different addresses to which subsequent notices or other communications shall be sent.
Section 12.2 Binding Effect. This Supplemental Resolution shall inure to the benefit of
and shall be binding upon the DNRC, the Borrower and their respective successors and assigns.
Section 12.3 Severability. If any provision of this Supplemental Resolution shall be
determined to be unenforceable at any time, it shall not affect any other provision of the
Resolution or the enforceability of that provision at any other time.
Section 12.4 Amendments. This Supplemental Resolution may not be effectively
amended without the written consent of the DNRC.
Section 12.5 Applicable Law. This Supplemental Resolution shall be governed by and
construed in accordance with the internal laws of the State.
Section 12.6 Captions; References to Sections. The captions in this Supplemental
Resolution are for convenience only and do not define or limit the scope or intent of any
provisions or Sections of this Supplemental Resolution.
Section 12.7 No Liability of Individual Officers, Directors or Trustees. No recourse
under or upon any obligation, covenant or agreement contained in this Supplemental Resolution
shall be had against any director, officer or employee, as such, past, present or future, of the
DNRC, the DEQ or the Trustee, either directly or through the DNRC, the DEQ or the Trustee, or
against any officer, or member of the governing body or employee of the Borrower, past, present
or future, as an individual so long as such individual was acting in good faith. Any and all
personal liability of every nature, whether at common law or in equity, or by statute or by
constitution or otherwise, of any such officer or member of the governing body or employee of
the DNRC, the Trustee or the Borrower is hereby expressly waived and released by the Borrower
and by the DNRC as a condition of and in consideration for the adoption of this Supplemental
Resolution and the making of the 2010H Loan.
29
Section 12.8 Payments Due on Holidays. If the date for making any payment or the last
date for performance of any act or the exercise of any right, as provided in this Supplemental
Resolution or the Series 2010H Bond, shall not be Business Day, such payments may be made or
act performed or right exercised on the next succeeding Business Day with the same force and
effect as if done on the nominal date provided in this Supplemental Resolution or the Series
2010H Bond.
Section 12.9 Right of Others To Perform City’s Covenants. In the event the Borrower
shall fail to make any payment or perform any act required to be performed hereunder, then and
in each such case the DNRC or the provider of any Collateral Document may (but shall not be
obligated to) remedy such default for the account of the Borrower and make advances for that
purpose. No such performance or advance shall operate to release the Borrower from any such
default and any sums so advanced by the DNRC or the provider of any Collateral Document
shall be paid immediately to the party making such advance and shall bear interest at the rate of
ten percent (10.00%) per annum from the date of the advance until repaid. The DNRC and the
provider of any Collateral Document shall have the right to enter the Water Reclamation Facility
Project or the facility or facilities of which the Water Reclamation Facility Project is a part or
any other facility which is a part of the System in order to effectuate the purposes of this Section.
Section 12.10 Authentication of Transcript. The officers of the Borrower are hereby
authorized and directed to furnish to the DNRC and to Bond Counsel certified copies of all
proceedings relating to the issuance of the Series 2010H Bond and such other certificates and
affidavits as may be required to show the right, power and authority of the Borrower to issue the
Series 2010H Bond, and all statements contained in and shown by such instruments, including
any heretofore furnished, shall constitute representations of the Borrower as to the truth of the
statements of fact purported to be shown thereby.
Section 12.11 Effective Date. This Supplemental Resolution shall take effect
immediately.
Adopted by the City Commission of the City of Bozeman, Montana, on this 1st day of
November, 2010.
____________________________________
Mayor
Attest: ___________________________
Clerk of the Commission
(SEAL)
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APPENDIX A
DESCRIPTION OF THE WATER RECLAMATION FACILITY PROJECT
The Water Reclamation Facility Project consists of designing, engineering and
constructing improvements to the Borrower’s Water Reclamation Facility, including demolition
within the existing Headworks Building and construction of an influent connection and
Headworks Building, construction of a Primary Effluent Pumping Station, construction of a
biological nutrient removal facility and connection to the existing bioreactor basins, demolition
of existing blowers and construction of an aeration blower system, conversion of an existing un-
used surge tank into a sludge fermenter basin, rehabilitation of an existing gravity thickener
system, retrofitting of an existing RAS control facility with new flow control equipment,
construction of a new RAS/WAS Flow Control and Pumping Facility, construction of two new
secondary clarifiers, replacement of an existing chlorine disinfection system with a UV
disinfection system, construction of all associated mechanical, electrical, controls and general
sitework items, and related improvements.
Administrative/Finance Costs
Series 2010D Bond
$9,500,000
@ 3.75%
Series 2010H Bond
$9,573,000
@ 3.75%
Source:
Local Total:
Personnel Costs
76,000.00 76,000.00
Office Costs
12,000.00 12,000.00
Professional Services - -
35,260.00 35,260.00
Legal Costs
3,000.00 3,000.00
Audit Fees
12,000.00 12,000.00
Travel & Training
3,000.00 3,000.00
Debt Service Reserve 681,093.00 680,808.00
- 1,361,901.00
Bond Counsel & Related costs 12,000.00 13,154.00 25,154.00
Preliminary Engineering
123,000.00 123,000.00
Engineering/Arch. Design - -
5,015,965.00 5,015,965.00
Construction Engr. Services
2,603,000.00 2,603,000.00
Construction 8,806,907.00 8,879,038.00
10,440,148.00 28,126,093.00
Contingency - -
2,675,530.00 2,675,530.00
TOTAL PROJECT COSTS 9,500,000.00 9,573,000.00
20,998,903.00 40,071,903.00
A-1
B-1
APPENDIX B
[Form of the Series 2010H Bond]
UNITED STATES OF AMERICA
STATE OF MONTANA
GALLATIN COUNTY
CITY OF BOZEMAN
SEWER SYSTEM REVENUE BOND
(DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM),
SERIES 2010H
No. R-1 $9,573,000
FOR VALUE RECEIVED, the City of Bozeman, Montana (the “Borrower”), a
duly organized municipal corporation and political subdivision of the State of Montana,
acknowledges itself to be specially indebted and, for value received, hereby promises to pay to
the Department of Natural Resources and Conservation of the State of Montana (the “DNRC”),
or its registered assigns, solely from the Revenue Bond Account of its Sewer System Fund, the
principal sum equal to the sum of the amounts entered on Schedule A attached hereto under
“Total Amount Advanced,” with interest on each such amount from the date such amount is
advanced hereunder at the rate of 2.00% per annum on the unpaid balance until paid. In
addition, the Borrower shall pay, solely from said source, an Administrative Expense Surcharge
and a Loan Loss Reserve Surcharge on the outstanding principal amount of this Bond at the rates
of seventy-five hundredths of one percent (0.75%) per annum and one percent (1.00%) per
annum, respectively. Interest and Administrative Expense Surcharge and a Loan Loss Reserve
Surcharge shall be payable in semiannual installments payable on each January 1 and July 1
(each a “Loan Repayment Date”) commencing July 1, 2011. Principal shall be payable on the
dates set forth in Schedule B hereto. Each installment shall be in the amount set forth opposite
its due date in Schedule B attached hereto under “Total Loan Payment.” The portion of each
such payment consisting of principal, the portion consisting of interest and the portion consisting
of Administrative Expense Surcharge and the portion consisting of Loan Loss Reserve Surcharge
shall be as set forth in Schedule B hereto. Upon each disbursement of 2010H Loan amounts to
the Borrower pursuant to the Resolution described below, the DNRC shall enter (or cause to be
entered) the amount advanced on Schedule A under “Advances” and the total amount advanced
under the Resolution (as hereinafter defined), including such disbursement, under “Total Amount
Advanced.” The DNRC shall prepare Schedule B and any revised Schedule B, or cause
Schedule B and any revised Schedule B to be prepared, as provided in Section 5.1 of the
Resolution. Schedule B shall be calculated and recalculated on a level debt service basis
assuming an interest rate of 3.75% per annum. Past-due payments of principal and interest and
Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall bear interest at the
rate of ten percent (10.00%) per annum, until paid. Interest and Administrative Expense
Surcharge and Loan Loss Reserve Surcharge shall be calculated on the basis of a 360-day year
comprising 12 months of 30 days each. All payments under this Bond shall be made to the
registered holder of this Bond, at its address as it appears on the Bond register, in lawful money
of the United States of America.
B-2
This Bond is one of an issue of Sewer System Revenue Bonds of the Borrower
authorized to be issued in one or more series from time to time, and constitutes a series in the
maximum authorized principal amount of $9,573,000 (the “Series 2010H Bond”). The Series
2010H Bond is issued to finance a portion of the costs of the construction of certain
improvements to the sewer system of the Borrower (the “System”), to fund deposits to the
Reserve Account, and to pay costs of issuance of the Series 2010H Bond. The Series 2010H
Bond is issued pursuant to and in full conformity with the Constitution and laws of the State of
Montana thereunto enabling, including Montana Code Annotated, Title 7, Chapter 7, Part 44, as
amended, and ordinances and resolutions duly adopted by the governing body of the Borrower,
including Resolution No. 4220 duly enacted by the City Commission on November 16, 2009, as
amended and supplemented by Resolution Nos. 4234, 4245, 4254, and 4299 adopted on January
19, 2010, February 16, 2010, May 3, 2010, and November 1, 2010, respectively (as so amended
and supplemented, the “Resolution”). The Series 2010H Bond is issuable only as a single, fully
registered bond. The Series 2010H Bond is issued on a parity with the Borrower’s $359,300
Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program),
Series 2010B, its $1,223,000 Sewer System Revenue Bond (DNRC Water Pollution Control
State Revolving Loan Program), Series 2010C, its $9,500,000 Sewer System Revenue Bond
(DNRC Water Pollution Control State Revolving Loan Program), Series 2010D, its $816,000
Sewer System Revenue Bond (DNRC Water Pollution Control State Revolving Loan Program),
Series 2010F, and its $3,903,000 Sewer System Revenue Bond (DNRC Water Pollution Control
State Revolving Loan Program), Series 2010G (collectively, the “Outstanding Bonds”).
Reference is made to the Resolution for a more complete statement of the terms
and conditions upon which the Series 2010H Bond has been issued, the net revenues of the
System pledged and appropriated for the payment and security thereof, the conditions upon
which additional bonds may be issued under the Resolution and made payable from such net
revenues on a parity with the Outstanding Bonds and the Series 2010H Bond (collectively, the
“Bonds”) or otherwise, the conditions upon which the Resolution may be amended, the rights,
duties and obligations of the Borrower, and the rights of the owners of the Series 2010H Bond.
The Borrower may prepay the principal of the Series 2010H Bond only if (i) it
obtains the prior written consent of the DNRC thereto, and (ii) no Loan Repayment or
Administrative Expense Surcharge or Loan Loss Reserve Surcharge is then delinquent. Any
prepayment permitted by the DNRC must be accompanied by payment of accrued interest and
Administrative Expense Surcharge and Loan Loss Reserve Surcharge to the date of prepayment
on the amount of principal prepaid. If the Series 2010H Bond is prepaid in part, such
prepayments shall be applied to principal payments in inverse order of maturity.
The Bonds, including interest and any premium for the redemption thereof, are
payable solely from the net revenues pledged for the payment thereof and do not constitute a
debt of the Borrower within the meaning of any constitutional or statutory limitation or
provision.
B-3
The Borrower may deem and treat the person in whose name this Series 2010H
Bond is registered as the absolute owner hereof, whether this Series 2010H Bond is overdue or
not, for the purpose of receiving payment and for all other purposes, and the Borrower shall not
be affected by any notice to the contrary. The Series 2010H Bond may be transferred hereinafter
as provided.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that
the Borrower will forthwith construct and complete the improvements to the System hereinabove
described, that it will prescribe and collect reasonable rates and charges for all services and
facilities afforded by the System, including all additions thereto and replacements and
improvements thereof, and has created a special Sewer System Fund into which the gross
revenues of the System will be paid, and a separate and special Revenue Bond Account in that
fund, into which will be paid each month, from and as a first and prior lien on the Net Revenues
of the System then on hand, an amount equal to not less than the sum of one-sixth of the interest
due within the next six months plus one-twelfth of the principal due within the next twelve
months with respect to all Bonds payable from the Revenue Bond Account; that the Borrower
has created a Reserve Account in such fund into which shall be paid additional Net Revenues,
after required credits to the Revenue Bond Account, sufficient to maintain a reserve therein equal
to the maximum amount of principal and interest payable in any subsequent fiscal year on all
such Bonds; that the Revenue Bond Account will be used only to pay the principal of, premium,
if any, and interest on the Bonds and any other additional Bonds issued pursuant to the
Resolution on a parity therewith; that the rates and charges for the System will from time to time
be made and kept sufficient, to provide gross income and revenues adequate to pay promptly the
reasonable and current expenses of operating and maintaining the System and to produce in each
fiscal year Net Revenues in excess of such current expenses, equal to 125% of the maximum
amount of principal and interest payable from the Revenue Bond Account in any subsequent
fiscal year; that additional Bonds and refunding Bonds may be issued and made payable from the
Revenue Bond Account on a parity with the Bonds and other parity Bonds, upon certain
conditions set forth in the Resolution, but no obligation will be otherwise incurred and made
payable from the Net Revenues of the System, unless the lien thereof shall be expressly made
subordinate to the lien of the Bonds and additional parity Bonds on such Net Revenues; that all
provisions for the security of the holder of this Series 2010H Bond set forth in the Resolution
will be punctually and faithfully performed as therein stipulated; that all acts, conditions and
things required by the Constitution and laws of the State of Montana and the ordinances and
resolutions of the Borrower to be done, to exist, to happen and to be performed in order to make
this Series 2010H Bond a valid and binding special obligation of the Borrower according to its
terms have been done, do exist, have happened and have been performed in regular and due
form, time and manner as so required; and that this Series 2010H Bond and the interest hereon
are payable solely from the Net Revenues of the System pledged and appropriated to the
Revenue Bond Account and do not constitute a debt of the Borrower within the meaning of any
constitutional or statutory limitation or provision and the issuance of the Series 2010H Bond
does not cause either the general or the special indebtedness of the Borrower to exceed any
constitutional or statutory limitation.
B-4
IN WITNESS WHEREOF, the City of Bozeman, Montana, by its governing
body, has caused this Bond to be executed by the signatures of the Mayor, the Director of
Finance, and the Clerk of the Commission, and has caused the official seal of the Borrower to be
affixed hereto, and has caused this Bond to be dated as of the day of ,
2010.
______________________________________
Mayor
(Seal)
_______________________________________
Director of Finance
_______________________________________
Clerk of the Commission
B-5
REGISTRATION AND TRANSFER
This Bond shall be fully registered as to both principal and interest. No transfer of this
Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized
attorney or legal representative, executes the form of assignment appearing on this Bond, and (2)
the Director of Finance as bond registrar (the “Registrar”), has duly noted the transfer on the
Bond and recorded the transfer on the Registrar’s registration books. The Borrower shall be
entitled to deem and treat the person in whose name this Bond is registered as absolute owner
thereof for all purposes, notwithstanding any notice to the contrary. Payments on account of the
Bond shall be made only to the order of the registered holder thereof, and all such payments shall
be valid and effectual to satisfy and discharge the Borrower’s liability upon the Bond to the
extent of the sum or sums so paid.
REGISTER
The ownership of the unpaid Principal Balance of this Bond and the interest accruing
thereon is registered on the books of the City of Bozeman, Montana in the name of the registered
holder appearing on the first page hereof or as last noted below:
Date of Name and Address Signature of
Registration of Registered Holder Director of Finance
, 2010 Department of Natural
Resources and Conservation
1625 Eleventh Avenue
Helena, MT 59620
THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND
REGISTRAR UPON REGISTRATION OF EACH TRANSFER
The Director of Finance of the Borrower, acting as Bond Registrar, has transferred, on
the books of the Borrower, on the date last noted below, ownership of the principal amount of
and the accrued interest on this Bond to the new registered holder noted next to such date, except
for amounts of principal and interest theretofore paid.
Date of Transfer
Name of New
Registered Holder
Signature of
Bond Registrar
B-6
FORM OF ASSIGNMENT
For value received, this Bond is hereby transferred and assigned by the undersigned
holder, without recourse, to
on this day of , .
By:
(Authorized Signature)
For:
(Holder)
B-7
SCHEDULE A
SCHEDULE OF AMOUNTS ADVANCED
Total Amount Notation
Date Advances Advanced Made By
B-8
SCHEDULE B
Loan Loss
Administrative Reserve Total Loan
Date Principal Interest Expense Surcharge Surcharge Payment
APPENDIX C
ADDITIONAL REPRESENTATIONS AND COVENANTS
[None]
C-1