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HomeMy WebLinkAbout2005-009 Water System Improvements e e RESOLUTION NO. r:-y;; (J ~ 9-2005 BY THE COUNCIL: A RESOLUTION AUTHORIZING AND CONFIRMING THE FINANCING OF WATER SYSTEM IMPROVEMENTS THROUGH THE STATE OF IDAHO DEPARTMENT OF ENVIRONMENTAL QUALITY AND IN PARTICULAR AUTHORIZING A PROMISSORY NOTE, LOAN OFFER, ACCEPTANCE AND CONTRACT AND RELATED DOCUMENTS WITH THE DEPARTMENT OF ENVIRONMENTAL QUALITY IN AN AMOUNT UP TO $360,630 TO FINANCE SAID WATER SYSTEM IMPROVEMENTS, AUTHORIZING A RESERVE FUND AND AUTHORIZING RELATED MATTERS PROCEEDINGS AND PROVIDING AN EFFECTIVE DATE. WHEREAS, various City officials have previously determined that it is necessary to make certain improvements (the "Project") to its water system facilities and related facilities to provide sufficient capacity to meet applicable standards; and WHEREAS, the City Public Works Director and City Treasurer have recommended that the permanent financing of said Project be accomplished by a Promissory Note and a Loan Offer, Acceptance and Contract with the State ofIdaho, Department of Environmental Quality ("DEQ") and related documents in an aggregate amount of up to $360,630 (the "Financing Documents"); and WHEREAS, the authority to enter into the Financing Documents has been judicially confirmed by the District Court for the Sixth Judicial District of the State ofIdaho on August 22, 2005; and WHEREAS, on September 14, 2005, the City did enter into a Loan Offer, Acceptance and Contract for a Drinking Water Treatment Design and Construction with DEQ providing for the financing of the Project. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE CITY OF CHUBBUCK, IDAHO: Section 1. Definitions. The terms defined in this Section, except where the context requires otherwise, shall have the following meanings: "City" means the City of Chubbuck, Idaho and its successors. "Consulting Engineer" means Keller Associates, or any other qualified registered or licensed professional engineer practicing under the laws of the State of Idaho. "DEQ" means the State ofIdaho Department of Environmental Quality. RESOLUTION - PAGE 1 J:\Water\System\Resavoirs\ConcreteTankRehab2005\DEQLoan\Resolution CLEAN.doc - e "Financing Documents" means the documents as defined in the second WHEREAS clause above. "Fiscal Year" means the twelve (12) months commencing October 1 of any year and ending September 30 of the following year or such other fiscal year as may subsequently be required by state law. "Gross Income", "Gross Revenues", "Income" or "Revenues" means all income and revenue derived by the City from any rates, fees, tolls and charges for the services furnished by, or the use of, the System as the same may at any time exist to serve customers within or outside the municipal limits, whether resulting from improvements or otherwise. "Holder" means the registered owner ofthe Note, initially the DEQ. "Loan" means the loan by DEQ to the City evidenced by the Loan Agreement "Loan Agreement" means the Loan Offer, Acceptance and Contract for Drinking Water Treatment Design and Construction between the City and DEQ dated September 14, 2005, as amended. "Net Income" or "Net Revenues" means the remaining revenues of the System after deducting Operation and Maintenance Expenses. "Note" means the Promissory Note to DEQ evidencing the Loan for the Project. "Operation and Maintenance Expenses" means all reasonable and necessary current expenses of the municipality, paid or accrued, for operating, maintaining and repairing the System, including legal and overhead expenses of the municipality directly related to the administration of the System, insurance premiums, audits, charges of depository banks and paying agents, professional services, salaries, administrative expenses, labor, and the cost of materials and supplies for current operation, but not including depreciation, legal liabilities not based on contract, the cost of improvements to the System, or charges for the accumulation of reserves. "Paying Agent" means the City. "Prior Obligations" means the City's obligations under its Installment Purchase and Trust Agreement dated as of April 1, 1995, between the City and First Security Bank of Idaho, N.A., now Wells Fargo Bank, National Association, as Trustee, for financing of earlier upgrades and improvements to the System through the issuance of the City's Water Revenue Certificates of Participation, Series 1995. "Project" means the water system improvement and construction program financed in part by the Note and described in the Financing Documents. RESOLUTION - PAGE 2 J:\Water\System\Reservoirs\ConcreteTankRehab2005\DEQLoan\Resolution CLEAN.doc e e "Reserve Fund" means the "2005 Water System Promissory Note Reserve Fund". "System" means all of the City's water system, and its water facilities and properties now owned or hereafter acquired, whether situated within or without the City boundaries. Section 2. Ratification. All consistent action taken previously by the Council and the municipal officers directed toward the Project and toward the issuance of its revenue obligations for that purpose is ratified, approved and confirmed. Section 3. Authorization of Financing Documents and Sale Thereof. For the purpose of providing funds to pay costs ofthe Project, the Note in the principal amount of $360,630 shall be issued and be payable both as to principal and interest, solely from the Net Revenues of the System, and the City shall pledge irrevocably such Net Revenues to the payment of said Note and the interest thereon, the proceeds thereof to be used solely for the aforesaid purpose and shall execute all of the Financing Documents in connection therewith. The issuance of the Note to the DEQ to evidence the obligations of the City under the Loan Agreement is hereby accepted and confirmed. The Mayor, Clerk-Treasurer and Public Works Director are hereby authorized to execute such documents as may be necessary to effect the sale of the Note. Section 4. Description of Note. The Note shall be dated not later than December 28, 2005, or the date of closing and delivery of the Note, shall consist of one Note in the denomination of $360,630 shall bear interest from the date of delivery at a rate of three and one-quarter percent (3.25%) per annum, and together with equally amortized payments of principal, shall be payable to the Holder over twenty (20) years as provided in the Note and the Note shall be substantially in the form set forth in Exhibit "A" attached hereto and by this reference incorporated herein. Section 5. Payment of Notes; Pledge of Net Revenues. a) The principal of and interest on the Note are payable in lawful money of the United States of America to the Holder thereof, without deduction for exchange or collection charges, whose name and address shall appear on the registration records of the City (the "Note Register") maintained by the Note Registrar. b) The Note, upon the surrender thereof at the Office of the City Clerk for the City of Chubbuck, Idaho, with a written instrument of transfer duly executed by the registered owner or its duly authorized attorney, may, at the option of the registered owner and at its expense, be exchanged for serial Notes, in registered form, in the aggregate principal amount then remaining unpaid, bearing the same interest rate, and payable as to remaining principal as provided in the original Note and dated as of the year during which the surrender and exchange is effected. c) The City hereby pledges the Net Revenues to the punctual payment of the Note, on a parity with the payment of any qualified additional obligations, and subordinate to the payment of the Prior Obligations. RESOLUTION - PAGE 3 J:\Water\System\Rescrvoirs\ConcreteTankRehab2005\DEQLoan\Resolution CLEAN.doc - e Section 6. Prior Redemption and Prepayment. The Note shall be subject to prepayment upon the prior written approval ofDEQ or a successor Holder. Section 7. Note Registration. The Note shall be registered for payment as to both principal and interest. The City Clerk of the City of Chubbuck, Idaho, is appointed Note registrar (herein the "Registrar" or "Note Registrar") and shall maintain books for the registration, transfer and conversion of the Note, and do all things authorized by the Idaho Registered Public Obligations Act, Chapter 9, Title 57, Idaho Code, as amended. The Registrar shall register or permit to be transferred or discharged from registration the Note presented for such purpose subject to said Act and such reasonable regulations as the Registrar may prescribe and after the City is reimbursed for any tax or governmental charge payable in connection therewith. For the purposes of said Registered Public Obligations Act, this Resolution shall constitute a "system of registration" within the meaning, and for all purposes, of said Act. The Note may be transferred only upon the books for the registration and transfer of Notes, upon the surrender thereof at the office of the Note Registrar, together with a form of transfer duly executed by the registered owner or his attorney duly authorized in writing, substantially in the form of Note set forth in Exhibit "A". Upon the transfer of the Note, there shall be issued in the name of the transferee or transferees a new fully registered Note or Notes of any authorized denomination or denominations and of the same maturity and interest rate, and of the same aggregate principal amount as the surrendered Note. The new Note or Notes shall be dated as of the year during which the surrender and exchange is effected, and shall bear interest from the immediately preceding interest payment date to which interest has been paid or duly provided for. The Note Registrar shall not be required to exchange or transfer the Note within fifteen (15) days of an interest payment date or, in the case of any redemption of the Note, within fifteen (15) days of the redemption date. Section 8. Ownership of Note. The City and its officers shall treat the person in whose name the Note is registered as the absolute owner, whether or not such Note shall be overdue. All payments made as provided in this Resolution shall be valid and effectual to discharge the liability upon the Note to the extent of the amount so paid. Section 9. Execution of Note. If their facsimile signatures are to be printed on the Note, the Mayor and Clerk shall file their manual signatures with the Secretary of State. Without reasonable delay, the City shall cause the definitive Note to be prepared, executed, and delivered, which Note may be typewritten, lithographed or printed with engraved or lithographed borders at the option of Purchaser. The Note shall be signed by the manual or facsimile signature of the Mayor, which signature shall be attested by the manual or facsimile signature of the Clerk- Treasurer, and the seal of the City or a facsimile thereof shall be imprinted thereon. In case any of the officers who shall have signed or countersigned the Note shall cease to be such officer or officers of the City before the Note so signed or countersigned shall have been delivered or issued by the City, such Note may nevertheless be delivered and issued and, upon such delivery and issue, shall be as binding upon the City as though those who signed and RESOLUTION - PAGE 4 J:\ Water\System\Rcservoirs\ConcreteTankRdlab2005\DEQLoan\Resolution CLEAN.doc e e countersigned the same had continued to be such officers of the City. The Note may also be signed and countersigned on behalf of the City by such persons as at the actual date of execution of such note shall be the proper officers of the City although at the original date of such note any such person shall not have been such officer ofthe City. Section 10. Special Obligations. Principal of and interest on the Note shall be payable solely out of the Net Revenues of the System. The Net Revenues of the System are pledged for that purpose. The Holder may not look to any general or other fund for the payment of Note principal or interest, except any special funds pledged therefor. The Note shall not constitute an indebtedness nor a debt within the meaning of any constitutional or statutory provision or limitation and shall not be considered general obligations of the City. The Note shall constitute the City's special obligation. Section 11. Period of Facilities' Usefulness. The facilities to be acquired with Note proceeds will be useful for at least twenty (20) years. Section 12. Note Preparation, Execution and Delivery. The Mayor, Clerk and Treasurer are directed to prepare and execute the Note. Thereafter, the Treasurer shall deliver them to the DEQ on receipt of the agreed purchase price. Section 13. Disposition of Note Proceeds. The Note shall evidence the Loan of DEQ for construction of the Project and any costs of issuance or other costs of the Project. Section 14. Fiscal Year. For the purpose ofthis Resolution the System shall be operated upon a fiscal year commencing October 1 in each year and ending on September 30 of the following year or such other fiscal year as may subsequently be required by state law. Section 15. Income Fund. A special fund shall be maintained separate and distinct from all other funds and accounts of the City, which shall be the City's Water System Enterprise Fund, to be known for purposes of this Resolution as the "Income Fund." So long as any Bonds shall be outstanding all income and revenues derived from the operation of the System less amounts due in connection with the Prior Obligations shall be deposited into the Income Fund. Section 16. Administration of Income Fund. The following payments shall be made from the Income Fund: A. Operation and Maintenance Expenses. Firstly, there shall be set aside each month such reasonable percentage of the Income Fund as the City shall determine to be reasonable and necessary for the proper operation and maintenance of the System. Any surplus remaining at the end of the fiscal year and not used for operation and maintenance purposes shall be transferred back to the Income Fund. B. Note Fund Payments. Secondly, from any moneys remaining in the Income Fund there shall be deposited into a separate account known as the "2005 Water System Promissory Note Fund" (herein the "Note Fund"), the following: RESOLUTION - PAGE 5 J;\ Water\System\Reservoirs\COIlLTeteTankRchab2005\DEQLoan\Resolution CLEAN.dol;: e e (I) Commencing on the first day of the month immediately following delivery of the Note, an amount, in monthly installments, which, with other monies available therefor, will be equal to at least one-sixth (116) of the principal and interest to become due on the next principal and interest payment date on the Note. The monies allocated shall be used solely to pay currently maturing installments of principal of and interest on the Note. (2) If serial notes have been substituted for the Note, then (a) Commencing on the first day of the month immediately following such substitution, an amount in equal monthly installments which, with other monies available therefor, will be equal to at least one-sixth (1/6) of the next installment of interest on the outstanding Note, and on the first of each and every month thereafter, one-sixth (1/6) of the amount necessary to pay the next maturing installment of interest on the outstanding Note. (b) Commencing on the first day of the month immediately following such substitution, an amount in equal monthly installments which, with other monies available therefor, will be sufficient to pay the next semi-annual installment of principal of the outstanding Note, and on the first of each and every month thereafter, one-sixth (1/6) of the amount necessary to pay the next maturing installment of principal on the outstanding Note. (3) If the City for any reason shall fail to make such monthly deposits, then an amount equal to the deficiency shall be set apart and deposited in the Note Fund out of the Net Revenues in the ensuing month or months, which amount shall be in addition to the regular monthly deposit required during such succeeding month or months. C. Debt Service Reserve Fund. There is hereby created a separate account in the Note Fund known as the "2005 Water System Promissory Note Reserve Fund," (herein the "Reserve Fund"), which shall be maintained by the Treasurer. (1) Deposits. Concurrently with the above payments into the Note Fund, commencing on the first day of January, 2007 and January 1 of each year thereafter through January 1, 2011, at least $4,932.66 shall be deposited into the Reserve Fund until an amount not less than $24,663.28 (herein "Minimum Reserve") has been accumulated. The City may deposit the full amount of the Minimum Reserve at any time. After the Minimum Reserve has been accumulated, within thirty (30) days of using any such monies from the Reserve Fund, an amount shall be deposited from the Income Fund into the Reserve Fund to the extent needed to maintain said Reserve Fund in an amount not less than the Minimum Reserve. RESOLUTION - PAGE 6 J:\Water\System\Reservoirs\ConcrcteTankRehab2005\DEQLoan\ResoJution CLEAN.doc e e (2) Deficiencies or Withdrawals. Whenever any monies are withdrawn from the Reserve Fund to pay the principal of or interest on the Note, or if a deficiency exists in such Reserve Fund, then the Treasurer shall, within thirty (30) days of using any such monies from the Reserve Fund, deposit from the Income Fund into the Reserve Fund an amount sufficient to restore the amount withdrawn or the amount of the deficiency. (3) Refunding. In the event refunding bonds are ever issued, the amount set aside into the Reserve Fund to secure the payment of the Note shall be used to retire the Note. (4) Investments. Subject to the limitations set forth in the Tax Certificate of the City with respect to the Note, all monies in the Reserve Fund may be kept in cash or deposited in institutions permitted by law in an amount in each institution not greater than the amount insured by any department or agency of the United States government, or may be invested and reinvested in any legal investment permitted for City monies maturing not later than the last maturity date of any outstanding Note. Interest earned on any such investment shall be deposited into the Note Fund. D. Payment for Additional Obligations. After making the above payments, any balance in the Income Fund may be used for the payment of principal and interest on additional obligations including reasonable reserves therefor. The lien of additional obligations on Net Revenues shall be on a parity with, or subordinate to, the lien and pledge of the Note and of the Prior Obligations (and in accordance with their terms). Any payments in respect of additional parity obligations shall be made concurrently with those required by this Section. E. Use of Surplus Revenues. After making the above payments, the remaining Net Revenues shall be applied for any of the following purposes: (1) The additional improvement, extension and betterment of the System; (2) The payment of debt service on other obligations incurred in the acquisition, construction or improvement of the System; (3) The redemption or prepayment, in whole or in part of the Note, or purchase in the open market or prior redemption of any Notes or bonds payable from Net Revenues at the best reasonable price obtainable; (4) Any other lawful purpose. Section 17. General Administration of Funds. The funds and accounts hereof shall be administered as follows: RESOLUTION - PAGE 7 ];\ Water\System\Reservoirs\COIlLTeteTankRehab2005\DEQLoan\Resolution CLEAN.doc e e A. Places and Times of Deposits or Transfers of Funds. The above accounts and funds shall be separately maintained and deposited in one or more bank accounts in a Federally Insured Bank or Banks. Each account shall be continuously secured to the extent required by law and shall be irrevocable and not withdrawable by anyone for any other purpose. Payments shall be made into the proper account on the first day of the month or year, as the case may be, except when the first day shall be a Sunday or legal holiday, then payment shall be made on the preceding secular day. At least five (5) days prior to any principal and interest payment date, monies sufficient to pay interest and principal then due shall be transferred to the Paying Agent. Nothing in this Resolution shall prevent the City from establishing one bank account for any of the funds required by this Resolution. B. Investment of Monies. Monies in any fund not immediately needed may be invested as provided by state and applicable federal statutes and regulations, provided that the City shall take no step or make any investment which would imperil the exemption ofthe interest on the Note from income taxation under any federal law now in force or hereafter existing. Section 18. Lien of the Note. The Note constitutes an irrevocable lien upon the Revenues, subject to the payment of all necessary and reasonable Operation and Maintenance Expenses and subject to the lien ofthe Prior Obligations, if any. Section 19. Additional Obligations. This Resolution shall not prevent the issuance of additional obligations on a parity with the Note in accordance with the following conditions. Before any such additional parity obligations are actually issued, it must be determined that: A. The City is not, and has not been in default of this Resolution during the Fiscal Year immediately preceding the issuance of such additional obligations, or if the Note has not been outstanding for a full Fiscal Year, then for the longest period of time the Note has been outstanding; and B. A report of the Consulting Engineer shows that Net Revenues of the System projected for the life of the additional obligations will be at least equal to 125% of the maximum annual principal and interest requirements on the outstanding obligations constituting a lien upon Net Revenues and on the obligations proposed to be issued (excluding reserves) or the Net Revenue derived from the operation of the System for the fiscal year immediately preceding the date of the ordinance or resolution authorizing the issuance of any such parity lien obligations shall have been sufficient to pay an amount representing 125% of the maximum annual principal and interest requirements on the outstanding Note and any other outstanding parity obligations constituting a lien upon Net Revenues, and on the obligations proposed to be issued (excluding reserves). As used in this Section, "maximum annual principal and interest requirements" shall be the largest amount of principal and interest coming due on the then outstanding Note, any other outstanding parity obligations and the proposed parity lien obligations during any subsequent fiscal year. RESOLUTION - PAGE 8 J:\ Water\Systcm\R.(servoirs\Co(l(:reteTankRehab2005\DEQLoan~lution CLEAN.doc e e C. A written certificate by an independent Consulting Engineer that Net Revenue is sufficient shall conclusively determine the right of the City to issue additional parity obligations. The Consulting Engineer may utilize the results of any annual audit to the extent it covers the applicable period. D. In determining whether additional parity obligations may be issued, the Consulting Engineer shall consider any probable increase (but not reduction) in Operation and Maintenance Expenses. E. The City may issue obligations having a lien on Net Revenues subordinate to the lien of the Note. Section 20. Protective Covenants. The City covenants and agrees with each and every Holder that: A. Use of Note Proceeds. The proceeds of the Note shall be used to finance construction ofthe Project in accordance with this Resolution. B. Payment of Notes Herein Authorized. The City will pay Note principal and interest at the place, on the dates, and in the manner specified according to the true intent and meaning thereof. C. Use Charges. Rates for services rendered by the System shall be reasonable and just, taking into account the cost and value of the System, operation and maintenance expenses, possible delinquencies, proper allowances for depreciation, contingencies, and the amounts necessary to retire the Note payable from Net Revenues, and the reserves therefor. There shall be charged against all users, including the State and its subdivisions, rates and amounts sufficient to produce revenues to pay the annual operation and maintenance charges, and the annual principal of and interest on the Note and other obligations payable from Net Revenues, including reserves. No free service shall be furnished by the City. Any use of the System by the City will be paid for from the City's general fund at the reasonable value of the use so made. Income so derived from the City shall be treated in the same manner as any other System income. D. Levy of Charges. Prior to the delivery of the Note, the City will establish and levy the required rates and charges. No reduction in any initial rate schedule may be made unless: (1) The City has complied with Section 19B for at least two (2) fiscal years immediately preceding such reduction; and, (2) The audits for the full two (2) fiscal years immediately preceding such reduction disclose that the estimated revenues resulting from the proposed rate schedule will be sufficient to meet the requirements of paragraph C of this Section 20. RESOLUTION - PAGE 9 J:\Water\System\Reservoirs\ConcreleTankRebab2005\DEQLoan\Resolution CLEAN.doc e e E. Efficient Operation. The City shall make such improvements and repairs to the System as may be necessary to insure its economical and efficient operation and its ability to meet demands for service. F. Records. Separate records will be kept showing complete and corrected entries of all transactions relating to the System. Such records shall include monthly entries showing: (1) The number of customers; (2) The revenues received; and (3) A detailed statement of expenses. G. Right to Inspect. The DEQ, any other Holder, or their duly authorized agents, shall have the right at all reasonable times to inspect the System, and all records, accounts, and data relating thereto. H. Audits. The City agrees that it will, within one hundred twenty (120) days following the close of each fiscal year, furnish to the Holder an audit made by an Independent Accountant. Each such audit, in addition to matters thought proper by the accountant, shall include: (1) A statement for the fiscal year just closed, of the income and expenditures of the System, including gross revenues, net revenues, the amount of any capital expenditures and profit or loss; (2) A balance sheet as of the end of such fiscal year, including all funds created by proceedings authorizing obligations payable from System revenues; (3) The accountant's comment regarding the City's methods of operation and accounting practice; (4) A list of the insurance policies in force, setting out the amount of each policy, the risks covered, the name ofthe insurer, and the expiration date; (5) A recapitulation of each fund or account created by the various proceedings showing deposits and withdrawals for said fiscal year. Any Holder shall have the right to discuss the contents with any person making the audit. (6) The accountant's statement that to the best of his knowledge the City is in compliance with the provisions of this Resolution, or if the City is not in compliance, specifying where and how the City has failed to comply with this Resolution. RESOLUTION - PAGE 10 J:\WateJ\System\RescrvoiIs\ConcreteTankRchah2005\DEQLoan\Resolution CLEAN.doc e e 1. Budgets. The City agrees that it will comply with State budget laws in preparing annual budgets and in keeping accounts and records. The City will establish an acceptable method of bookkeeping for the System and the City will prepare an annual operating budget for the System. J. Billing Procedure and Discontinuance of Service. All bills shall be sent out on a regularly established day of each month in advance or after service is rendered. Bills shall be due within twenty (20) days from date, or such lesser time prescribed by City resolution. In lieu of monthly billings the City may require by resolution that rates and charges established by the City shall be paid by the 20th of each month, or such lesser time prescribed by City resolution. Ifbills are not paid sixty (60) days after such date or such lesser time prescribed by City resolution, they shall be collected in any lawful manner, including the denial or discontinuance of service. K. Use of Note and Reserve Funds. The Note Fund and the Reserve Fund shall be used solely and only, and said funds are hereby pledged, for the purposes set forth above. L. Charges and Liens Upon System. The City will pay all taxes and governmental charges lawfully levied in respect of the System when due. The City will comply with all valid requirements of any governmental authority relative to the System. It will not create or permit to be created any lien or charge upon the System or the Revenues except as permitted herein. The City will satisfy all claims and demands within sixty (60) days after the same shall accrue which might by law become a lien upon the System or upon the Revenues unless the validity thereof is being contested in good faith by appropriate legal proceedings. M. Construction Contract and Bond. The City has required or will require each person, firm or corporation with whom it may contract for labor or materials to furnish a performance and payment bond in the full amount of any contract. Any such contract will meet the reasonable requirements of the Purchaser as are not inconsistent with state law. N. Insurance. Fire and extended coverage insurance on the System will be in such minimum amounts as are reasonable and prevalent for similar municipalities and systems in the State of Idaho and under such other terms and conditions as determined with the assistance of the Project Engineer, provided that such coverage amount shall not be less than the replacement cost of the system. The City will maintain liability insurance coverage of not less than $500,000/$1,000,000 with regard to personal injury and not less than $500,000 with regard to property damage. The City will carry worker's compensation coverage on all full-time employees in accordance with applicable state laws. O. Competing System or Works. The City shall not grant any franchise or license to a competing System, or permit any person or organization to sell water service within the City. RESOLUTION - PAGE 11 J:\W atcr\S~tem\Rest2"Voirs\ConcreteTankRehab2005\DEQLoan\ResolutioD CLEAN.doc e e P. Alienating System. The City will not sell, lease, mortgage, pledge, or otherwise alienate, the System, or any part thereof, except any portion which shall have been replaced by other property of at least equal value or which shall cease to be necessary for the efficient operation of the System. In the event of any sale as aforesaid, the proceeds of such sale shall be distributed as Net Revenues. Q. Extension of Interest Payments. The City will not extend or be a party to the extension of the time for paying any claim for interest. Any installment of interest so extended shall not be entitled in case of default hereunder to the benefit or security of this Resolution except subject to the prior payment in full of the principal of the Note and interest which has not been extended. R. Management of the System. If an "event of default" shall occur or if the Net Revenues in any fiscal year fail to equal principal, interest and reserves for the Note payable from Net Revenues, the City shall retain a Consulting Engineer to assist the management of the System so long as such default continues or the Net Revenues are less than the amount designated. S. System Operation and Maintenance. The City has adopted or will adopt adequate Rules and Regulations for the operation of the System. The City has prepared or will prepare an Operation and Maintenance Manual for the System and will provide a summary of the training provided or to be provided to System employees in the operation and maintenance of the System. T. Compliance with Loan Agreement. The City shall comply with all of the terms and provisions of the Loan Agreement and in the event of a conflict between the terms of this Resolution and the Loan Agreement, the terms of the Loan Agreement shall prevail. U. Indemnification. So long as DEQ is the Holder of the Note, the City will indemnify DEQ for any payments made or losses suffered by DEQ on behalf of the City. Such indemnification shall be payable from Revenues or from any other legally permissible source. V. City's Existence. The City will maintain its corporate identity and existence so long as the Note remains outstanding, unless another political subdivision by operation of law succeeds to the liabilities and rights of the City, without adversely affecting to any substantial degree the privileges and rights of any Holder. Section 21. Non-Arbitrage. The proceeds of the sale of the Note shall not be used directly or indirectly to acquire any securities or obligations, the acquisition of which would cause the Bond to be an arbitrage bond within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"). The City shall also comply with all terms of the Tax Certificate furnished by the City at closing of the Note and shall take such measures as needed in order to assure that interest on the Note is excluded from federal income tax under Section 103 of the Code. RESOLUTION - PAGE 12 J:\Watcr\System\Resavoirs\ConcreteTankRehab2005\DEQloan\Resolutioo CLEAN.doc e e Section 22. [Reserved.] Section 23. [Reserved.] Section 24. Events of Default. It is an "event of default" if: A. Non-Payment of Principal. Payment of principal of the Note is not made when due at maturity or upon prior redemption. B. Non-Payment ofInterest. Payment of interest is not made when due. C. Incapable to Perform. The City is not capable of fulfilling its obligations hereunder. D. Default of any Provision. The City defaults in the punctual performance of its covenants hereunder for sixty (60) days after written notice shall have been given by the Holders of25% or more of the outstanding Note. Section 25. Remedies of Defaults. Upon the happening of any event of default, the Holder or Holders of not less than 25% in principal amount of the outstanding Notes, or any trustee therefor, may protect and enforce the rights of any Holder by proper legal or equitable remedy deemed most effectual, including mandamus, specific performance of any covenant, the appointment of a receiver (the consent to such appointment being hereby granted), injunctive relief, or requiring the governing body of the City to act as if it were the trustee of an express trust, or any combination of such remedies. All proceedings shall be maintained for the equal benefit of all Holders. Any receiver appointed to protect the rights of the Holders may take possession and operate and maintain the System in the same manner as the City itself might do. The failure of any Holder to proceed does not relieve the City or any person of any liability for failure to perform any duty hereunder. The foregoing rights are in addition to any other right and the exercise of any right by any Holder shall not be deemed a waiver of any other right. Section 26. Duties Upon Default. Upon the happening of any event of default, the City will perform all proper acts to protect and preserve the security created for the prompt payment of the principal of and interest on the Note(s). The Holder or Holders of not less than 25% in principal amount of the outstanding Notes, after written demand, may proceed to protect and enforce the rights provided by this Section. Section 27. Prior Charge Upon Lower Rates. If any commission or authority lawfully prescribes a lower schedule of rates than that contemplated by this Resolution, then the payment of principal and of interest on the Note, and any parity obligations, shall constitute a first and prior charge on Revenues of the System, subject to the prior lien of any parity obligations issued in accordance with this Resolution, and also subject to the prior lien ofthe Prior Obligations. Section 28. Amendment of Resolution. This Resolution may be amended, without receipt by the City of any additional consideration, but with the written consent of the Holders of three-fourths (3/4) of the Notes then outstanding (not including Note(s) which may be held for RESOLUTION - PAGE 13 J:\ Watcr\Systcm\Resavoirs\CoIK:reteTankRchab2005\DEQLoan\Resolution CLEAN.doc e e the account of the City); but no resolution adopted without the written consent of the Holders of all outstanding Notes shall have the effect of permitting: (1) An extension of the maturity ofthe Note; or (2) A reduction in the principal amount or interest rate of the Note(s); or (3) The creation of a lien upon revenues ranking prior to the lien or pledge created by this Resolution; or (4) A reduction of the principal amount of Notes required for consent to such amendatory resolution; or (5) The establishment of priorities as between Notes issued and outstanding under the provisions of this Resolution; or (6) The modification of or otherwise affecting the rights of the Holders ofless than all ofthe outstanding Notes. Section 29. Resolution Irrepealable. After the Note is issued, this Resolution shall be irrepealable until the principal of and interest on all outstanding Notes has been paid in full. Section 30. Severability Clause. The invalidity or unenforceability of any provision of this Resolution shall not affect the remaining provisions. Section 31. Effective Date. This Resolution shall be in full force and effect from and after its passage and approval. (The remainder of this page left blank intentionally.) RESOLUTION - PAGE 14 J;\ WatLT\System\Reservoirs\ConcrdcTankRchab2005\DEQLoan\Reiolution CLEAN.doc e e PASSED by the City Council of the City of Chubbuck, Idaho, this 20th day of December, 2005. APPROVED by the Mayor of the City of Chubbuck, Idaho, this 20th day of December, 2005. ~)~t AYOR ::TE~ ~ CITY CLERK (SEAL) (The remainder of this page left blank intentionally.) RESOLUTION - PAGE 15 ]:\ Wata\System\Rcsavoirs\ConcreteTankRehab2005\DEQluan\Resolution CLEAN.doc e e EXHIBIT "A" TO RESOLUTION FORM OF PROMISSORY NOTE DEQ Loan #DW-9926 PROMISSORY NOTE DRINKING WATER LOAN ACCOUNT This Promissory Note is executed in conformance with and pursuant to the Drinking Water Treatment Loan Contract entered into between the City of Chubbuck and the State of Idaho, Department of Environmental Quality, (herein called the "State") on September 14, 2005 which is attached as Appendix A; the Record of Disbursements prepared by the State dated December 28,2005 which is attached as Appendix B; and the Judicial Confirmation Findings of Fact, Conclusions of Law and Judgment which is attached as Appendix C. Appendices A, Band C are hereby incorporated by reference. For value received, the City of Chubbuck (herein called the "Borrower") promises to pay to the State the principal amount of three hundred sixty thousand six hundred thirty dollars ($360,630), plus interest on the unpaid balance at the rate of three and one-quarter percent (3.25%) per annum. The principal and interest of this note shall be repaid in accordance with the Loan Repayment Schedule, which is attached as Appendix D and hereby incorporated by reference. The Borrower has authorized this Note by its Resolution No. 9-2005 adopted on December 20, 2005 (the "Resolution"). In addition, the Borrower pledges revenue and income of the Borrower's drinking water treatment facilities, whether collected or uncollected, in an amount sufficient to repay all principal and interest and pledges to maintain a reserve account equal to twenty four thousand six hundred sixty-three and 28/100ths dollars ($24,663.28) of principal and interest, subordinate to the Prior Obligations as defined in the Resolution. The reserve account may be established over a five-year period with a minimum of twenty percent (20%) put in the account each year. Every payment made on any indebtedness evidenced by this note shall be applied first to interest computed to the effective date of the payment and then to principal. Prepayments of scheduled installments, or any portion thereof, may be made only with prior written permission of the State. Refunds and extra payments, after payment of interest, will be applied to the installments last to become due under this note and shall not affect the obligation of the Borrower to pay the remaining installments as scheduled herein. If the State at any time assigns this note and insures the payment thereof, the Borrower shall continue to make payments to the State as collection agent for the holder. No assignment of this note shall be effective unless the Borrower is notified in writing of the name and address of the assignee. The Borrower shall thereupon duly note in its records the occurrence of such assignment, together with the name and address of the assignee. Any amount advanced or expended by the State for the collection hereof or to preserve or protect any security hereto, or otherwise under the terms of any security or other instrument RESOLUTION - PAGE 16 J;\ Waler\System\Re;ervoirs\ConcreteTankRehab2005\DEQLoan\R~lution CLEAN.doc