Resolution 4927 - BOI Loan - Meters & HydrantsRESOLUTION NO. 4 9 2 7
RESOLUTION RELATING TO $490,000 WATER SYSTEM
REVENUE BOND, SERIES 2004A; AUTHORIZING THE ISSUANCE
AND FIXING THE TERMS AND CONDITIONS THEREOF AND THE
SECURITY THEREFOR
BE IT RESOLVED by the City Council (the "Council") of the City of Kalispell,
Montana (the "City") as follows:
Section 1. Authorization and Recitals.
1.01 Authorization. The City pursuant to authority conferred by Montana Code
Annotated, Title 7, Chapter 7, Parts 44 and 45, as amended (the "Act"), and other laws of the
State of Montana, has established and presently owns and operates a municipal water system (the
"System"). Under the provisions of the Act, the City is authorized to issue and sell its revenue
bonds payable during a terra not exceeding forty years from their date of issue, to provide funds
for the reconstruction, improvement, betterment and extension of the System and 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 System to the City.
1.02 Outstanding Debt; Definitions. In accordance with the authorization described in
Section 1.01, the City has issued and there are outstanding its Water System Revenue Bond
(DNRC Drinking Water Revolving Loan Program), Series 2001 (the "Series 2001 Bond"),
outstanding in the total principal amount of $667,000, its Water System Revenue Bond, Series
2003 (the "Series 2003 Bond"), outstanding in the total principal amount of $876,456, and its
Water System Revenue and Refunding Bonds, Series 2004 (the "Series 2004 Bonds"),
outstanding in the total principal amount of $1,840,000, issued to finance or refinance the costs
of certain improvements to the System, pursuant to Resolution No. 4273, adopted by this
Council on .Tune 17, 1996, as amended and supplemented by Resolution Nos. 4603, 4758, and
4892, adopted by this Council on March 5, 2001, December 2, 2002, and May 17, 2004 (as so
amended and supplemented, the "Resolution"). Apart from the Series 2001 Bond, the Series
2003 Bond, and the Series 2004 Bonds, there are no other bonds or indebtedness of the City
outstanding that are payable in whole or in part from or secured by revenues of the System.
Terms which are defined in the Resolution shall have the same meanings when used
herein, unless such terms are also defined in this Supplemental Resolution,
1.03 The Proiect, The City has determined the necessity of upgrading the System. The
Project consists ofthe acquisition, construction and installation of various improvements to the
System, including changing out residential water meters and installation of fire hydrants (the
"Project"). The estimated costs of the Project, including engineering costs (but excluding costs
of issuance), are estimated to be $554,257, and consist of the following items:
Total
Bond
City
Costs
Proceeds
Funds
Water Meters
$395,600
$345,000
$50,000
Fire :Hydrants
109,657
100,000
9,657
Reserve Account
49,000
45,000
4,000
Total:
$554,257
$490,000
$63,657
Costs of the Project in excess of $490,000 are expected to be paid from funds that the City has on
hand in its Water System Fund.
1.04 Reimbursement With Bond Proceeds. On August 4, 2003, this Council adopted
Resolution No. 4813, which set annual appropriations and incorporated, among other things, the
Water Fund Program of Services. Line Item 946 of the Water Fund Program of Services calls
out the portion of the Project consisting of fire hydrant acquisition and installation and states that
of the estimated cost thereof (i.e., $109,657), $100,000 is estimated to be from bond proceeds.
Line Item 948 of the Water Fund Program of Services calls out the portion of the Project
consisting of meter acquisition and installation and states that of the estimated cost thereof (i.e.,
$385,000), $345,000 is estimated to be from bond proceeds. Resolution No. 4813 has the effect
of providing that the source of moneys for original expenditures on the Project would be the
Water Fund. From the first date of the original payment of expenditures on the Project from the
Water Fund, i.e., on or about July 15, 2003, through fiscal year ended June 30, 2004,
approximately $69,000 was expended by the City on the fire hydrant portion of the Project and
approximately $319,000 was expended by the City on the meter portion of the Project.
1.05 Additional Bonds. In Section 6.01 of the Resolution, the City reserved the right
to issue Additional Bonds upon certain terms and conditions, including obtaining a certificate or
report from an Independent Consultant stating that the Net Revenues in the Fiscal Year
immediately preceding the issuance of such Additional Bonds were at least 125% of the
maximum Principal and Interest Requirements for any complete Fiscal Year during the term of
the then Outstanding Bonds with respect to the Outstanding Bonds and the Series 2004A Bond
(as hereinafter defined).
It is hereby determined, declared and found that the City is authorized, based on the
covenants made in this Supplemental Resolution and the clarification set forth herein under
Section 6, to issue $490,000 in aggregate principal amount of Bonds to finance costs of the
Project under Section 6.01 of the Resolution (the "Series 2004A Bond"). The City has obtained
or shall obtain a certificate of an Independent Consultant in accordance with the previous
paragraph of this Section and Section 6.01 of the Resolution. The Series 2004A Bond is an
Additional Bond under the Resolution, and shall be and is hereby declared to be secured by a lien
on the Net Revenues on a parity with the Series 2001 Bond, the Series 2003 Bond, the Series
2004 Bonds, and any Additional Bonds hereafter issued.
1.06 Net Revenues Available. The City 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 Series 2001 Bond, the Series 2003 Bond, the Series 2004 Bonds,
and the Series 2004A 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, as most recently increased,
during the term of the Series 2004A Bond, are estimated to be more than sufficient to pay the
principal and interest when due on the Series 2001 Bond, the Series 2003 Bond, the Series 2004
Bonds, and the Series 2004A Bond, and to create and maintain reasonable reserves therefor and
to provide an allowance for replacement and depreciation, as prescribed by the Resolution.
I.07 Sale and Authorization of Series 2004A Bond. Pursuant to the authority recited in
Section 1.01 and for the purpose of financing the cost of the Project, this Council hereby
authorizes the issuance of the Series 2004A Bond. The City has received an offer from the
Board of Investments of the State of Montana (the "Board of Investments") through its
INTIRCAP Program to purchase the Series 2004A Bond at a price of $490,000, plus interest
accrued on the Series 2004A Bond to the date of delivery, if any, upon the terms and conditions
set forth herein. The terms and conditions of the offer are reasonable and advantageous to the
City and are hereby accepted. The City is authorized and shall proceed to issue and deliver the
Series 2004A Bond in the form and upon the terms and conditions provided in the Resolution, as
supplemented by this Supplemental Resolution.
1.08 Recitals. All acts, conditions and things required by the Constitution and laws of
the State of Montana to he done_ to exist_ to hannen and to he performed nrinr to the k-,nance of
the Series 2004A Bond have been done, do exist, have happened, and have been performed in
due time, form and manner, wherefore it is now necessary for this Council to establish the form
and terms of the Series 2004A Bond and to provide for the security thereof and to issue the
Series 2004A Bond.
Section 2. Terms. Form and Execution of and Security for the Series 2Q04A Bond.
2.01 General Terms. The City shall forthwith issue the Series 2004A Bond in the
principal amount of $490,000. The Series 2004A Bond shall be dated as of the date of its
delivery. Upon each disbursement of the Series 2004A Bond proceeds, the Board of Investments
shall enter the amount advanced on Schedule A attached thereto under "Advances" and the total
amount advanced under this Resolution, including such disbursement, under "Total Amount
Advanced." The Series 2004A Bond shall be lettered and numbered R-1 and shall be payable
semi-annually, with a final stated maturity date of August 15, 2014, subject to redemption as
herein provided, and shall bear interest on the principal amount thereof advanced at the rate per
annum equal to the Variable Rate (as hereinafter defined), as such may be adjusted from time to
time as hereinafter provided. Interest shall be computed on the basis of the actual number of
days in the years and the actual number of days amounts advanced under the Series 2004A Bond
are outstanding. Principal and interest shall be payable on each February 15 and August 15,
commencing February 15, 2005, through the final stated maturity of the Series 2004A Bond,
subject to prior redemption as herein provided. All outstanding principal, together with accrued
and unpaid interest on the Series 2004A Bond, shall be payable on the final stated maturity of the
Series 2004A Bond. Payments of principal of and interest on the Series 2004A Bond shall be
made to the registered holder of the Series 2004A Bond, at its address as it appears on the
Register on the date such principal and interest are payable, in lawful money of the United States
of America.
Outstanding principal of the Series 2004A Bond shall bear interest from the date of
advancement thereof under the Series 2004A Bond until paid at the Variable Rate, as such may
be adjusted from time to time as hereinafter provided. Until the initial Adjustment Date for the
Series 2004A Bond (February 16, 2005), the Variable Rate shall be two and seventy hundredths
percent (2.70%) per annum. Thereafter, for each Adjustment Period during the term of the
Series 2004A Bond, the Variable Rate shall be the rate per annum equal to the then prevailing
rate of interest determined by the Beard of Investments under the INTERCAP :Program (the
`Board of Investments Rate"). If for any reason the interest rate cannot be established as so
provided or is held invalid or unenforceable by a court of law, the interest rate for the Series
2004A Bond for the Adjustment Period shall be a rate equal to the largest integral multiple of
five hundredths of one percent (0.05%) that is equal to or less than eighty percent (80%) of the
average yield, evaluated at par, of United States Treasury obligations with a stated or remaining
maturity of one year, as reported in The Wail ,street Journal (Des Moines Edition) (or, if such
paper is no longer published or fails to report such information, in any other financial periodical
selected by the City acceptable to the Board of Investments) on the Adjustment Date or, if the
Adjustment Date is not a Business Day (as hereinafter defined), the immediately preceding
Business .Day, but in no event to exceed fifteen percent (15.00%) per annum. As used herein,
"Adjustment Date" means February 16 during the term of the Series 2004A Bond and
"Adjustment Period" means the period beginning on an Adjustment Date and ending on the day
immediately preceding the next succeeding Adjustment Date or the final stated maturity of the
Series 2004A Bond, whichever is earlier; provided that if the Series 2004A Bond is not paid at
its final stated maturity, the final Adjustment Period with respect to the Series 2004A Bond shall
extend until it is paid or provision has been duly made for its payment. "Business Day" means
any day other than (i) a Saturday or Sunday, or (ii) a legal holiday in the State of Montana.
If a stated maturity for the payment of any interest on or principal of the Series 2004A
Bond or if any redemption date shall be a day which is not a Business Day, then such payment
may be made on the next succeeding Business Day, with the same force and effect as if made on
such stated maturity or redemption date.
2.02 Registration. The Series 2004A Bond shall be fully registered as to both principal
and interest and shall be initially registered in the name of and payable to the Board of
Investments. While so registered, principal of and interest on the Bond shall be payable at the
office of U.S. Bank National Association, as Trustee for the INTERCAP Program, in Seattle,
Washington, or such other place as may be designated by the Board of Investments in writing
and delivered to the Finance Director. The Finance Director and his or her successors in office
shall act as Registrar for the Series 2004A Bond and as such shall establish and maintain a Bond
Register for the purpose of recording the names and addresses of the registered holder or assigns
of the Series 2004A Bond, and the date of registration. The City reserves the right to appoint a
successor Registrar which may be a financial institution. The City shall pay all fees and charges
of such Registrar for such services.
2.03 Redemption. Time Series 2004A Bond is subject to redemption at the option of the
City on any Business Day, in whole or in part at a Redemption Price equal to the principal
amount of the Series 2004A Bond or portions thereof to be redeemed with interest accrued to the
date of redemption and without premium. Notice of the call for redemption shall be mailed by
the City to the registered Holders of the Series 2004A Bond by first-class mail to the addresses
of such Holders shown on the registration books maintained by the Bond Registrar not less than
30 days before the date of redemption. It shall not be necessary for the Holder to surrender this
the Series 2004A Bond for payment upon the partial redemption hereof. The Holder agrees to
note the date and principal amount of any partial redemption of the Series 2004A Bond thereon,
but any failure to do so shall not affect the validity of any such redemption.
2.04 Form of Series 2004A Bond. The Series 2004A Bond shall be prepared in
substantially the form attached as Exhibit A to this Resolution (which is hereby incorporated
herein and made a part hereof) with such appropriate variations, omissions and insertions as are
permitted or required by this Resolution.
2.05 Assignment. The Series 2004A Bond shall be transferable by the registered
owner or attorney duly authorized in writing upon presentation thereof to the Finance Director
together with a written instrument of transfer satisfactory to the Finance Director duly executed
by the registered owner or its attorney. Such transfer shall be noted on the Series 2004A Bond.
Upon request of the registered owner or transferee, the City shall execute and deliver another
Series 2004A Bond of a principal amount equal to the outstanding principal amount of the Series
2004A Bond and maturing at the same time as the Series 2004A Bond so transferred, and the
Series 2004A Bond so surrendered for transfer shall be promptly canceled by the Finance
Director. No service charge shall be made for such transfer, but the City may require payment of
a sum sufficient to cover any tax, fee or governmental charge or other expense incurred by the
City with respect to such transfer. Until and unless otherwise provided by resolution of this
Council, the following shall be a sufficient written instrument of transfer within the meaning of
this Section 2.05:
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto:
the Water System Revenue Bond, Series 2004A, No. R- , of the City of Kalispell, Montana,
and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer the
Bond on the books kept for registration thereof, with full power of substitution in the premises.
Dated:
Registered Owner
2.06 Preparation, Execution and Delivery of Series 2004A Bond. The Series 2004A
Bond shall be prepared under the direction of the City Clerk and shall be executed on behalf of
the City by the signatures of the Mayor, City Manager and the Finance Director and sealed with
the official seal of the City. When the Bond has been executed, the City Clerk shall cause it to
be dated as of the date of delivery and delivered to the Board of Investments, as purchaser
thereof, upon payment of the purchase price heretofore agreed upon, and the Board of
Investments shall not be obligated to see to the application of the purchase price.
2.07 Rates and Charges. It is expressly understood that the Series 2004A Bond will be
payable from and secured by the Net Revenues of the System. The City hereby covenants and
agrees with the Holder of the Series 2004A Bond that the City has established rates, charges and
rentals for all services directly or indirectly furnished by the System, such that such rates,
charges and rentals are reasonable and expected to be sufficient to produce Net Revenues of the
System in each Fiscal Year, not less than 125% of the maximum annual principal and interest
payable from the Debt Service Account on the Series 2001 Bond, the Series 2003 Bond, the
Series 2004 Bonds, and the Series 2004A Bond.
Section 3. City Covenants. The City covenants and agrees with the holders from
time to time of each of the Series 2004A Bond that until the Series 2004A Bond and interest
thereon are fully paid:
3.01 Compliance with Covenants. The City will hold the Water System Fund of the
City, as trust funds, separate and apart from all of its other funds, and the City, its officers and
agents, will comply with all covenants and agreements contained in this resolution.
3.02 Construction of Project. The City will do all acts and things necessary to enforce
the provisions of the construction contracts entered into or to be entered into for the Project and
to ensure the completion of the Project in accordance with the plans and specifications therefor
and within the time therein provided, and will pay all costs thereof promptly as incurred and
allowed, out of the Construction Account and within the amount of the bond proceeds
appropriated thereto.
3.03 Absence of Litigation. There is now no litigation pending or, to the best
knowledge of the City, threatened, questioning the validity or regularity of the Project, any
contract for construction of the Project, or the right and powers of the City to issue the Series
2004A Bond, or in any manner questioning the existence of any condition precedent to the
exercise of the l.ity s powers I[[ €r)ese 111ULturs. H any such litigation should be initiated or
threatened, the City will forthwith notify in writing the Board of Investments, and will furnish
the Board of Investments a copy of all documents, including pleadings, in connection with such
litigation.
3.04 Additional Obligations. While the Series 2004A Bond is outstanding, no
additional obligations shall be hereafter issued without the prior written consent of the holders of
the Series 2004A Bond unless such obligations are secured by a lien on the Net Revenues which
is expressly made junior and subordinate to the lien upon the Surplus Net Revenues securing the
Series 2004A Bond.
Section 4. Security for the Series 2004A Bond. The Series 2004A Bond is issued as
an Additional Bond under Section 6.01 of the Resolution and shall, with the Series 2001 Bond,
the Series 2003 Bond, the Series 2004 Bonds, and any other Additional Bonds issued under the
provisions of Section 6.01 of the Resolution, be equally and ratably secured by the provisions of
the Resolution and payable out of the Net Revenues appropriated to the Debt Service Account of
the Water System Fund, without preference or priority, all as provided in the Resolution, and
secured by the Reserve Account, as further provided in Section 7.05 of the Resolution. Upon
advancement of principal of the Series 2004A Bond, the Finance Director shall transfer from
available funds of the System or proceeds of the Series 2004A Bond, or both, 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
2004A 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 2001 Bond, the
Series 2003 Bond, the Series 2004 Bonds, and the principal of the Series 2004A Bond so
advanced. The City 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 2004A Bond.
Section 5. Tax Matters.
5.01 Use ofPro'ect and -System. The Project is and will be owned and operated by the
City and used by the City to provide water services to members of the general public as part of
the System. No user of the System is granted any concession, license or special arrangement
with respect to the System or any part thereof. The City shall not enter into any lease, use or
other agreement with any non -governmental person relating to the use of the Project or the
System or security for the payment of the Series 2004A Bond which might cause the Series
2004A Bond to be considered a "private activity bond" or a "private loan bond" within the
meaning of Section 141 of the Code.
5.02 General Covenant. The City covenants and agrees with the owners from time to
time of the Series 2004A 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 2004A Bond to
become includable in gross income for federal income tax purposes under the Code and
applicable Treasury Regulations (the "Regulations"), and covenants to take any and all actions
within its powers to ensure that the interest on the Series 2004A Bond will not become
includable in gross income for federal income tax purposes under the Code and the Regulations.
5.03 Arbitrage Certification. The Mayor, the City Manager and the City Finance
Director, being the officers of the City charged with the responsibility for issuing the Series
2004A Bond pursuant to this resolution, are authorized and directed to execute and deliver to the
Board of Investments a certificate in accordance with the provisions of Section 148 of the Code,
and the Treasury Regulations, Sections 1.148-2(b), stating that on the basis of facts, estimates
and circumstances in existence on the date of issue and delivery of the Series 2004A Bond, it is
reasonably expected that the proceeds of the Series 2004A Bond will be used in a manner that
would not cause the Series 2004A Bond to be an "arbitrage bond" within the meaning of Section
148 of the Code and the Regulations.
5.04 Arbitrage Rebate Exem Lion. The City hereby represents that it qualifies for the
exception for small governmental units to the arbitrage rebate provisions contained in Section
148(f) of the Code for the Series 2004A Bond. Specifically, the City represents:
(a) The Project is to be used solely by members of the general public and no
special concession or contract is or will be granted to any user of the Project.
(b) Substantially all (not less than 95%) of the proceeds of the Series 2004A
Bond will be used for local governmental activities of the City.
(c) The aggregate face amount of all "tax-exempt bonds" (including warrants,
contracts, leases and other indebtedness, but excluding private activity bonds) issued by
7
the City and all subordinate entities thereof during 2004 is not reasonably expected to
exceed $5,000,000. To date in 2004, the City has issued its $1,543,000 Sewerage System
Revenue Bond (DNRC Revolving Loan Program), Series 2004 and its $1,840,000 Water
System Revenue and Refunding Bonds (the refunding portion of which constituted a
current refunding in an amount that was less than the amount of the Water System
Revenue Bonds, Series 1996, refunded thereby), and in the calendar years 1999 through
2003, the City issued no such tax-exempt bonds, except its $1,581,500 Special
Improvement District No. 343 Bonds, $761,000 Water System .Revenue Bond (DNRC
Drinking Water Revolving Doan Program), Series 2001, $2,355,000 Sewerage System
Revenue Refunding Bonds, Series 2002, $3,675,000 General Obligation Bonds, Series
2002, and $907,500 Water System Revenue Bond, Series 2003.
(d) If notwithstanding the other provisions of this Section 5.04, the arbitrage
rebate provisions of Section 148(f) of the Code apply to the Bond, the City hereby
covenants and agrees to make the determinations, retain records and rebate to the United
States the amounts at the times and in the manner required by said Section 148(f).
5.05 Information Reportiin. The City shall file with the Secretary of the Treasury, not
later than November 15, 2004, a statement concerning the Series Bond containing the
information required by Section 149(e) of the Code.
5.06 Qualified Tax-Exem t Obli ation. Pursuant to Section 265(b)(3)(B)(ii) of the
Code, the City hereby designates the Series 2004A Bond as a "qualified tax-exempt obligation"
for purposes of Section 265(b)(3) of the Code. The City has not designated any obligations in
2004 other than the Series 2004 Bonds and the Series 2004A Bond under Section 265(b)(3). The
City 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 City and all "subordinate
entities" of the City in 2004 in an amount greater than $10,000,000_
Section 6. Restatement of Clarification to Certain Provisions of the Resolution. In
Resolution No. 4758 duly adopted by the City Council on December 2, 2002, the Resolution was
amended and supplemented as follows:
"With respect to the Series 2003 Bond and any other water system revenue bonds
purchased or proposed to be purchased under the Board of Investments' INTERCAP
Program, and that bear or will bear interest at a variable or floating rate (collectively, the
"Water System Bonds"), interest on such Water System Bonds shall be calculated by
assuming that the interest rate then borne by such Water System Bonds is the average
annual rate of interest on loans made by the Board of Investments pursuant to the
INTERCAP Program calculated by reference to the then current annual rate of interest on
the Water System Bonds and the annual rates of interest on such bonds in each of the
immediately preceding four years (with each of such previous years being the .12-month
period ending on February 15)."
The Montana Department of Natural Resources, the holder of the Series 2001 Bond, and
the BOI consented to the above amendment and they then collectively held more than two-thirds
of the Outstanding Bonds (as defined in the Resolution); therefore, pursuant to Section 9.02 of
the Resolution, such amendment was duly approved.
Section 7. Amendments to Resolution. As long the Series 2004A Bond is
outstanding, the terms, conditions and covenants of this Supplemental Resolution may be
amended only with the written consent of the City and the Board of Investments.
Section 8. Authentication of Transcript. The officers of the City are hereby
authorized and directed to furnish to the Board of Investments and to the attorneys approving the
legality of the Series 2004A Bond certified copies of all proceedings relating to the issuance of
the Series 2004A Bond and such other certificates and affidavits as may be required to show the
right, power and authority of the City to issue the Series 2004A Bond, and all statements
contained in and shown by such instruments, including any heretofore furnished, shall constitute
representations of the City as to the statements contained therein.
Section 9. Repeals and Effective Date.
9.01 Repeal. All provisions of other resolutions and other actions and proceedings of
the City and this Council that are in any way inconsistent with the terms and provisions of this
resolution are repealed, amended and rescinded to the full extent necessary to give full force and
effect to the provisions of this resolution.
9.02 Effective Date. This Supplemental Resolution shall be in full force and effect
from and after its passage.
2004.
Attest:
Passed by the City Council of the City of Kalispell, Montana, on this 16th day of August,
G.
EXHIBIT A
UNITED STATES OF AMERICA
STATE OF MONTANA
COUNTY OF FLATHEAD
CITY OF KALISPELL
WATER SYSTEM REVENUE BOND
SERIES 2004A
Interest at the rate per annum specified below payable February 15 and August 15
through the final stated maturity or upon redemption thereof
No. R-1 $490,000
FOR VALUE RECEIVED, THE CITY OF KALISPELL (the "City"), a municipal
corporation and political subdivision of the State of Montana, acknowledges itself to be indebted
and hereby promises to pay to the BOARD OF INVESTMENTS OF THE STATE OF
MONTANA (the "Board of Investments") or registered assigns (the "Holders"), but solely from
the Water System Fund (the "Fund") hereinafter specified, the principal amount of FOUR
HUNDRED NINETY THOUSAND AND NO/ 100 DOLLARS ($490,000.00), or so much
thereof as is advanced, and to pay interest thereon, solely from the Fund, on the principal
amounts advanced hereunder from the respective dates of such advances, at an interest rate per
annum equal to the Variable Rate (as hereinafter defined), all subject to the provisions of this
Bond permitting the redemption hereof prior to maturity. Principal and interest on outstanding
principal of this Bond shall be payable on each February 15 and August 15, commencing
February 15, 2005 through August 15, 2014 (the final stated maturity), to the Holder of this
Bond appearing in the registration books of the City as of the date of such payment. Interest
hereon shall be computed on the basis of the actual number of days in the years and the actual
number of days that this Bond is outstanding at the Variable Rate (as hereinafter defined). The
installments of principal and interest are payable at the office of the U.S. Bank National
Association, Seattle, Washington, or such other place as the Board of Investments shall designate
in writing, except that in the event that the Board of Investments has assigned this Bond, the
installments of principal and interest are payable to the Holder at his address as it appears on the
Bond Register of the City. Principal and interest are payable in any coin or currency of the
United States of America which on the respective dates of payment is legal tender for public and
private debts.
This Bond comprises an issue of "Water System Revenue Bond, Series 2004A" of the
City, and is issued in the maximum authorized principal amount of $490,000. This 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, Parts 44 and 45, as
amended, and Resolution No. 4273, adopted by the City Council of the City (the "City Council")
on June 17, 1996, as amended and supplemented by Resolution Nos. 4603, 4758, and 4892,
A-1
adopted by the City Council on March 5, 2001, December 2, 2002, and May 17, 2004,
respectively (collectively, the "Original Resolution"), as amended and supplemented by
Resolution No. , adopted by the City Council on August 16, 2004 (the "Supplemental
Resolution") (the Original Resolution, as amended and supplemented by the Supplemental
Resolution, the "Resolution"). This Bond (sometimes referred to herein as the "Series 2004A
Bond") is issued for the purpose of financing the construction, improvement, extension and
rehabilitation of certain elements of the municipal water system of the City (the "System"),
including changing out residential water meters and installation of fire hydrants, and related
improvements, all pursuant to and in full conformity with the Constitution and laws of the State
of Montana and resolutions of the City thereunto enabling, including the Act and the Resolution,
to which Resolution reference is made for the terms and conditions, other than those herein
stated, upon which this Bond is issued and secured. The Series 2004A Bond, including the
interest thereon, is payable solely from the revenues pledged to the payment thereof and does not
constitute a debt of the City within the meaning of any constitutional or statutory limitation or
provision. Apart from the Series 2004A Bond, there are currently outstanding under the
Resolution the City's Water System .Revenue Bond (DNRC Drinking Water Revolving Loan
Program), Series 2001 (the "Series 2001 Bond"), its Water System Revenue Bond, Series 2003
(the "Series 2003 Bond"), and its Water System Revenue and Refunding Bonds, Series 2004 (the
"Series 2004 Bonds"). The Series 2001 Bond, the Series 2003 Bond, the Series 2004 Bonds, and
the Series 2004A Bond are payable solely, and equally and ratably, from the Net Revenues of the
System and on a parity with any Additional Bonds that may hereafter be issued on a parity
therewith under the Resolution (collectively, the "Bonds").
Outstanding principal of this Bond shall bear interest from the date it is advanced
hereunder until paid at the Variable Rate (as hereinafter defined), as such may be adjusted from
time to time as hereinafter provided. Until the initial Adjustment Date (as hereinafter defined),
the Variable Rate shall be two and seventy hundredths percent (2.70%) per annum. Thereafter,
for each Adjustment Period (as hereinafter defined), the Variable Rate shall be the rate per
annum equal to the Board of Investments Rate (as defined in the Resolution). If for any reason
the interest rate cannot be established as so provided or is held invalid or unenforceable by a
court of law, the interest rate for this Bond for the Adjustment Period shall be a rate equal to the
largest integral multiple of five hundredths of one percent (0.05%) that is equal to or less than
eighty percent (80%) of the average yield, evaluated at par. of United States Treasury obligations
with a stated or remaining maturity of one year, as reported in The Wall Street Journal (Des
Moines Edition) (or, if such paper is no longer published or fails to report such information, in
any other financial periodical selected by the City and acceptable to the Holder) on the
Adjustment Date or, if the Adjustment Date is not a Business Day (as hereinafter defined), the
immediately preceding Business Day, but in no event to exceed fifteen percent (15.00%) per
annum. As used herein, "Adjustment Date" means February 16, during the term of the Series
2004A Bond, and "Adjustment Period" means the period beginning on the Adjustment Date and
ending on the day immediately preceding the next succeeding Adjustment Date or the final stated
maturity of this Bond, whichever is earlier; provided that if this Bond is not paid at its final
stated maturity, the final Adjustment Period shall extend until all principal installments hereof
are paid or provision has been duly made for their payment. The initial Adjustment Date shall be
February 16, 2005. As used herein, "Business Day" means any day other than (1) a Saturday or
Sunday, or (ii) a legal holiday in the State of Montana.
A-2
Upon each disbursement of the Series 2004A Bond proceeds, the Board of Investments
shall enter the amount advanced on Schedule A attached thereto under "Advances" and the total
amount advanced under the Resolution, including such disbursement, under "Total Amount
Advanced."
This Series 2004A Bond is not a general obligation of the City and the City's general
credit and taxing powers are not pledged to the payment of this Series 2004A Bond or interest
thereon. This Series 2004A Bond does not constitute an indebtedness of the City within the
meaning of any constitutional or statutory provisions.
This Bond is subject to redemption at the option of the City on any Business Day, in
whole or in part at a Redemption Price equal to the principal amount of this Bond or portions
thereof to be redeemed with interest accrued to the date of redemption and without premium.
Notice of the call for redemption shall be mailed by the City to the registered :Holders of this
Bond by first-class mail to the addresses of such Holders shown on the registration books
maintained by the Bond Registrar not less than 30 days before the date of redemption. It shall
not be necessary for the Holder to surrender this Bond for payment upon the partial redemption
hereof. The Holder agrees to note the date and principal amount of any partial redemption
hereof hereon, but any failure to do so shall not affect the validity of any such redemption.
The City has designated this Bond as a "qualified tax-exempt obligation" within the
meaning of Section 265(b) of the Internal Revenue Code of 1986, as amended.
This Bond shall be registered in the name of the holder on the Bond register of the City
kept by the Finance Director as Bond Registrar. This Bond is transferable by the registered
holder or its attorney duly authorized in writing, upon presentation hereof with a written
instrument of transfer satisfactory to the City and duly executed by the registered holder or its
attorney. Such transfer shall be noted on the Bond register and on the reverse hereof. The City
will, upon request, issue to the registered holder or transferee, upon surrender of this Bond, one
or more other Bonds of the same series, of an aggregate principal amount equal to the principal
amount hereof then remaining unpaid and maturing at the same time or times as the then unpaid
principal installments hereof, subject to reimbursement for any tax, fee or governmental charge
or other expense incurred by the City with respect to such exchange. The City may treat the
person in whose name this Bond is registered as the absolute owner hereof, whether this Bond is
overdue or not, for the purpose of receiving payment of principal and interest and all other
purposes, and shall not be affected by any notice to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City
will fix, establish and collect reasonable rates, fees, tolls, rents and charges for the services and
facilities afforded by the System, subject to applicable law, and has created a special Water
System Fund into which the gross revenues of the System, including all additions thereto and
replacements and improvements thereof subsequently constructed or acquired, will be paid, and a
separate and special Debt Service Account in the Fund, into which .Debt Service Account there
shall be credited out of the Net Revenues of the System then on hand (the gross revenues
remaining after payment of operating expenses of the System) monthly an amount equal to not
less than one -sixth of the interest due within the next six months on all Bonds then Outstanding
and one -twelfth of the principal, if any, to become due within the next twelve months on all
Outstanding Bonds (whether due at a stated maturity, upon mandatory sinking fund redemption
FEW]
of Term Bonds or otherwise); except for payments to the Rebate Account, that the Debt Service
Account will be used only to pay the principal of, premium, if any, and interest on Bonds as such
principal, premium and interest respectively become due; that rates, fees, tolls, rents and charges,
if any, will from time to time be made and kept sufficient to provide gross income and revenues
adequate for prompt payment of the reasonable and current expenses of operation and
maintenance of the System and to produce in each fiscal year Net Revenues, in excess of such
current expenses, equal to 125% of the Maximum Principal and .Interest Requirements (as such
term is modified by Section 6 of Resolution No. 4758) on the Series 2001 Bond, the Series 2003
Bond, the Series 2004 .Bonds, this Series 2004A Bond and on any Additional Bonds hereafter
issued made payable from said Net Revenues in all Fiscal Years during which any of the Bonds
will be Outstanding, and to establish and maintain the Reserve Requirement, to pay promptly
current Operating Expenses, to pay any Subordinate Obligations, and to provide reserves for the
repair and replacement of the System, as further provided in the Resolution; that, except as
additional or refunding parity bonds are expressly authorized in the Resolution, no other
obligation will be 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 Series 2001 Bonds, the Series
2003 Bond, the Series 2004 Bonds, and this Series 2004A Bond on such Net Revenues; that all
provisions for the security, of the holler of this 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 resolutions of the City to
be done, to exist, to happen and to be performed in order to make this Series 2004A Bond a valid
and binding special, Limited obligation of the City according to its terms have been done, do
exist, have happened and have been performed as so required; and that the issuance of this Series
2004A Bond does not cause the indebtedness, whether general or special, of the City to exceed
any constitutional or statutory limitation.
IN WITNESS WHEREOF, the City of Kalispell, Montana, by its City Council, has
caused this Bond to be executed on its behalf by the signatures of the Mayor, City Manager and
Finance Director, sealed with the official corporate seal of the City, and has caused this Bond to
be dated as of 2004.
CITYKALISPELL, MONTANA
ByF=
Mayor
,L) SM By
sx_ City Manager
By
finance irector
A-4
PROVISIONS FOR.. REGISTRATION OF TRANSFER
The ownership of this Bond and of the interest payable hereon may be transferred to a
bona fide purchaser only by delivery with an assignment duly executed by the registered owner
or his attorney or legal representative, and the City may treat the registered owner as the person
exclusively entitled to receive payments of principal of and interest on this Bond and to exercise
all the rights and powers of an owner until this Bond is presented to the Finance Director of the
City of Kalispell, as Bond Registrar, accompanied by said assignment and by assurance of the
nature provided by law that the same is genuine and effective, and until such transfer is
registered on the books of the City and noted hereon by the finance Director.
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 Kalispell, Montana in the name of the registered
holder appearing on the first page hereof or as last noted below:
Date of Name and Address of
Registration Registered Holder Finance Director
Board of Investments
2401 Colonial Dr.
P.O. Box 200126
-Helena, MT 59620-0126
NO WRITING HEREON EXCEPT BY FINANCE DIRECTOR
AS BOND REGISTRAR
The Finance Director has transferred on the books of the City of Kalispell, Flathead
County, Montana, on the date last noted below, to the registered assign noted opposite said date,
ownership of the principal amount of and interest on this Bond, except the amounts of principal
and interest theretofore paid:
Date of Transfer
Signature of
Registered Assign Bond Registrar
A-5
SCHEDULE A
SCHEDULE OF AMOUNTS ADVANCED
Total Amount
Date Advances Advanced
FEW
Natation Made By