Resolution 5001 - $517,000 Water System Revenue BondsRESOLUTION NO.5001
RESOLUTION RELATING TO $517,000 WATER SYSTEM REVENUE BOND, SERIES
2005; 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 term 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 $653,000, its Water System Revenue .Bond, Series
2003 (the "Series 2003 Bond"), outstanding in the total principal amount of $779,072, its Water
System Revenue and Refunding Bonds, Series 2004 (the "Series 2004 Bonds"), outstanding in
the total principal amount of $1,840,000, and its Water System Revenue Bond, Series 2004A
(the "Series 2004A Bond"), outstanding in the total principal amount of $465,500, issued to
finance or refinance the costs of certain improvements to the System, pursuant to Resolution No.
4273, adopted by this Council on June 17, 1996, as amended and supplemented by Resolution
Nos. 4603, 4758, 4892, and 4927, adopted by this Council on March 5, 2001, December 2, 2002,
May 17, 2004, and August 16, 2004, respectively (as so amended and supplemented, the
"Resolution"). Apart from the Series 2001 Bond, the Series 2003 Bond, the Series 2004 Bonds,
and the Series 2004A Bond, 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 Project. The City has determined the necessity of upgrading the System. The
Project consists of the 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 $517,000, and consist of the following items:
Total
Costs
Water Meters $360,225
Fire Hydrants 110,225
Reserve Account 46,550
Total: $S 17,000
1.04 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 Jo 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 2005 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 $517,000 in aggregate principal amount of Bonds to finance costs of the
.Project under Section 6.01 of the Resolution (the "Series 2005 Bond"). The City has obtained a
certificate of an Independent Consultant in accordance with the previous paragraph of this
Section and Section 6.01 of the Resolution. The Series 2005 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 outstanding Series 2001 Bond, the Series 2003 Bond, the Series 2004 Bonds,
the Series 2004A Bond, and any Additional Bonds hereafter issued.
1.05 Net Revenues Available, The City is authorized to charge just and equitable fees,
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,
the Series 2004A Bond, and the Series 2005 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 fees, rates, charges and
rentals, as most recently increased, during the term of the Series 2005 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, the Series 2004A Bond and the Series 2005 Bond, and
to create and maintain reasonable reserves therefor and to provide an allowance for replacement
and depreciation, as prescribed by the Resolution.
1.06 Sale and Authorization of Series 2005 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 2005 Bond. The City has received an offer from the Board
of Investments of the State of Montana (the "Board of Investments") through its INTERCAP
Program to purchase the Series 2005 Bond at a price of $517,000, plus interest accrued on the
Series 2005 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 2005 Bond in
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the form and upon the terms and conditions provided in the Resolution, as supplemented by this
Supplemental Resolution.
1.07 Recitals. All acts, conditions and things required by the Constitution and laws of
the State of Montana to be done, to exist, to happen and to be performed prior to the issuance of
the Series 2005 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 2005 Bond and to provide for the security thereof and to issue the Series 2005
Bond.
Section 2. Terms Form and Execution of and Securitv for the Series 2005 Bond,
2.01 General Terms. The City shall forthwith issue the Series 2005 Bond in the
principal amount of $517,000. The Series 2005 Bond shall be dated as of the date of its delivery.
Upon each disbursement of the Series 2005 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 2005 Bond shall be lettered and numbered R-1 and shall be payable semi-annually,
with a final stated maturity date of August 15, 20.1.5, 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 to actual number of days amounts advanced under the Series 2005 Bond are
outstanding. Interest only shall be payable on the outstanding principal amount of the Series
2005 Bond through August 15, 2005, and thereafter installments of principal and interest shall be
payable on each February 15 and August 15, commencing February 15, 2006, through the final
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Stated maturity of the ,Sciiw _vuJ �vjiu, suuJr,4e w t,rior IUUU111 lutl as 1leiGiil PIUVIUVU. t ll
outstanding principal, together with accrued and unpaid interest on the Series 2005 Bond, shall
be payable on the final stated maturity of the Series 2005 Bond. Payments of principal of and
interest on the Series 2005 Bond shall be made to the registered holder of the Series 2005 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 2005 Bond shall bear interest from the date of
advancement thereof under the Series 2005 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 2005 Bond (February 16, 2006), the Variable Rate shall be three and eighty hundredths
percent (3.80%) per annum. Thereafter, for each Adjustment Period during the term of the
Series 2005 Bond, the Variable Rate shall be the rate per annum equal to the then prevailing rate
of interest determined by the Board 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 2005 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 acceptable to the Board of Investments) on the Adjustment Date or, if the Adjustment Date
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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"
mennS Febrnnry 16 during the term of the Series 2005 Bond and "Adiustment. 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 2005 Bond, whichever is
earlier; provided that if the Series 2005 Bond is not paid at its final stated maturity, the final
Adjustment Period with respect to the Series 2005 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 2005
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 Re ig stration. The Series 2005 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 2005 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 2005 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. The Series 2005 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 2005 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 2005 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 2005 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 2005 Bond thereon, but any
failure to do so shall not affect the validity of any such redemption.
2.04 Form of Series 2005 Bond. The Series 2005 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 Ass i Tent. The Series 2005 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 2005 Bond. Upon
request of the registered owner or transferee, the City shall execute and deliver another Series
2005 Bond of a principal amount equal to the outstanding principal amount of the Series 2005
Bond and maturing at the same time as the Series 2005 Bond so transferred, and the Series 2005
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 2005, 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 2005 Bond. The Series 2005 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 2005 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 2005 Bond that the City has established fees, 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 1.25% of the maximum annual principal and interest
payable from the Debt Service Account in respect of the Series 2001 Bond, the Series 2003
Bond, the Series 2004 Bonds, the Series 2004A Bond, and the Series 2005 Bond.
Section 3. City Covenants. The City covenants and agrees with the holders from
time to time of each of the Series 2005 Bond that until the Series 2005 Bond and interest thereon
are fully paid:
3.01 Compliance with Covenants. The City will bold 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 the 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
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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
2005 Bond, or in any manner questioning the existence of any condition precedent to the
exercise of the City's powers in these matters. If 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 2005 Bond is outstanding, no additional
obligations shall be hereafter issued without the prior written consent of the holders of the Series
2005 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 2005
Bond.
Section 4. Security for the Series 2005 Bond. The Series 2005 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, the Series 2004A Bond, and any other Additional
Bonds issued under the provisions of Section 6.01 of the Resolution, be equally and ratably
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secured' oy (he provisions u► Otte acesc�iutiol:t and payable oui ut me t�et xevenues appropriates 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 2005 Bond, the Finance
Director shall transfer from available funds of the System or proceeds of the Series 2005 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 2005 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, the Series 2004A Bond, and the
principal of the Series 2005 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 2005 Bond.
Section 5. Tax Matters.
5.01 Use of Project 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 2005 Bond which might cause the Series 2005
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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 2005 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 2005 Bond to
become includable in gross income for federal income tax purposes under the Cade 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 2005 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 2005
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 2005 Bond, it is
reasonably expected that the proceeds of the Series 2005 Bond will be used in a manner that
would not cause the Series 2005 Bond to be an "arbitrage bond" within the meaning of Section
148 of the Code and the Regulations.
5.04 Arbitrage Rebate. The City acknowledges that the Series 2005 Bond is subject to
the rebate requirements of Section 148(f) of the Code. The City 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 2005 Bond from gross income for federal income
tax purposes, unless the Series 2005 Bond qualifies for the exception from the rebate
requirement under Section 148(f)(4)(B) of the Code and no "gross proceeds'" of the Series 2005
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 Finance
Director is hereby authorized and directed to execute a Rebate Certificate, substantially in the
form of the Rebate Certificate prepared by Bond Counsel and the City hereby covenants and
agrees to observe and perform the covenants and agreements contained therein, unless amended
or terminated in accordance with the provisions thereof.
5.05 Information Reporting. The City shall file with the Secretary of the Treasury, not
later than August 15, 2005, 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)(13)(h) of the
Code, the City hereby designates the Series 2005 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 2005
other than the Series 2005 Bond and its $3,000,000 General Obligation Bonds, Series 2005,
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
7
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 2005 in an amount greater than. $10,000,000.
Section 6. Restatement of Clarification to Certain Provisions of the Resolution. By
Resolution No. 4758 duly adopted by the City Council on December 2, 2002, the Resolution was
amended and supplemented as follows.
"To apply and construe certain provisions of the Resolution in view of the
variable rate of interest on the Series 2003 Bond, such as Section 6.01 of the Resolution,
Sections 8.09 of Resolution No. 4273 and 2.07 of this Supplemental Resolution,
provisions pertaining to the Reserve Requirement, and any other provisions of the
Resolution that establish tests based on principal of and interest on the Bonds, such
sections and provisions are hereby amended m set forth in this Section. 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, as the holder of the Series 2001 Bond,
and the BOl 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
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y.t)G ill h I�GSUIUUtUtt, NUU1i U111G11Ull1Gllt WdS UU1y UpplUVGU.
Section 7. Amendments to Resolution. As long the Series 2005 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 S. 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 2005 Bond certified copies of all proceedings relating to the issuance of the
Series 2005 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 2005 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. Reveals and Effective Date.
9.01 Reveal. 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.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF
THE CITY OF KALISPELL THIS 4TH DAY OF APRIL, 2005.
ATTEST:
Theresa White
City Clerk
9
Pamela B. Kenned
Mayor
EXHIBIT A
UNITED STATES OF AMERICA
STATE OF MONTANA
COUNTY OF FLATHEAD
CITY OF KALISPELL
WATER SYSTEM REVENUE BOND
SERIES 2005
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
$51 '7,000
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 FIVE
HUNDRED SEVENTEEN THOUSAND AND NO/100 DOLLARS ($517,000.00), 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
Bored permitting the redemption hereof prior to maturity. Interest only on the outstanding
principal of this Bond shall be payable on August 15, 2005, and thereafter outstanding principal
and interest thereon shall be payable in equal installments of principal with interest thereon on
each February 15 and August 15, commencing February 15, 2006 through August 15, 2015.(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 2005" of the City,
and is issued in the maximum authorized principal amount of $517,000. 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")
A -I
on June 17, 1996, as amended and supplemented by Resolution Nos. 4603, 4758, 4892, and
4927, adopted by the City Council on March 5, 2001, December 2, 2002, May 17, 2004, and
August 1.6, 2004, respectively (collectively, the "Original Resolution"), as amended and
supplemented by Resolution No. , adopted by the City Council on April 4, 2005 (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 2005 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 2005 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 2005 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"), its Water System Revenue and Refunding Bonds, Series 2004 (the
"Series 2004 Bonds"), and its Water System Revenue Bond, Series 2004A (the "Series 2004A
Bond"). The Series 2001 Bond, the Series 2003 Bond, the Series 2004 Bonds, the Series 2004A
Bond, and the Series 2005 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 three and eighty hundredths percent (3.80%) 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 .Iournal (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
2005 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
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February 16, 2006. As used herein, "Business Day" means any day other than (i) a Saturday or
Sunday, or (ii) a legal holiday in the State of Montana.
Upon each disbursement of the Series 2005 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 2005 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 2005 Bond or interest thereon.
This Series 2005 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
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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
of Terra 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 1.25% 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, the Series 2004A Bond, this Series 2005 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, the Series 2004A Bond, and this Series
2005 Bond on such Net Revenues; that all provisions for the security of the holder 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 2005 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 2005 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 , 2005.
CITY OF KALISPELL, MONTANA
(SEAL) By
By
Mayor
City Manager
Finance Director
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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
Board of Investments
2401. Colonial Dr.
P.Q. Box 200126
Helena, MT 59620-0126
Finance Director
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:
Signature of
Date of Transfer Registered Assign Bond Registrar
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SCHEDULE A
SCHEDULE OF AMOUNTS ADVANCED
Total Amount
Date Advances Advanced Notation Made B
A