Resolution 5246 - Approves Sewer System Revenue BondRESOLUTION NO, 5246
RESOLUTION RELATING TO $14,470400 SEWERAGE SYSTEM REVENUE BOND
(DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM),
SERIES 2007; AUTHORIZING THE ISSUANCE AND FIXING THE TERMS AND
CONDITIONS THEREOF
WHEREAS, pursuant to the Montana Water Pollution Control State Revolving Fund Act,
Montana Code Annotated, Title 75, Chapter 5, Part 11, as amended (the"State Act"), the State of
Montana (the "State") has established a revolving loan program (the "Program") to be
administered by the Department of Natural Resources and Conservation of the State of Montana,
an agency of the State (the "DNRC"), and by the Department of Environmental Quality of the
State of Montana, an agency of the State (the "DEQ"), and has provided that a water pollution
control state revolving fund (the "Revolving Fund") be created within the State Treasury and all
federal, state and other funds for use in the Program be deposited into the Revolving Fund,
including, but not limited to, all federal grants for capitalization of a state water pollution control
revolving fund under the Federal Water Pollution Control Act (also known as the Clean Water
Act) (the "Clean Water Act"), all repayments of assistance awarded from the Revolving Fund,
interest on investments made on money in the Revolving Fund and payments of principal of and
interest on loans made from the Revolving Fund; and
WHEREAS, the State Act provides that funds from the Program shall be disbursed and
administered for the purposes set forth in the Glean Water Act and according to rules adopted by
the DEQ and the DNRC; and
WHEREAS, the City of Kalispell, Montana (the "City") has applied to the DNRC for a
loan (the "2007 Loan") from the Revolving Fund to enable the City to finance, refinance or
reimburse itself, in part, for the costs of the 2007 Project (as hereinafter defined) which will carry
out the purposes of the Clean Water Act; and
WHEREAS, the City is authorized under applicable laws, ordinances and regulations to
adopt this Supplemental Resolution and to issue the Series 2007 Bond (as hereinafter defined) to
evidence the Loan for the purposes set forth herein; and
WHEREAS, the DNRC will fund the 2007 Loan in part, directly or indirectly, With
proceeds of Recycled Money (as hereinafter defined).
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF I ALISPELL, MONTANA, AS FOLLOWS:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION AND APPENDICES
Section 1.1 Definitions. Unless a different meaning clearly appears from the context,
terms used with initial capital letters but undefined in this Supplemental Resolution shall have
the meanings given them in the Original Ordinance or the Indenture (each as hereinafter defined)
and terms used herein with capital letters shall have the following meanings:
"Accountant" or "Accountants" means an independent certified public accountant or a
firm of independent certified public accountants satisfactory to the DNRC.
"Act" means Montana Code Annotated, Title 7, Part 7, Chapter 44, as amended from
time to time.
"Administrative Expense Surcharge" means a surcharge on the Loan charged by the
DNRC to the City equal to 0.75% per annurn on the outstanding principal amount of the Loan,
payable by the City on the same dates that payments of interest on the Loan are due.
"Authorized DNRC officer" means the Director or Deputy Director of the DNRC, and,
when used with reference to an act or document, also means any other individual authorized by
resolution of the Department of Natural Resources and Conservation to perform such act or sign
such document. If authorized by a resolution of the Department of Natural Resources and
Conservation, an Authorized DNRC officer may delegate all or a portion of his authority as an
Authorized DNRC officer to another individual and such individual shall be deemed an
Authorized DNRC officer for purposes of exercising such authority.
"Bond Counsel" means any Counsel acceptable to the DNRC which is nationally
recognized as bond counsel. Counsel is nationally recognized as bond counsel if it has rendered
a legal opinion as to the validity and enforceability of state or municipal bonds and as to the
exclusion of interest thereon from gross income for federal income tax purposes (short-term
issues excluded) during the two-year period preceding the date of determination.
"Bonds" means the Series 1991 A Bonds, the Series 2002 Bonds, the Series 2 004 Bond,
the Series Zoo? Bond, and any additional bonds to be issued on a parity therewith pursuant to the
Ordinance.
"Borrower" means the City or its permitted successors or assigns.
"Business Day" means any day which is not a Saturday or Sunday and is not a day on
which banks in Montana are authorized or required by law to close.
"City" means the City of Kalispell, Montana.
"Clean Water Act" means the Federal Water Pollution Control Act, 3 3 U. S .C. § § 1251-
1387, as amended, and all regulations, rules and interpretations issued by the EPA thereunder.
"Closing" means the date of delivery of the Series 2007 Bond to the DNRC.
"Code's means the Internal Revenue Code of 1986, as amended.
"Collateral Documents" means any security agreement, guaranty or other document or
agreement delivered to the DNRC securing the obligations of the City under this Supplemental
Resolution and the Series 2007 Bond. If no Collateral Documents secure such obligations, any
reference to Collateral Documents in this Supplemental Resolution shall be without effect.
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"Committed Amount" means the amount of the Loan committed to be lent by the DNRC
to the City pursuant to Section 4.1 of this Supplemental Resolution, as such amount may be
reduced pursuant to Section 3.2, Section 3.4 or Section 7.3 of this Supplemental Resolution.
"Construction Account" means the account created in the Sewerage System Fund
pursuant to Section 3.02 of the Original Ordinance.
"Consultant" means a nationally recognized consultant or firm of consultants, or an
independent engineer or firm of independent engineers, or an Accountant, which in any case is
qualified and has skill and experience in the preparation of financial feasibility studies or
projections for facilities similar to the System or the 2007 Project, selected by the City and
satisfactory to the DNRC.
"Counsel" means an attorney duly admitted to practice law before the highest court of
any state and satisfactory to the DNRC.
"Debt" means, without duplication, (1) indebtedness of the City for borrowed money or
for the deferred purchase price of property or services; (2) the obligation of the City as lessee
under leases which should be recorded as capital leases under generally accepted accounting
principles; and (3) obligations of the City under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in
clause (1) or (2) above.
"DEQ" means the Department of Environmental Quality of the State of Montana, an
agency of the State, or any successor to its powers, duties and obligations under the State Act or
the EPA Agreements.
"DNRC" means the Department of Natural Resources and Conservation of the State of
Montana, an agency of the State, and any successor to its powers, duties and obligations under
the State Act.
"EPA" means the Environmental Protection Agency, an agency of the United States of
America, and any successor to its functions under the Clean water Act.
"EPA. Agreements" means all capitalization grant agreements and other written
agreements between the DEQ, DNRC and the EPA concerning the Program.
"EPA Capitalization Grant' means a grant of funds to the State by the EPA under Title
VI of the Clean Water Act and any grant made available by the EPA for deposit in the Revolving
Fund pursuant to Section 205 (m) of the Clean water Act.
"Fund" means the Sewerage System Fund established pursuant to Section 3 of the
Original Ordinance.
"Governmental Unit" means governmental unit as such term is used in Section 145(a) of
the Code.
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"Indenture" means the Indenture of Trust, dated as of June 1, 1991, between the Board of
Examiners of the State and the Trustee, as such may be supplemented or amended from time to
time in accordance with the provisions thereof, pursuant to which, among other things, the State
Bonds are to be or have been issued.
"Loan Loss Reserve Surcharge" means a fee equal to 1.00% per annum on the
outstanding principal amount of the Loan, payable on the same dates that payments of interest on
the Loan are due.
"Net Revenues" means the entire amount of the gross revenues of the System (as
described in Section 3.03 of the original ordinance) remaining upon each such quarterly
apportionment, after crediting to the operating Account the amount required hereby, including
sums required to maintain the operating Reserve in the minimum amount required by the
Original ordinance.
"Operating Account" means the account created in the Sewerage System Fund pursuant
to Section 3.03 of the original ordinance.
"operating Reserve" means the reserve to be maintained in the operating Account as
required by Section 3.03 of the original ordinance.
"ordinance" means the original ordinance, as amended and supplemented by this
Supplemental Resolution and other supplemental resolutions.
"original ordinance" means ordinance No. 859, passed and adopted by the City Council
of the City on June 21, 1976, as amended and supplemented by ordinance Nos. 862, 1002, loll ,
1421, and 1476, and by Resolution Nos. 4022, 4685, and 4910, all as duly passed and adopted by
the City Council of the City.
"Outstanding" means, as of the date of determination, all Bonds or notes theretofore
issued except: (i) obligations theretofore cancelled by the City or the Registrar or delivered to
the City or the Registrar cancelled or for cancellation; (ii) obligations and portions of obligations
for whose payment or redemption money or government obligations shall have been theretofore
deposited in trust for the holders of such obligations; provided, however, that if such obligations
are to be redeemed, notice of such redemption shall have been duly given pursuant to the
Ordinance or irrevocable instructions to call such obligations for redemption at a stated
redemption date shall have been given to the City; and (iii) obligations in exchange for or in lieu
of which other obligations shall have been issued and delivered pursuant to the ordinance;
provided, however, that in determining whether the holders of the requisite principal amount of
outstanding obligations have given any request, demand, authorization, direction, notice, consent
or waiver hereunder, obligations owned by the City shall be disregarded and deemed not to be
outstanding.
"outstanding Bonds" means the Series 1991A Bond, the Series 2002 Bonds, the Series
2004 Bond, and any other bonds that are outstanding and issued on a parity therewith, including,
from and after its issuance, the Series 2007 Bond.
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"Private Person" means an individual, corporation, partnership, association, joint venture,
joint stock company or unincorporated organization, except a Public Entity.
"Program" means the Montana Water Pollution Control State Revolving Fund Program
established by the State Act.
"Project" means the costs of designing, engineering, acquiring, constructing, installing,
improving, or enlarging the System, or any part thereof, financed, refinanced or the cost of which
is being reimbursed to the Borrower in part with proceeds of the Bonds, subordinate obligations,
or other funds of the Borrower, including the 2007 Project.
"Public Entity" means a municipality, town, county, school district, political or
administrative subdivision of State government, irrigation district, drainage district or other
public body established by State law.
"Recycled Money" means payments and prepayments of principal of any loan, and any
other amounts transferred to the Principal Subaccount in the Revenue Subaccount in the State
Allocation Account.
"Regulations" means the Treasury Regulations, whether final, temporary or proposed,
promulgated under the Code or otherwise applicable to the Series 2007 Bond.
"Replacement and Depreciation Account" means the Account created in the Sewerage
System Fund pursuant to Section 3.05 of the original Ordinance.
"Reserve" means the reserve established in the Revenue Bond Account in the Sewerage
System Fund pursuant to Section 3.04 of the original Ordinance.
"Reserve Requirement" means as of the date of calculation, an amount equal to the
maximum amount of principal and interest payable on the Bonds in any future fiscal year (giving
effect to mandatory sinking fund redemption, if any).
"Reserved Amounts" means any undisbursed Committed Amount which will or may be
required to pay any remaining costs of the 2007 Project upon completion thereof as provided in
Section 3.4(a) of this Supplemental Resolution.
"Revenue Bond Account" means the account created in the Sewerage System Fund
pursuant to Section 3.04 of the Original ordinance.
"Series 1991A Bond" means the Sewerage System Revenue Bond (DNRC Revolving
Loan Program), Series 1991A, issued by the City, in the original principal amount of $4,717,000.
"Series 2002 Bonds" means the Sewerage System Revenue Refunding Bonds, Series
2002, issued by the City in the original principal amount of $211,355,000.
"Series 2004 Bond" means the Sewerage System Revenue Bond (DNRC Revolving Loan
Program), Series 2004, issued by the City, in the original principal amount of $1,543,000.
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"Series 2007 Bond" means the Sewerage System Revenue Bond (DNRC Water Pollution
Control State Revolving Loan Program), Series 2007, issued by the City, in the original principal
amount of $14,470,000.
"State" means the State of Montana.
"State Bonds" means the State" s General Obligation Bonds (water Pollution Control
State Revolving Fund Program) issued or to be issued pursuant to the Indenture.
"State Act" means Montana Code Annotated, Title 75, Part 5, Chapter 11, as amended
from time to time.
"Supplemental Resolution" means this Resolution No. 5246 of the City adopted on
October 15, 2007.
"Surplus Account" means the account created in the Sewerage System Fund pursuant to
Section 3.06 of the Original ordinance.
"System" means the sewerage system of the City, which includes, without limitation, the
sanitary sewer facilities and storm sewer facilities of the City's sewerage system, and all
extensions, improvements and betterments thereof heretofore or hereafter constructed and
acquired.
"Trustee" means U.S. Bank National Association, in Seattle, Washington, or any
successor trustee under the Indenture.
"2007 Loan" means the loan made to the City by the DNRC pursuant to the Program in
the maximum amount of the Committed Amount to provide fiends to pay all or a portion of the
costs of the 2007 Project and to fund a deposit to the Reserve.
"2007 Project" means the facilities, improvements and activities financed, refinanced or
the cost of which is being reimbursed to the City, in part, with proceeds of the 2007 Loan,
described in Exhibit A hereto.
Section 1.2 Other Rules of Construction. For all purposes of this Supplemental
Resolution, except where the context clearly indicates otherwise:
(a) All accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted government accounting standards.
(b) Terms in the singular include the plural and vice versa.
(c) All references to time shall refer to Helena, Montana time, unless otherwise
provided herein.
(d) All references to mail shall refer to first-class mail postage prepaid.
(e) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.
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(f) "Or" is not exclusive, but is intended to permit or encompass one, more or all of
the alternatives conjoined.
Section 1.3 Appendices. Attached to this Resolution and hereby made a part hereof
are the following Appendices:
Appendix A: a description of the 2007 Project;
Appendix B : the form of the Series 2007 Bond; and
Appendix C: additional agreements and representations of the City.
ARTICLE II
AUTHORIZATION, FINDINGS, REPRESENTATIONS AND COVENANTS
Section 2.1 Authorization and Findings.
(a) Authorization. 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 issues to
provide funds for the reconstruction, improvement, betterment and extension of the System or to
refund its revenue bonds issued for such purpose; provided that the bonds and the interest
thereon are to be payable solely out of the net income and revenues to be derived from rates, fees
and charges for the services, facilities and commodities furnished by the undertaking, and are not
to create any obligation for the payment of which taxes may be levied except to pay for services
provided by the undertaking to the City.
(b) The System. The City, pursuant to the Act and other laws of the State, has
established and presently owns and operates the System and has caused the System to include the
City's sanitary sewer facilities and storm sewer facilities.
(c) The 2007 Project. After investigation of the facts and as authorized by the Act,
this Council has determined it to be necessary and desirable and in the best interests of the City
to acquire and construct or cause the construction of the 2007 Project.
(d) Outs t_andn Bands. Pursuant to the Act and the Ordinance, the City has issued its
Series 1991 A Bonds, its Series 2002 Bonds, and its Series 2004 Bond. The Series 1991 A Bond,
Series 2002 Bonds, and the Series 2004 Bond are payable from Net Revenues of the System. No
other bonds or indebtedness are outstanding that are payable from revenues of the System.
(e) Additional Parity Bonds. The City reserved the right under Section 4.03 of
Ordinance No. 859 to issue additional parity Bonds payable from the Revenue Bond Account of
the Fund on a parity as to both principal and interest on the outstanding Bonds, if the Net
Revenues of the System for the last complete fiscal year preceding the issuance of such
additional bonds have equaled at least 125 % of the maximum amount of principal and interest
payable from the Revenue Bond Account in any subsequent fiscal year during the terns of the
Outstanding Bonds, on all outstanding Bonds and on the additional bonds proposed to be issued.
For the purpose of the foregoing computation, the Net Revenues for the fiscal year preceding the
issuance of the additional bonds shall be the net revenues shown by the official books and
records of the City, except that if the rates and charges for sewerage service have been changed
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since the beginning of such preceding fiscal year, then the rates and charges in effect at the time
of issuance of the additional bonds shall be applied to the quantities of service actually rendered
and made available during such preceding fiscal year to ascertain the gross revenues, from which
there shall be deducted to determine the Net Revenues, the actual operation and maintenance
cost for the last complete fiscal year shown by the official books and records of the City plus any
additional annual costs of operation and maintenance which the engineer for the City estimates
will be incurred because of the improvement or extension of the sewerage system to be
constructed from the proceeds of the additional bonds proposed to be issued. In no event shall
any additional bonds be issued and made payable from the Revenue Bond Account if the City is
then in default in any payment of principal or interest on any Outstanding Bonds payable
therefrom., or if there then exists any deficiency in the balances required by the Ordinance to be
maintained in any of the accounts of the Sewerage System Fund. Based on a certificate executed
or to be executed by the City Manager and Finance Director of the City, it is hereby determined
that the City is authorized to issue $14,470,000 in aggregate principal amount of additional
Bonds pursuant to Section 4.03 of Ordinance No. 859, payable from and secured by the Net
Revenues on a parity with the Outstanding Series 1991A Bonds, Series 2002 Bonds, and Series
2004 Bond.
Section 2.2 Representations. The City represents as follows:
(a) Organization and Authority. The City:
(i) is duly organized and validly existing as a municipal corporation of the
State;
(ii) has all requisite power and authority and all necessary licenses and
permits required as of the date hereof to own and operate the System and to carry on its
current activities with respect to the System, to adopt this Resolution and to enter into the
Collateral Documents and to issue the Series 2007 Bond and to carry out and
consummate all transactions contemplated by the Ordinance, the Series 2007 Bond and
the Collateral Documents,
(iii) is a Governmental Unit and a Public Entity; and
(iv) has taken all proper action to authorize the execution, delivery and
performance of its obligations under this Supplemental Resolution, the Series 2007 Bond
and the Collateral Documents and the incurrence of the Debt evidenced by the Series
2007 Bond in the maximum amount of the Committed Amount.
(b) Pending ,Litigation. There is no litigation or proceeding pending, or to the
knowledge of the City threatened, against or affecting the City in any court or before or by any
governmental authority or arbitration board or tribunal that, if adversely determined, would
materially and adversely affect the existence, corporate or otherwise, of the City, or the ability of
the City to make all payments and otherwise perform its obligations under the ordinance, the
Series 2007 Bond and the Collateral Documents, or the financial condition of the City, or the
transactions contemplated by the ordinance, the Series 2007 Bond and the Collateral Documents
or the validity and enforceability of the Ordinance, the Series 2007 Bond and the Collateral
Documents. No referendum petition has been filed with respect to any resolution or other action
of the City relating to the 2007 Project, the Series 2007 Bond or any Collateral Documents and
the period for filing any such petition will have expired before issuance of the Series 2007 Bond.
(c) Borrowing -Legal and Authorized. The adoption of the Supplemental Resolution,
the execution and delivery of the Series 2007 Bond and the Collateral Documents and the
consummation of the transactions provided for in the Ordinance, the Series 2007 Bond and the
Collateral Documents and compliance by the City with the provisions of the Ordinance, the
Series Zoo? Bond and the Collateral Documents:
(i) are within the powers of the City and have been duly authorized by all
necessary action on the part of the City; and
(ii) do not and will not result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the City pursuant to any
resolution, indenture, loan agreement or other agreement or instrument (other than the
Ordinance and any Collateral Documents) to which the City is a party or by which the
City or its property may be bound, nor will such action result in any violation of the
provisions of any laws, ordinances, governmental rules or regulations or court or other
governmental orders to which the City, its properties or operations are subject.
(d) No Defaults. No event has occurred and no condition exists that, upon execution
and delivery of the Series Zoo? Bond and the Collateral Documents, would constitute a default
under the Ordinance or the Collateral Documents. The City is not in violation of any term of any
agreement, bond resolution, trust indenture, charter or other instrument to which it is a party or
by which it or its property may be bound which violation would materially and adversely affect
the transactions contemplated hereby or the compliance by the City with the terms hereof or of
the Series 2007 Bond and the Collateral Documents.
(e) Governmental Consent. The City has obtained or made all permits, findings and
approvals required to the date of adoption of this Supplemental Resolution by any governmental
body or officer for the making and performance by the City of its obligations under this
Supplemental Resolution, the Series 2007 Bond and the Collateral Documents (including any
necessary sewerage rate increase) or for the 2007 Project, the financing or refinancing thereof or
the reimbursement of the City for the costs thereof. No consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority (other than those, if any,
already obtained) is required on the part of the City as a condition to adopting this Supplemental
Resolution, issuing the Series Zoo? Bond or entering into the Collateral Documents and the
performance of the City's obligations hereunder and thereunder. If a utility board or commission
manages or controls the System, such board or commission has agreed with the DNRC to abide
by the terms of the Ordinance and the Collateral Documents, including approving any necessary
sewerage rate increases.
(f) Binding Obligation. The Ordinance, the Series 2007 Bond and any Collateral
Document to which the City is a party are the valid and binding special, limited obligations and
agreements of the City, enforceable against the City in accordance with their terms, except to the
extent that the enforceability thereof may be limited by laws relating to bankruptcy, moratorium,
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reorganization, insolvency or similar laws affecting creditors' rights and general principles of
equity.
(g) The 2007„Project. The 2007 Project consists and will consist of the facilities,
improvements and activities described in Appendix A, as such Appendix A may be amended
from time to time in accordance with the provision of Article III of this Supplemental
Resolution.
(h) Full Disclosure. There is no fact that the City has not specifically disclosed in
writing to the DNRC that materially and adversely affects or (so far as the City can now foresee),
except for pending or proposed legislation or regulations that are a matter of general public
information, that will materially and adversely affect the properties, operations and finances of
the System, the City's status as a Public Entity and Governmental Unit, its ability to own and
operate the System in the manner it is currently operated or the C ity' s ability to perform its
obligations under the Ordinance, the Series Zoo? Bond and the Collateral Documents and to
pledge any revenues or other property pledged to the payment of the Series 2007 Bond.
(i) Compliance With Law. The City:
(1) is in compliance with all laws, ordinances, governmental rules and
regulations and court or other governmental orders, judgments and decrees to which it is
subject and which are material to the properties, operations and finances of the System or
its status as a Public Entity and Governmental Unit; and
(2) has obtained all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of the System and the operation thereof and
agrees to obtain all such licenses, permits, franchises or other governmental
authorizations as may be required in the future for the System and the operation thereof,
which failure to obtain might materially and adversely affect the ability of the City to
conduct the operation of the System as presently conducted or the condition (financial or
otherwise) of the System or the C ity' s ability to perform its obligations under the
Ordinance, the Series 2007 Bond and the Collateral Documents.
Section 2.3 Covenants.
(a) Insurance. In addition to the requirements of Sections 5.03 and 5.04 of the
Original ordinance, the City at all times shall keep and maintain with respect to the System
property and casualty insurance and liability insurance with financially sound and reputable
insurers, or self-insurance as authorized by State law, against such risks and in such amounts,
and with such deductible provisions, as are customary in the State in the case of entities of the
same size and type as the City and similarly situated and shall carry and maintain, or cause to be
carried and maintained, and pay or cause to be paid timely the premiums for all such insurance.
All such insurance policies shall name the DNRC as an additional insured. Each policy must
provide that it cannot be cancelled by the insurer without giving the City and the DNRC 10 days'
prior written notice. The City shall give the DNRC prompt notice of each insurance policy it
obtains or maintains to comply with this Section 2.2(a) and of each renewal, replacement, change
in coverage or deductible under or amount of or cancellation of each such insurance policy and
the amount and coverage and deductibles and carrier of each new or replacement policy. Such
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notice shall specifically note any adverse change as being an adverse change. The City shall
deliver to the DNRC at Closing a certificate providing the information required by this Section
2.3(a).
(b) Right of Ins ection and Notice of Chan e of Location. The DNRC, the DEQ and
the EPA and their designated agents shall have the right at all reasonable times during normal
business hours and upon reasonable notice to enter into and upon the property of the City for the
purpose of inspecting the System or any or all books and records of the City relating to the
System.
(c) Further Assurance. The City shall execute and deliver to the DNRC all such
documents and instruments and do all such other acts and things as may be necessary or required
by the DNRC to enable the DNRC to exercise and enforce its rights under the Ordinance, the
Series 2007 Bond and the Collateral Documents and to realize thereon, and record and file and
re-record and refile all such documents and instruments, at such time or tunes, in such manner
and at such place or places, all as may be necessary or required by the DNRC to validate,
preserve and protect the position of the DNRC under the ordinance, the Series 2007 Bond and
the Collateral Documents.
(d) Maintenance of Security!, -if Any; Recordation of Interest.
G) The City shall, at its expense, take all necessary action to maintain and
preserve the lien and security interest of the ordinance and the Collateral Documents so
long as any amount is owing under the ordinance or the Series 2007 Bond;
(ii) The City shall forthwith, after the execution and delivery of the Series
2007 Bond and thereafter from time to time, cause the ordinance and any Collateral
Documents granting a security interest in revenues or real or personal property and any
financing statements or other notices or documents relating thereto to be filed, registered
and recorded in such manner and in such places as may be required by law in order to
perfect and protect fully the lien and security interest hereof and thereof and the security
interest in them granted by the ordinance and, from time to time, shall perform or cause
to be performed any other act required by law, including executing or causing to be
executed any and all required continuation statements and shall execute or cause to be
executed any further instruments that may be requested by the DNRC for such perfection
and protection; and
(iii) Except to the extent it is exempt herefrom, the City shall pay or cause to
be paid all filing, registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation, execution and acknowledgment of
the documents described in subparagraph (ii), and all federal or state fees and other
similar fees, duties, imposts, assessments and charges arising out of or in connection with
the execution and delivery of the Series 2007 Bond and the Collateral Documents and the
documents described in subparagraph (ii).
(e) Additional Agreements. The City covenants to comply with all representations,
covenants, conditions and agreements, if any, set forth in Appendix C hereto.
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(f) Financial Information. This Section 2.3(f) supplements, and is not intended to
limit, the requirements in Section 5.06 of the original ordinance. The City agrees that for each
fiscal year it shall furnish to the DNRC and the DEQ, promptly when available:
( 1 ) the preliminary budget for the System, with items for the 2007 Project
shown separately; and
(2) when adopted, the final budget for the System, with items for the 2007
Project shown separately.
The City will cause proper and adequate books of record and account to be kept showing
complete and correct entries of all receipts, disbursements and other transactions relating to the
System, the monthly gross revenues derived from its operation, and the segregation and
application of the gross revenues in accordance with the ordinance, in such reasonable detail as
may be determined by the City in accordance with generally accepted governmental accounting
practice and principles. It will cause such books to be maintained on the basis of the same fiscal
year as that utilized by the City. The City shall, within 180 days after the close of each fiscal
year, cause to be prepared and supply to the DNRC a financial report with respect to the System
for such fiscal year. The report shall be prepared at the direction of the financial officer of the
City in accordance with applicable generally accepted governmental accounting principles and,
in addition to whatever matters may be thought proper by the financial officer to be included
therein, shall include the following:
(A) A statement in detail of the income and expenditures of the System for the
fiscal year, identifying capital expenditures and separating them from operating
expenditures;
(B) A balance sheet as of the end of the fiscal year;
(C) The number of premises connected to the System at the end of the fiscal
year;
(D) The amount on hand in each account of the Fund at the end of the fiscal
year;
(E) A list of the insurance policies and fidelity bonds in force at the end of the
fiscal year, setting out as to each the amount thereof, the risks covered thereby, the name
of the insurer or surety and the expiration date of the policy or bond; and
(F) A determination that the report shows full compliance by the City with the
provisions of the ordinance during the fiscal year covered thereby, including proper
segregation of the capital expenditures from operating expenses, maintenance of the
required balance in the Reserve, and receipt of Net Revenues during each fiscal year at
least equal to 125 % of the maximum amount of principal and interest payable on
Outstanding Parity Bonds in any subsequent fiscal year, or, if the report should reveal
that the revenues have been insufficient for compliance with the ordinance, or that the
methods used in accounting for such revenues were contrary to any provision of the
Ordinance, the report shall include a full explanation thereof, together with
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recommendations for such change in rates or accounting practices or in the operation of
the System as may be required.
The City shall also have prepared and supplied to the DNRC and the DEQ, within 180
days of the close of every other fiscal year, an audit report prepared by an independent certified
public accountant or an agency of the state in accordance with generally accepted governmental
accounting principles and practice with respect to the financial statements and records of the
System.. The audit report shall include an analysis of the City's compliance with the provisions
of the ordinance.
(g) 2007 Project Accounts. The City shall maintain 2007 Project accounts in
accordance with generally accepted government accounting standards, and as separate accounts,
as required by Section 602(b)(9) of the Clean Water Act.
(h) Records. After reasonable notice from the EPA, the City shall make available to
the EPA such records as the EPA reasonably requires to review and determine compliance with
Title VI of the Clean Water Act, as provided in Section 606(e) of the Clean Water Act.
(i) Compliance with Clean Water Act. The City has complied and shall comply with
all conditions and requirements of the Clean Water Act pertaining to the 2007 Loan and the 2007
Project.
(j) Program Covenant. The City agrees that neither it nor any "related person" to the
City (within the meaning of Section 147(a)(2) of the Code) shall, whether pursuant to a formal or
informal arrangement, acquire bonds issued by the State under the Indenture in an amount
related to the amount of the Series 2007 Bond.
(k) Information Reporting. The City understands and acknowledges that the DNRC
is financing the purchase of the Series 2007 Bond under the Program pursuant to which the State
issues from time to time the State Bonds to provide funds therefor. The City covenants and
agrees that, upon written request of the DNRC from time to time, the City will promptly provide
to the DNRC all information that the DNRC reasonably determines to be necessary or
appropriate to offer and sell State Bonds or to provide continuing disclosure in respect of State
Bonds, whether under Rule 1 5c2-12 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934 (17 C.F.R. § 240.1 Sc2- 12) or otherwise. Such
information shall include, among other things and if so requested, financial statements of the
City or the System prepared in accordance with generally accepted accounting principles
promulgated by the Financial Accounting Standards Board as modified in accordance with the
governmental accounting standards promulgated by the Governmental Accounting Standards
Board or as otherwise provided under Montana law, as in effect from time to time (such financial
statements to relate to a fiscal year or any period therein for which they are customarily prepared
by the City, and, if for a fiscal year and so requested by the Department, subject to an audit
report and opinion of an accountant or goverment auditor, as permitted or required by the laws
of the State of Montana). The City will also provide, with any information so furnished to the
Department, a certificate of the Mayor and the Finance Director to the effect that, to the best of
their knowledge, such information does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein to make the statements made, in light
of the circumstances under which they are made, not misleading.
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Section 2.4 Covenants Relating to the Tax -Exempt, Status of the State Bonds.
(a) The City covenants and agrees that it will not use or permit to be used any of the
proceeds of the Series 2007 Bond or any other funds of the City in respect of the 2007 Project or
the Series 2007 Bond, directly or indirectly, in a manner that would cause, or take any other
action that would cause, any State Bond to be an "arbitrage bond" within the meaning of Section
148 of the Code or would otherwise cause the interest on the State Bonds to be included in gross
income for purposes of federal income taxation. In addition, the City agrees that it will not enter
into, or allow any "related person" (as defined in Section 147(a)(2) of the Code) to enter into,
any arrangement, formal or informal, for the purchase of the State Bonds or any other obligations
of the DNRC in an amount related to the amount of the 2007 Loan or the portion of the 2007
Loan derived directly or indirectly from proceeds of the State Bonds or that would otherwise
cause any State Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code.
(b) The City shall not use or permit the use of the 2007 Project directly or indirectly
in any trade or business carried on by any Person who is not a Governmental Unit. For the
purpose of this subparagraph, use as a member of the general public (within the meaning of the
Regulations) shall not be taken into account and any activity carried on by a Person other than a
natural person shall be treated as a trade or business.
(c) Any portion of the 2007 Project being refinanced or the cost of which is being
reimbursed was acquired by and is now and shall, during the term of the 2007 Loan, be owned
by the City and not by any other Person. Any portion of the 2007 Project being financed shall be
acquired by and shall, during the term of the 2007 Loan, be owned by the City and not by any
other Person. Notwithstanding the previous two sentences, the City may transfer the 2007
Project or a portion thereof to another Governmental Unit which is also a Public Entity if such
transfer is otherwise permitted under the Ordinance and if such organization agrees with the
DNRC to comply with Sections 2.2(h) and 2.2(i) of this Supplemental Resolution and if the
DNRC receives an Opinion of Bond Counsel that such transfer will not violate the State Act or
the Clean Water Act or adversely affect the exclusion of interest on the Bonds from gross income
or purposes of federal income taxation. In addition, except as otherwise provided in the
Ordinance or in any Collateral Documents, the City may sell or otherwise dispose of any portion
of the 2007 Project which has become obsolete or outmoded or is being replaced or for other
reasons is not needed by the City or beneficial to the general public or necessary to carry out the
purposes of the Clean Water Act.
(d) At the Closing of the 2007 Loan the DNRC will, if necessary to obtain the
Opinion of Bond Counsel described in Section 7.05(a) of the Indenture, deliver to the City
instructions concerning compliance by the City with the arbitrage rebate requirements of Section
148 of the Code (the "Arbitrage Rebate Instructions"). The City shall comply with the Arbitrage
Rebate Instructions, if any, delivered to it by the DNRC at Closing, as such Instructions may be
amended or replaced by the DNRC from time to time. The Arbitrage Rebate Instructions may be
amended or replaced by new Arbitrage Debate Instructions delivered by the DNRC and
accompanied by an Opinion of Bond Counsel to the effect that the use of said amended or new
Arbitrage Rebate Instructions will not adversely affect the excludability of interest on the State
Bonds (except State Bonds the interest on which the State did not intend to be excluded from
gross income for federal income tax purposes) from gross income of the recipients thereof for
federal income tax purposes.
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(e) The City agrees that during the Loan Term it will not contract with or permit any
Private Person to manage the 2007 Project or any portion thereof except according to a written
management contract which complies with the following provisions:
(1) If any contract between the City and the Private Person with respect to the
2007 Project provides for compensation based on a percentage of fees charged for
services rendered by the Private Person, the contract may not exceed a term of five years
(including any renewal options). At least 50% of the compensation to the Private Person
must be based upon a periodic fixed fee. In addition, the City must be able to cancel the
contract without penalty or cause at the end of any three-year period of the contract term.
The compensation must be reasonable, and it may not be based on a percentage of the net
profits of the 2007 Project or the System or any portion thereof or any other division or
activity of the City.
(2) If any contract between the City and the Private Person with respect to the
2007 Project provides for compensation based on a periodic flat fee, the compensation
must be reasonable and the contract may not exceed a term of five years (including any
renewal options. In addition, the City must be able to cancel the contract without penalty
or cause at the end of any three-year period of the contract term. If the contract provides
for automatic increases in the periodic flat fee, the increases may not exceed the
percentage increases determined by particular external standards for computing such
increases that are mutually agreed upon in the contract. The percentage increases
reflected in the Consumer Price Index compiled by the Bureau of Labor Statistics, U.S.
Department of Labor, or the actual percentage increases for services that result from the
application of external criteria (for example, increases in rates paid by insurance
companies) are illustrations of two external standards that may be used.
(3) If a Private Person and the City enter into a contract described in
subparagraph (1) or (2) above and the governing body of the City contains five or more
members, no more than one member of the governing body of the City may be the
Private Person or a related person (as described in Section 144(a)(3) of the Code) (a
"Related Person"), an employee of the Private Person or a Related Person, or a member
of the governing body of the Private Person or a Related Person. However, such Private
Person or a Related Person, employee of the Private Person or a Related Person or a
member of the governing body of the Private Person or a Related Person may not serve as
the chief executive of the City. If a Private Person and the City enter into a contract
described in (1) or (2) above and the governing body contains less than five members, no
member of the governing body may be the Private Person or a Related Person, an
employee of the Private Person or a Related Person or a member of the governing body
of the Private Person or a Related Person.
(4) The City may depart from any of its agreements contained in subparagraphs
(1) through (3) if it delivers to the DNRC, at the City's expense, an Opinion of Bond
Counsel that to do so would not adversely affect the exclusion of interest on the State
Bonds from gross income for purposes of federal income taxation.
(f) The City may not lease the 2007 Project or any portion thereof to any Person
other than a Nonexempt Person which agrees in writing with the City and the State not to cause
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any default to occur under the ordinance; provided the City may lease all or any portion of the
2007 Project to a Nonexempt Person pursuant to a lease which in the Opinion of Bond Counsel
delivered to the DNRC will not cause the interest on the State Bonds to be included in gross
income for purposes of federal income taxation.
(g) The City shall not change the use or nature of the 2007 Project if (i) such change
will violate the Clean water Act, or (ii) so long as the State Bonds are outstanding unless, in the
Opinion of Bond Counsel delivered to the DNRC, such change will not result in the inclusion in
gross income of interest on the State Bonds for federal income tax purposes.
Section 2.5 Maintenance of System Liens. The City shall maintain the System,
including the 2007 Project, in good condition and make all necessary renewals, replacements,
additions, betterments and improvements thereto. The City shall not grant or permit to exist any
lien on the 2007 Project or any other property making up part of the System, other than liens
securing Debt where a parity or senior lien secures the Series 2007 Bond; provided that this
Section 2.6 shall not be deemed to be violated if a mechanic's or contractor's lien is filed against
any such property so long as the City uses its best efforts to obtain the discharge of such lien and
promptly reports to the DNRC the filing of such lien and the steps it plans to tape and does take
to discharge of such lien.
Section 2.6 Maintenance of Existence• Merger Consolidation Etc. • Disposition of
Assets. The City shall maintain its corporate existence, except that it may consolidate with or
merge into another Governmental Unit or permit one or more Governmental Units to consolidate
with or merge into it or may transfer all or substantially all of its assets to another Governmental
Unit and then dissolve if the surviving, resulting or transferee entity (if other than the City) (i) is
a Public Entity and (ii) assumes in writing all of the obligations of the City under the Ordinance,
the Series 2007 Bond and the Collateral Documents, and (a) such action does not result in any
default in the performance or observance of any of the terms, covenants or agreements of the
City under the Ordinance, the Series 2007 Bond and the Collateral Documents, (b) such action
does not violate the State Act or the Clean water Act and does not adversely affect the exclusion
of interest on the Series 2007 Bond or the State Bonds from gross income for federal income tax
purposes and (c) the City delivers to the DNRC on the date of such action an opinion of Bond
Counsel that such action complies with this Section 2.6.
Other than pursuant to the preceding paragraph and Section 2.4(c), the City shall not
transfer the System or any portion thereof to any other Person, except for property which is
obsolete, outmoded, worn out, is being replaced or otherwise is not needed for the operation of
the System, unless the provisions of (a) and (b) of the preceding paragraph and Section 2.4(c) are
satisfied and the City delivers to the DNRC an Opinion of Bond Counsel to that effect and, in
addition, the DNRC consents to such transfer.
ARTICLE III
USE OF PROCEEDS; THE 2007 PROJECT
Section 3.1 Use of Proceeds. The City shall apply the proceeds of the 2007 Loan from
the DNRC solely as follows:
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(a) The City shall apply the proceeds of the 2007 Loan solely to the financing,
refinancing or reimbursement of the costs of the 2007 Project as set forth in Appendix A hereto
and this Section 3.1. The 2007 Loan will be disbursed in accordance with Article IV ,hereof and
Article VII of the Indenture. If the 2007 Project has not been completed prior to Closing, the
City shall, as quickly as reasonably possible, complete the 2007 Project and expend proceeds of
the Series 2007 Bond to pay the costs of completing the 2007 Project.
(b) No portion of the proceeds of the 2007 Loan shall be used to reimburse the City
for costs paid prior to the date of adoption of this Supplemental Resolution of a Project the
construction or acquisition of which occurred or began earlier than March 7, 1955. In addition,
if any proceeds of the 2007 Loan are to be used to reimburse the City for 2007 Project costs paid -
prior to the date of adoption of this Supplemental Resolution, the City shall have complied with
Section 1.150-2 of the Regulations. The City adopted a reimbursement resolution on June 21,
2007.
(c) Any Debt to be refinanced with proceeds of the 2007 Loan was incurred after
March 7, 1985 for a Project the construction or acquisition of which began after March 7, 1985.
No proceeds of the 2007 Loan shall be used for the purpose of refinancing an obligation the
interest on which is exempt from federal income tax or excludable from gross income for
purposes of federal income taxation unless the DNRC has received an opinion of Bond Counsel,
satisfactory to it, to the effect that such refinancing will not adversely affect the exclusion of
interest on the State Bonds from gross income for purposes of federal income taxation..
Section 3.2 The 2007 Project. Set forth in Appendix A to this Supplemental
Resolution is a description of the 2007 Project, which describes the property which has been or is
to be acquired, installed, constructed or improved and the other activities, if any, to be funded, in
part, from the 2007 Loan (the 2007 Project may consist of more than one facility or activity).
The 2007 Project may be changed and the description thereof in Appendix A may be amended
from time to time by the City but only after delivery to the DNRC of the following:
(a) A certificate of the City setting forth the amendment to Appendix A and stating
the reason therefor, including statements whether the amendment would cause an increase or
decrease in the cost of the 2007 Project, an increase or decrease in the amount of 2007 Loan
proceeds which will be required to complete the 2007 Project and whether the change will
materially accelerate or delay the construction schedule for the 2007 Project;
(b) A written consent to such change in the 2007 Project by an Authorized DNRC
Officer,
(c) An opinion or opinions of Bond Counsel stating that the 2007 Project, as
constituted after such amendment, is, and was at the time the State Bonds were issued, eligible
for financing under the State Act and is, and was at the time the Series 2007 Bond was issued,
eligible for financing under the Act, such amendment will not violate the State Act or the Act
and such amendment will not adversely affect the exclusion of interest on the State Bonds or the
Series 2007 Bond from gross income for purposes of federal income taxation. Such an opinion
of Bond Counsel shall not be required for amendments which do not affect the type of facility to
be constructed or activity to be financed.
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The City acknowledges and agrees that an increase in the principal amount of the 2007
Loan may be made only upon an application to the DEQ, the DNRC and the Trustee, in such
form as the DEQ shall specify, which is approved by the DEQ and the DNRC, in their sole and
absolute discretion, and adoption by the governing body of the City of a resolution amendatory
of or supplementary to the Ordinance authorizing the additional loan and delivery of written
certifications by officers of the City to the DEQ, the DNRC and the Trustee to the effect that all
representations and covenants contained in the resolution as it may be so amended or
supplemented are true as of the date of closing of the additional loan and compliance with
applicable tests for the incurrence of such Debt. No assurance can be given that any additional
loan funds will be available under the Program at the time of any such application or thereafter.
The City acknowledges and agrees that neither the DEQ, the DNRC, the Trustee nor any of their
agents, employees or representatives shall have any liability to the City and have made no
representations to the City as to the sufficiency of the 2007 Loan to pay Project Costs or as to the
availability of additional funds under the Program to increase the principal amount of the 2007
Loan.
Section 3.3 2007 Project Representations and Covenants. The City hereby represents
to and covenants with the DNRC that:
(a) all construction of the 2007 Project has complied and will comply with all federal
and state standards, including, without limitation, EPA regulations and standards;
(b) all future construction of the 2007 Project will be done only pursuant to fixed
price construction contracts. The City shall obtain a performance and payment bond from the
contractor for each construction contract in the amount of 100% of the construction price and
ensure that such bond is maintained until construction is completed to the City's, the DNRC's
and the DEQ's satisfaction;
(c) all future construction will be done in accordance with plans and specifications on
file with the DNRC and the DEQ, provided that changes may be made in such plans and
specifications with the written consent of an Authorized DNRC Officer and the DEQ; and
(d) the 2007 Project is a project of the type permitted to be financed under the Act,
the State Act and the Program and Title VI of the Clean Water Act.
Section 3.4 Completion or Cancellation or Reduction of Costs of the 2007 Pro' ect.
(a) Upon completion of the 2007 Project, the City shall deliver to the DNRC a
certificate stating that the 2007 Project is complete, stating the amount, if any, of the Reserved
Amounts, and releasing the remaining amount, if any, of the Committed Amount. If any
Reserved Amount is not later needed, the City shall so inform the DNRC and release such
amount. If Appendix A describes two or more separate projects as making up the 2007 Project, a
separate completion certificate shall be delivered for each.
(b) If all or any portion of the 2007 Project is cancelled or cut back or its costs are
reduced or for any other reason the City will not require the full Committed Amount, the City
shall promptly notify the DNRC in writing of such fact and release the portion of the Committed
Amount which will not be needed.
1:
ARTICLE IV
THE LOAN
Section 4.1 The 2007 Loan• Disbursement of 2007 Loan. The DNRC has agreed to
lend to the City, from time to time as the requirements of this Section 4.1 are met, an amount up
to $1.4,470,000 (the "Committed Amount7') for the purposes of financing, refinancing or
reimbursing the City for a portion of the costs of the 2007 Project; provided the DNRC shall not
be required to loan any proceeds of the State Bonds to the City after June 30, 2009 (the estimated
completion date of the 2007 Project). The Committed Amount may be reduced as provided in
Section 3.2 and Section 3.4 of this Supplemental Resolution. The 2007 Loan shall be disbursed
as provided in this Section 4.1. The DNRC intends to disburse the 2007 Loan through the
Trustee.
(a) In consideration of the issuance of the Series 2007 Bond by the City, the DNRC
shall make, or cause the Trustee to make, a disbursement of all or a portion of the 2007 Loan
upon receipt of the following documents:
(1) an Opinion of Bond Counsel as to the validity and enforceability of the Series
2007 Bond and the security therefor and stating in effect that interest on the Series 2007
Bond is not includable in gross income for purposes of federal income taxation, in form
and substance satisfactory to the DNRC;
(2) the Series 2007 Bond, fully executed;
(3) a certified copy of the Original Ordinance and this Supplemental Resolution;
(4) any other security instruments or documents required by the DNRC or DEQ
as a condition to their approval of the 2007 Loan;
(5) if all or part of a 2007 Loan is being made to refinance a Project or reimburse
the City for the costs of a Project paid prior to the Closing, evidence, satisfactory to the
DNRC and the Bond Counsel referred to in (1) above, (A) that the acquisition or
construction of the Project was begun no earlier than March 7, 1985 or the debt was
incurred no earlier than March 7, 1985, (B) of the City's title to the Project, (C) of the
costs of such Project and that such costs have been paid by the City and (D) if such costs
were paid before adoption of this Supplemental Resolution that the City has complied
with Section 1.150-2 of the Regulations;
(6) the items required by the Indenture for the portion of the 2007 Loan to be
disbursed at Closing; and
(7) such other certificates, documents and other information as the DNRC, the
DEQ or the Bond Counsel giving the opinion referred to in subparagraph (1) may require
(including any necessary arbitrage rebate instructions).
(b) In order to obtain a disbursement of a portion of the 2007 Loan to pay costs of the
2007 Project, the City shall submit to the DNRC and the Trustee a signed request for
disbursement on the form prescribed by the DNRC, with all attachments required by such form.
Wt
The City may obtain disbursements only for costs which have been legally incurred and are due
and payable. All 2007 Loan disbursements will be made to the City only upon proof that cost
was incurred.
(c) For refinancings, a disbursement schedule complying with the requirements of the
Clean water Act shall be established by the DNRC and the City at Closing. The Trustee shall
disburse 2007 Loan amounts directly to the holder of the debt being refinanced according to such
schedule. If the City should repay all or a portion of the debt to be refinanced from other sources
or should otherwise not need any portion of the 2007 Loan which was to have been used to
refinance such debt, it shall inform the DNRC and the Trustee of such fact pursuant to Section
3.4(b) and a new disbursement schedule shall be drawn up by the DNRC. The DNRC shall
obtain a receipt from the holder of the debt being refinanced for each disbursement made to pay
or prepay a portion of such debt.
(d) If all or a portion of a 2007 Loan is made to reimburse a City for Project costs
paid by it prior to Closing, the City shall present at Closing the items required by Section 4.1(b)
relating to such costs. The Trustee shall disburse such amounts to the City pursuant to a
disbursement schedule complying with the requirements of the Clean Water Act established by
the DNRC and the City at the Closing.
(e) Notwithstanding anything else provided herein, the Trustee shall not be obligated
to disburse the 2007 Loan any faster or to any greater extent than it has available EPA
Capitalization Grants, Bond proceeds and other amounts available therefor in the Revolving
Fund. The DNRC shall not be required to do "overmatching" pursuant to Section 5.04(b) of the
Indenture, but may do so in its discretion. The City acknowledges that if Project costs are
incurred faster than the City projected at Closing, there may be delays in making 2007 Loan
disbursements for such costs because of the schedule under which EPA makes EPA
Capitalization Chant money available to the DNRC. The DNRC will use its best efforts to obtain
an acceleration of such schedule if necessary.
(f) Upon making each 2007 Loan disbursement, the Trustee shall note such
disbursement on Schedule A to the Series 2007 Bond.
(g) The City agrees that it will deposit in the Reserve upon receipt any proceeds of
the 2007 Loan borrowed for the purpose of causing the balance in the Reserve equal the Reserve
Requirement, either on the Closing Date of the 2007 Loan or upon any disbursement date. The
City further acknowledges and agrees that any portions of the 2007 Loan representing capitalized
interest shall be advanced only on Payment Dates and shall be transferred by the Trustee on the
Payment Date directly to the Revenue Bond Account. The amount of any such transfer shall be a
credit against the interest payments due on the Series 2007 Bond and interest thereon shall
accrue only from the date of transfer.
Section 4.2 Commencement of Loan Term. The City's obligations under this
Supplemental Resolution and the Collateral Documents shall commence on the date hereof
unless otherwise provided in this Supplemental Resolution. However, the obligation to make
payments under Article V hereof shall commence only upon the first disbursement by the
Trustee of 2007 Loan proceeds.
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Section 4.3 Termination of Loan Term. The C ity' s obligations under this
Supplemental Resolution and the Collateral Documents shall terminate upon payment in full of
all amounts due under the Series 2007 Bond and the Supplemental Resolution in respect thereof;
provided, however, that the covenants and obligations provided in Article VI and Section 10.4
shall survive the termination of the Supplemental Resolution.
Section 4.4 2007 Loan C1os in S ubmis s ions. On or prior to the Closing, the City will
have delivered to the DNRC and the Trustee the closing submissions required by Section 7.05 of
the Indenture.
ARTICLE V
REPAYMENT of LOAN
Section 5.1 Repayment of 2007 Loan. The City shall repay the amounts lent to it
pursuant to Section 4.1 hereof, plus interest on the unpaid amounts lent at the rate of two percent
(2.00%) per annum, in semiannual loan repayments. In addition, the City shall pay an
Administrative Expense Surcharge on the outstanding principal amount of the 2007 Loan at the
rate of seventy-five hundredths of one percent (0.75%) per annum and a Loan Loss Reserve
Surcharge equal to one percent (1.00%) per annum on the outstanding principal amount of the
2007 Loan. For purposes of this Resolution and the Program, the term "interest" on the Zoo?
Loan shall include the Administrative Expense Surcharge and the Loan Loss Reserve Surcharge.
The City shall pay all Loan Repayments and Administrative Expense Surcharges and Loan Loss
Reserve Surcharge in lawful money of the United States of America to the DNRC. Interest and
Administrative Expense Surcharges and Loan Loss Reserve Surcharge shall be calculated on the
basis of a year of 360 days comprising 12 months of 30 days each.
The Loan Repayments required by this Section 5.1, and the Administrative Expense
Surcharge and the Loan Loss Reserve Surcharge, shall be due on each January 1 and July 1 (the
"Payment Dates"), as follows:
(1) interest and Administrative Expense Surcharge and Loan Loss Reserve
Surcharge on the outstanding principal balance of the 2007 Loan shall be payable on each
January 1 and July 1, beginning on January 1, 2008, which is the first Payment Date after
the closing of the Zoo? Loan, and concluding on the date that the last installment of
principal of the 2007 Loan is due (i.e., July 1, 2027); and
(2) the principal of the 2007 Loan shall be repayable on each Payment Date,
beginning on January 1, 2008 and concluding on July 1, 2027, and the amount of each
principal payment shall be calculated on the basis of a substantially level debt service at
an interest rate of 3.75% per annum; provided that principal of the 2007 Loan is payable
only in amounts that are multiples of $1,000.
The payments of principal of and interest and Administrative Expense Surcharge and
Loan Loss Reserve Surcharge on the 2007 Loan shall be due on the dates and in the amounts
shown in Schedule B to the Series Zoo? Bond, as such Schedule B shall be modified from time
to time as provided below. The portion of each such Loan Repayment consisting of principal
and the portion consisting of interest and the amount of each Administrative Expense Surcharge
and the amount of each Loan Loss Reserve Surcharge shall be set forth in Schedule B to the
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Series 2007 Bond. Upon each disbursement of Zoo? Loan amounts to the City pursuant to
Section 4.1 hereof, the Trustee shall enter or cause to be entered the amount advanced on
Schedule A to the Series Zoo? Bond under "Advances" and the total amount advanced under
Section 4.1, including such disbursement, under "Total Amount Advanced."
If the advance was made to pay costs of the 2007 Project pursuant to Section 4.1(b),
interest and Administrative Expense Surcharge and Loan Loss Reserve Surcharge on such
advance shall accrue from the date the advance is made and shall be payable on each Payment
Date thereafter. Once the completion certificate for the Zoo? Project has been delivered to the
DNRC, the Trustee shall revise Schedule B to the Series 2007 Bond in accordance with this
Section 5.1 and the Trustee shall send a copy of such Schedule B to the City within one month
after delivery of the completion certificate.
Past -due payments of principal and interest and Administrative Expense Surcharges and
Loan Loss Reserve Surcharge shall bear interest at the rate of ten percent (10.00%) per annum,
until paid.
Any payment of principal, interest or Administrative Expense Surcharge and Loan Loss
Reserve Surcharge under this Section 5.1 shall also be credited against the same payment
obligation under the Series 2007 Bond.
Section 5.2 Additional Payments. The City shall also pay, within 30 days after receipt
of a bill therefor, from any legally available funds therefor, including proceeds of the Zoo? Loan,
if the City so chooses, all reasonable expenses of the DNRC and the Trustee in connection with
the Zoo? Loan, the Collateral Documents and the Series 2007 Bond, including, but not limited to:
(1) the cost of reproducing this Supplemental Resolution, the Collateral
Documents and the Series 2007 Bond;
(2) the fees and disbursements of Bond Counsel and other Counsel utilized by
the DNRC and the Trustee in connection with the 2007 Loan, the Ordinance, the
Collateral Documents and the Series 2007 Bond and the enforcement thereof; and
(3) all taxes and other governmental charges in connection with the execution
and delivery of the Collateral Documents or the Series 2007 Bond, whether or not the
Series 2007 Bond is then outstanding', including all recording and filing fees relating to
the Collateral Documents and the pledge of the State's right, title and interest in and to
the Series 2007 Bond, the Collateral Documents and the Ordinance under the Board
Resolution (and with the exceptions noted therein) and all expenses, including attorneys'
fees, relating to any amendments, waivers, consents or collection or enforcement
proceedings pursuant to the provisions hereof or thereof.
Section 5.3 Prepayments. The City may not prepay all or any part of the outstanding
principal amount of the Series 2007 Bond unless (i) it obtains the prior written consent of the
DNRC thereto, and (ii) no loan repayment or Administrative Expense Surcharge or Loan Loss
Reserve Surcharge is then delinquent. Any prepayment permitted by the DNRC must be
accompanied by payment of accrued interest and Administrative Expense Surcharge and Loan
Loss Reserve Surcharge to the date of prepayment on the amount of principal prepaid. If the
22
Series 2007 Bond is prepaid in part pursuant to this Section 5.3 , such prepayments shall be
applied to principal payments in inverse order of maturity.
Section 5.4 'Obliizations of City,,Unconditional. The obligations of the City to make
the payments required by the ordinance and the Series 2007 Bond and to perform its other
agreements contained in the ordinance, the Series 2007 Bond and Collateral Documents shall be
absolute and unconditional, except as otherwise provided herein or in such documents. The City
(a) shall not suspend or discontinue any payments provided for in the ordinance and the Series
2007 Bond, (b) shall perform all its other agreements in the ordinance, the Series 2007 Bond and
the Collateral Documents and (c) shall not terminate the ordinance, the Series 2007 Bond or the
Collateral Documents for any cause, including any acts or circumstances that may constitute
failure of consideration, destruction of or damage to the 2007 Project or the System, commercial
frustration of purpose, any dispute with the DNRC or the EPA, any change in the laws of the
United States or of the State or any political subdivision of either or any failure of the DNRC to
perform any of its agreements, whether express or implied, or any duty, liability or obligation
arising from or connected with the ordinance.
Section 5.5 Limited Liability. All payments of principal of and interest on the 2007
Loan and other payment obligations of the City hereunder and under the Series 2007 Bond shall
be special, limited obligations of the City payable solely out of the Net Revenues and shall not,
except at the option of the City and as permitted by law, be payable out of any other revenues of
the City. The obligations of the City under the ordinance and the Series 2007 Bond shall never
constitute an indebtedness of the City within the meaning of any state constitutional provision or
statutory limitation and shall never constitute or give rise to a pecuniary liability of the City or a
charge against its general credit or taxing power. The taxing powers of the City may not be used
to pay principal of or interest on the Series . 2007 Bond, and no funds or property of the City other
than the Net Revenues may be required to be used to pay principal of or interest on the Series
2007 Bond.
ARTICLE VI
INDEMNIFICATION OF DNRC AND DEQ
The City shall indemnify and save harmless the DNRC, DEQ and their officers,
employees and agents (each an "Indemnified Party" or, collectively, the "Indemnified Parties")
against and from any and all claims, damages, demands, expenses, liabilities and losses of every
kind asserted by or on behalf of any Person arising out of the acts or omissions of the City or its
employees, officers, agents, contractors, subcontractors, or consultants in connection with or
with regard or in any way relating to the condition, use, possession, conduct, management,
planning, design, acquisition, construction, installation or financing of the Project. The City
shall also indemnify and save harmless the Indemnified Parties against and from all costs,
reasonable attorneys' fees, expenses and liabilities incurred in any action or proceeding brought
by reason of any such claim or demand. If any proceeding is brought against an Indemnified
Party by reason of such claim or demand, the City shall, upon notice from an Indemnified Party,
defend such proceeding on behalf of the Indemnified Party.
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ARTICLE V II
ASSIGNMENT
Section 7.1 Assignment _ by City. The City may not assign its rights and obligations
under the Ordinance or the Series 2007 Bond.
Section 7.2 Assignment by DNRC. The DNRC will pledge its rights under and
interest in the Ordinance, the Series 2007 Bond and the Collateral Documents (except to the
extent otherwise provided in the Indenture) as security for the payment of the State Bonds.
Section 7.3 State Refunding Bonds. In the event the State Bonds and Additional State
Bonds are refunded by bonds which are not Additional State Bonds, all references in the
Ordinance to State Bonds and Additional State Bonds shall be deemed to refer to the refunding
bonds and any bonds of the State on a parity with such refunding bonds (together, the
"Refunding Bonds") or, in the case of a crossover refunding, to the State Bonds and Additional
State Bonds and the Refunding Bonds. In the event the State Bonds are refunded by an issue of
Additional State Bonds, all references in the Ordinance to the State Bonds shall be deemed to
refer to such Additional State Bonds or, in the case of a crossover refunding, both the State
Bonds and such Additional State Bonds.
ARTICLE VIII
THE SERIES 2007 BOND
Section 8.1 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 Outstanding Bonds and the Series 2007 Bond the net
revenues to be derived from the operation of the System, including improvements, betterments or
extensions thereof hereafter constructed or acquired. The net revenues to be produced by such
rates, charges and rentals during the terra of the Series Zoo? Bond will be more than sufficient to
pay the principal and interest when due on the Series 2W7 Bond, and to create and maintain
reasonable reserves therefor and to provide an adequate allowance for replacement and
depreciation, as herein prescribed.
Section 8.2 Issuance and Sale of the Series 2007 Bond. The Council has investigated
the facts necessary and hereby finds, determines and declares it to be necessary and desirable for
the City to issue the Series 2007 Bond to evidence the 2007 Loan. The Series 2007 Bond is
issued to the DNRC without public sale pursuant to Montana Code Annotated, Section 7w7W
4433(2)(a).
Section 8.3 Terms. The Series 2007 Bond shall be in the maximum principal amount
equal to the original Committed Amount of the 2007 Loan, shall be issued as a single, fully
registered bond numbered R-1, shall be dated as of the date of delivery to the DNRC, and shall
bear interest at the rate charged by the DNRC on the 2007 Loan. The principal of and interest on
the Series 2007 Bond shall be payable on the same dates and in the same amounts as principal
and interest of the Loan Repayments are payable. Advances of principal of the Series 2007
Bond shall be deemed made when advances of the 2007 Loan are made under Section 4.1, and
such advances shall be payable in accordance with Schedule B to the Series 2007 Bond, as it
may be revised by the DNRC from time to time in accordance with Section 5.1.
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The City may prepay the Series 2007 Bond, in whole or in part, only upon the terms and
conditions under which it can prepay the 2007 Loan under Section 5.3.
Section 8.4 Ne otiabilit Transfer and Registration. The Series 2007 Bond shall be
fully registered as to both principal and interest, and shall be initially registered in the name of
and payable to the DNRC. while so registered, principal of and interest on the Series 2007 Bond
shall be payable to the DNRC at the Office of the Department of Natural Resources and
Conservation, 1625 Eleventh Avenue, Helena, Montana 59620-2301 or such other place as may
be designated by the DNRC in writing and delivered to the City. The Series 2007 Bond shall be
negotiable, subject to the provisions for registration and transfer contained in this Section 8.4.
No transfer of the Series 2007 Bond shall be valid unless and until (1) the holder, or his duly
authorized attorney or legal representative, has executed the form of assignment appearing on the
Series 2007 Bond, and (2) the Finance Director of the City (or successors, the "Registrar"), as
Bond Registrar, has duly noted the transfer on the Series 2007 Bond and recorded the transfer on
the registration books of the Registrar. The Registrar may, prior to noting and recording the
transfer, require appropriate proof of the transferor's authority and the genuineness of the
transferor's signature. The City shall be entitled to deem and treat the Person in whose name the
Series 2007 Bond is registered as the absolute owner of the Series 2007 Bond for all purposes,
notwithstanding any notice to the contrary, and all payments to the registered holder shall be
valid and effectual to satisfy and discharge the City's liability upon such Bond to the extent of
the sum or sums so paid.
Section 8.5 Execution and Delivery. The Series 2007 Bond shall be executed on
behalf of the City by the manual signatures of the Mayor, City Manager and the City Finance
Director. Any or all of such signatures may be affixed at or prior to the date of delivery of the
Series 2007 Bond. The Series 2007 Bond shall be sealed with the corporate seal of the City. In
the event that any of the officers who shall have signed the Series 2007 Bond shall cease to be
officers of the City before the Series 2007 Bond is issued or delivered, their signatures shall
remain binding upon the City. Conversely, the Series 2007 Bond may be signed by an
authorized official who did not hold such office on the date of adoption of this Supplemental
Resolution. The Series 2007 Bond shall be delivered to the DNRC, or its attorney or legal
representative.
Section 8.6 Form. The Series 2007 Bond shall be prepared in substantially the form
attached as Appendix B.
ARTICLE I
SECURITY FOR THE SERIES 2007 BOND
The Series 2007 Bond is issued as an additional Bond under Section 4.03 of the
Ordinance and shall, on a parity with the Series 1991 A Bond, the Series 2002 Bonds, the Series
2004 Bond, and any other additional parity Bonds issued under the provisions of Sections 4.01
through 4.03 of the Original Ordinance, be equally and ratably secured by the provisions of the
Ordinance and payable out of the Net Revenues appropriated to the Revenue Bond Account of
the Sewerage System Fund, without preference or priority, all as provided in the Ordinance, and
secured by the Reserve, as further provided in Section 4.03 of the Ordinance. The Reserve
Requirement upon the issuance of the Series 2007 Bond in the maximum principal amount
thereof is estimated to be $1,376,506. There is currently $630,260 on hand in the Reserve. The
25
City shall fund the Reserve Requirement allocable to the Series 2007 Bond from proceeds of the
Series 2007 Bond, in part, and from available moneys of the System on and after the date of
issuance of the Series 2007 Bond. The portion of the Reserve Requirement to be funded by
proceeds of the Series 2007 Bond shall be funded in full first, at which time the City shall
deposit into the Reserve in one lump sum from funds of the System it has available therefor in an
amount sufficient to cause the total amount deposited into the Reserve on account of the Series
2007 Bond to equal the Reserve Requirement assuming the full principal amount of the Series
2007 Bond was then advanced. on the date of the final disbursement of proceeds of the Series
2007 Bond, if the amount in the Reserve is less than the Reserve Requirement, the City shall
deposit in the Reserve from other available funds of the City an amount necessary to cause the
balance in the Reserve to equal the Reserve Requirement, calculated as of that date and based on
the actual principal amount of the Series 2007 Bond. In the event the amount in the Reserve
exceeds the Reserve Requirement as of the date of the final disbursement of proceeds of the
Series 2007 Bond, the City shall reduce the amount then in the Reserve to equal the Reserve
Requirement by adjusting the amount in the Reserve allocable to the Series 2007 Bond that is
from amounts contributed by the City from funds on hand and not from proceeds of the Series
2007 Bond. Thereafter, upon each monthly apportionment, from the Net Revenues remaining
after the apportionment to the Revenue Bond Account, the City shall credit to the Reserve such
additional Net Revenues as may be required to establish and thereafter maintain the balance in an
amount equal, as of the date of calculation, to the Reserve Requirement. Money in the Reserve
shall be used only to pay maturing principal, premium, if any, and interest when money within
the Revenue Bond Account is insufficient therefor; provided that on any date when all
outstanding Bonds of a series are due or prepayable by their terms, if the amount then on hand in
the Reserve allocable to such Bonds and available for such appropriation is sufficient with
money available for the purpose to pay all such Bonds and the interest accrued thereon in full, it
may be used for that purpose; and provided, further, that so long as the amount on hand in the
Reserve is not less than the Reserve Requirement, the City may credit earnings on investment of
the Reserve to the Replacement and Depreciation Account. The Reserve Requirement will be
met upon the issuance of the Series 2007 Bond. The City shall keep, perform and observe each
and every one of its covenants and undertakings set forth in the Ordinance for the benefit of the
registered owners from time to time of the Series 2007 Bond.
ARTICLE
TAX MATTERS
Section 10.1 Use of 2007 Project. The 2007 Project will be owned and operated by the
City and available for use by members of the general public on a substantially equal basis. The
City shall not enter into any lease, use or other agreement with any non -governmental person
relating to the use of the 2007 Project or the System or security for the payment of the Series
2007 Bond which might cause the Series 2007 Bond to be considered a "private activity bond" or
"private loan bond" within the meaning of Section 141 of the Code.
Section 10.2 General Covenant. The City covenants and agrees with the owners from
time to time of the Series 2007 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 2007 Bond
to become includable in gross income for federal income tax purposes under the Code and the
Regulations, and covenants to take any and all actions within its powers to ensure that the
26
interest on the Series 2007 Bond will not become includable in gross income for federal income
tax purposes under the Code and the Regulations.
Section 10.3 Arbitrage Certification. The Mayor, City Manager and the City Finance
Director, being the officers of the City charged with the responsibility for issuing the Series 2007
Bond pursuant to the Ordinance, are authorized and directed to execute and deliver to the DNRC
a certificate in accordance with the provisions of Section 148 of the Code, and Section 1.148-
2(b) of the Regulations, stating that on the basis of facts, estimates and circumstances in
existence on the date of issue and delivery of the Series 2007 Bond, it is reasonably expected that
the proceeds of the Series 2007 Bond will be used in a manner that would not cause the Series
2007 Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code and the
Regulations.
Section 10.4 Arbitrage Rebate. The City acknowledges that the Series 2007 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 2007B Bond from gross income
for federal income tax purposes, unless the Series 2007B 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 2007 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.
Section 10.5 Information Reporting. The City shall file with the Secretary of the
Treasury, not later than February 15, 2008, a statement concerning the Series 2007 Bond
containing the information required by Section 149(e) of the Code.
ARTICLE X1
MISCELLANEOUS
Section 11.1 Notices. All notices or other communications hereunder shall be
sufficiently sent or given and shall be deemed sent or given when delivered or mailed by
certified mail, postage prepaid, to the parties at the following addresses:
DNRC: Department of Natural Resources and Conservation
1625 Eleventh Avenue
Helena, Montana 59620
Attn: Conservation and Resource Development Division
Trustee: U.S. Bank National Association
c/o Corporate Trust Services
1420 Fifth Avenue, 7th Floor
Seattle, Washington 98101
Attn: Corporate Trust Department
27
City: City of Kalispell
312 1"Avenue East
P.O. Box 1997
Kalispell, Montana 59903
Attn: City Finance Director
Any of the above parties may, by notice in writing given to the others, designate any
further or different addresses to which subsequent notices or other communications shall be sent.
Section 11.2 B indina Effect. This Supplemental Resolution shall inure to the benefit of
and shall be binding upon the DNRC, the City and their respective successors and assigns.
Section 11.3 Sever If any provision of this Supplemental Resolution shall be
determined to be unenforceable at any time, it shall not affect any other provision of the
Ordinance or the enforceability of that provision at any other time.
Section 11.4 Amendments. This Supplemental Resolution may not be effectively
amended without the written consent of the DNRC.
Section 11.5 Applicable Law. This Supplemental Resolution shall be governed by and
construed in accordance with the internal laws of the State.
Section 11.6 Cations; References to Sections. The captions in this Supplemental
Resolution are for convenience only and do not define or limit the scope or intent of any
provisions or Sections of this Supplemental Resolution.
Section 11.7 No Liability of Individual Officers Directors or Trustees. No recourse
under or upon any obligation, covenant or agreement contained in this Supplemental Resolution
shall be had against any director, officer or employee, as such, past, present or future, of the
DNRC or the Trustee, either directly or through the DNRC or the Trustee, or against any officer,
or member of the governing body or employee of the City, past, present or future, as an
individual so long as such individual was acting in good faith. Any and all personal liability of
every nature, whether at common law or in equity, or by statute or by constitution or otherwise,
of any such officer or member of the governing body or employee of the DNRC, the Trustee or
the City is hereby expressly waived and released by the City and by the DNRC as a condition of
and in consideration for the adoption of this Ordinance and the making of the 2007 Loan.
Section 11.8 Payments Due on Hoiid. If the date for making any payment or the last
date for performance of any act or the exercise of any right, as provided in this Supplemental
Resolution or the Series 2007 Bond, shall not be Business Day, such payments may be made or
act performed or right exercised on the next succeeding Business Day with the same force and
effect as if done on the nominal date provided in this Supplemental Resolution or the Series 2007
Bond.
Section 11.9 Right of Others To Perform Cit 's Covenants. In the event the City shall
fail to make any payment or perform any act required to be performed hereunder, then and in
each such case the DNRC or the provider of any Collateral Document may (but shall not be
obligated to) remedy such default for the account of the City and make advances for that
purpose. No such performance or advance shall operate to release the City from any such default
and any sums so advanced by the DNRC or the provider of any Collateral Document shall be
paid immediately to the party making such advance and shall bear interest at the rate of ten
percent (10.00%) per annum from the date of the advance until repaid. The DNRC and the
provider of any Collateral Document shall have the right to enter the 2007 Project or the facility
or facilities of which the 2007 Project is a part or any other facility which is a part of the System
in order to effectuate the purposes of this Section.
Section 11.10 Authentication of Trans cri t. The officers of the City are hereby
authorized and directed to furnish to the DNRC and to Bond Counsel certified copies of all
proceedings relating to the issuance of the Series 2007 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 2007 Bond, and all statements contained in and shown by such instruments, including any
heretofore furnished, shall constitute representations of the City as to the truth of the statements
of fact purported to be shown thereby.
Section 11.11 Effective Date. This Supplemental Resolution shall take effect
immediately.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE
CITY OF KALISPELL, THIS I5TH DAY OF OCTOBER, 2007.
Theresa White
City Clerk
Pamela B. Kenned
Mayor
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APPENDIX A
Description of the 2007 Project
The 2007 Project consists of the following: expansion of the existing Kalispell Advanced
Wastewater Treatment Plant to increase the capacity thereof and related betterments. Major
upgrades include the headworks, influent pump stations secondary treatment complex,
disinfection, solids treatment and odor control, and adding a new truck storage facility for
vehicles serving the System.
A-1
APPENDIX B
[Form of the Series 2007 Bond]
UNITED STATES of AMERICA
STATE of MONTANA
COUNTY of FLATHEAD
CITY OF KALI S PELL
SEWERAGE SYSTEM REVENUE BOND
(DNRC WATER POLLUTION CONTROL STATE REVOLVING LOAN PROGRAM)
SERIES 2007
R-1 $ 14,470,000
FOR VALUE RECEIVED, the City of Kalispell, Montana (the "City"), a duly organized
municipal corporation and political subdivision of the State of Montana, acknowledges itself to
be specially indebted and hereby promises to pay to the Department of Natural Resources and
Conservation of the State of Montana (the "DNRC"), or its registered assigns, solely from the
Revenue Bond Account of its Sewerage System Fund, the principal sum equal to the sum of the
amounts entered on Schedule A attached hereto under "Total Amount Advanced," with interest
on each such amount from the date such amount is advanced hereunder at the rate of two percent
(2.00%) per annum on the unpaid balance until paid. In addition, the City shall pay, solely from
said source, an Administrative Expense Surcharge and a Loan Loss Reserve Surcharge on the
outstanding principal amount of this Bond at the rates of seventy-five hundredths of one percent
(0.75%) and one percent (1.00%), respectively, per annum. Interest and Administrative Expense
Surcharge and Loan Loss Reserve Surcharge shall be payable in semiannual installments payable
on each January 1 and July 1. (each a "Loan Repayment Date") commencing January 1, 2008.
Principal shall be payable on the dates set forth in Schedule B hereto. Each installment shall be
in the amount set forth opposite its due date in Schedule B attached hereto under "Total Loan
Payment." The portion of each such payment consisting of principal, the portion consisting of
interest, the portion consisting of Administrative Expense Surcharge, and the portion consisting
of Loan Loss Surcharge shall be as set forth in Schedule B hereto. Upon each disbursement of
2007 Loan amounts to the City pursuant to the ordinance described below, the DNRC shall enter
(or cause to be entered) the amount advanced on Schedule A under "Advances" and the total
amount advanced under the ordinance (as hereinafter defined), including such disbursement,
under "Total Amount Advanced." The DNRC shall prepare Schedule B and any revised
Schedule B, or cause Schedule B and any revised Schedule B to be prepared, as provided in
Section 5.1 of the ordinance. Schedule B shall be calculated and recalculated on a substantially
level debt service basis assuming an interest rate of 3.75% per annum. Past -due payments of
principal and interest, Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall
bear interest at the rate of ten percent (10.00%) per annum, until paid. Interest and
Administrative Expense Surcharge and Loan Loss Reserve Surcharge shall be calculated on the
basis of a 360-day year comprising 12 months of 30 days each. All payments under this Bond
mar
shall be made to the registered holder of this Bond, at its address as it appears on the bond
register, in lawful money of the United States of America.
This Bond is one of an issue of Sewerage System Revenue Bonds of the City authorized
to be issued in one or more series from time to time, and constitutes a series in the maximum
authorized principal amount of $14,470,000 (the "Series 2007 Bond"). The Series 2007 Bond is
issued to finance a portion of the costs of the construction of certain improvements to the
sewerage system of the City, which includes sanitary sewer facilities and storm sewer facilities
(the "System"), to make a deposit to a reserve fund for the Bonds and to pay costs of issuance of
the Series 2007 Bond. The Series 2007 Bond is issued pursuant to and in fill conformity with
the Constitution and laws of the State of Montana thereunto enabling, including Montana Code
Annotated, Title 7, Chapter 7, Part 44 and 45, as amended, and ordinances and resolutions duly
adopted by the governing body of the City, including Ordinance No. 859 of the City, duly passed
and adopted on June 21, 1976, as amended and supplemented by ordinance Nos. 862, 1002,
loll, 1421, and 1476, all as duly passed and adopted by the City Council of the City, and by
Resolution Nos. 40221, 4685, 4910, and of the City, duly passed and adopted on
November 4, 1991, March 18, 2002, July 6, 2004, and October 15, 2007, respectively (as so
supplemented and amended and as hereafter amended or supplemented in accordance with its
terms, the "ordinance"). The Series 2007 Bond is issuable only as a single, fully registered
bond. The Series 2007 Bond is issued on a parity and is equally and ratably secured by the Net
Revenues of the System with the City's outstanding Sewerage System Revenue Bond (DNRC
Revolving Loan Program), Series 1991A, Sewerage System Revenue Refunding Bonds, Series
2002, and Sewerage System. Revenue Bond (DNRC Revolving Loan Program), Series 2004
(collectively, the "Outstanding Bonds").
Reference is made to the ordinance for a more complete statement of the terms and
conditions upon which the Series 2007 Bond has been issued, the net revenues of the System
pledged and appropriated for the payment and security thereof, the conditions upon which
additional bonds may be issued under the ordinance and made payable from such net revenues
on a parity with the outstanding Bonds and the Series 2007 Bond (collectively, the "'Bonds") or
otherwise, the conditions upon which the ordinance may be amended, the rights, duties and
obligations of the City, and the rights of the owners of the Series 2007 Bond.
The City may prepay the principal of its Series 2007 Bond only if (i) it obtains the prior
written consent of the DNRC thereto, and (ii) no Loan Repayment or Administrative Expense
Surcharge or Loan Loss Reserve Surcharge is then delinquent. Any prepayment permitted by the
DNRC must be accompanied by payment of accrued interest and Administrative Expense
Surcharge and Loan Loss Reserve Surcharge to the date of prepayment on the amount of
principal prepaid. If this Series 2007 Bond is prepaid in part, such prepayments shall be applied
to principal payments in inverse order of maturity.
The Bonds, including interest and any premium for the redemption thereof, are payable
solely from the net revenues pledged for the payment thereof and do not constitute a debt of the
City within the meaning of any constitutional or statutory limitation or provision.
The City may deem and treat the person in whose name this Series 2007 Bond is
registered as the absolute owner hereof, whether this Series 2007 Bond is overdue or not, for the
purpose of receiving payment and for all other purposes, and the City shall not be affected by
any notice to the contrary. The Series 2007 Bond may be transferred hereinafter as provided.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED AND AGREED that the City
will forthwith construct and complete the improvements to the System referred to above, that it
will establish and collect reasonable rates and charges for the services afforded by the System,
and has created a Sewerage System Fund into which the gross revenues of the System., including
all additions, replacements and improvements thereto subsequently constructed or acquired, will
be paid; that the Sewerage System Fund contains a Revenue Bond Account, into which the
Finance Director shall monthly credit an amount equal to not less than one -sixth of the interest to
become due in the next six months plus one -twelfth of the principal to become due in the next
twelve months with respect to the Outstanding Bonds, the Series 2007 Bond and any additional
parity bonds; that it will transfer from available funds of the System or proceeds of the Series
2007 Bond such amount or amounts to the Reserve to cause the balance therein to equal the
Reserve Requirement, treating such principal amount as Outstanding; that the Revenue Bond
Account and the Reserve will be used only to pay the principal of, premium, if any, and interest
on the outstanding Bonds, the Series 2007 Bond and any additional parity bonds hereafter issued
under the ordinance; that the rates and charges for the System will from time to time be made
and kept sufficient to provide gross income and revenues adequate to pay promptly the
reasonable and current expenses of operating and maintaining the System, to maintain the
operating reserve, and to produce in each fiscal year Net Revenues in excess of such current
expenses, equal to at least 125 % of the maximum amount of principal and interest payable from
the Revenue Bond Account in any subsequent fiscal year; that additional Bonds and refunding
Bonds may be issued and made payable from the Revenue Bond Account on a parity with the
Outstanding Bonds, the Series 2007 Bonds and other parity bonds, upon certain conditions set
forth in the ordinance, but no obligation will be otherwise incurred and made payable from the
Net Revenues of the System, unless the lien thereof shall be expressly made subordinate to the
lien of the outstanding Bonds, the Series 2007 Bond and additional parity bonds on such Net
Revenues; that all provisions for the security of the holder of this Series 2007 Bond set forth in
the Ordinance will be punctually and faithfully performed as therein stipulated; that all acts,
conditions and things required by the Constitution and laws of the State of Montana and the
ordinances and resolutions of the City to be done, to exist, to happen and to be performed in
order to make this Series 2007 Bond a valid and binding special obligation of the City according
to its terms have been done, do exists have happened and have been performed in regular and due
form, time and manner as so required; and that this Series 2007 Bond and the interest hereon are
payable solely from the Net Revenues of the System pledged and appropriated to the Revenue
Bond Account and do not constitute a debt of the City within the meaning of any constitutional
or statutory limitation or provision and the issuance of the Series 2007 Bond does not cause
either the general or the special indebtedness of the City to exceed any constitutional or statutory
limitation.
IN WITNESS WHEREOF, the City of Kalispell, acting by and through its City Council,
has caused this Series 2007 Bond to be executed in its behalf by the signature of the Mayor, City
Manager and City Finance Director, and has caused the official seal of the City to be affixed
hereto, and has caused this Series 2007 Bond to be dated as of the day of November, 2007.
(SEAL)
Mayor
City Manager
City Finance Director
REGISTRATION AND TRANSFER
This Bond shall be fully registered as to both principal and interest. No transfer of this
Bond shall be valid unless and until (1) the registered holder of the Bond, or his duly authorized
attorney or legal representative, executes the form of assignment appearing on this Bond, and (2)
the Finance Director, or his or her successor, as bond registrar, has duly noted the transfer on the
Bond and recorded the transfer on the Finance Director's registration books. The City shall be
entitled to deem and treat the person in whose name a Bond is registered as the absolute owner
thereof for all purposes, notwithstanding any notice to the contrary. Payments on account of a
Bond shall be made only to the order of the registered holder thereof, and all such payments shall
be valid and effectual to satisfy and discharge the City" s liability upon such Bond to the extent of
the sum or sums so paid.
REGISTER
The ownership of the unpaid Principal Balance of this Bond and the interest accruing
thereon is registered on the books of the City of Kalispell, Montana in the name of the registered
holder appearing on the first page hereof or as last noted below:
Date of
Registration
2007
Name and Address
of Registered Holder
Department of Natural
Resources and Conservation
1625 Eleventh Avenue
Helena, MT 59620
Signature of
Finance Director
THE FOLLOWING ENTRIES ARE TO BE MADE ONLY BY THE BOND
REGISTRAR UPON REGISTRATION OF EACH TRANSFER
The Finance Director of the City of Kalispell, Montana, acting as Bond Registrar, has
transferred, on the books of the City, on the date last noted below, ownership of the principal
amount of and the accrued interest on this Bond to the new registered holder noted next to such
date, except for amounts of principal and interest theretofore paid.
Date of Transfer
Name of New
Registered Holder
Signature of
Bond Registrar
FORM OF ASSIGNMENT
For value received, this Bond is hereby transferred and assigned by the undersigned
holder, without recourse, to
on this day of
0
(Authorized Signature)
For:
(Holder)
SCHEDULE A
SCHEDULE of AMOUNTS ADVANCED
Date Advances
Total Amount
Advanced Natation Made B
I: 1
SCHEDULE
Loan Loss
Administrative Reserve Total Loan
Date Principal Interest Expense Surcharge SurcPayment
APPENDIX
ADDITIONAL REPRESENTATIONS AND COVENANTS
None
C-1