HomeMy WebLinkAboutOrdinance 3638 N41 CROFILMED
ORDINANCE NO . 3638
AN ORDINANCE PROVIDING FOR THE ISSUANCE OF $ 10 , 0001000 OF
WATER AND SEWER SYSTEM REFUNDING AND IMPROVEMENT REVENUE
BONDS , SERIES 1992 OF THE CITY OF FAYETTEVILLE , ARKANSAS ;
AUTHORIZING THE EXECUTION AND DELIVERY OF A BOND PURCHASE
AGREEMENT AND AN ESCROW DEPOSIT AGREEMENT IN CONNECTION
THEREWITH ; DIRECTING THE TRANSFER OF MONEYS HELD IN CONNECTION
WITH THE OUTSTANDING WATER AND SEWER REVENUE BONDS OF SAID
CITY ; PROVIDING FOR CERTAIN OTHER MATTERS RELATING THERETO AND
DECLARING AN EMERGENCY .
WHEREAS , the City of Fayetteville , Arkansas ( the " City " ) , a
city of the first class , owns and operates water and sewer
utilities as a combined , integrated public water and sewer system
( which system , together with all capital improvements thereto , is
herein collectively called the " System" ) ; and
WHEREAS , the City issued its $4 , 335 , 000 Water and Sewer
Revenue Refunding Bonds , Series 1985 , dated November 15 , 1985 ( the
" Prior Bonds " ) , of which $ 3 , 280 , 000 in principal amount are now
outstanding , pursuant to Ordinance No . 3134 , adopted by the Board
of Directors of the City ( the " Board" ) on October 9 , 1985 , and the
constitution and laws of the State of Arkansas ( the " State " ) ; and
WHEREAS , the City is authorized under: the constitution and
laws of the State , including particularly Title 14 , Chapter 234 ,
Subchapter 2 , Title 14 , Chapter 235 , Subchapter 2 , Title 14 ,
Chapter 164 , Subchapter 4 and Title 19 , Chapter 91 Subchapter 6 of
the Arkansas Code of 1987 Annotated ( collectively the "Authorizing
Legislation" ) , to acquire , construct , equip , improve , maintain ,
operate and repair the System and to issue its revenue bonds to
finance capital improvements to the System or to refund any
outstanding bonds issued for the purpose of financing such capital
improvements ; and
WHEREAS , the Board believes that it is desirable to refund the
Prior Bonds and necessary to make certain capital improvements to
the System as hereinafter described and , accordingly , that it is in
the best interest of the City that the City authorize and issue its
Water and Sewer System Refunding and Improvement Revenue Bonds ,
Series 1992 , dated August 15 , 1992 , in the aggregate principal
amount of $ 10 , 000 , 000 and as further described in Section 3 of this
Ordinance ( the "Bonds " ) , to provide funds , with any other available
funds , to refund the Prior Bonds , to finance the cost of making
such capital improvements , to establish a related debt service
reserve and to pay certain expenses incidental thereto ;
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WHEREAS , the City has made arrangements for the sale of the '
Bonds to Llama Company of Fayetteville , Arkansas ( the "Purchaser" )
and in connection therewith has prepared and distributed a
Preliminary Official Statement , dated August 7 , 1992 ( the
" Preliminary Official Statement" ) ; and
WHEREAS , there has been submitted to the City a Bond Purchase
Agreement , dated August 18 , 1992 ( the "Bond Purchase Agreement" ) ,
providing for the purchase of the Bonds by the Purchaser ; and
WHEREAS , a final Official Statement , dated August 18 , 1992 ,
( the "Official Statement" ) , has been prepared and will be
distributed in connection with the offer and sale of the Bonds ; and
WHEREAS , there has been submitted to the City an Escrow
Deposit Agreement , dated as of August 15 , 1992 , between The State
First National Bank in the City of Texarkana , Arkansas , as escrow
agent ( the " Escrow Agent" ) , and the City , which provides for the
refunding of the Prior Bonds ( the " Escrow Deposit Agreement " ) ; and
WHEREAS , copies of the Preliminary Official Statement ,
Official Statement , Bond Purchase Agreement and Escrow Deposit
Agreement have been presented to and are before the Board at this
meeting ;
NOW , THEREFORE , BE IT ORDAINED BY THE BOARD OF DIRECTORS OF
THE CITY OF FAYETTEVILLE , ARKANSAS , AS FOLLOWS :
Section 1 . Definitions . In addition to the terms defined in
the preamble to this Ordinance the following terms shall have the
following meanings ;
"Accountant" means a firm of independent certified public
accountants of recognized national standing selected from time to
time by the City which may be the firm of accountants which
regularly audits the books of the City .
"Amortization Requirements " means the amounts required to be
deposited in the Redemption Account for the purpose of redeeming
prior to their maturity and paying at their maturity the Term
Bonds , the specific amounts and times of such deposits being set
forth in Schedule A attached hereto .
" Budget" means the annual budget of the System adopted in
accordance with this Ordinance .
"Code" means the Internal Revenue Code of 1986 , as now or
hereafter amended , and applicable regulations issued or proposed
thereunder .
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" Consulting Engineer" means a firm of independent engineers
having recognized experience in municipal water and sewer systems
selected from time to time by the City .
"Government Obligations" means ( i ) direct obligations of , or
obligations the payment of the principal of and interest on which
is fully guaranteed by , the United States of America ; ( ii )
obligations issued or guaranteed by any instrumentality or agency
of the United States of America , whether now existing or hereafter
organized , including but not limited to those of the Federal
Financing Bank , the members of the Farm Credit System whether
individually or consolidated , Federal Home Loan Banks , the
Export-Import Bank , Government National Mortgage Association and
the Tennessee Valley Authority ; ( iii ) evidences of ownership of
proportionate interests in future interest or principal payments on
obligations specified in clause ( i ) of this definition held by a
bank or trust company as custodian , under which the owner of the
investment is the real party in interest and has the right to
proceed directly and individually against the obligor on the
underlying obligations described in clause ( i ) of this definition ,
and which underlying obligations are not available to satisfy any
claim of the custodian or any person claiming through the custodian
or to whom the custodian may be obligated ; ( iv) municipal
obligations , the payment of the principal of , interest on and
redemption premium , if any , on which are irrevocably secured by
obligations described in clause ( i ) of this definition and which
obligations have been deposited in an escrow account which is
irrevocably pledged to the payment of the principal of , interest on
and redemption premium , if any , on such municipal obligations ; ( v)
obligations issued by any state of the United States ; and ( vi )
municipal obligations the payment of the principal of and interest
on which are insured ; provided , however , the obligations described
in clauses ( v) and ( vi ) of this definition shall also be rated in
one of the top two highest rating categories (without regard to any
gradation within such category ) by both Moody ' s and S&P or , upon
the discontinuance of either or both of such services , any other
nationally recognized rating service or services .
"Gross Revenues " means all fees , tolls , rates , rentals and
charges levied and collected in connection with and all other
income and receipts of whatever kind or character derived by the
City from the operation of the System . Gross Revenues shall
specifically include , but not be limited to , revenues from water
sales , fire protection charges , sewer service charges and interest
income on Revenue Fund balances . Notwithstanding the foregoing ,
Gross Revenues shall not include acreage , connection , front-
footage , tap-on , assessment and similar fees , charges ,
contributions or grants derived by the City in connection with the
provision of or payment for capital improvements constituting a
part of the System .
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"Guaranteed Investment Contract" means investment agreements
with any bank or trust company which has long-term obligations
rated in one of the two highest rating categories by Moody ' s and
S &P or , upon the discontinuance of either or both of such services ,
any other nationally recognized rating service or services .
" Improvements " means the capital improvements to be made to
the System described in Section 2 of this Ordinance , the cost of
which is to be financed in part by the issuance of the Bonds .
" Investment Obligations " means any of the following , to the
extent that the same are legal investments for the investment of
public funds under State law :
( a ) Government Obligations ;
( b) bankers acceptances , certificates of deposit or time
deposits of any bank , trust company or savings and loan
association ( including any investment in pools of such bankers
acceptances , certificates of deposit or time deposits ) , which ,
to the extent that such obligations are not insured by the
Federal Deposit Insurance Corporation , are collateralized at
all times in amounts and by obligations as shall be permitted
by State law ;
( c ) any repurchase , reverse repurchase or investment
agreement with any bank or trust company organized under the
laws of any state of the United States or any national banking
association , insurance company , or government bond dealer
reporting to , trading with , and recognized as a primary dealer
by the Federal Reserve Bank of New York and a member of the
Security Investors Protection Corporation , which agreement is
secured by any one or more of the securities described in
clauses ( i ) , ( ii ) or ( iii ) of the definition of Government
Obligations provided that the City has a perfected first
security interest in the collateral and that the City or its
agent has possession of the collateral , and that such col-
lateral is held free and clear of claims by third parties ; and
( d ) Guaranteed Investment Contracts .
"Maximum Principal and Interest Requirements " means the
maximum amount of Principal and Interest Requirements for any
fiscal year of the System .
"Moody ' s " means Moody ' s Investors Service , a corporation
organized and existing under the laws of the State of Delaware , its
successors and their assigns , and , if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of
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a securities rating agency , "Moody ' s " shall be deemed to refer to
any other nationally recognized securities rating agency designated
by the City .
"Net Revenues " means , for any period , Gross Revenues less
Operating Expenses for such period .
"Operating Expenses " means , for any period , all ordinary and
necessary expenses of operation , repair , maintenance and insuring
of the System under generally accepted accounting principles except
that they shall not include any allowance for depreciation , any
deposits or transfers to the credit of the Bond Fund or any other
fund or account created for the payment of debt service on Parity
Indebtedness or subordinated indebtedness secured by a pledge of
Net Revenues as permitted hereunder , the Debt Service Reserve Fund
or any other debt service reserve fund or account created in
connection with the issuance of Parity Indebtedness or such
subordinated indebtedness or the Renewal and Replacement Fund , any
payments of franchise taxes to the City or any payments with
respect to obligations not payable in whole or in part under any
circumstances from Gross Revenues , Operating Expenses shall
specifically include obligations of the City to. the Beaver Water
District of Benton and Washington Counties , Arkansas .
" Parity Indebtedness " means indebtedness of the City issued on
a parity as to security with the Bonds in accordance with Section
14 of this Ordinance .
" Principal and Interest Requirements " for any fiscal year of
the System , as applied to the Bonds , means the sum of :
( a ) the amount required to pay the interest on the Bonds
then outstanding which is payable on February 15 and on August
15 of such fiscal year ,
( b) the amount required to pay the principal of the
Serial Bonds then outstanding which is payable on August 15 of
such fiscal year and
( c ) the Amortization Requirement for the Term Bonds then
outstanding for the twelve ( 12 ) -month period ending on August
14 of such fiscal year .
In calculating Principal and Interest Requirements there may be
excluded any principal amount of the Bonds or any Amortization
Requirement which the City covenants to pay or satisfy with moneys
in the Debt Service Reserve Fund which may be used for such
purpose .
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" Principal and Interest Requirements " for any fiscal year of the
System , as applied to any Parity Indebtedness , means the sum of the
amounts required by the ordinance providing for the issuance of
such Parity Indebtedness to pay or to provide for the payment of
the interest on and principal of such Parity Indebtedness then
outstanding with respect to such fiscal year .
"Registrar" means the Registrar serving as such under this
Ordinance , whether original or successor .
"Reserve Fund Requirement" , as applied to the Bonds , means the
amount of $800 , 000 unless the Bonds are redeemed prior to maturity ,
in which case such amount shall be the lesser of ( a ) such amount
reduced pro rata by multiplying such amount by a ratio the
numerator of which is the principal amount of Bonds so redeemed and
the denominator of which is $10 , 000 , 000 and ( b) the Maximum
Principal and Interest Requirements on account of the Bonds in the
then current or any subsequent fiscal year .
" Serial Bonds " means the Bonds which shall be stated to mature
in annual installments and are so designated in Schedule A attached
hereto .
" S&P" means Standard & Poorfs Corporation , a corporation
organized and existing under the laws of the State of New York , its
successors and their assigns , and , if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of
a securities rating agency , " S&P" shall be deemed to refer to any
other nationally recognized securities rating agency designated by
the City .
"Term Bonds " means the Bonds so designated in Schedule A
attached hereto .
"Trustee " means the Trustee serving as such under this
Ordinance , whether original or successor .
Section 2 . Refunding Prior Bonds and Making improvements . 1 .
The Board hereby determines that it is desirable to refund the
Prior Bonds . The Board also hereby determines that it is necessary
to construct or otherwise make the Improvements consisting of the
following capital improvements to the System , the cost of which is
to be financed in part by the issuance of the Bonds as hereinafter
provided :
( a ) The construction of approximately 59 , 650 feet of a
36-inch water transmission main from the Beaver Water
Treatment Plant at Lowell , Arkansas to the northern part of
the City in accordance with the recommendations in a Water
Master Planning Study and an Overall Design Report prepared
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for the City by MCGoodwin , Williams and Yates in 1989 and
1991 , respectively , and as specified in plans and
specifications for such work prepared by McGoodwin , Williams
and Yates and McClelland Engineers ( "Phase I of the Water
Main" ) . The estimated cost of constructing Phase I of the
Water Main , including related engineering and right-of-way
acquisition costs , is $ 6 , 500 , 000 .
( b) The construction of approximately 38 , 000 feet of a
36- inch water transmission main constituting the continuation
of Phase I of the Water Main within the City and the
construction of other water lines connecting such main to the
System in accordance with such recommendations and
specifications described in subsection ( a ) above ( collectively
"Phase II of the Water Main" ) . The estimated cost of
constructing Phase II of the Water Main , including related
engineering and right-of-way acquisition costs , is $ 4 , 400 , 000 .
( c ) The rehabilitation of the existing sewer collection
system constituting a part of the System in the White River
Watershed in accordance with the recommendations in a Sewer
System Evaluation Study performed by McGoodwin , Williams and
Yates in 1989 and 1990 and in the Illinois River Watershed in
accordance with the recommendations in a Sewer System
Evaluation Study performed by RJN Environmental Group in
conjunction with McClelland Engineers in 1991 ( collectively
" Sewer Rehabilitation" ) . The estimated cost of such
rehabilitation is $5 , 841 , 600 .
( d ) The construction of two six-million-gallon water
storage tanks and approximately 12 , 500 feet of connecting
water transmission lines which are required to meet fire flood
and operational water demands and complement Phase I of the
Water Main and Phase II of the Water Main in accordance with
the recommendations in the study and the report and as
specified in the plans and specifications described in
subsection ( a ) of this Section ( collectively "Phase III " ) .
The estimated cost of Phase III is $ 3 , 3001000 .
2 . After the proceeds of the Bonds are applied to the
refunding of the Prior Bonds and the funding of the Debt Service
Reserve Fund and the Bond Fund in accordance with the provisions of
Section 23 of this Ordinance , the proceeds of the Bonds will be
deposited to the credit of the Construction Fund created by this
Ordinance and applied to pay a portion of the cost of making the
Improvements , as follows :
( a ) The first priority for such application of Bond
proceeds will be to pay a portion of the cost of Phase I of
the Water Main .
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(b) If the proceeds of the City ' s Sales and Use Tax
Capital Improvement Bonds , Series 1990 ( the " Sales and Use Tax
Bonds" ) intended to be used for constructing Phase I of the
Water Main are made available to the City for such purpose by
the Trustee under the Trust Indenture , dated as of October 15 ,
1990 , relating to the Sales and Use Tax Bonds ( the
" Indenture" ) , then ( i ) such proceeds of the Sales and Use Tax
Bonds will be applied or , with respect to costs of Phase I of
the Water Main paid from the proceeds of the Bonds , deemed to
have been applied to such purpose in accordance with the
Indenture , ( ii ) such proceeds of the Sales and Use Tax Bonds
in an amount equal to the costs of Phase I of the Water
Project paid from the proceeds of the Bonds will be deposited
to the credit of the Construction Fund as a reimbursement of
the proceeds of the Bonds so applied and ( iii ) the unexpended
or reimbursed proceeds of the Bonds initially intended to be
applied to pay the cost of Phase I of the Water Main will
instead be applied to pay the cost of Sewer Rehabilitation and
a portion of the cost of Phase II of the Water Main to the
extent that such proceeds are available therefor .
( c ) If , due to unexpected circumstances , the City is
unable to proceed with the construction of Phase I of the
Water Main or to apply the proceeds of the Bonds to such
purpose , then the proceeds of the Bonds initially intended to
be applied to pay the cost of Phase I of the Water Main will
instead be applied to pay the cost of Sewer Rehabilitation and
a portion of the cost of Phase III to the extent that such
proceeds are available therefor .
Section 3 . Authorization and Terms of Bonds . 1 . Under the
authority of the constitution and laws of the State , including
particularly the Authorizing Legislation , there is hereby
authorized the issuance of revenue bonds of the City to be
designated "Water and Sewer System Refunding and Improvement
Revenue Bonds , Series 1992 " in the principal amount of Ten Million
Dollars ( $ 10 , 000 , 000 ) . The Bonds shall be special obligations of
the City and the principal of and the interest and any redemption
premiium on the Bonds shall be secured by a pledge of and payable
solely from the Net Revenues as provided in this Ordinance . The
principal of and the interest and any redemption premium on the
Bonds may also be paid as herein provided from other moneys in the
Debt Service Reserve Fund and certain other funds created hereby ,
including any income received from the investment of moneys
deposited in such funds .
2 . The Bonds shall be dated August 15 , 1992 , and interest
thereon shall be payable semiannually on February 15 and August 15
of each year , commencing February 15 , 1993 . The Bonds shall be
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ssued as fully-registered bonds , numbered consecutively from R- 1
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upwards , and shall be in the denomination of $ 5 , 000 or any integral
multiple thereof . Each Bond shall bear interest from the interest
payment date next preceding the date of authentication thereof
unless it is authenticated as of an interest payment date , in which
event it shall bear interest from such date , or unless it is
authenticated prior to the first interest payment date , in which
event it shall bear interest from its date , or unless at the time
of authentication interest on the Bonds shall be in default , in
which event it shall bear interest from the date to which interest
has been paid in full .
3 . The Bonds shall be issued in the principal amounts , shall
mature , unless sooner redeemed in the manner in this Ordinance set
forth , shall consist of Serial Bonds and Term Bonds , with the Term
Bonds having such Amortization Requirements , and shall bear
interest as set forth in Schedule A attached hereto (which Schedule
is incorporated herein by this reference ) .
4 . The Bonds shall be subject to redemption prior to
maturity in accordance with the provisions pertaining thereto
appearing in the form of Bond hereinafter set forth in this
Ordinance . Bonds shall be redeemed only from and to the extent
funds on deposit in the Bond Fund are available and sufficient for
such purpose .
5 . The Bonds shall be payable , with respect to principal ,
premium , if any , and interest , in any coin or currency of the
United States of America which at the time of payment is legal
tender for the payment of public and private debts . The principal
of and any redemption premium on each Bond shall be payable to the
registered owner thereof or his registered assigns or legal
representative at the corporate trust office of the Registrar upon
the presentation and surrender thereof as the same shall become due
and payable . Payment of the interest on each Bond shall be made by
the Registrar on each interest payment date to the person appearing
on the registration books of the City hereinafter provided for as
the registered owner of such Bond ( or the previous Bond or Bonds
evidencing the same debt as that evidenced by such Bond ) at the
close of business on the record date for such interest , which shall
be the first ( lst ) day (whether or not a business day ) of the
calendar month of such interest payment date , by check mailed to
such person at his address as it appears on such registration
books . Payment of the interest on the Bonds shall also be made by
wire transfer to the registered owner of $ 1 , 000 , 000 or more in
principal amount of the Bonds upon the request of such owner .
6 . The Bonds shall bear the facsimile signatures of the
Mayor and City Clerk of the City and a facsimile of the official
seal of the City shall be imprinted thereon . In case any officer
a facsimile of whose signature shall appear on any of the Bonds
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shall cease to be such officer before the Bonds shall have been
delivered , such Bonds may , nevertheless , be delivered as herein
provided and may be issued as if the person whose facsimile
signature appears on such Bonds had not ceased to hold such office .
Any Bonds may bear the facsimile signatures of such persons who at
the time of the execution of such Bonds shall be duly authorized or
hold the proper office in the City although at the date of the
Bonds such persons may not have been so authorized or have held
such office .
7 . The Bonds may be exchanged and registered and transfers
of the Bonds may be registered in accordance with the provisions
pertaining thereto appearing in the form of Bond hereinafter set
forth in this Ordinance .
8 . No Bond shall be valid or become obligatory for any
purpose or be entitled to any benefit or security under this
Ordinance until it shall have been authenticated by the execution
by the Registrar of the certificate of authentication endorsed
thereon .
Section 4 . Bond Form , The Bonds and the endorsements thereon
shall be in substantially the following forms and the Mayor and
City Clerk of the City are hereby authorized and directed to make
all recitals contained therein :
UNITED STATES OF AMERICA , STATE OF ARKANSAS
COUNTY OF WASHINGTON
No . R- $
CITY OF FAYETTEVILLE
WATER AND SEWER SYSTEM REFUNDING AND
IMPROVEMENT REVENUE BOND
SERIES 1992
Rate of Maturity Dated
Interest : Date : Date : August 15 , 1992 CUSIP:
Registered Owner :
Principal Amount : Dollars
THE CITY OF FAYETTEVILLE , ARKANSAS ( the " City " ) , a city of the
first class , duly created under the laws of the State of Arkansas ,
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for value received , promises to pay to the Registered Owner shown
above , or registered assigns or legal representative , upon pre-
sentation and surrender of this bond at the corporate trust office
of The State First National Bank ( the "Registrar" ) , in the City of
Texarkana , Arkansas , the Principal Amount shown above on the
Maturity Date shown above (unless this bond shall have been called
for prior redemption , in which case on the redemption date ) , in
such coin or currency of the United States of America as at the
time payment shall be legal tender for the payment of public and
private debts , and to pay interest on said Principal Amount from
the Dated Date shown above or from the February 15 or August 15
next preceding the date of authentication to which interest shall
have been paid , unless such date of authentication is a February 15
or an August 15 to which interest shall have been paid , in which
case from such date , such interest to the maturity hereof being
payable on February 15 and August 15 in each year , at the Interest
Rate per annum specified above , until payment of said Principal
Amount . The interest so payable on any such interest payment date
will be paid to the person in whose name this bond ( or the previous
bond or bonds evidencing the same debt as that evidenced by this
bond ) is registered at the close of business on the record date for
such interest , which shall be the first ( 1st ) day ( whether or not
a business day ) of the calendar month next preceding such interest
payment date , by check mailed to such person at his address as it
appears on the bond registration books of the City maintained by
the Registrar . Payment of the interest on this bond shall also be
made by wire transfer to the registered owner of this bond upon the
request of such owner if such owner is the registered owner of
$ 1 , 000 , 000 or more in principal amount of the bonds of the series
of which this bond is one .
This bond is one of a series of bonds , designated "Water and
Sewer System Refunding and Improvement Revenue Bonds , Series 1992 "
and aggregating in principal amount Ten Million Dollars
( $ 10 , 000 , 000 ) ( the "Bonds " ) . The Bonds have been issued for the
purpose of financing a portion of the cost of refunding all
outstanding water and sewer revenue bonds of the City , financing a
portion of the cost of making certain capital improvements to the
water and sewer system of the City , funding a debt service reserve
and paying certain expenses incidental thereto . The Bonds have
been issued pursuant to and in full compliance with the
constitution and laws of the State of Arkansas , including
particularly Title 14 , Chapter 234 , Subchapter 2 , Title 14 , Chapter
235 , Subchapter 2 , Title 14 , Chapter 164 , Subchapter 4 and Title
19 , Chapter 9 , Subchapter 6 of the Arkansas Code of 1987 Annotated ,
and pursuant to Ordinance No . 3638 of the City adopted by the Board
of Directors of the City on August 18 , 1992 ( the "Ordinance" ) . The
Ordinance permits the City to issue , under certain circumstances ,
Parity Indebtedness ( as defined in the Ordinance ) which may be on
a parity of security with the Bonds and subordinated indebtedness
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payable from Net Revenues subordinate to the Bonds and Parity
Indebtedness . Reference is hereby made to the Ordinance and to all
ordinances supplemental thereto for the provisions , among others ,
with respect to the nature and extent of the security , the rights ,
duties and obligations of the City , the Registrar , the Trustee
appointed under the Ordinance ( the "Trustee" ) and the registered
owners of the Bonds , and the terms upon which Bonds are issued and
secured . A copy of the Ordinance is on file at the corporate trust
office of the Trustee and , by the acceptance of this bond , the
registered owner hereof assents to all of the provisions of the
Ordinance .
The Bonds are special obligations of the City and the
principal of and the interest and any redemption premium on the
Bonds are secured by a pledge of and payable solely from the Net
Revenues ( as defined in the Ordinance ) of the City ' s water and
sewer system , as more particularly described in the Ordinance . In
no event shall the Bonds constitute an indebtedness of the City
within the meaning of any constitutional or statutory debt
limitation or restriction .
THE TERMS AND PROVISIONS OF THIS BOND ARE CONTINUED ON THE
REVERSE HEREOF AND SUCH CONTINUED TERMS AND PROVISIONS SHALL FOR
ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE .
IT IS HEREBY CERTIFIED , RECITED AND DECLARED that all acts ,
conditions and things required to exist , happen and be performed
precedent to and in the issuance of this bond do exist , have
happened and have been performed in due time , form and manner as
required by law and that the indebtedness represented by the Bonds ,
together with all other obligations of the City , does not exceed
any constitutional or statutory limitation .
This bond shall not be valid until the Certificate of
Authentication endorsed hereon shall have been signed by the
Registrar .
IN WITNESS WHEREOF , the City of Fayetteville , Arkansas , has
caused this bond to bear the facsimile signatures of its Mayor and
its City Clerk , thereunto duly authorized , and its official seal to
be imprinted hereon , all as of the Dated Date ,
CITY OF FAYETTEVILLE , ARKANSAS
( facsimile signature )
Mayor
( facsimile sianaturel
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II
A
[SEAL]
City Clerk
CERTIFICATE OF AUTHENTICATION
This bond is one of the City of Fayetteville, Arkansas Water
and Sewer System Refunding and Improvement Revenue Bonds, Series
1992 described herein.
Date of authentication:
Registrar
By:
Authorized Signatory
[REVERSE OF BOND]
The Bonds are special obligations of the City payable solely
from the revenues of the City's water and sewer system (the
"System") which are transferred to the Bond Fund established by the
Ordinance (the "Bond Fund") in an amount sufficient to pay the
principal of and interest and any redemption premium on the Bonds
after providing for the payment of operation and maintenance
expenses of the System from such revenues. In the Ordinance the
City covenants to maintain rates for System services sufficient to
produce annually revenues of at least one hundred ten percent
(110%) of the amount required for the same period to provide for
the payment of expenses of operation and maintenance of the System,
to provide for the payment of principal of and interest on the
Bonds and any Parity Indebtedness as the same become due, to
provide for the payment of Registrar and Trustee fees, to make
required deposits into the Debt Service Reserve Fund established by
the Ordinance (the "Debt Service Reserve Fund") and to make
required deposits into the Renewal and Replacement Fund established
by the Ordinance (the "Renewal and Replacement Fund").
The Bonds are further secured by amounts maintained in the
Debt Service Reserve Fund. Moneys in the Debt Service Reserve Fund
may be used only for the payment of principal of and interest on
the Bonds in the event moneys in the Bond Fund are insufficient for
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such purposes or to pay the final maturity of and the respective
interest on the Bonds.
under certain circumstances moneys in the Renewal and
Replacement Fund may also be used to pay principal of and interest
on the Bonds if moneys in the Debt Service Reserve Fund are
insufficient for such purposes.
The Bonds consist of bonds maturing on August 15 of the years
1993 to 2009, inclusive (the "Serial Bonds"), and of bonds maturing
on August 15, 2012 (the "Term Bonds"). The Term Bonds are subject
to mandatory redemption in part from moneys in the Redemption
Account created by the Ordinance in a total principal amount equal
to the Amortization Requirements (as defined in the Ordinance),
less the principal amount of the Term Bonds retired by purchase, at
the principal amount thereof, together with accrued interest to the
date fixed for redemption, but without premium, on August 15 of the
following years and in the following amounts:
2010 $ 665,000
2011 705,000
2012 1,550,000
Bonds maturing on or after August 15, 2000, are subject to
redemption prior to maturity, at the option of the City, in whole
or in part at any time, on or after August 15, 1999, from funds
from any source, at the redemption prices set forth below
(expressed as a percentage of principal amount) together with
accrued interest to the date fixed for redemption:
Redemption
Dates
(Inclusive)
Redemption Prices
August
15,
1999
to August
14, 2000
103%
August
15,
2000
to August
14, 2001
102
August
15,
2001
to August
14, 2002
101
August
15,
2002
and thereafter
100
If less than all of the Bonds of any one maturity shall be
called for redemption, the particular Bonds or portions of Bonds of
such maturity to be redeemed shall be selected by lot by the City
in such manner as the City in its discretion may determine;
provided, however, that the portion of any Bond to be redeemed
shall be in the principal amount of $5,000 or some multiple thereof
and that, in selecting Bonds for redemption, the Registrar shall
treat each Bond as representing that number of Bonds which is
obtained by dividing the principal amount of such Bond by $5,000.
If less than all of the Bonds stated to mature on different dates
shall be called for redemption, the particular Bonds or portions
thereof to be redeemed shall be called in inverse order of their
maturities.
E-:
Not more than sixty (60) nor less than thirty (30) days before
the redemption date of any Bonds to be redeemed, whether such
redemption be in whole or in part, the City shall cause a notice of
such redemption to be filed with the Registrar and the Registrar
shall mail, postage prepaid, such notice to the registered owner of
each Bond to be redeemed in whole or in part at his address
appearing upon the registration books of the City. Such notice may
also be given to such national depositaries and wire services used
to distribute information relating to municipal bonds in such
manner and at such time as the Registrar may deem appropriate.
Failure so to mail or give such notice or any defect therein shall
not affect the validity of the proceedings for such redemption as
regards registered owners to whom such notice was given as
required. Each such notice shall set forth the date designated for
redemption, the redemption price to be paid, the maturities of the
Bonds to be redeemed and, if less than all of the Bonds of any one
maturity then outstanding shall be called for redemption, the
distinctive numbers and letters, if any, of such Bonds to be
redeemed and, in the case of any Bond to be redeemed in part only,
the portion of the principal amount thereof to be redeemed. If any
Bond is to be redeemed in part only, the notice of redemption shall
state also that on or after the redemption date, upon surrender of
such Bond, a new Bond or Bonds in principal amount equal to the
unredeemed portion of such Bond will be issued.
On or before the date fixed for redemption, moneys shall be
deposited with the Registrar or the Trustee to pay the principal of
and the redemption premium, if any, on the Bonds or portions
thereof called for redemption as well as the interest accruing
thereon to the redemption date thereof.
On the date fixed for redemption, notice having been given in
the manner and under the conditions hereinabove provided, the Bonds
or portions thereof called for redemption shall be due and payable
at the redemption price provided therefor, plus accrued interest to
such date. If moneys sufficient to pay the redemption price of the
Bonds or portions thereof to be redeemed, plus accrued interest
thereon to the date fixed for redemption, are held by the Registrar
or the Trustee in trust for the registered owners of Bonds or
portions thereof to be redeemed, interest on the Bonds or portions
thereof so called for redemption shall cease to accrue, such Bonds
or portions thereof shall cease to be entitled to any benefits or
security under the Ordinance or to be deemed outstanding, and the
registered owners of such Bonds or portions thereof shall have no
rights in respect thereof except to receive payment of the
redemption price thereof, plus accrued interest to the date of
redemption.
15
f
If a portion of a Bond shall be selected for redemption, the
registered owner thereof or his attorney or legal representative
shall present and surrender such Bond to the Registrar for payment
of the principal amount thereof so called for redemption and the
redemption premium, if any, on such principal amount, and the
Registrar shall authenticate and deliver to or upon the order of
such registered owner or his legal representative, without charge
therefor, for the unredeemed portion of the principal amount of the
Bond so surrendered, a new Bond or Bonds of the same maturity, of
any authorized denominations and bearing interest at the same rate.
The Bonds are issuable in fully registered form in the
denomination of $5,000 or any integral multiple thereof. Upon
surrender thereof at the corporate trust office of the Registrar
together with an assignment duly executed by the registered owner
or his attorney or legal representative in such form as shall be
satisfactory to the Registrar, Bonds may, at the option of the
registered owner thereof, be exchanged for an equal aggregate
principal amount of Bonds of the same maturity, of any authorized
denominations and bearing interest at the same rate.
The Registrar shall keep at its corporate trust office the
books of the City for the registration of transfer of Bonds. The
transfer of this bond may be registered only upon such books upon
the surrender hereof to the Registrar together with an assignment
duly executed by the registered owner hereof or his attorney or
legal representative in such form as shall be satisfactory to the
Registrar. Upon any such registration of transfer, the Registrar
shall deliver in exchange for this bond a new Bond or Bonds,
registered in the name of the transferee, of any authorized
denominations, in an aggregate principal amount equal to the
unredeemed principal amount of this bond, of the same maturity and
bearing interest at the same rate.
In all cases in which Bonds shall be exchanged or the transfer
of Bonds shall be registered as provided above, the Registrar shall
authenticate and deliver at the earliest practicable time Bonds in
accordance with such provisions. All Bonds surrendered in any such
exchange or registration of transfer shall forthwith be cancelled
by the Registrar. The City or the Registrar may make a charge for
shipping and out-of-pocket costs for every such exchange or
registration of transfer of Bonds sufficient to reimburse it for
any tax or other governmental charge required to be paid with
respect to such exchange or registration of transfer, but no other
charge shall be made for exchanging or registering the transfer of
Bonds. The Registrar shall not be required to exchange or register
the transfer of any Bond during a period beginning at the opening
of business fifteen (15) days before the day of the mailing of a
notice of redemption of Bonds or any portion thereof and ending at
the close of business on the day of such mailing or of any Bond
16
called for
Ordinance.
redemption in whole or in part pursuant to the
The registered owner of this Bond is required to give the
Registrar written notice of ownership hereof and of the address to
which interest payments are to be mailed. The City and the
Registrar may deem and treat the person in whose name this bond is
registered as the absolute owner hereof (whether or not this bond
shall be overdue) or the purpose of receiving payment of, or on
account of, principal hereof and interest due hereon and for all
other purposes, and neither the City nor the Registrar shall be
affected by any notice to the contrary.
In certain events, on the conditions, in the manner and with
the effect set forth in the Ordinance, the principal of all the
Bonds then outstanding under the Ordinance may become or may be
declared due and payable before the stated maturities thereof,
together with the interest accrued thereon.
This bond is declared to be a negotiable instrument within the
meaning of the negotiable instruments law of the State of Arkansas
under the provisions of Title 14, chapter 164, chapter 4 referred
to herein and is issued with the intent that the laws of the State
of Arkansas will govern its construction.
No covenant or agreement contained in this bond or the
Ordinance shall be deemed to be a covenant or agreement or any
past, present or future director, officer or employee of the City
in his individual capacity, and no officer thereof executing this
bond shall be liable personally on this bond or be subject to any
personal liability or accountability by reason of the issuance of
this bond.
17
[Form of Assignment]
FOR VALUE RECEIVED,
the undersigned, hereby sells, assigns, and transfers unto
(Please insert Social Security or other identifying number of
assignee)
the within bond and all rights thereunder, and hereby irrevocably
constitutes and appoints
aLLorney to register the Lransier oI said bond on the books kept
for registration thereof, with full power of substitution in the
premises.
Dated:
NOTICE: The signature(s) to this
assignment must correspond with the
names appearing upon the face of the
within bond in every particular,
without alteration or enlargement or
any change whatever.
Signature Guaranteed:
NOTICE: Signature(s) must be
guaranteed by a member firm of
the New York Stock Exchange or
a commercial bank or a trust
company.
Ei3
Section 5. Construction Fund.
and establishes the Construction Fund,
the City as a segregated fund and to
shall be deposited proceeds of the
Ordinance.
1. The City hereby creates
which shall be maintained by
the credit of which there
Bonds as directed in this
2. The cost of the Improvements shall be paid from the
Construction Fund as herein provided. For the purposes of this
Section, the cost of the Improvements shall include, without
intending thereby to limit or to restrict or to extend any proper
definition of such cost under the provisions of this Ordinance, the
following:
(a) obligations incurred for labor and materials and to
contractors, builders and materialmen in connection with the
construction of enlargements, improvements and extensions or
other work, for machinery and equipment, and for the
restoration of property damaged or destroyed in connection
therewith;
(b) all direct costs of the Improvements described in
the plans and specifications for the Improvements;
(c) the cost of acquiring by purchase, if such purchase
shall be deemed expedient, and the amount of any award or
final judgment in any proceeding to acquire by condemnation,
such land, property rights, rights -of -way, franchises, ease-
ments, and other interests in lands as may be deemed necessary
or convenient in connection with the Improvements, and the
amount of any damages incident thereto;
(d) expenses of administration properly chargeable to
the work constituting the Improvements, legal, architectural
and engineering expenses and fees, cost of audits and of pre-
paring and issuing the Bonds, fees and expenses of consul-
tants, financing charges, taxes or other governmental charges
lawfully assessed during such work, premiums on insurance in
connection with such work, premiums for bond insurance,
initial set-up fees and annual fees for letters of credit,
lines of credit, standby bond purchase agreements or other
similar credit enhancement or liquidity enhancement devices
and all other items of expense not elsewhere in this Section
specified, incident to the work constituting the Improvements
and the placing of the same in operation; and
(e) any obligation or expense heretofore or hereafter
incurred by the City for any of the foregoing purposes,
including the cost of materials, supplies or equipment fur-
nished by the City in connection with the work constituting
OV
the Improvements and paid for by the City out of funds other
than moneys in the Construction Fund.
3. Before any such payment shall be made, there shall be
filed with the Administrative Services Director of the City or one
or more other officers or employees of the City designated for such
purpose by the City (collectively the "Administrative Services
Director") a requisition, signed by the City Engineer or one or
more other officers or employees of the City designated for such
purpose by the City (collectively the "City Engineer"), stating:
(a) the item number of such payment,
(b) the name of the person to whom such payment is due,
(c) the amount to be paid excluding any applicable sales
tax,
(d) the purpose by general classification for which the
obligation to be paid was incurred,
(e) that the obligation in the stated amount has been
incurred, is presently due and payable and constitutes a
proper charge against the Construction Fund that has not been
paid,
(f) that there has not been filed with or served upon
the City notice of any lien, right to lien or attachment upon,
or claim affecting the right to receive payment of, any of the
money payable to any of the persons named in such requisition,
which has not been released or will not be released
simultaneously with the payment of such obligation, and
(g) that such requisition contains no item representing
payment on account of any retainage which the City is entitled
to retain at the date of such requisition.
Upon receipt of each requisition, the Administrative Services
Director shall pay the obligations set forth in such requisition
out of money in the Construction Fund.
4. When the work constituting the Improvements shall have
been completed, which fact shall be evidenced by a certificate
stating the date of such completion, signed by the City Engineer,
the balance in the Construction Fund not reserved by the City for
the payment of any remaining part of the cost of the Improvements
shall be transferred, in the discretion of the City, to the credit
of the Bond Fund for the payment of principal of or interest on
the Bonds or retained in the Construction Fund and used to pay the
20
cost of additional capital improvements within the meaning of the
Authorizing Legislation which have been approved by the City.
Section 6. Rate Covenants. The City covenants that:
(a) It will continue in effect the present schedules of rates
for water and sewer services established by Ordinance No. 3491,
adopted by the Board on July 17, 1990, and Ordinance No. 3637,
adopted by the Board on August 18, 1992 (which ordinances are
incorporated herein by this reference and which rates are herein
collectively called the "System Rates").
(b) Application of the System Rates will produce during each
fiscal year of the System Gross Revenues of at least one hundred
ten percent (110%) of the amount required for such fiscal year to
(i) pay operating Expenses, (ii) pay Principal and Interest
Requirements on all Bonds and Parity Indebtedness then outstanding,
(iii) pay any Registrar and Trustee fees, (iv) make required
deposits into the Debt Service Reserve Fund hereinafter
established, and (v) make required deposits into the Renewal and
Replacement Fund hereinafter established. The City shall increase
System Rates from time to time, as and when necessary, to produce
Gross Revenues in the amount specified above.
Section 7. Other Funds. 1. The City hereby creates and
establishes the following funds:
(a) Revenue Fund
(b) Operation and Maintenance Fund
(c) Bond Fund
(d) Debt Service Reserve Fund
(e) Renewal and Replacement Fund
The City hereby also creates and establishes two separate accounts
in the Bond Fund designated the "Bond Service Account" and the
"Redemption Account".
The Revenue Fund, Operation and Maintenance Fund and Renewal and
Replacement Fund shall be maintained by the City as segregated
funds and the Bond Fund and Debt Service Reserve Fund shall be
maintained by the Trustee as segregated funds.
Moneys deposited in each of such funds shall be expended only as
set forth in this Ordinance.
2. The City may, in connection with the issuance of Parity
Indebtedness, create other funds under this Ordinance as may be
necessary or convenient.
21
Section 8. Revenue Fund. 1. The City shall cause all Gross
Revenues to be promptly deposited to the credit of the Revenue
Fund.
2. Commencing on the day following the delivery of the Bonds
and thereafter not later than the fifth (5th) business day
preceding the fifteenth (15th) day of each month, the City shall
transfer from the Revenue Fund to the following funds, in the order
indicated, the amounts set forth below:
FIRST: for deposit into the Operation and Maintenance
Fund, the amount necessary to cause moneys therein to
equal the anticipated Operating Expenses, as shown by the
Budget, for the two next succeeding months;
SECOND: to the Trustee, for deposit into the Bond Service
Account, an amount equal to one -sixth (1/6th) of the
interest due on the outstanding Bonds on the next
interest payment date plus one -twelfth (1/12th) of the
principal due on the outstanding Serial Bonds on the next
principal payment date, after taking into account any
amounts then held for the credit of the Bond Service
Account for the payment of such interest and principal,
and, for deposit into a separate account, such amount as
is required to make the amount in each other fund or
account created for the payment of debt service on Parity
Indebtedness equal to the amount then required to be in
such debt service fund or account;
THIRD: to the Trustee, for deposit into the Redemption
Account, an amount equal to one -twelfth (1/12th) of the
Amortization Requirement with respect to the outstanding
Term Bonds to be satisfied within the next succeeding
twelve (12) -month period ending on August 14 plus the
premium, if any, on the respective principal amount of
Term Bonds which would be payable if such principal
amount of Term Bonds were to be redeemed during such
period from moneys held for the credit of the Redemption
Account, after taking into account any amounts then held
for the credit of the Redemption Account;
FOURTH: to the Trustee, for deposit into the Debt
Service Reserve Fund, beginning in the month following
the month in which a deficiency in the Debt Service
Reserve Fund was created by a withdrawal, valuation or
otherwise, an amount at least equal to one -twelfth
(1/12th) of the amount of such deficiency until the
amount in the Debt Service Reserve Fund is equal to the
Reserve Fund Requirement and, for deposit into a separate
22
account, such amount as is required to make the amount in
each other debt service reserve fund or account created
in connection with the issuance of Parity Indebtedness
equal to the amount then required to be in such debt
service reserve fund or account; and
FIFTH: for deposit into the Renewal and Replacement
Fund, to the extent moneys are available in the Revenue
Fund, the amount necessary to cause the amount therein to
equal three hundred thousand dollars ($300,000) or such
greater amount as the Board may determine from time to
time to be appropriate, provided that the amount to be
transferred from the Revenue Fund and deposited into such
fund in any month need not exceed one -twelfth (1/12th) of
the amount then required to be held for the credit of
such fund.
3. If in any month there shall be a failure to transfer the
required amount into any of the funds or accounts as described
above, then the amount of any deficiency shall be added to the
amount otherwise required to be transferred into said funds or
accounts in the next succeeding month.
4.
Any moneys remaining in the
Revenue Fund
immediately
following
the transfers required by
this Section,
and before
additional
deposits of Gross Revenues
are made into
the Revenue
Fund, may
be used, at the option of
the City, for
any lawful
purposes,
including such purposes as may be provided
for by any
ordinance
of the Board other than
this Ordinance and the
reconstruction,
replacement or repair of the System as
provided in
Section 15
hereof.
5. Not later than the time that the City shall have called
any of the Bonds for redemption prior to maturity at its option,
the City shall transfer to the Trustee for deposit into the
Redemption Account from any available funds of the City an amount
sufficient, together with any other funds in the Redemption Account
available for such purpose, to pay the principal of and any premium
on the Bonds to be redeemed pursuant to such call.
Section 9. Operation and Maintenance Fund. 1. The City shall
deposit to the credit of the Operation and Maintenance Fund moneys
received therefor pursuant to Section 8 of this Ordinance.
2. Moneys in the Operation and Maintenance Fund shall be
expended solely for the purpose of paying Operating Expenses.
Section 10. Bond Fund. 1. The Trustee shall deposit to the
credit of each account in the Bond Fund and any separate account
with respect to a debt service fund or account created in
23
connection with the issuance of Parity Indebtedness moneys received
therefor pursuant to Section 8 of this Ordinance.
2. On or before the third (3rd) business day preceding each
interest payment date or redemption date for any of the Bonds
outstanding, the Trustee shall withdraw from the Bond Service
Account and deposit in trust with the Registrar in immediately
available funds an amount sufficient to enable the Registrar to
remit by mail or wire transfer, as the case may be, to the
registered owners of the Bonds the amounts required to pay interest
on the Bonds due on such date, and such amount shall be so applied.
3. On or before the third (3rd) business day preceding each
principal payment date for any of the Serial Bonds outstanding, the
Trustee shall withdraw from the Bond Service Account and deposit in
trust with the Registrar in immediately available funds the amount
required to pay principal of the Serial Bonds due on such date, and
such amount shall be so applied.
4. Moneys held for the credit of the Redemption Account shall
be applied to the retirement of the Bonds as follows:
(a) Subject to the provisions of paragraph (c) of this
subsection, at the direction of the City the Trustee shall
endeavor to purchase any Bonds secured hereby and then
outstanding, whether or not such Bonds shall then be subject
to redemption, on the most advantageous terms obtainable with
reasonable diligence, such price not to exceed the principal
of such Bonds plus the amount of the redemption premium, if
any, which might on the next redemption date be paid to the
registered owners of such Bonds under the provisions of this
Ordinance regarding redemption if such Bonds should be called
for redemption on such date from moneys in the Bond Fund. The
Trustee shall pay the interest accrued on such Bonds to date
of settlement therefor from the Bond Service Account and the
purchase price from the Redemption Account, but no such
purchase shall be made by the Trustee within the period of
forty-five (45) days next preceding any interest payment date
on which such Bonds are subject to call for redemption under
the provisions of this Ordinance, except from moneys other
than moneys set aside or deposited for the redemption of
Bonds.
(b) Subject to the provisions of this Ordinance
regarding redemption and paragraph (c) of this subsection, the
Trustee may call for redemption on each date on which Bonds
are subject to redemption as provided in this Ordinance such
amount of such Bonds as, with the redemption premium, if any,
will exhaust the moneys which will be held for the credit of
the Redemption Account on such date as nearly as may be;
provided, however, that no less than fifty thousand dollars
($50,000) principal amount of Bonds shall be called for
redemption at any one time unless a lesser amount shall be
required to satisfy any applicable Amortization Requirement.
On or before the third (3rd) business day preceding each
redemption date, the Trustee shall withdraw from the Bond
Service Account and the Redemption Account and set aside in
separate accounts or deposit with the Registrar the respective
amounts required for paying the interest on, and the principal
and redemption premium of, the Bonds so called for redemption.
(c) Moneys held by the Trustee in the Redemption Account
shall be applied by the Trustee during each twelve (12) -month
period ending on August 14 to the retirement of Bonds then
outstanding in the following order:
FIRST: the Term Bonds to the extent of the
Amortization Requirement, if any, for such period for
such Term Bonds, plus the applicable premium, if any;
SECOND: the remaining Term Bonds; and
THIRD: after the retirement of all Term Bonds,
Serial Bonds in the inverse order of their maturities.
Upon the retirement of any Bonds by purchase or redemption the
Trustee shall file with the City Clerk a statement briefly
describing such Bonds and setting forth the date of their purchase
or redemption, the amount of the purchase price or the redemption
price of such Bonds and the amount paid as interest thereon. The
expenses in connection with the purchase or redemption of any Bonds
shall be paid by the City or the Trustee from Revenues after the
application of the Revenues as required by subsections 2 and 3 of
Section 8 hereof.
5. All moneys which the Trustee shall have withdrawn from the
Bond Fund or shall have received from any other source and
deposited with the Registrar for the purpose of paying any of the
Bonds hereby secured, either at the maturity thereof or upon call
or redemption, or for the purpose of paying any interest or
redemption premium on any of the Bonds hereby secured, shall be
held in trust for the respective registered owners of such Bonds.
But any moneys which shall be so set aside or deposited by the
Trustee and which shall remain unclaimed by the registered owners
of such Bonds for the period of three (3) years after the date on
which such Bonds or the interest or any redemption premium thereon
shall have become due and payable shall be remitted to the State
Treasurer or to such other officer, board or body as may then be
entitled by law to receive the same, and thereafter the registered
owners of such Bonds shall look only to the State Treasurer or to
such other officer, board or body, as the case may be, for payment
and then only to the extent of the amounts so received without any
25
interest thereon, and the Registrar shall have no responsibility
with respect to such moneys.
6. If there shall be insufficient moneys in the Bond Fund,
after all required transfers thereto have been made, to pay in full
interest, principal and any premium due on any interest payment
date or principal payment date or mandatory redemption date the
Trustee shall, on the second (2nd) business day prior to such date,
withdraw from the Debt Service Reserve Fund and deposit in trust
with the Registrar in immediately available funds an amount equal
to such deficiency.
7. If there shall be insufficient moneys on deposit with the
Registrar, after all required deposits thereto have been made as
provided above in this Section, to pay in full the interest,
principal and any premium due on any interest payment date or
principal payment date or redemption date the City shall
immediately withdraw from the Renewal and Replacement Fund and
.deposit in trust with the Registrar in immediately available funds
an amount equal to such deficiency.
8. Moneys credited to a separate account with respect to a
debt service fund or account created in connection with the
issuance of Parity Indebtedness shall be transferred by the trustee
in accordance with the terms of the supplemental ordinance
providing for the issuance of such Parity Indebtedness.
Section 11. Renewal and Replacement Fund. 1. The City shall
deposit to the credit of the Renewal and Replacement Fund moneys
received therefor Dursuant to Section R of fhic fl,-Ainannn
2. Subject to the provisions of Section 10 of this
Ordinance, moneys in the Renewal and Replacement Fund shall be used
solely for the purpose of paying the cost of repairs or
replacements necessary due to the depreciation of the System and
not paid for with moneys in the Operation and Maintenance Fund and
costs of damage caused to the System by unforeseen catastrophes.
Section 12. Debt Service Reserve Fund. 1. The Trustee shall
deposit to the credit of the Debt Service Reserve Fund and any
separate account with respect to a debt service reserve fund or
account created in connection with the issuance of Parity
Indebtedness moneys received therefor pursuant to Section 8 of this
Ordinance.
2. Moneys credited to the Debt Service Reserve Fund shall be
transferred as necessary, pursuant to Section 10 of this Ordinance,
to provide for the payment of the principal of and interest and
premium on the Bonds when due. Moneys credited to the Debt Service
Reserve Fund may also be transferred, at the option of the City, to
the Bond Fund to provide for the payment of the final maturity of
26
•
the principal of the Bonds and the respective interest thereon
after all other principal of and interest on the Bonds has been
paid, except as may be otherwise provided in connection with any
refunding of the Bonds.
3. Moneys credited to the Debt Service Reserve Fund in
excess of the Reserve Fund Requirement and investment earnings on
moneys credited to the Debt Service Reserve Fund shall be
transferred to the Bond Fund.
4. Moneys credited to a separate account with respect to a
debt service reserve fund or account created in connection with the
issuance of Parity Indebtedness shall be transferred by the Trustee
in accordance with the terms of the supplemental ordinance
providing for the issuance of such Parity Indebtedness.
Section 13. Investment of Moneys. 1. The City and the
Trustee may invest moneys in funds or accounts in Investment
Obligations with maturity or redemption dates consistent with the
times at which said moneys will be required for the purposes
provided in this Ordinance. Moneys in separate funds or accounts
may be commingled for the purpose of investment.
2. obligations
fund or account creat
times to be a part of
due to an investment
fund or account for
otherwise provided in
purchased as an investment of moneys in any
ed by this Ordinance shall be deemed at all
such fund or account, and any income or loss
thereof shall be charged to the respective
which the investment was made except as
this Ordinance.
3. Investments in any fund or account shall be evaluated at
least annually by the City or the Trustee, as may be appropriate.
For the purpose of determining the amount in any fund or account,
the City and the Trustee shall value all Investment Obligations
credited to such fund or account at the price at which such
Investment Obligations are redeemable by the holders or owners
thereof at their option if so redeemable, or, if not so redeemable,
at the lesser of (i) the cost of such Investment Obligations minus
the amortization of any premium or plus the amortization of any
discount thereon and (ii) the market value of such Investment
Obligations, provided that Investment Obligations credited to the
Debt Service Reserve Fund, if not so redeemable, shall be valued at
the cost thereof minus the amortization of any premium or plus the
amortization of any discount thereon.
Section
entitled to
the Bonds to
to finance
betterments
Parity Indel
14. Parity Indebtedness.
issue and incur indebtedness
refund any outstanding Bonds
the cost of constructing
or improvements to the Sys
)tedness may provide for the
1. The City shall be
secured on a parity with
or Parity Indebtedness or
any future extensions,
tem. The amount of any
funding of interest for
27
such period as the City may determine, the funding of a debt
service reserve in such amount as the City may determine and the
payment of certain expenses in connection with the issuance of such
Parity Indebtedness.
2. Prior to issuing Parity Indebtedness the City shall
obtain an Accountant's or Consulting Engineer's certificate to the
effect that Net Revenues for each of the two fiscal years preceding
the year in which such indebtedness is proposed to be issued were
not less than one hundred twenty percent (120%) of the Maximum
Principal and Interest Requirements on all Bonds and any Parity
Indebtedness then outstanding and the proposed Parity Indebtedness.
In addition, the City may issue Parity Indebtedness to refund any
outstanding Bonds or Parity Indebtedness without obtaining such
certificate if the average annual Principal and Interest
Requirements until final maturity for the Parity Indebtedness
proposed to be issued are not greater than the average annual
Principal and Interest Requirements until final maturity for the
Bonds or the Parity Indebtedness proposed to be refunded.
Net Revenues may be adjusted for the purpose of the test
described above by including a Consulting Engineer's estimate of
additional Net Revenues to be derived from existing customers of
the System (or existing customers of any facilities to be acquired
in connection with any extension, betterment or improvement to the
System described in clause (ii) of this paragraph) resulting from
(i) System Rate increases adopted before the Parity Indebtedness is
issued and (ii) contemplated extensions, betterments, and
improvements to the System to be financed in whole or in part with
the proceeds of the Parity Indebtedness proposed to be issued or to
be constructed during the then current or next succeeding fiscal
year with any other available funds of the City (as if completed
and placed in service).
3. Nothing in this Ordinance shall prohibit the City from
issuing or incurring indebtedness secured by the Net Revenues
subordinate to the Bonds and any Parity Indebtedness.
Section 15. Insurance. While any Bonds are outstanding, the
City covenants and agrees to insure and at all times keep insured,
in the amount of the actual value thereof, by a responsible
insurance company or companies authorized and qualified under the
laws of the State to assume the risk thereof, all properties of the
System other than mains and lines for the transmission,
distribution or collection of water or sewage against loss or
damage from fire, lightning, tornado, winds, strike, malicious
damage, explosion, and against loss or damage from any other causes
customarily insured against by private companies engaged in a
similar type of business. In the event of loss, the proceeds of
such insurance shall be applied solely toward the reconstruction,
replacement, or repair of the System, and in such event the City
shall, with reasonable promptness, cause to be commenced and
completed the reconstruction, replacement, and repair work. If
such proceeds are more than sufficient for such purposes, the
balance remaining shall be deposited to the credit of the Renewal
and Replacement Fund and, if such proceeds shall be insufficient
for such purposes, the deficiency shall be supplied, first, from
moneys in the Renewal and Replacement Fund and, second, from any
available moneys in the Revenue Fund pursuant to subsection 4 of
Section 8 hereof.
Section 16. Records. The City shall keep or cause to be kept
proper books of accounts and records (separate from all other
records and accounts of the City) in which complete and correct
entries shall be made of all transactions relating to the operation
of the System and its revenues. Such books shall be available for
inspection by any registered owner of the Bonds at reasonable times
and under reasonable circumstances. The City agrees to have these
records audited by an Accountant at least annually, and a copy of
the audit shall be delivered to any registered owner of the Bonds
who shall request the same in writing and reimburse the City a
reasonable amount for the cost thereof.
Section 17. Other Covenants. The City hereby covenants that:
(a) The City will promptly pay or cause to be paid the
principal of and the interest on each and every Bond and all other
indebtedness issued or incurred under the provisions of this
Ordinance at the places, on the dates and in the manner specified
herein and in the Bonds and such indebtedness and any premium
required for the retirement of the Bonds and such indebtedness by
purchase or redemption, according to the true intent and meaning
thereof. Such principal, interest and premium will be payable
solely from the Net Revenues and the Net Revenues are hereby
pledged to the payment of such principal of and interest and
premium on the Bonds and such other indebtedness secured on a
parity with the Bonds as to the pledge of Net Revenues hereunder
and then such other indebtedness not so secured in the manner and
to the extent hereinabove particularly specified.
The City is not obligated to pay the principal of and interest and
any premium on the Bonds and such other indebtedness except from
the Net Revenues pledged hereunder, and such principal and interest
shall not constitute an indebtedness of the City within the meaning
of any constitutional or statutory debt limitation.
(b) The City will construct the Improvements in accordance
with plans and specifications theretofore approved by the City and
otherwise as required by law. The City further covenants that any
contract with any person for any work constituting a part of the
Improvements shall provide for such performance and payment bonds
or security in lieu thereof and for such retainages as shall be in
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compliance with the laws of the State and the normally established
practices of the City from time to time in effect.
(c) All Bonds paid or purchased either at or before maturity
shall be canceled when such payment or purchase is made and held by
the Trustee or the City and shall not be reissued.
(d) The System shall be operated on a fiscal year basis
beginning January 1 and ending December 31 of each year.
(e) The City will faithfully and punctually perform all
duties with reference to the System required by the constitution
and laws of the State, including the charging and collecting of
reasonable and sufficient rates lawfully established for services
rendered by the System, the segregating of the Gross Revenues as
herein required, and the applying of Net Revenues to the respective
funds and accounts herein created and referred to.
(f) The City will maintain the System in good condition and
operate the same in an efficient manner and at reasonable cost.
(g) Except for water service for the purposes of street
washing and fire fighting, none of the facilities or services
afforded by the System shall be furnished without a charge being
made therefor. In the event that the City or any department,
agency, or instrumentality thereof shall avail itself of the
facilities and services afforded by the System, the reasonable
value of the service or facilities so afforded shall be charged
against the City or such department, agency, or instrumentality and
shall be paid for as the charges accrue, except as hereinabove
otherwise provided. The revenues so received shall be deemed to be
Gross Revenues and shall be used and accounted for in the same
manner as the other Gross Revenues.
(h) So long as any Bonds or Parity Indebtedness is
outstanding, the City will not mortgage, pledge or otherwise
encumber the System or any Gross Revenues and will not sell, lease
or otherwise dispose of all or any substantial portion of the same
except as provided in Section 14 of this Ordinance and except for
such replacements, substitutions or other dispositions of
properties of the System as shall be necessary or incidental to the
efficient operation of the System as a revenue producing
enterprise.
(i) In the event the offices of the Mayor, City Clerk or City
Manager of the City or the Board shall be abolished, or any two or
more of such offices shall be merged or consolidated, or in the
event the duties of a particular office shall be transferred to
another office or officer, or in the event of a vacancy in any such
office by reason of death, resignation, removal from office, or
otherwise, or in the event any such officer shall become incapable
30
of performing the duties of his office by reason of sickness,
absence from the City, or otherwise, all powers conferred and all
obligations and duties imposed upon such office or officer or body
shall be performed by the office or officer or body succeeding to
the principal function thereof, or by the office or officer or body
upon whom such powers, obligations and duties shall be imposed by
law.
(j) The City shall cause a Budget of proposed System capital
costs and Operating Expenses to be prepared for each fiscal year of
operation. The Budget for any fiscal year shall be completed no
later than February 1 of said fiscal year and shall be available
for inspection by the registered owner of any of the Bonds
outstanding.
(k) Periodically the City shall cause a Consulting Engineer
to prepare a report on the status of the System's assets and
compliance with the terms and provisions of this Ordinance. Such
report shall be prepared no less frequently than every three (3)
years and the first such report shall be prepared prior to
September 1, 1993.
(1) The City covenants that it will not, and it will direct
the Trustee not to, take any action which will, or fail to take any
action, which failure will, cause the interest on Bonds to be
includable in the gross income of the registered owners thereof for
federal income tax purposes.
Section 18. Event of Default and Acceleration of Maturities.
If there be any default in the payment of the principal of, or
premium, if any, or interest on, any Bonds or Parity Indebtedness,
or if the City defaults in the performance of any of its other
covenants or agreements contained in this Ordinance and such
default shall continue for thirty (30) days after written notice
specifying such default and requiring the same to be remedied shall
have been given to the City by the Trustee, or if there shall be
filed by the City a petition in bankruptcy, then upon the
continuance of any such event (an "event of default") the Trustee
may, and upon the written request of the registered owners of not
less than twenty percent (20%) in aggregate principal amount of the
Bonds then outstanding shall, by a notice in writing to the City,
declare the principal of all of the Bonds then outstanding (if not
then due and payable) to be due and payable immediately, and upon
such declaration the same shall become and be immediately due and
payable, anything contained in the Bonds or this Ordinance to the
contrary notwithstanding; provided, however, that if at any time
after the principal of the Bonds shall have been so declared to be
due and payable, and before the entry of final judgment or decree
in any suit, action or proceeding instituted on account of such
event of default, or before the completion of the enforcement of
any other remedy under this ordinance, moneys shall have
31
accumulated in the Bond Fund and each fund or account created for
the payment of debt service on Parity Indebtedness sufficient to
pay the principal of all matured Bonds and Parity Indebtedness and
all arrears of interest, if any, upon all of the Bonds and Parity
Indebtedness then outstanding (except the principal of any Bonds
and Parity Indebtedness not then due and payable by their terms and
the interest accrued on such Bonds and Parity Indebtedness since
the last interest payment date), and the charges, compensation,
expenses, disbursements, advances and liabilities of the Trustee
and all other amounts then payable by the City hereunder shall have
been paid or a sum sufficient to pay the same shall have been
deposited with the Trustee, and every other event of default known
to the Trustee in the observance or performance of any covenant,
condition, agreement or provision contained in the Bonds or this
Ordinance (other than a default in the payment of the principal of
such Bonds and Parity Indebtedness then due and payable only
because of a declaration under this Section) shall have been
remedied to the satisfaction of the Trustee, then and in every such
case the Trustee may, and upon the written request of the
registered owners of not less than twenty percent (20%) in
aggregate principal amount of the Bonds not then due and payable by
their terms and then outstanding shall, by written notice to the
City, rescind and annul such declaration and its consequences, but
no such rescission or annulment shall extend to or affect any
subsequent default or impair any right consequent thereon.
Section 19. Enforcement of Remedies. 1. Upon the happening
and continuance of any event of default specified in Section 18
hereof, then and in every such case the Trustee may, and upon the
written request of the registered owners of not less than ten
percent (10%) in aggregate principal amount of the Bonds then
outstanding shall, proceed to protect and enforce the rights of the
registered owners of the Bonds under the Authorizing Legislation or
other applicable State law and this Ordinance by such suits,
actions or special proceedings in equity or at law, either for the
specific performance of any covenant or agreement contained herein
or in aid or execution of any power herein granted or for the
enforcement of any proper legal or equitable remedy, as the
Trustee, being advised by counsel, shall deem most effectual to
protect and enforce such rights.
2. Among such remedies the Trustee may, and upon the
written request of the registered owners of not less than ten
percent (10%) in aggregate principal amount of the Bonds then
outstanding shall, apply in the proper action to a court of
competent jurisdiction for the appointment of a receiver to
administer the System on behalf of the City and the registered
owners of the Bonds, with power to charge and collect (or by
mandatory injunction or otherwise to cause to be charged and
collected) rates sufficient to provide for the payment of Operating
Expenses, to pay principal of and interest on the Bonds and Parity
32
Indebtedness outstanding, and to apply the Gross Revenues in
conformity with the provisions of the Authorizing Legislation and
this Ordinance. When all defaults in principal, premium, and
interest payments have been cured, the custody and operation of the
System shall revert to the City.
3. It is hereby declared and intended that no one or more
registered owners of the Bonds shall have any right in any manner
whatever by his, her, or their action to affect, disturb, or
prejudice the security of this Ordinance, or to enforce any right
hereunder except in the manner herein provided, that all
proceedings at law or in equity shall be instituted, had, and
maintained in the manner herein provided and for the benefit of all
registered owners of the outstanding Bonds, and that any individual
rights of action or other right given to one or more of such owners
by law are restricted by this Ordinance to the rights and remedies
herein provided.
4. No remedy conferred upon or reserved to the Trustee or to
the registered owners of the Bonds is intended to be exclusive of
any other remedy or remedies, and each and every such remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing or available at law or in
equity.
5. No delay or omission of the Trustee or any registered
owners of the Bonds to exercise any right or power accrued upon any
default shall impair any such right or power or shall be construed
to be a waiver of any such default or an acquiescence therein; and
every power and remedy given by this Ordinance to the Trustee or
the registered owners of the Bonds may be exercised from time to
time and as often as may be deemed expedient.
6. The Trustee may, and upon the written request of the
registered owners of not less than fifty percent (50%) in principal
amount of the Bonds then outstanding shall, waive any default which
shall have been remedied before the entry of final judgment or
decree in any suit, action, or proceeding instituted under the
provisions of this Ordinance or before the completion of the
enforcement of any other remedy, but no such waiver shall extend to
or affect any other existing or any subsequent default or defaults
or impair any rights or remedies consequent thereon.
Section 20. Trustee and Registrar. 1. The State First
National Bank, in the City of Texarkana, Arkansas, is hereby
appointed as Trustee under this Ordinance. The Trustee shall file
with the city a written acceptance of the duties and obligations
and agreement to execute the trusts imposed upon it by this
Ordinance, but only upon the terms and conditions set forth in this
Section and subject to the provisions of this Ordinance to all of
which the registered owners of the Bonds agree. Unless an event of
33
default of which the Trustee shall have notice pursuant to the
provisions of this Ordinance has occurred and is continuing, the
Trustee shall not be responsible except for the performance of
those duties that are expressly set forth in this Ordinance, and no
implied covenant or duty shall be read into this Ordinance against
the Trustee.
2. The City shall appoint such registrars, transfer agents,
paying agents or other agents as may be necessary for the
registration, registration of transfer and exchange of Bonds within
a reasonable time according to then current commercial standards
and for the timely payment of principal, interest and any
redemption premium with respect to the Bonds. The State First
National Bank, in the City of Texarkana, Arkansas, is hereby
appointed the registrar, transfer agent and paying agent for the
Bonds (collectively the "Registrar"), subject to the right of the
City to appoint another Registrar, and as such shall keep the books
of the City for the registration, registration of transfer,
exchange and payment of the Bonds as provided in this Ordinance.
Prior to the issuance of the Bonds, the City shall obtain from a
duly authorized officer of the Registrar a written acceptance of
the duties imposed upon the Registrar by this Ordinance.
3. The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Ordinance, or
to enter any appearance or in any way defend in any suit in which
it may be made defendant, or to take any steps in the execution of
the trusts hereby created or in the enforcement of any rights and
powers hereunder, until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees
and other reasonable disbursements, and against all liability; the
Trustee may, nevertheless, begin suit, or appear in and defend
suit, or do anything else in its judgment proper to be done by it
as such Trustee, without indemnity, and in such case the City shall
reimburse the Trustee for all costs and expenses, outlays and
counsel fees and other reasonable disbursements properly incurred
in connection therewith, provided that the Trustee will inform the
City of any such action which might require the City to reimburse
the Trustee before commencing such action and that such
reimbursement shall be subject to the provisions of the second
paragraph of subsection 6 of this Section. If the City shall fail
to make such reimbursement, the Trustee may reimburse itself from
any moneys in its possession under the provisions of this Ordinance
and shall be entitled to a preference therefor over any of the
Bonds outstanding hereunder.
4. The Trustee shall be under no obligation to effect or
maintain insurance or to renew any policies of insurance or to
inquire as to the sufficiency of any policies of insurance carried
by the City or to report, or make file claims or proof of loss for,
any loss or damage insured against or which may occur, or to keep
M
itself informed or advised as to the payment of any taxes or
assessments, or to require any such payment to be made. The
Trustee shall have no responsibility in respect of the validity or
sufficiency of this Ordinance or the due execution or
acknowledgment thereof, or in respect of the validity of the Bonds
or the due execution or issuance thereof. The Trustee shall be
under no obligation to see that any duties herein imposed upon the
City, any Registrar or any party other than itself, or any
covenants herein contained on the part of any party other than
itself to be performed, shall be done or performed, and the Trustee
shall be under no obligation for failure to see that any such
duties or covenants are so done or performed.
5. The Trustee shall not be liable or responsible because of
the failure of the City or of any of its employees or agents to
make any collections or deposits or to perform any act herein
required of the City or because of the loss of any moneys arising
through the insolvency or the act or default or omission of any
other depositary in which such moneys shall have been deposited
under the provisions of this Ordinance. The Trustee shall not be
responsible for the application of any of the proceeds of the Bonds
or any other moneys deposited with it and paid out, withdrawn or
transferred hereunder if such application, payment, withdrawal or
transfer shall be made in accordance with the provisions of this
Ordinance. The immunities and exemptions from liability of the
Trustee hereunder shall extend to its directors, officers,
employees and agents.
6. Subject to the provisions of the next succeeding
paragraph, the City shall, from moneys lawfully available therefor,
pay to the Trustee reasonable compensation for all services
performed by it hereunder and also all its reasonable expenses,
charges and other disbursements and those of its attorneys, agents
and employees incurred in and about the administration and
execution of the trusts hereby created and the performance of its
powers and duties hereunder and, to the extent permitted by law and
from moneys lawfully available therefor, shall indemnify and save
the Trustee harmless against any liabilities which it may incur in
the exercise and performance of its powers and duties hereunder.
If the City shall fail to make any payment required by this
subsection, the Trustee may make such payment from any moneys in
its possession under the provisions of this Ordinance and shall be
entitled to a preference therefor over any of the Bonds outstanding
hereunder. The City shall not be required to indemnify the Trustee
against any liabilities which the Trustee may incur as a result of
negligent or wrongful acts or omissions of the Trustee.
The City shall pay to the Trustee compensation for its
services as described in the next preceding paragraph in accordance
with a separate agreement between the City and the Trustee,
provided that such compensation, together with all expenses,
35
charges and other disbursements of the Trustee and its attorneys,
agents and employees as described in the next preceding paragraph
and all reimbursements to the Trustee for all costs and other
disbursements as described in subsection 3 of this Section, shall
not exceed $15,000 annually without the prior written approval of
the City, which approval shall not be unreasonably withheld. If
the Trustee wishes to consult with or retain counsel for any
purpose hereunder whose anticipated fees, together with all other
compensation, disbursements and reimbursements of the Trustee and
its attorneys, agents and employees to be paid by the City
hereunder, shall exceed $15,000 annually, then such counsel shall
have to be nationally recognized and acceptable to the city and
such fees shall have to be approved by the City as described above.
7. It shall be the duty of the Trustee, on or before the
10th day of each month after the month in which the Bonds are
delivered, to file with the City a statement setting forth in
respect of the preceding calendar month:
(a) the amount withdrawn or transferred by it and the
amount deposited with it on account of each fund and account
held by it under the provisions of this Ordinance,
(b)
the amount on deposit
with
it
at the end of such
month to
the credit of each such
fund
and
account,
(c) a brief description of all obligations held by it as
an investment of moneys in each such fund and account,
(d) the amount applied to the purchase or redemption of
Bonds under the provisions of this Ordinance and a description
of the Bonds or portions of Bonds so purchased or redeemed,
and
(e) any other information which the City may reasonably
request.
All records and files pertaining to each such fund and account
in the custody of the Trustee hereunder shall be open at all
reasonable times to the inspection of the city and its agents and
representatives and the City may make copies thereof.
8. In case at any time it shall be necessary or desirable
for the Trustee to make any investigation respecting any fact
preparatory to taking or not taking any action or doing or not
doing anything as such Trustee, and in any case in which this
Ordinance provides for permitting or taking any action, the Trustee
may rely upon any certificate or other instrument required or
permitted to be filed with it under the provisions of this
Ordinance, and any such instrument shall be evidence of such fact
to protect the Trustee in any action that it may or may not take or
36
in respect of anything it may or may not do, in good faith, by
reason of the supposed existence of such fact. Except as otherwise
provided in this Ordinance, any request, notice, certificate or
other instrument from the City to the Trustee shall be deemed to
have been signed by the proper party or parties if signed by the
Mayor or the City Manager of the City or by any two officers or
employees of the City who shall be designated by the City by
resolution for such purpose and the Trustee may accept and rely
upon a certificate signed by the City Clerk of the City as to any
action taken by the City.
9. Except upon the happening of any default in the payment
of the principal of, or premium, if any, or interest on the Bonds
or any Parity Indebtedness, the Trustee shall not be obliged to
take notice or be deemed to have notice of any event of default
hereunder, unless specifically notified in writing of such event of
default by the registered owners of not less than ten percent (10%)
in aggregate principal amount of the Bonds then outstanding.
10. The
Trustee and its directors,
officers, employees or
agents may in
good faith
buy, sell, own,
hold and deal in any of
the Bonds and
may join in
any action which
any registered owner of
the Bonds may
be entitled
to take.
11. The Trustee shall be protected and shall incur no
liability in acting or proceeding, or in not acting or not
proceeding, in good faith, and in accordance with the terms of this
Ordinance, upon any resolution, order, notice, request, consent,
waiver, certificate, statement, affidavit, requisition, bond or
other paper or document which it shall in good faith believe to be
genuine and to have been adopted or signed by the proper board or
person or to have been prepared and furnished pursuant to any of
the provisions of this Ordinance, or upon the written opinion of an
attorney, engineer or accountant believed by the Trustee to be
qualified in relation to the subject matter, and the Trustee shall
be under no duty to make any investigation or inquiry as to any
statement contained or matters referred to in any such instrument.
The Trustee shall not be under any obligation to see to the
recording or filing of this Ordinance or otherwise to the giving to
any person of notice of the provisions hereof. No permissive right
of the Trustee under this Ordinance to take any action shall impose
any duty upon the Trustee to take such action, and the Trustee
shall not be liable to the registered owners of any Bonds or to the
City or any other person for failing to take any such action
pursuant to any such permissive right.
12. The Trustee may resign and thereby become discharged from
the trusts hereby created, by notice in writing to be given to the
City and published once in a daily newspaper of general circulation
published in the City and in a daily newspaper of general
circulation or a financial journal published in the Borough of
37
Manhattan, City and State of New York, not less than sixty (60)
days before such resignation is to take effect, but such
resignation shall take effect immediately upon the appointment of
a new Trustee hereunder, if such new Trustee shall be appointed
before the time limited by such notice and shall then accept the
trusts hereof.
13. The Trustee may be removed at any time by an instrument
or concurrent instruments in writing, executed by the registered
owners of not less than a majority in principal amount of the Bonds
then outstanding and filed with the City. A photostatic copy of
each such instrument shall be delivered promptly by the City to the
Trustee. The Trustee may also be removed at any time for any
breach of trust or for acting or proceeding in violation of, or for
failing to act or proceed in accordance with, any provision of this
Ordinance with respect to the duties and obligations of the
Trustee, by any court of competent jurisdiction, upon the
application of the City or the registered owners of not less than
five percent (5%) in aggregate principal amount of the Bonds then
outstanding under this Ordinance.
14. If at any time hereafter the Trustee shall resign, be
removed, be dissolved or otherwise become incapable of acting, or
the bank or trust company acting as Trustee shall be taken over by
any governmental official, agency, department or board, the
position of Trustee shall thereupon become vacant. If the position
of Trustee shall become vacant for any of the foregoing reasons or
for any other reason, the City shall appoint a Trustee to fill such
vacancy. The City shall cause a notice of any such appointment by
it to be mailed by first-class mail, postage prepaid to all
registered owners of the Bonds at their addresses as they appear on
the registration books.
At any time within one year after any such vacancy shall have
occurred, the registered owners of a majority in principal amount
of the Bonds then outstanding, by an instrument or concurrent
instruments in writing, executed by such owners and filed with the
City, may appoint a successor Trustee, which shall supersede any
Trustee theretofore appointed by the city. Photostatic copies of
each such instrument shall be delivered promptly by the City to the
predecessor Trustee and to the Trustee so appointed by such owners.
If no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this subsection, the
registered owner of any Bond outstanding hereunder or any retiring
Trustee may apply to any court of competent jurisdiction to appoint
a successor Trustee. Such court may thereupon, after such notice,
if any, as such court may deem proper and prescribe, appoint a
successor Trustee.
Any Trustee hereafter appointed shall be a bank or trust
company in good standing located in or incorporated under the laws
of the State, duly authorized to exercise corporate trust powers
and subject to examination by federal or State authority and shall
maintain a reported capital and surplus aggregating not less than
twenty-five million dollars ($25,000,000).
15. Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to its predecessor, and also the
City, an instrument in writing accepting such appointment
hereunder, and thereupon such successor Trustee, without any
further act, shall become fully vested with all the rights,
immunities, powers and trusts, and subject to all the duties and
obligations, of its predecessor; but such predecessor shall,
nevertheless, on written request of its successor or of the City,
and upon payment of the expenses, charges and other disbursements
of such predecessor which are payable pursuant to the provisions of
this Section, execute and deliver an instrument transferring to
such. successor Trustee all the rights, immunities, powers and
trusts of such predecessor hereunder; and every predecessor Trustee
shall deliver all property and moneys held by it hereunder to its
successor. Should any instrument in writing from the City be
required by any successor Trustee for more fully and certainly
vesting in such Trustee the rights, immunities, powers and trusts
hereby vested or intended to be vested in the predecessor Trustee,
any such instrument in writing shall and will, on request, be
executed, acknowledged and delivered by the City.
Notwithstanding any of the foregoing provisions of this
Section, any bank or trust company having power to perform the
duties and execute the trusts of this Ordinance and otherwise
qualified to act as Trustee hereunder with or into which the bank
or trust company acting as Trustee may be merged or consolidated,
or to which the assets and business of such bank or trust company
may be sold, shall be deemed the successor of the Trustee.
Section 21. Sale of Bonds. 1. All actions heretofore taken
by the City and its officers, in connection with the offer and sale
of the Bonds, including the preparation and distribution of the
Preliminary Official Statement and the preparation of the Official
Statement, are hereby in all respects ratified and approved. The
Official Statement is hereby approved in substantially the form
presented to the Board for its consideration and the Mayor of the
City is hereby authorized and directed to execute, deliver and
permit the distribution of the Official Statement with such changes
as he deems advisable in the name of and on behalf of the city, his
execution and delivery of the Official Statement to constitute
conclusive evidence of his approval of any such changes.
2. The City hereby represents that it reasonably expects
that it and all subordinate entities thereof will not issue more
39
than $10,000,000 of tax-exempt obligations (not counting private -
activity bonds except for qualified 501(c)(3) bonds as defined in
the Code) during calendar year 1992. In addition, the City hereby
designates each of the Bonds as a "qualified tax-exempt obligation"
for the purposes of the Code.
3. There is hereby authorized and directed the acceptance of
the offer by the Purchaser, pursuant to the Bond Purchase
Agreement, to purchase the Bonds at a price of $ 9.865.000 (98.65% of
the principal amount thereof), plus accrued interest thereon from
August 15, 1992 to the date of delivery thereof. The Bond Purchase
Agreement is hereby approved in substantially the form exhibited at
this meeting, and the Mayor or the Assistant Mayor of the City is
hereby authorized to execute, acknowledge and deliver the Bond
Purchase Agreement and the City Clerk of the City is hereby
authorized to attest the same and to affix the seal of the City
thereto. Any changes to the Bond Purchase Agreement may be
approved by any officers of the City executing such document, their
execution and delivery to constitute conclusive evidence of such
approval.
Section 22. Delivery Instructions. 1. When the Bonds have
been executed by the facsimile signatures of the Mayor and City
Clerk of the City and the seal of the City imprinted thereon, as
herein provided, they shall be delivered to the Registrar, which
shall authenticate them and deliver them to the Purchaser upon the
payment of the purchase price, as specified by written instructions
of the City Manager of the City.
2. The proceeds of the Bonds shall be applied as follows:
(a) There shall be deposited into an irrevocable trust with
the Escrow Agent, moneys sufficient, together with investment
earnings thereon and amounts to be transferred pursuant to Section
23 of this Ordinance, to provide funds sufficient to pay, as
provided in the Escrow Deposit Agreement, all principal of and
interest and premium on the Prior Bonds, all trustee and paying
agent fees in connection therewith and the fees of the Escrow
Agent.
(b) There shall be deposited into the Debt Service Reserve
Fund moneys sufficient, together with any amount to be deposited
into the Debt Service Reserve Fund from the debt service reserve
fund moneys securing the Prior Bonds as provided in the Escrow
Deposit Agreement, to equal the Reserve Fund Requirement.
(c) There shall be deposited into the Bond Fund the amount of
accrued interest on the Bonds paid by the Purchaser.
(d) There shall be deposited into the Construction Fund the
balance of the Bond proceeds.
40
Section 23. Refunding Matters. 1. The State First National
Bank, in the City of Texarkana, Arkansas, is hereby appointed as
Escrow Agent in connection with the refunding of the Prior Bonds,
subject to the right of the Board to appoint another Escrow Agent
as provided in the Escrow Deposit Agreement, and as such shall
perform its responsibilities as provided in the Escrow Deposit
Agreement. The Escrow Deposit Agreement is hereby approved in
substantially the form exhibited at this meeting, and the Mayor or
the Assistant Mayor of the City is hereby authorized to execute,
acknowledge, and deliver the Escrow Deposit Agreement and the City
Clerk of the City is hereby authorized to attest the same and to
affix the seal of the City thereto. Any changes to the Escrow
Deposit Agreement may be approved by any officers of the City
executing such document, their execution and delivery to constitute
conclusive evidence of such approval.
2. Upon delivery of the Bonds, all moneys held by Mcllroy
Bank & Trust, of Fayetteville, Arkansas, as Registrar for the Prior
Bonds shall be transferred and applied as provided in the Escrow
Deposit Agreement.
3. All other moneys held by the City or other parties in
funds or accounts established or maintained in connection with the
Prior Bonds shall, to the extent necessary to refund the Prior
Bonds, be transferred to be held under the Escrow Deposit Agreement
or otherwise and applied as provided in the Escrow Deposit
Agreement or as directed by written instructions of the City
Manager of the City.
4. Coopers & Lybrand, Tulsa, Oklahoma, is hereby appointed to
verify the accuracy of certain mathematical computations in
connection with the issuance of the Bonds, as described under the
caption "Verification of Mathematical Computations" in the Official
Statement mentioned above.
Section 24. Supplemental Ordinances. 1. The provisions of
this Ordinance shall constitute a binding contract among the City
and the registered owners of the Bonds issued hereunder. The City
will at all times strictly adhere to the terms and provisions
hereof and fully discharge all of its obligations hereunder.
2. The City may, without consent of the registered owners of
the Bonds, adopt ordinances supplemental hereto as may be necessary
or desirable:
(a) to cure any ambiguity or formal defect or omission in
this Ordinance;
(b) to grant to or confer on the registered owners of the
Bonds any additional rights, remedies, powers or
41
•
authority that may be lawfully be granted to or conferred
on them;
(c) to add to the covenants and agreements of the City in
this Ordinance other covenants and agreements to be
observed by the City;
(d) to more precisely identify the revenues pledged under
this ordinance;
(e) to pledge additional revenues under this Ordinance; or
(f) to provide for the issuance of Parity Indebtedness.
3. The registered owners of not less than fifty-one (51%) in
aggregate principal amount of the Bonds outstanding shall have the
right, from time to time, to consent to and approve the adoption by
the City of such ordinances supplemental hereto as shall be
necessary or desirable for the purpose of modifying, altering,
amending, adding to, or rescinding, in any particular, any of the
terms or provisions contained in this Ordinance or in any
supplemental ordinance; provided, however, that nothing herein
contained shall permit or be construed as permitting (a) an
extension of the maturity of the principal of or the interest on
any Bond or any date fixed for meeting any Amortization
Requirement, (b) a reduction in the principal amount of any Bond or
any redemption premium or the rate of interest thereof, (c) the
creation of a pledge of revenues other than as created or permitted
by this ordinance, (d) a privilege or priority of any Bond or Bonds
over any other Bond or Bonds, or (e) a reduction in the aggregate
principal amount of the Bonds required for consent to such
supplemental ordinance.
4. In the event the City shall adopt any ordinance
supplemental to this Ordinance a copy thereof shall be mailed, at
least fifteen (15) days prior to adoption, by first class mail
postage prepaid, to the registered owner of each Bond outstanding
at his or her address appearing in the registration books of the
City maintained by the Registrar.
Section 25. Publication. The City Manager of the City is
hereby directed to publish this Ordinance once in The Northwest
Arkansas Times, which is hereby found and declared to be a
newspaper published and of general circulation in the City of
Fayetteville, Arkansas.
Section 26. Defeasance. 1. If, (a) when the Bonds secured
hereby shall have become due and payable in accordance with their
terms or shall have been duly called for redemption or (b)
irrevocable instructions to call the Bonds for redemption or to pay
the Bonds at their respective maturities or to effect some
42
combination of such payment and redemption shall have been given by
the City to the Trustee, the whole amount of the principal and the
interest and premium, if any, so due and payable upon all of the
Bonds then outstanding shall be paid or sufficient moneys, or
obligations described in clause (i) of the definition of
"Government Obligations" herein ("Defeasance Obligations") the
principal of and the interest on which when due will provide
sufficient moneys, shall be held by the Trustee for such purpose
under the provisions of this Ordinance, and provision shall also be
made for paying all other sums payable hereunder by the city, then
and in that case the right, title and interest of the Trustee in
the Net Revenues, funds and accounts mentioned in this Ordinance
shall thereupon cease, determine and become void, and the City
shall have no obligation with respect to such Bonds except for the
payment of the principal of, redemption premium, if any, and
interest thereon solely from the moneys or Defeasance Obligations
deposited pursuant to this Section, and the Trustee in such case,
on demand of the City, shall release this Ordinance and shall
execute such documents to evidence such release as may be
reasonably required by the City, and shall turn over to the City
any surplus in any fund and account in the Bond Fund and all
balances remaining in any other funds and accounts other than
moneys held for the redemption or payment of Bonds or the interest
thereon for application to any lawful purposes of the city as the
Board shall determine; otherwise this Ordinance shall be, continue
and remain in full force and effect; provided, however, that in the
event Defeasance Obligations shall be deposited with and held by
the Trustee or other bank, trust company or other appropriate
financial institution, acting as escrow agent, as hereinabove
provided, and in addition to the requirements regarding redemption
set forth in this Ordinance, the Trustee shall within thirty (30)
days after such Defeasance Obligations shall have been deposited
with it, cause a notice signed by the Trustee to be published once
in a daily newspaper of general circulation published in the City,
and in a daily newspaper of general circulation or a financial
journal published in the Borough of Manhattan, City and State of
New York, setting forth (i) the date or dates, if any, designated
for the redemption of the Bonds or, if some of the outstanding
Bonds are not being redeemed prior to their maturities or mandatory
redemption dates, a statement to the effect that such Bonds are
being paid at maturity or are being redeemed in amounts and at
times which will satisfy the Amortization Requirements therefor,
(ii) a description of the Defeasance Obligations so held by the
Trustee or other bank, trust company or other appropriate financial
institution, acting as escrow agent, and (iii) that this Ordinance
has been released in accordance with the provisions of this
Section.
2. All moneys and obligations held by the Trustee or other
bank, trust company or other appropriate financial institution,
acting as escrow agent, pursuant to this Section shall be held in
43
(S E A L)
trust and the principal of and interest on said obligations when
received, and said moneys, applied to the payment, when due, of the
principal of, and the interest and the premium, if any, on the
Bonds payable therefrom.
Section 27. Miscellaneous. 1. The Mayor or Assistant Mayor,
the City Clerk, the City Manager and other officers of the City are
hereby empowered to execute and deliver all documents, certificates
and other instruments which may be necessary or appropriate under
the terms of the Bond Purchase Agreement and the Escrow Deposit
Agreement or to effect the purposes of this Ordinance.
2. This Ordinance shall not create any right of any kind and
no right of any kind shall arise hereunder pursuant to it until the
Bonds authorized hereby are issued and delivered.
3. The provisions of this Ordinance are hereby declared to
be separable and if any such provision shall for any reason be held
illegal or invalid, such holding shall not affect the validity of
the remainder of this Ordinance.
4. All resolutions or ordinances and parts thereof in
conflict herewith are hereby repealed to the extent of such
conflict.
Section 28. Emergency Clause. It is hereby ascertained and
declared that, in order to alleviate immediate hazards to the
health, safety, and welfare of the City, its inhabitants, and their
property by insuring the continued operation of the System on an
adequate and efficient basis , the refunding of the Prior Bonds and
the making of the Improvements must be accomplished and facilitated
by the issuance of the Bonds. It is, therefore, declared that an
emergency exists and this Ordinance being necessary for the
immediate preservation of the public peace, health, and safety
shall take effect and be enforced from and after its adoption.
ADOPTED: August 18, 1992.
APPROVED: �Q
Mayor
CL
(7) A letter dated within five (5) days of the
Closing Date, addressed to the City, the Underwriter and
the Underwriter's counsel from Coopers & Lybrand, Tulsa,
Oklahoma, independent certified public accountants,
consenting to the use of the City's audited financial
statements for the year ended December 31, 1991 and to
the references to such firm in the Official Statement;
(8) A letter dated as of the Closing Date,
addressed to the City, the Underwriter and the
Underwriter's counsel from Black & Veatch, Engineers -
Architects, Kansas City, Missouri, consenting to the use
of their report dated August 5, 1992 and to the
references to such firm in the Official Statement;
(9) Verification dated as of the Closing Date,
addressed to the City, Bond Counsel, the Underwriter and
the Underwriter's counsel, from Coopers & Lybrand,
Oklahoma City, Oklahoma, independent certified public
accountants, with respect to the mathematical accuracy of
computations supporting (i) the adequacy of the maturing
principal of, and interest on, the United States Treasury
Obligations and other available moneys deposited under
the Escrow Agreement to pay the principal of and interest
on the Series 1985 Bonds and (ii) supporting the
conclusion that the Series 1992 Bonds are not "arbitrage
bonds" within the meaning of Section 148(a) of the
Internal Revenue Code of 1986, as amended;
(10) A letter dated as of the Closing Date,
addressed to the City, the Underwriter and the
Underwriter's counsel, from Coopers & Lybrand, Oklahoma
City, Oklahoma, independent certified public accountants,
consenting to the references to such firm in the Official
Statement; and
(11) Such additional certificates and other
documents as the Underwriter may reasonably request to
evidence performance of or compliance with the provisions
of this Agreement and the transactions contemplated
hereby and by the Official Statement, all such
certificates and other documents to be satisfactory in
form and substance to the Underwriter, its counsel and
Bond Counsel.
(d) Ordinance No. 3491 adopted by the City on July 17,
1990, and Ordinance No. adopted by the City on August 18, 1992
(collectively, the "Rate Ordinance"), shall be in full force and
effect and shall not be the subject of any referendum petition
pursuant to Amendment 7 to the Constitution of the State of
Arkansas.
GMWV64OOF8E
RLF081892 -8-
SECTION 4. THE UNDERWRITER'S RIGHT TO CANCEL.
The Underwriter shall have the right to cancel its obligation
to purchase the Series 1992 Bonds hereunder by notifying the City
in writing or by telegram of its election to do so between the date
hereof and the Closing Time, if at any time hereafter and prior to
the Closing Time:
(a) Legislation shall be introduced, by amendment or
otherwise, in, or be enacted by the House of Representatives or the
Senate, or be recommended to the Congress of the United States for
passage by the President of the United States, or a decision by a
court established under Article III of the Constitution of the
United States or by the Tax Court of the United States, shall be
rendered, or a ruling, regulation or order of the Treasury
Department of the United States or the Internal Revenue Service
shall be made or proposed having the purpose or effect of imposing
federal income taxation, or any other event shall have occurred
which results in the imposition of federal income taxation, upon
revenues of the System or upon the interest received on obligations
of the general character of the Series 1992 Bonds, or the Series
1992 Bonds, which, in the Underwriter's opinion, materially
adversely affects the market price of the Series 1992 Bonds;
(b) Any legislation, ordinance, rule or regulation shall
be introduced in or be enacted by any department or agency of the
State of Arkansas, or a decision by any court of competent
jurisdiction within the State of Arkansas shall be rendered which,
in the Underwriter's opinion, materially adversely affects the
market price of the Series 1992 Bonds;
(c) Legislation shall be introduced, by amendment or
otherwise, in, or be enacted by the House of Representatives or the
Senate of the Congress of the United States, or a decision by a
court of the United States shall be rendered, or a stop order,
ruling, regulation or official statement by, or on behalf of the
Securities and Exchange Commission or other governmental agency
having jurisdiction of the subject matter shall be made or
proposed, to the effect that the issuance, offering, or sale of
obligations of the general character of the Series 1992 Bonds or
the Series 1992 Bonds, as contemplated hereby or by the Official
Statement, is or would be in violation of any provision of the
Securities Act of 1933, as amended and as then in effect, or the
Securities Exchange Act of 1934, as amended and as then in effect,
or the Trust Indenture Act of 1939, as amended and as then in
effect, or with the purpose or effect of otherwise prohibiting the
issuance, offering, or sale of obligations of the general character
of the Series 1992 Bonds or the Series 1992 Bonds, as contemplated
hereby or by the Official Statement;
(d) Any event shall have occurred or information become
known which, in the Underwriter's opinion, makes untrue, incorrect
or misleading in any material respect any statement or information
contained in the Official Statement (or any appendices thereto) as
GMW%RSS00FBE
EI lsc2 .9
originally circulated, or has the
Statement (or any appendices thereto)
contains an untrue, incorrect or mislea,
fact or omits to state a material fact
the statements made therein, in light
which they were made, not misleading;
effect that the Official
as originally circulated,
ling statement of a material
necessary in order to make
of the circumstances under
(e) Additional material restrictions not in force as of
the date hereof shall have been imposed upon trading in securities
generally by any governmental authority or by any national
securities exchange;
(f) A general banking moratorium shall have been
established by federal or Arkansas authorities;
(g) A default shall have occurred with respect to the
obligations of, or proceedings have been instituted under the
federal bankruptcy laws or any similar state laws by or against,
any state of the United States or any city located in the United
States having a population in excess of one million persons or any
entity issuing obligations on behalf of such a city or state which,
in the Underwriter's opinion, materially adversely affects the
market price of the Series 1992 Bonds;
(h) Any rating of the Series 1992 Bonds shall have been
downgraded or withdrawn by a national rating service; or
(i) A war involving the United States shall have been
declared, or any conflict involving the armed forces of the United
States shall have escalated into armed conflict, or any other
national emergency relating to the effective operation of
government or the financial community shall have occurred, which,
in the underwriter's opinion, materially adversely affects the
market price of the Bonds.
SECTION 5. CONDITIONS TO THE
The obligations of the
Underwriter's performance of
further condition that at the
receive the opinions describec
SECTION 6. INDEMNIFICATION.
OBLIGATIONS OF THE CITY.
City hereunder are subject to the
its obligations hereunder, and the
Closing Time the Underwriter shall
in Section 3(c)(4) hereof.
To the extent permitted by law, the City agrees to indemnify
and hold harmless the Underwriter, any member, officer, official or
employee of the Underwriter, and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Securities
Act of 1933, as amended (collectively, the "Indemnified Parties"),
against any and all losses, claims, damages, liabilities or
expenses whatsoever caused by any untrue statement or misleading
statement or allegedly misleading statement of a material fact
GMW\RSS00F8E
RIF087892 _ 10
contained in the Official Statement or caused by any omission or
alleged omission from the Official Statement of any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue or misleading statement or
omission or allegedly untrue or misleading statement or omission in
the information contained under the caption "UNDERWRITING."
In case any action shall be brought against one or more of the
Indemnified Parties based upon the Official Statement and in
respect of which indemnity may be sought against the City, the
Indemnified Parties shall promptly notify the City in writing and,
to the extent permitted by law, the City shall promptly assume the
defense thereof, including the employment of counsel, the payment
of all expenses and the right to negotiate and consent to
settlement. Any one or more of the Indemnified Parties shall have
the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party or
Parties unless employment of such counsel has been specifically
authorized by the City. The City shall not be liable for any
settlement of any such action effected without its consent by any
of the Indemnified Parties, but if settled with the consent of the
City or if there be a final judgment for the plaintiff in any such
action against the City or any of the Indemnified Parties, with or
without the consent of the City, the City agrees to indemnify and
hold harmless the Indemnified Parties to the extent provided in
this Agreement and to the extent permitted by law.
SECTION 7. DELIVERY OF OFFICIAL STATEMENT.
The City shall supply to the Underwriter a final Official
Statement, in form satisfactory to the Underwriter, within seven
business days of the date hereof and in time to accompany any
confirmation that requests payment from any customer, and in a
sufficient quantity to comply with SEC Rule 15c2 -12(b)(4) and the
rules of the Municipal Securities Rulemaking Board. Such Official
Statement shall be signed on behalf of the City by its Mayor. The
City hereby authorizes the use of copies of the Escrow Agreement,
the Authorizing Ordinance and the Official Statement and the
information therein contained by the Underwriter in connection with
the public offering and the sale of the Series 1992 Bonds. The
City ratifies and confirms the use by the Underwriter prior to the
date hereof of the Preliminary Official Statement in connection
with the public offering of the Series 1992 Bonds.
SECTION 8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All
representations
and agreements of the City shall
remain
operative
and in full
force and effect, regardless
of any
GMW'RSSmFSE
RL oeievx — 11—
investigations made by or on the Underwriter's behalf, and shall
survive delivery of the Series 1992 Bonds to the Underwriter.
SECTION 9. PAYMENT OF EXPENSES.
If the Underwriter accepts delivery of and pays for the Series
1992 Bonds as set forth herein, all expenses and costs to effect
the authorization, preparation, issuance, delivery and sale of the
Series 1992 Bonds (including, without limitation, the fees and
disbursements of Brown & Wood, as Bond Counsel, the fees for
verification of the mathematical sufficiency of the escrowed moneys
for the defeasance of the Series 1985 Bonds and of the yield on the
Series 1992 Bonds, rating agency fees and expenses incurred in
connection therewith, and the expenses and costs for the
preparation, printing, photocopying, execution and delivery of the
Series 1992 Bonds, the Preliminary Official Statement, the Official
Statement, the Escrow Agreement, the Authorizing Ordinance, and all
other agreements and documents contemplated thereby) shall be paid
out of the proceeds of the Series 1992 Bonds.
Whether or not the Underwriter accepts delivery of and pays
for the Series 1992 Bonds as set forth herein, the Underwriter
shall pay all costs and disbursements incurred by it in connection
with the transaction including, without limitation, fees and
expenses of any counsel for the Underwriter and Blue Sky fees.
SECTION 10. NOTICE.
Any notice or other communication to be given to the City
under this Agreement may be given by mailing or delivering the same
in writing to the City Manager, City of Fayetteville, City Hall,
113 West Mountain, Fayetteville, Arkansas 72701; and any notice or
other communication to be given to the Underwriter under this
Agreement may be given by delivering the same in writing to Llama
Company, One Mcllroy Plaza, Suite 302, Fayetteville, Arkansas
72701, Attention: David Hausam.
SECTION 11. APPLICABLE LAW; NONASSIGNABILITY.
This Agreement shall
be governed
by
the laws
of
the State of
Arkansas and shall not be
assigned by
the
City or
the
Underwriter.
SECTION 12. EXECUTION OF COUNTERPARTS.
This Agreement may be
of which shall be regarded
constitute one and the same
executed in several
as an original and
document.
counterparts, each
all of which shall
-12-
SECTION 13. SEVERABILITY.
In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other
provision hereof.
Attest:
By:
City Clef*
(S E A L)
CITY OF FAYETTEVILLE, ARKANSAS
By: 4
Mayor
-
GMW\RSS00FSE
RJO81892 -13-
�
1
EXHIBIT A
$10,000,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding and
Improvement Revenue Bonds,
Series 1992
Maturity Schedule
Year
Amount
Rate of
(August 15)
Interest
1993
$275,000
3.00%
1994
290,000
3.50
1995
300,000
3.85
1996
310,000
4.15
1997
325,000
4.35
1998
340,000
4.65
1999
360,000
4.70
2000
380,000
4.85
2001
395,000
5.00
2002
420,000
5.10
2003
440,000
5.55
2004
470,000
5.60
2005
495,000
5.75
2006
525,000
5.85
2007
555,000
5.90
2008
590,000
6.00
2009
625,000
6.05
2012
2,905,000
6.15
GMW\RS500F8E
R1F081892 A-1
S
September 22, 1992
The State First National Bank
State Line Plaza
300 Olive Street
Texarkana, Arkansas 75502
Brown & Wood
One World Trade Center
New York, New York 10048
Llama Company
One Mcllroy Plaza, Suite 302
Fayetteville, Arkansas 72701
Rose Law Firm, a Professional Association
120 East Fourth Street
Little Rock, Arkansas 72201
Ladies and Gentlemen:
I am City Attorney for the City of Fayetteville, Arkansas (the
"City"), and have acted in that capacity in connection with the
issuance and sale by the City of its $10,000,000 Water and Sewer
System Refunding and Improvement Revenue Bonds, Series 1992 (the
"Bonds), which Bonds are being sold pursuant to a Bond Purchase
Agreement dated August 18, 1992 (the "Bond Purchase Agreement"),
between Llama Company (the "Underwriter") and the City. The terms
defined in the Bond Purchase Agreement are used in this letter with
the meaning assigned to them in the Bond Purchase Agreement.
In this connection, I have reviewed certain documents with
respect to the Bonds, and such records, certificates and other
documents as I have considered necessary or appropriate for the
purposes of this opinion, including Ordinance No. 3491 adopted by
the City on July 17, 1990, and Ordinance No. adopted by the
City on August 18, 1992 (collectively, the "Rate Ordinance"),
Ordinance No. adopted by the City on August 18, 1992 (the
"Authorizing Ordinance"), the Escrow Agreement dated as of
August 15, 1992 (the "Escrow Agreement"), between the City and The
State First National Bank, in Texarkana, Arkansas (the "Escrow
Agent"), the Preliminary Official Statement dated August 7, 1992
and the final Official Statement dated August 18, 1992, with
respect to the Bonds (collectively with the Preliminary Official
Statement, the "Official Statement"), and a closing certificate of
GMW�0.SSOOFBE
8LPo81892 B-1
•
September 22, 1992
Page 2
the City. Based on such review and such other considerations of
law and fact as I believe to be relevant, I am of the opinion that:
1. The City has been properly formed and is
validly existing as a city of the first class and
political subdivision of the State of Arkansas with full
power and authority to adopt the Rate Ordinance and the
Authorizing Ordinance and to execute and deliver the
Bonds, the Escrow Agreement, the Official Statement and
the Bond Purchase Agreement.
2. The adoption of the Rate Ordinance and the
Authorizing Ordinance, the issuance of the Bonds, the
execution and delivery of the Escrow Agreement and the
Bond Purchase Agreement, and the performance of the
City's obligations thereunder do not and will not in any
material respect conflict with or constitute on the part
of the City a breach of or a default under any indenture,
deed of trust, or other instrument to which the City is
a party, or conflict with, violate, or result in a breach
of any statute or court decree to which the City is a
party.
3. Excepting those matters discussed in the
Official Statement, the City is not in violation of any
provision of any agreement or instrument the violation of
or default of which would materially and adversely affect
the business, properties, assets, liabilities or
condition (financial or other) of the City.
4. Excepting those matters discussed in the
Official Statement, there are no legal or governmental
actions, proceedings, inquiries or investigations pending
or threatened by governmental authorities or to which the
City is a party or to which any property of the City is
subject which, if determined adversely, would
individually or in the aggregate (i) materially and
adversely affect the validity or the enforceability of
the Bonds, the Escrow Agreement or the Bond Purchase
Agreement, (ii) otherwise materially and adversely affect
the ability of the City to comply with its obligations on
the Bonds or under the Authorizing Ordinance, the Escrow
Agreement or the Bond Purchase Agreement, or
(iii) materially and adversely affect the transactions
contemplated by the Official Statement to be engaged in
by the City.
GMNIRSSOOFSE
RImRIRsi B-2
September 22, 1992
Page 3
5. Except with respect to such litigation as is
described in the Official Statement, the aggregate amount
which may reasonably be expected to be recovered in
litigation pending or threatened against the City, taking
into account insurance coverage, is not material to the
owners of the Bonds.
6. I have reviewed and considered the information
contained in the Official Statement under the captions
"THE IMPROVEMENTS," "THE CITY'S WATER AND SEWER SYSTEM,"
"THE CITY" and "LEGAL MATTERS -Litigation" therein, and
nothing has come to my attention which leads me to
believe that those captioned sections of the Official
Statement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to
make the statements made therein, in light of the
circumstances under which they were made, not misleading.
I hereby consent to the references made to me in the Official
Statement.
Very truly yours,
Jerry Rose
FM
555 CALIFORNIA STREET
SAN FRANCISCO, CA. 94104-1715
TELEPHONE: 415-398-3909
FACSIMILE: 415-397-4621
10900 WILSHIRE BOULEVARD
LOS ANGELES. C.A. 90024-3959
TELEPHONE; 310-443-0200
FACSIMILE: 310-200-5740
SHIROYAMA JT MORI BUILDING, 15TH FLOOR
3-1, TORANOMON 4-CHOME, MINATO-KU
TOKYO 105. JAPAN
TELEPHONE: 03-5472-5360
FACSIMILE: 03.5472-5OS8
BROWN & WOOD
ONE WORLD TRADE CENTER
New YORK, N.Y. 10048-0557
TELEPHONE: 212 839-5300
FACSIMILE; 212-839-5599
Jerry Rose, Esq.
City of Fayetteville
113 W. Mountain
Fayetteville, Arkansas 72701
615 CONNECTICUT AVENUE, N.W.
WASHINGTON. D.C. 20006-4004
TELEPHONE: 202-223-0220
FACSIMILE: 202-223-0485
December 29, 1992
Re: City of Fayetteville, Arkansas
$10,000 Water and Sewer System
Refunding and Improvement Revenue
Bonds. Series 1992
Dear Jerry:
172 WEST STATE STREET
TRENTON, N.J. 08608-1104
TELEPHONE: 609-393-0303
FACSIMILC: 609-393-1990
BLACKWELL HOUSE
GUILDHALL YARD
LONDON EC2V SAB
TELEPHONE: 071-606-1688
FACSIMILE: 071-796-1807
In response to a question raised by Pat Bell, I realized
that we had attached an incorrect version of Exhibit A to
Ordinance No. 3638 behind tab 1.F. in the transcript of legal
papers relating to the issuance of the bonds described above
which we sent to you on November 17, 1992.
I am enclosing a copy of the correct version of such Exhibit
A. Please substitute it for the incorrect version in your
transcript and excuse us for the inconvenience that this error
might cause you.
I hope that your holidays have been pleasant and extend my
best wishes to you for the approaching new year.
Sincerely yours,
Gundars Aperans
? ^ I
y
VL�J ' .-i ___i._4
41
SCHEDULE A
$10,000,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding and Improvement
Revenue Bonds, Series 1992
The Bonds shall consist of Serial Bonds in the principal amount
of $7,095,000 maturing on August 15 in each of the years and in the
amounts and bearing interest at the interest rates shown below:
Year of
Principal
Rate of
Maturity
Amount
Interest
1993
$275,000
3.00%
1994
290,000
3.50
1995
300,000
3.85
1996
310,000
4.15
1997
325,000
4.35
1998
340,000
4.65
1999
360,000
4.70
2000
380,000
4.85
2001
395,000
5.00
2002
420,000
5.10
2003
440,000
5.55
2004
470,000
5.60
2005
495,000
5.75
2006
525,000
5.85
2007
555,000
5.90
2008
590,000
6.00
2009
625,000
6.05
and of Term Bonds in the principal amount of $2,905,000 maturing on
August 15, 2012 and bearing interest at the interest rate of 6.15%.
The Amortization Requirements for the Term Bonds shall begin in
the twelve (12) -month period ending August 14, 2010 and shall be as
follows:
Twelve (12) -Month Period
Ending August 14
2010
2011
2012
Amortization
Reauirement
$ 660,000
700,000
1,545,000
SCHEDULE A
$10,000,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding and Improvement Bonds,
Series 1992
The Bonds shall consist of Serial Bonds in the principal amount
of $ mauturing on August 15 in each of the years and
in the amounts and bearing interest at the interest rates shown below:
Year of
Maturity
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Principal
Amount
Rate of
Interest
and the Term Bonds in the principal amount of $ maturing
on August 15, 2012 and bearing interest at the interest rate of $•
The Amortization Requirements for the Term Bonds shall begin in
the twelve (12) -month period ending August 14, 2010 and shall be as
follows:
Twelve (12) -Month Period Amortization
Ending August 14 Requirement
2010 $
2011
2012
$10,000,000
city of Fayetteville, Arkansas
Water and Sewer System Refunding and
Improvement Revenue Bonds,
Series 1992
BOND PURCHASE AGREEMENT
AUGUST 18, 1992
The undersigned Llama Company (the "Underwriter") offers to
enter into the following agreement with the City of Fayetteville,
Arkansas (the "City") which, upon the City's acceptance of this
offer, will be binding upon the City and the Underwriter. This
offer is made subject to the City's acceptance of this Bond
Purchase Agreement on or before 10:00 p.m., Little Rock, Arkansas
time, on the date first written above, and if not so accepted, will
be subject to withdrawal by the Underwriter upon written notice
delivered to the City at any time prior to acceptance hereof by the
City.
On the basis of the representations, warranties and agreements
and upon the terms and conditions contained herein, the Underwriter
hereby offers to purchase the $10,000,000 Water and Sewer System
Refunding and Improvement Revenue Bonds, Series 1992 (the "Series
1992 Bonds"), to be issued by the City, a political subdivision
organized and existing under the laws of the State of Arkansas,
under and pursuant to an Ordinance of the City adopted August 18,
1992 (the "Authorizing Ordinance"), pursuant to which The State
First National Bank, Texarkana, Arkansas, will act as trustee,
registrar and paying agent (the "Trustee") for the Series 1992
Bonds. The Series 1992 Bonds are to be issued by the City pursuant
to and in accordance with the provisions of Act No. 131 of the Acts
of the General Assembly of the State of Arkansas for the year 1933,
as amended ("Act No. 131"), Act No. 132 of the Acts of the General
Assembly of the State of Arkansas for the year 1933, as amended
("Act No. 132"), Act No. 974 of the Acts of the General Assembly of
the State of Arkansas for the year 1985, as amended ("Act
No. 974"), and Act No. 852 of the Acts of the General Assembly of
the State of Arkansas for the year 1987, as amended ("Act No. 852")
(collectively, Acts No. 131, 132, 974 and 852 are referred to
hereinafter as the "Act"). The Series 1992 Bonds will constitute
special obligations of the City secured solely by a pledge of the
net revenues (the "Net Revenues) of the City's waterworks and sewer
system (the "System") and a debt service reserve fund, as more
particularly described in the Authorizing Ordinance. The Series
1992 Bonds do not constitute an indebtedness of the City within the
meaning of any constitutional or statutory limitation or
restriction.
The Series 1992 Bonds shall be issued in the forms and
denominations set forth in the Authorizing Ordinance; shall be
dated August 15, 1992; shall be numbered as provided in the
Authorizing Ordinance; shall mature annually on August 15 of the
years 1993 through 2009, inclusive, and 2012, as set forth in
Exhibit A hereto; shall bear interest payable semiannually on
February 15 and August 15 of each year commencing February 15,
1993, at the rates set forth in the Authorizing Ordinance and in
Exhibit A hereto; and shall be subject to redemption prior to
maturity upon the terms and conditions set forth in the Authorizing
Ordinance.
The proceeds of the Series 1992 Bonds will be used, along with
other available moneys, to finance the acquisition, construction
and equipping of certain capital improvements to the System, to
refund the City's Water and Sewer Revenue Refunding Bonds, Series
1985 (the "Series 1985 Bonds"), to fund a debt service reserve and
to pay costs of issuance of the Series 1992 Bonds. Sufficient
moneys to refund the Series 1985 Bonds will be deposited with The
State First National Bank, Texarkana, Arkansas, as escrow agent
(the "Escrow Agent"), pursuant to an Escrow Deposit Agreement (the
"Escrow Agreement") between the City and the Escrow Agent.
SECTION 1. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
By execution hereof, the City hereby represents to, and agrees
with, the Underwriter that:
(a) The City is a city of the first class and political
subdivision duly organized and existing under the Constitution and
laws of the State of Arkansas. The City is authorized by the
provisions of the Act and the Authorizing Ordinance to issue, sell
and deliver the Series 1992 Bonds for the purposes specified above,
to adopt and perform its obligations under the Authorizing
Ordinance , the Escrow Agreement and this Bond Purchase Agreement
(this "Agreement"), and to pledge the Net Revenues to the payment
of the principal of and interest on the Bonds as provided in the
Authorizing Ordinance.
(b) The City has full power and authority to consummate
all transactions contemplated by this Agreement, the Series 1992
Bonds, the Authorizing Ordinance, the Escrow Agreement and any and
all other agreements relating thereto to which the City is a party.
(c) The City has duly authorized all action necessary
under the Act or otherwise to be taken by it or on its behalf for:
(i) the issuance and delivery of the Series 1992 Bonds upon the
terms set forth in the Act, the Authorizing Ordinance, the Escrow
Agreement, this Agreement and the Official Statement (as
hereinafter defined); (ii) the execution and delivery by it of the
GMW\RSSWFSE
R1J081892 -2
Escrow Agreement and this Agreement; (iii) the pledge of the Net
Revenues as set forth in the Authorizing Ordinance and described in
the Official Statement; and (iv) the adoption of the Authorizing
Ordinance and the performance of its duties thereunder.
(d) The City has previously provided the Underwriter
with copies of its Preliminary Official Statement, including the
cover page, dated August 7, 1992, relating to the Series 1992 Bonds
(the "Preliminary Official Statement"). As of its date, the
Preliminary Official Statement has been "deemed final" by the City
for purposes of SEC Rule 15c2 -12(b)(1). The Preliminary Official
Statement, as amended to conform to the terms of this Bond Purchase
Agreement, including Exhibit A hereto, and with such other changes
and amendments as are mutually agreed to by the City and the
Underwriter, is herein referred to as the "Official Statement."
(e) Except as described in the Official Statement, there
is no action, suit, proceeding, inquiry or investigation at law or
in equity or before or by any court, public board or body pending
or, to the knowledge of the City, threatened against or affecting
it (or, to its knowledge, any basis therefor) wherein an
unfavorable decision, ruling or finding would adversely affect the
transactions contemplated by this Agreement or would adversely
affect the validity of the Series 1992 Bonds, the Authorizing
Ordinance, the Escrow Agreement, this Agreement or any agreement or
instrument to which the City is a party and which is used or
contemplated for use in the consummation of the transactions
contemplated hereby.
(f) The financial statements of the City referred to and
contained in Appendix A to the Preliminary Official Statement and
the final Official Statement dated August 18, 1992 (the Preliminary
Official Statement, the final Official Statement, the Appendices
thereto and any and all supplements and amendments thereto are
hereinafter referred to collectively as the "Official Statement"),
present fairly the financial position of the City and the System as
of the dates indicated therein and the results of operations for
the periods specified therein, and the financial statements therein
have been prepared in conformity with generally accepted accounting
principles consistently applied, except as may be noted in the
Official Statement, in all material respects with respect to the
periods involved.
(g) The descriptions and information contained in the
Official Statement, including the Appendices thereto, relating to
the City, the System, its organization, properties, operations and
financial condition and the descriptions of the Series 1992 Bonds,
the Authorizing Ordinance, the Escrow Agreement and the Net
Revenues are, and at the Closing Date (as defined in this Agreement
and used hereinafter) will be, true and do not contain, and at the
Closing Date will not contain, any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under
which they were made, not misleading.
GMW\RSSOOF8E
waeisn _ 3 —
•
(h) Since December 31, 1991, there has not been any
material adverse change in the properties, financial position or
results of operations of the City or the System, whether or not
arising from transactions arising in the ordinary course of
business, other than any such changes which are disclosed in the
Official Statement, and since such date the City has not entered
into any transaction or incurred any liability material as to the
City or the System, except as disclosed in the Official Statement.
(i) The City will not take or omit to take any action
which will in any way result in the proceeds from the sale of the
Series 1992 Bonds being applied in a manner inconsistent with the
provisions of the Authorizing Ordinance or the Escrow Agreement.
(j) The Series 1992 Bonds, when issued and delivered by
the City, will constitute special obligations of the City
enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by bankruptcy, insolvency
or other similar laws affecting creditors' rights generally and by
the application of general principles of equity.
(k) The Authorizing Ordinance, the Escrow Agreement and
this Agreement, when adopted, executed and delivered by the City,
will be the legal, valid and binding obligations of the City
enforceable in accordance with their respective terms, except to
the extent that enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally and by the application of general principles of equity.
(1) The execution and delivery of the Series 1992 Bonds,
the Escrow Agreement and this Agreement, the adoption of the
Authorizing Ordinance, and the performance by the City of its
obligations under the aforementioned, do not and will not violate
the Act or any court order by which the City is bound, and such
actions do not and will not constitute a default under any existing
resolution, agreement, indenture, mortgage, lease, note or other
obligation or instrument to which the City is a party, and no
approval or other action by any governmental authority or agency is
required in connection therewith.
(m) The City has not been notified of any listing or
proposed listing by the Internal Revenue Service to the effect that
it is a bond issuer whose arbitrage certifications may not be
relied upon.
SECTION 2. PURCHASE, SALE, AND DELIVERY OF THE SERIES 1992 BONDS.
On the basis of, and in reliance upon, the warranties,
representations and agreements of the City contained herein and in
the other documents and agreements referred to herein and subject
to the terms and conditions herein set forth, at the Closing Time,
the Underwriter agrees to purchase from the City, and the City
agrees to sell to the Underwriter, the Series 1992 Bonds at a price
GMW\RSSOOFSE
NPOSIS92 -4-.
of $9,865,000 (98.65% of the principal amount thereof) plus accrued
interest from the date of the Series 1992 Bonds to the date of
payment and delivery thereof.
The Series 1992 Bonds shall be issued under and secured as
provided in the Authorizing Ordinance, and the Series 1992 Bonds
shall have the maturities and interest rates and be subject to
redemption as set forth in the Authorizing Ordinance and in
Exhibit A hereto.
Payment for the Series 1992 Bonds shall be made by certified
or official bank check or draft, wire transfer, or otherwise in
funds immediately available to the City on the same day, at the
offices of the Rose Law Firm, a Professional Association, in Little
Rock, Arkansas, at 10:00 a.m. on September 22, 1992, or at such
other place, date and hour as shall be mutually agreed upon between
the City and the Underwriter. The date of such delivery and
payment is herein called the "Closing Date," and the hour and date
of such delivery and payment is herein called the "Closing Time."
The Series 1992 Bonds shall be printed or lithographed on
steel engraved borders, shall bear CUSIP numbers, shall be prepared
and delivered as fully registered bonds in denominations of $5,000
or integral multiples thereof in such names as the Underwriter may
request at least five business days prior to the Closing Date, and
,shall be made available to the Underwriter at least three business
days before the Closing Date for purposes of inspection and
packaging.
SECTION 3. CONDITIONS TO THE UNDERWRITER'S OBLIGATIONS.
The Underwriter's obligations hereunder shall be subject to
the due performance by the City of its obligations and agreements
to be performed hereunder at or prior to the Closing Time and to
the accuracy of and compliance with the representations and
warranties of the City contained herein, as of the date hereof and
as of the Closing Time, and the Underwriter's obligations hereunder
are also subject to the following:
(a) The City shall have received from Standard & Poor's
Corporation the rating of "A" and from Moody's Investors Service
the rating of "A" on the Series 1992 Bonds and letters evidencing
such ratings shall have been delivered to the Underwriter.
(b) The Series 1992 Bonds shall have been duly
authorized, executed and delivered in the form heretofore approved
by the City in the Authorizing ordinance with only such changes
therein as the Underwriter and the City shall mutually agree upon.
(c) At the Closing Time, the Underwriter shall receive
two counterpart originals of the following documents, in each case
satisfactory in form and substance to the Underwriter:
GMNIRS.S FBE
R1fl1892 -5-
(1) The Official Statement, executed on behalf
of the City by its Mayor;
(2) The Authorizing Ordinance, certified by
the City Clerk as a true, correct and complete copy of
the Authorizing Ordinance duly adopted by the City Board
of Directors that has not been amended, modified or
repealed and is in full force and effect as of the
Closing Date;
(3) The Escrow Agreement executed by the City
and the Escrow Agent;
(4) The opinions dated as of the Closing Date
of (A) Jerry Rose, City Attorney, in substantially the
form and substance as that attached hereto as Exhibit B;
(B) Brown & Wood, Bond Counsel, in substantially the form
and substance as attached hereto as Exhibits C, D and E;
and (C) Rose Law Firm, a Professional Association,
counsel to the Underwriter, in substantially the form and
substance attached hereto as Exhibit F;
(5) A certificate, in form and substance
satisfactory to the Underwriter, its counsel and Bond
Counsel, of the Mayor of the City or any duly authorized
officer or official of the City satisfactory to the
Underwriter, its counsel and Bond Counsel, dated as of
the Closing Date, to the effect that:
(i) each of the City's
representations contained herein are true and
correct as of the Closing Time;
(ii) the City has authorized, by
all action necessary under the Act, the
adoption of the Authorizing Ordinance and the
execution, delivery and due performance of the
Series 1992 Bonds, the Escrow Agreement, this
Agreement, and the pledging of the Net
Revenues;
(iii) the Authorizing Ordinance has
not been amended, modified or repealed and is
in full force and effect as of the Closing
Date;
(iv) except as described in the
Official Statement, no litigation is pending
or, to his knowledge threatened, to restrain
or enjoin the issuance or sale of the Series
1992 Bonds or in any way affecting any
authority for or the validity of the
Authorizing Ordinance, the Escrow Agreement,
GMW\ESSOOPSE
RLFWI892 -6-
this Agreement, or the pledge of the Net
Revenues;
(v) the Series 1992 Bonds, as
executed by the City, are in the form or in
substantially the form approved for such
execution by appropriate proceedings of the
City;
(vi) since December 31, 1991, there
has not been any material adverse change in
the properties, financial position or results
of operations of the City or the System,
whether or not arising from transactions in
the ordinary course of business, other than
such changes which are disclosed in the
Official Statement, and since such date the
City has not entered into any transaction or
incurred any liability material as to the City
or the System except as disclosed in the
Official Statement;
(vii) there are not pending or, to
his knowledge, threatened legal proceedings
which are not disclosed in the Official
Statement and which are material as to the
City or the System, or to which the City or
the System is a party, or of which property of
the City or the System is subject, or which
will adversely affect the transactions
contemplated hereby or by the Official
Statement;
(viii) the information contained
in the official Statement relating to the City
and the System, their organization,
properties, operations and financial condition
and the descriptions of the Series 1992 Bonds,
the Authorizing Ordinance, the Escrow
Agreement and the Net Revenues are true and
correct in all material respects and do not
contain any untrue or incorrect statement of a
material fact and do not omit to state a
material fact necessary in order to make the
statements made therein, in light of the
circumstances under which they were made, not
misleading; and
(ix) the City has duly authorized
by all necessary action the signing of the
Official Statement by its Mayor;
(6) An arbitrage certificate of the City, in
form satisfactory to Bond Counsel, signed by the Mayor;
IH,b ii
c ,, .
-7-.
EXHIBIT C
September 22, 1992
Board of Directors of the
City of Fayetteville
City Hall
113 West Mountain
Fayetteville, Arkansas 72701
The State First National Bank
City of Fayetteville
City Hall
120 West Mountain
Fayetteville, Arkansas 72701
Ladies and Gentlemen:
Llama Company
One Mcllroy Plaza, Suite 302
Fayetteville, Arkansas 72701
Rose Law Firm,
a Professional Association
120 East Fourth Street
Little Rock, Arkansas 72201
We have acted as bond counsel in connection with the issuance
by the City of Fayetteville, Arkansas (the "City"), of its
$10,000,000 aggregate principal amount of Water and Sewer System
Refunding and Improvement Revenue Bonds, Series 1992, dated August
15, 1992 (the "Bonds"). The Bonds are being issued for the purpose
of providing a portion of the funds necessary to finance the costs
of acquiring, constructing and equipping certain capital
improvements to the City's water and sewer system (the "System"),
to refund the City's outstanding Water and Sewer Revenue Refunding
Bonds, Series 1985, to fund a debt service reserve and to pay
certain costs of issuing the Bonds.
The Series 1992 Bonds are being issued under the authority of
the Constitution and laws of the State of Arkansas, including
particularly Amendment 65 to the Constitution of the State of
Arkansas and Title 14, Chapter 234, Subchapter 2, Title 14, Chapter
235, Subchapter 2, Title 14, Chapter 164, Subchapter 4 and Title
19, Chapter 9, Subchapter 6 of the Arkansas Code of 1987 Annotated
(collectively the "Authorizing Legislation"), and pursuant to
Ordinance No. of the City adopted by the Board of Directors
of the City on August 18, 1992 (the "Ordinance"), under which the
City has pledged the net revenues of the System (such net revenues
as more particularly defined in the Ordinance being called the "Net
Revenues") to the payment of the Bonds. The Ordinance permits the
City to issue, under certain circumstances, Parity Indebtedness (as
defined in the Ordinance) which may be on a parity of security with
the Bonds as to the pledge of Net Revenues (as defined in the
Ordinance) thereunder and subordinated indebtedness payable from
Net Revenues subordinate to the Bonds and any Parity Indebtedness.
GMW\RSS00FSE
RLFOEIE92 C- 1
Approving Opinion
September 22, 1992
Page 2
The Bonds have such terms and provisions and are subject to
redemption prior to maturity as provided in the Ordinance.
We have examined certified copies of the legal proceedings,
including the ordinance, and certain other proofs submitted
relative to the authorization and issuance of the Bonds. From such
examination we are of the opinion that:
1. In reliance on the opinion of Jerry E. Rose, Esquire,
City Attorney, of even date herewith, the City is duly created and
validly existing as a city of the first class of the State of
Arkansas, with the power to adopt the Ordinance and to issue the
Bonds.
2. Pursuant to the Authorizing Legislation the Bonds have
been duly authorized and issued by the City and are valid and
binding special obligations of the City, enforceable in accordance
with their terms, and the principal of and interest and any
redemption premium on the Bonds are secured by a pledge of and
payable solely from the Net Revenues to the extent and in the
manner provided in the Ordinance. The principal of and interest
and any redemption premium on the Bonds may also be paid as
provided in the Ordinance from other moneys in the Debt Service
Reserve Fund and certain other funds established thereby, including
any income received from the investment of moneys deposited in such
funds.
The City is not obligated to pay the principal of and interest
and any redemption premium on the Bonds and such other indebtedness
except from the Net Revenues pledged under the Ordinance, and such
principal, interest and premium shall not constitute an
indebtedness of the City within the meaning of any constitutional
or statutory debt limitation.
3. Under existing statutes, regulations and court decisions
and assuming continuing compliance by the City with certain
covenants and requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), regarding among other matters, use,
expenditures and investment of Bond proceeds and the timely payment
of certain interest earnings to the United States Treasury, the
interest on the Bonds is not includable in the gross income of the
owners of the Bonds for purposes of federal income taxation.
Interest on the Bonds will not be treated as a preference item
in calculating alternative minimum taxable income of individuals or
corporations; however, interest on the Bonds will be included in
the calculation of the alternative minimum tax and environmental
tax liabilities of corporations.
GMW\RSSOOFSE
RLFM1B93 C-2
• •
Approving Opinion
September 22, 1992
Page 3
4. The Code prohibits the deduction of interest on
indebtedness incurred or continued by a bank or other financial
institution to purchase or carry tax-exempt obligations, such as
the Bonds. The Code, however, contains a limited exception to this
provision which permits an 80 percent deduction for interest for
financial institutions to the extent that they purchase directly or
in the secondary market obligations of certain governmental units
(i) that, together with all subordinate entities thereof, do not
reasonably expect to issue in the aggregate more than $10,000,000
of tax-exempt obligations (not counting private -activity bonds
except for qualified 501(c)(3) bonds) in a calendar year and (ii)
that designate such obligations as qualifying for such exception.
In the Ordinance the City has (i) represented that it reasonably
expects that it and all subordinate entities thereof will not issue
more than $10,000,000 of tax-exempt obligations (not counting
private -activity bonds except for qualified 501(c) (3) bonds) during
calendar year 1992 and (ii) designated the Bonds as qualifying for
such exception.
Based on certain representations of the City described above
and assuming continuing compliance with such representations, the
Bonds are "qualified tax-exempt obligations" within the meaning of
Section 265(b)(3) of the Code, and, in the case of certain
financial institutions (within the meaning of Section 265(b)(5) of
the Code), a deduction is allowed for 80 percent of that portion of
such financial institutions' interest expense allocable to interest
on the Bonds.
5. Under existing law, the Bonds and the interest thereon
are exempt from all state, county and municipal taxes in the State
of Arkansas.
The rights of the owners of the Bonds and the enforceability
thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights
heretofore and hereafter enacted to the extent constitutionally
applicable and their enforcement may also be subject to the
exercise of judicial discretion in appropriate cases.
Respectfully submitted,
BROWN & WOOD
GMWJRSSI FBE
N13i)81892 C-3
September 22, 1992
Llama Company
One Mcllroy Plaza, Suite 302
Fayetteville, Arkansas 72701
Rose Law Firm, a Professional Association
120 East Fourth Street
Little Rock, Arkansas 72201
The State First National Bank
State Line Plaza
300 Olive Street
Texarkana, Arkansas 75502
Re: $10,000,000 City of Fayetteville, Arkansas Water
and Sewer System Refunding and Improvement Revenue
Bonds, series 1992
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the issuance
by the City of Fayetteville, Arkansas (the "City") of $10,000,000
aggregate principal amount of Water and Sewer System Refunding and
Improvement Revenue Bonds, Series 1992 (the "Bonds"), and have
delivered on this date our approving opinion with respect thereto.
Reference is made to such approving opinion. All terms not defined
herein shall have the meanings assigned thereto in such approving
opinion.
It is our opinion, under existing law, that:
1. The Bond Purchase Agreement, dated August 18, 1992 (the
"Purchase Contract"), by and between Llama Company (the
"Purchaser") and the City has been duly authorized, executed and
delivered by the City and, assuming due execution by the Purchaser,
and subject to the extent that the enforceability of the rights and
remedies set forth therein may be limited by bankruptcy,
insolvency, or other laws affecting creditors' rights generally,
and that their enforcement may also be subject to the exercise of
judicial discretion in appropriate cases, constitutes a valid and
binding agreement in accordance with its terms.
GMW\RSSOOFBE
RIlMIM D-1
' r•
Supplemental Opinion
September 22, 1992
Page 2
2. The Escrow Deposit Agreement, dated August 15, 1992 (the
"Escrow Agreement"), by and between the City and The State First
National Bank, Texarkana, Arkansas (the "Escrow Agent"), has been
duly authorized, executed and delivered by the City and, assuming
due execution by the Escrow Agent, and subject to the extent that
the enforceability of the rights and remedies set forth therein may
be limited by bankruptcy, insolvency, or other laws affecting
creditors' rights generally, and that their enforcement may also be
subject to the exercise of judicial discretion in appropriate
cases, constitutes a valid and binding agreement in accordance with
its terms.
3. The City has ratified the distribution of the Preliminary
Official Statement, dated August 7, 1992, and approved the
distribution of the Official Statement, dated August 18, 1992,
relating to the Bonds (collectively, the "Official Statement").
4. The Ordinance conforms as to form and tenor with the
terms and provisions thereof as summarized and set out in
Appendix C to the Official Statement.
5. To the best of our knowledge and based only upon
inquiries of the City Attorney and City Manager and no other
inquiry or investigation, there is no action, suit, proceeding, or
investigation at law or in equity before or by any court or public
board or body, pending or threatened, against or affecting the
City, challenging the validity of the transactions contemplated by
the Official Statement, or the validity of the Bonds, the
Ordinance, the Escrow Agreement or the Purchase Contract.
6. Nothing has come to our attention which would lead us to
believe that the information in the Official Statement under the
captions "INTRODUCTORY STATEMENT," "THE SERIES 1992 BONDS,"
"SECURITY FOR AND SOURCE OF PAYMENT OF THE SERIES 1992 BONDS"
(except for that information under the subcaption "Historical and
Projected Financial Date"), "THE REFUNDING PROGRAM," "THE
IMPROVEMENTS," "TAX EXEMPTION," and "INTEREST DEDUCTION FOR
FINANCIAL INSTITUTIONS" and in the Summary of Certain Provisions of
the Ordinance in Appendix C thereto contains an untrue statement of
a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
Very truly yours,
BROWN & WOOD
GMW'RSSOOFSE
RLFOSI a D-2
September 22, 1992
City of Fayetteville
City Hall
113 West Mountain
Fayetteville, Arkansas 72701
The State First National Bank
State Line Plaza
300 Olive Street
Texarkana, Arkansas 75502
Re: $10,000,000 City of Fayetteville, Arkansas Water
and Sewer System Refunding and Improvement Revenue
Bonds, series 1992
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the issuance
by the City of Fayetteville, Arkansas (the "City") of $10,000,000
aggregate principal amount of Water and Sewer System Refunding and
Improvement Revenue Bonds, Series 1992 (the "Series 1992 Bonds"),
and have delivered on this date our approving opinion with respect
thereto. Reference is made to such approving opinion. All terms
not defined herein still have the meanings assigned thereto in such
approving opinion.
A portion of the proceeds of the Series 1992 Bonds will be
used to purchase certain governmental securities for deposit with
The State First National Bank, in the City of Texarkana, Arkansas,
as escrow agent (the "Escrow Agent"), under an Escrow Deposit
Agreement dated as of August 15, 1992 (the "Escrow Agreement"),
between the Issuer and the Escrow Agent, for the purpose of
defeasing the Issuer's previously issued $4,335,000 aggregate
original principal amount of Water and Sewer Revenue Refunding
Bonds, Series 1985 (the "Series 1985 Bonds"). The Series 1985
Bonds were issued pursuant to Ordinance No. 3134, adopted by the
City on October 9, 1985 (the "1985 Ordinance"), under which Mcllroy
Bank & Trust, in the City of Fayetteville, Arkansas, was named as
trustee and registrar (the "Trustee"). This opinion is being
delivered pursuant to Section 26 of the 1985 Ordinance.
GMW BSSOOF8E
aEraelsn E-1
•
y
Defeasance Opinion
September 22, 1992
Page 2
In connection with this opinion, we have examined (a) the 1985
Ordinance, (b) the Escrow Agreement, and (c) the opinion of Rose
Law Firm, a Professional Association, dated November 15, 1985, with
respect to the Series 1985 Bonds (the "Original 1985 Bond Counsel
Opinion"). For purposes of this opinion, we have also reviewed
originals or copies, certified or otherwise identified to our
satisfaction, of (i) a certificate of the Escrow Agent with respect
to receipt of governmental obligations and cash under the Escrow
Agreement, (ii) instructions of the City to the Escrow Agent and
the Trustee with respect to matters set forth in the 1985
Ordinance, and (iii) such other documents, opinions, certificates,
and letters as we have deemed relevant and necessary in rendering
this opinion. We have made no independent verification or
determination as to the correctness of the Original 1985 Bond
Counsel Opinion.
We have also reviewed such other documentation, certificates,
and other materials, including items delivered in connection with
the issuance of the Series 1992 Bonds and the defeasance of the
Series 1985 Bonds, as we have deemed necessary for purposes of the
opinion set forth herein.
It is our opinion, under existing law, that:
1. The issuance of the Series 1992 Bonds, the
investment of a portion of the proceeds of the Series 1992 Bonds in
governmental obligations, and the deposit of such governmental
obligations and cash with the Escrow Agent as described in the
Escrow Agreement to defease the Series 1985 Bonds will not
adversely affect the exclusion from gross income for federal income
tax purposes of interest on the Series 1985 Bonds and will not
cause the Series 1985 Bonds to be treated as arbitrage bonds within
the meaning of Section 148 of the Internal Revenue Code of 1986, as
amended. For purposes of this opinion, we have assumed the
correctness of the Original 1985 Bond Counsel Opinion and the
continuing exclusion from gross income for federal income tax
purposes of the interest on the Series 1985 Bonds.
2. Assuming that such governmental obligations will
mature and yield interest earnings at such times and in such
amounts which, together with uninvested funds in the escrow fund
established with the Escrow Agent, will be sufficient to pay, when
due, the principal of and interest and premium on the Series 1985
Bonds, as verified by Coopers & Lybrand based upon information
supplied to it by the City and Llama Company, and relying upon such
verification, the requirements of Section 26 of the 1985 Ordinance
as to the discharge of the lien of the 1985 Ordinance on the Net
GMWV%SSOOFBE
B'MIM E-2
• r
If
Defeasance Opinion
September 22, 1992
Page 3
Revenues of the System in favor of the Series 1985 Bonds have been
satisfied and the lien of the 1985 Ordinance against the Net
Revenues of the System in favor of the Series 1985 Bonds has been
discharged.
Very truly yours,
BROWN & WOOD
GMW\PSS EFBE
Ell81sn E-3
I.
4.
September _, 1992
Llama Company
One Mcllroy Plaza, Suite 302
Fayetteville, Arkansas 72701
Re: $10,000,000 City of Fayetteville, Arkansas Water
and Sewer System Refunding and Improvement Revenue
Bonds, series 1992
Ladies and Gentlemen:
This opinion is delivered to you in connection with the
issuance and sale by the City of Fayetteville, Arkansas (the
"City") of the referenced bonds (the "Bonds"). Undefined terms
used in this opinion shall have the meaning assigned to them in the
Bond Purchase Agreement, dated August 18, 1992 (the "Bond Purchase
Agreement"), between the City and Llama Company (the
"Underwriter").
We have acted as counsel to the Underwriter in connection with
the issuance and sale of the Bonds, and in that capacity have
examined executed or certified counterparts of the Bond Purchase
Agreement and the Authorizing Ordinance. We have also examined
originals or copies, certified or otherwise identified to our
satisfaction, of such other documents, records and instruments as
we have deemed necessary or advisable for purposes of this opinion.
In connection with the preparation of the Official Statement,
dated August 18, 1992 (the "Official Statement"), we have generally
reviewed information furnished to us by, and have participated in
conferences with, representatives of the City, Jerry Rose, counsel
to the City (the "City Attorney"), and Brown & Wood, bond counsel
("Bond Counsel"). In rendering this opinion, we have also reviewed
other records relating to the authorization, issuance and sale of
the Bonds and have relied, with your consent, upon certificates of
officials, including officials of the City, and upon written
opinions and letters, including opinions and letters received from
the City, the City Attorney and Bond Counsel.
Based upon our review and discussions undertaken in the course
of our representation, and in reliance upon the accuracy of the
GMW\RSSOOFBE
RLPOSI �. F-1
September 22, 1992
Page 2
information contained in the aforementioned certificates, written
opinions and letters, nothing has come to our attention which leads
us to believe that the information in the Official Statement under
the caption "UNDERWRITING" contains any untrue statement of a
material fact or omits to state a material fact necessary in order
to make the statements made therein, in light of the circumstances
in which they were made, not misleading.
Further, we are of the opinion that the offer, sale and
delivery of the Bonds under the circumstances contemplated do not
require registration of the Bonds under the Securities Act of 1933,
as amended, and do not require qualification of the Authorizing
Ordinance under the Trust Indenture Act of 1939, as amended.
Very truly yours,
ROSE LAW FIRM,
a Professional Association
GMWNR5500FBE
Eu981avx F-2
•
t t ` - STATE of ARKANSAS l
Tss.
t County of Washington l
I, S , O. . +rthhereby certify that I
am the publisher of THE NORTHWEST ARKANSAS TIMES, a daily newspaper
having a second class mailing privilege, and being not less than four pages of five
columns each, published at a fixed place of business and at a fixed (daily) intervals
continuously in the City of Fayetteville. County of Washington. Arkansas for more
than a period of twelve months, circulated and distributed from an established place
of business to subscribers and readers generally of all classes in the City and County
for a definite price for each copy, or a fixed price per annum, which price was fixed
at what is considered the value of the publication, based upon the news value and ser-
vice value it contains, that at least fifty percent of the subscribers thereto have paid
cash for their subscriptions to the newspaper or its agents or through recognized news
dealers over a period of a least six months; and that the said newspaper publishes an
average of more than forty percent news matter.
I further certify that the legal notice hereto attached in the matter of
(S Lth nn of , d 3 3 S
was published in the regular daily issue of said newspaper for t
consecutive insertions as follows:
The first insertion on the day of _ __ 19
the second insertion on the day of 19
the third insertion on the day of 19
and the fourth insertion on the day of 19
Publisher eral Manager
Sworn to and subscribed before me on this C T day of
l9
Q
. .. .,p. Q
'INotary Public
My CommissExpires: • '
Fees for.Printing $�
Costof proof _ $
• - Total $ 5 llq• L
,r
i
r
CERTIFICATE OF RECORD
Stele of Arkznsa9 ( SS
City of F s etteviiie
I, }terry Thoiras, City Clerk sad. Et
Officio recorder for the (:;'Y of
Faye1tev€`•.ie, do hereby certify U. -,=t t''e
n^.neied or foregoing is of recur'in v'y
end the slime app!rr i s
Orc hiDitcr i'c Resolution book
at
p.xltm Witness uiy hand Ltd
lei tte.r�' /_day of
194_________
City Cierh sx-omelo Recorder
June because he was "inefficient,"
said the Cuban official, Rafael
Dausa, third secretary of the
Cuban Interests Section in Wash-
ington.
Speaking in a telephone inter-
view, he said the reports of embez-
zlement were "inflated" and
indicative of an anti -Havana turn
in the Russian press.
Cuban state media have not
reported on the whereabouts of
Castro Diaz-Balart, 41, since the
firing, which President Castro last
month blamed on his son's incom-
petence. The reports carried by
the Tass news agency last week
said the younger Castro would be
tried and could face a firing
squad.
Dausa said the delayed, scaled -
down Revolution Day festivities
will be held in the southern port of
Cienfuegos, likely on Sept. 5 or 6.
They will also mark the 35th
anniversary of a failed attack by
pro -Castro elements in the mili-
tary on a base there, he said.
"It will be a grand celebration,
but nothing like the million (peo-
ple) who used to go to the Plaza of
the Revolution," Dausa said.
Cubans traditionally went to the
Havana plaza on Revolution Day
to hear Castro deliver the equiva-
lent of a State of the Union mes-
sage, setting the ideological tone
for the year.
Sell Idle Items for
Quick Cash - Call
442-1700
2 -Legal Notices
ORDINANCE NO. 3638
AN ORDINANCE PROVID-
ING FOR THE ISSUANCE
OF $10,000,000 OF WATER
AND SEWER SYSTEM RE-
FUNDING AND IMPROVE-
MENT REVENUE BONDS.
SERIES 1992 OF THE CITY
OF FAYETTEVILLE. ARKAN-
SAS: AUTHORIZING THE
EXECUTION AND DELIV-
ERY OF A BOND PURCH-
ASE AGREEMENT AND AN
ESCROW DEPOSIT AGREE-
MENT IN CONNECTION
THEREWITH; DIRECTING
THE TRANSFER OF MO-
NEYS HELD IN CONNEC-
TION WITH THE OUT-
STANDING WATER AND
SEWER REVENUE BONDS
OF SAID CITY; PROVIDING
FOR CERTAIN OTHER
MATTERS RELATING
THERETO AND DECLAR-
ING AN EMERGENCY.
WHEREAS, the City of
Fayetteville. Arkansas (the
"City"), a city of the first
class. owns and operates
water and sewer utilities as
a combined. integrated
public water and sewer sys-
tem (which system.
together with all capital im-
provements thereto, is he-
rein collectively call the
"System"): and
WHEREAS, the City
issued its $4.335,000 Water
and Sewer Revenue Re-
funding Bonds. Series 1985.
dated November 15. 1985
(the "Prior Bonds"), of
which $3,280,000 in princi-
pal amount are now out-
standing, pursuant to Ordi-
nance No. 3134, adopted
by the Board of Directors of
the City (the 'Board') on
October 9. 1985. and the
constitution and laws of the
State of Arkansas (the
"State") and
WHEREAS. the City is
authorized under the consti-
tution and laws of the
State, including particularly
Title 14. Chapter 234, Sub-
chapter 2, Title 14. Chapter
235. Subchapter 235, Sub-
chapter 2, Title 14. Chapter
164. Subchapter 4 and Title
19, Chapter 9, Subchapter.6
made arrangements for the
sale of the Bonds to Llama
Company of Fayetteville.
Arkansas (the "Purchase")
and In connection therewith
has prepared and distri-
buted a Preliminary Official
Statement, dated August 7.
1992 (the "Preliminary Offi-
cial Statement"); and
WHEREAS, there has
been submitted to the City
a Bond Purchase Agree-
ment. dated August 18.
1992 (the "Bond Purchase
Agreement"), providing for
the purchase of the Bonds
by the Purchaser; and
WHEREAS, a final Official
Statement, dated August
18, 1992, (the "Official
Statement"), has been pre-
pared and will be distri-
buted in connection with
the offer and sale of the
Bonds; and
WHEREAS, there has
been submitted to the City
and Escrow Deposit Agree-
ment. dated as of August
15, 1992, between The
State First National Bank in
the City of Texarkana. Ark-
ansas. as escrow agent (the
"Escrow Agent"), and the
City, which provides for the
refunding of the Prior
Bonds (the "Escrow Depo-
sit Agreement"); and
WHEREAS, copies of the
Preliminary Official State-
ment- Official Statement,
Bond Purchase Agreement
and Escrow Deposit Agree-
ment have been presented
to and are before the Board
at this meeting;
NOW. THEREFORE, BE IT
ORDAINED BY THE
BOARD OF DIRECTORS OF
THE CITY OF FAYETTE-
VILLE. ARKANSAS, AS
FOLLOWS:
Section 1. Definitions.
In addition to the terms de-
fined in the preamble to
this Ordinance the following
terms shall have the follow-
ing meanings:
"Accountant" means a
firm of independent certi-
fied public accountants of
recognized national standing
selected from time to time
by the City which may be
the firm of accountants
which regularly audits the
books of the City.
"Amortization Require-
ments" means the amounts
required to be deposited in
the Redemption Account
for the purpose of redeem-
ing prior to their maturity
end paying at their maturity
the Term Bonds, the spe-
cific amounts and times of
such deposits being set
forth in Schedule A at-
tached hereto.
"Budget" means the an-
nual budget of the System
adopted in accordance with
this Ordinance.
"Code" means the Inter-
nal Revenue Code of 1986,
as now or hereafter
amended, and applicable
regulations issued or prop-
osed thereunder.
"Consulting Engineer"
means a firm of indepen-
dent engineers having rec-
ognized experience in mun-
icipal water and sewer sys-
tems selected from time to
time by the City.
"Government Obliga-
tions" means (i) direct obli-
gations of, or obligations
the payment of the principal
of and interest on which is
fully guaranteed by, the Un-
ited States of America: (ii)
obligations issued or guar-
anteed by any instrumental-
ity or agency of the United
States of America. whether
now existing or hereafter
payment of the principal of,
"Net Revenue;
interest on and redemption
fo[ any period, I
premium, if any, on such
venue lea.?- Opel
municipal obligations;'5v) ob-
"penses for such g
ligations isauud byany
"Operating E:
state of the united States;
means, for any
and (vi) municipal oblige-
ordinary and nect
tions the payment of, the
pense of operatic
principal of and interest on
.magintenwice and i
which are insured; provided,
the System under
however, the obligations
accepted account
described in clauses (v) and
plea except that
(vi) of this definition shall
not Include any
also be rated in one of the
for depreciation, i
top two highest rating
sits or transfers t
categories (without regard
dit of the Bond Ft
to any gradation within
other fund or
such category) by both
created for the q
Moody's and S&P or, upon
debt service on P
the discontinuance of either
btedness or sub
or both of such services,
indebtedness sect
any other nationally recog-
pledge of Net Re'
nized rating service or
permitted hereur
services.
Debt Service Rea
"Gross Revenues"
or any other del
means all fees, tolls, rates,
reserve fund or
rentals and charges levied
created in connec
and collected in connection
the issuance of P
with and all other income
btedness or suct
and receipts of whatever
noted indebtedner
kind or character derived by
Renewal and Reg
the City from the operation
Fund, any payn
of the System. Gross Ra
franchise taxes to
venues shall specifically in-
or any payments
elude, but not be limited to.
revenues from water sales,
fire protection charges,
sewer service charges and
interest income on Revenue
Fund balances. Notwiths-
tanding the foregoing.
Gross Revenues shall not
include acreage, connection,
front -footage, tap -on, as-
sessment and similar fees.
charges, contributions or
grants derived by the City
in connection with the pro-
vision of or payment for
capital improvements con-
stituting a part of the
System.
"Guaranteed Investment
Contract" means invest-
ment agreements with any
bank or trust company
which has long-term obliga-
tions rated in one of the
two highest rating catego-
ries by Moody's and S&P
or, upon the discontinuance
of either or both of such
services, any other nation-
ally recognized rating ser-
vice or services.
"Improvements" means
the capital improvements to
be made to the System de-
scribed in Section 2 of this
Ordinance, the cost of
which is to be financed in
part of the issuance of the
Bonds.
"Investment Obligations"
means any of the following.
to the extent that the same
are legal investments for
the investment of public
funds under State law:
(a) Government
Obligations;
(b) bankers acceptances,
certificates of deposit or
time deposits of any bank.
trust company or savings
and loan association (includ-
ing any investment in pools
of such bankers accep-
tances, certificates of depo-
sit or time deposits), which.
to the extent that such obli-
gations are not insured by
the Federal Deposit Insur-
ance Corporation, are colla-
teralized at all times in
amounts and by obligations
as shall be permitted by
State law;
Cc) any repurchase, re-
verse repurchases or invest-
ment agreement with any
bank or trust company or-
ganized under the laws of
any state of the United
States or any national bank-
ing association, insurance
company, or government
bond dealer reporting to.
sped to obhgat
payable in whole
under any circus
from Gross Revel
grating Expens
specifically includ
tions of the Cit
Beaver Water 0
Benton and We
Counties, Arkansas
"Parity Indeb
means indebtedne
City Issued on a p
security with the
accordance with
of this ordinance.
"Principal and
cal year of the S
applied to the
means the sum o
(a) the amount
to pay the intere.
Bonds then ou
which is payable
ary 15 and on Aug
such fiscal year.
(b) the amount
to pay the princir
Serial Bonds then
ing which is payat
gust 15 of such I
and
(c) the Amorti2
quirement for t
Bonds then outstl
the twelve (12)-jr
iod ending on Aug
such fiscal year.
In calculating Prir
Interest Requiremt
may be excluded I
pal amount of the
any Amortization
ment which the C
ants to pay or as
moneys in the Del
Reserve Fund w;
be used for such
"Principal and
Requirements" foi
cal year of the 5'
applied to any Pe
btedness, means
of the amounts re
the ordinance pro
the issuance of at
Indebtedness to g
provide for the pi
the interest on anc
of such Parity Intl,
then outstanding
spect to such fisc
"Registrar" mi
Register serving
under this On
whether orig
successor.
"Reserve Fund
ment", as applies
Bonds, means tht
of $800,000 un
Bonds are redeer
to maturity, in wl
such amount she'
, '1t
(7�
"F)
successor.
Aection 2. Refunding
Prior Bonds and Making
Imprbvemelrts. 1. The
Board hereby determines
that It Is desirable to 'refund
the Prior Bonds. The Board
also hereby determines that
It is necessary to construct
or otherwise make the Im-
provements consisting of
the following capital im-
provements to the System,
the cost of which is to be
financed in pert by the is-
suance of the Bonds as he-
reinafter provided:
(a) The construction of
approximately 59.650 feet
of a 36 -inch water transmis-
Sion main from the Beaver
Water Treatment Plant at
Lowell. Arkansas to the
northern pert of the City in
accordance with the recom-
mendations in a Water
Master Planning Study and
an Overall Design Report
prepared for the City by
McGoodwin, Williams and
Yates in 1989 and 1992. re-
spectively, and as specified
in plans and specifications
for such work prepared by
McGoodwin. Williams and
Yates and McClelland Engi-
neers ("Phase I of the Wa-
ter Main"). The estimated
cost of constructing Phase I
of the Water Main, includ-
ing related engineering and
right-of-way acquisition
costs is $6.500,000.
(b) The construction of
approximately 38,000 feet
of a 36 -inch water transmis-
sion main constituting the
continuation of Phase I of
the Water Main within the
City and the construction of
other water lines connect-
ing such main to the Sys -
tam in accordance with
such recommendations and
specifications described in
subsection (a) above (collec-
tively "Phase II of the Wa-
ter Mein"). The estimated
cost of constructing Phase
II of the Water Main, in-
cluding related engineering
and right-of-way acquisition
costs is $4,400,000.
(c) The rehabilitation of
the existing sewer collec-
tion system constituting a
pan of the System in the
White River Watershed in
accordance with the recom-
mendations in a Sewer Sys-
tem Evaluation Study per-
formed by McGoodwin. Wil-
liams and Yates in 1989
and 1990 and in the Illinois
River Watershed in accor-
dance with the recommen-
dations in a Sewer System
Evaluation Study performed
by RJN Environmental
Group in conjunction with
McClelland Engineers in
1991 (collectively "Sewer
Rehabilitation"). The esti-
mated cost of such rehabili-
tation is $5.841.600.
(d) The construction of
two six -million -gallon water
storage tanks and approxi-
mately 12.500 feet of con-
necting water transmission
lines which are required to
meet fire flood and opera-
tional water demands and
complement Phase I of the
Water Main and Phase 11 of
the Water Main in accor-
dance with the recommen-
dation in the study and the
report and as specified in
the plans and specifications
described in subsection (a)
of this Section (collectively
"Phase III'). The estimated
cost of Phase III is
$3.300.000.
2. After the proceeds of
the Bonds are applied to
the refunding of the Prior
Bonds and the Funding of
I of the Water Project paid
from the proceeds of the
Bonds will be deposited to
the credit of the Construc-
tion FunS' as a reimburse-
ment of the proceeds of
the Bonds so applied and
(iii) the unexpended or reim-
bursed proceeds of the
Bonds initially intended to
be applied to pay the cost
of Phase I of the Water
Main will instead be applied
to pay the cost of Sewer
Rehabilitation and a portion
of the cost of Phase 11 of
the Water Main to the ex-
tent that such proceeds are
available therefor.
(c) If, due to unexpected
circumstances, the City is
unable to proceed with the
construction of Phase I of
the Water Main or to apply
the proceeds of the Bonds
to such purpose, then the
proceeds of the Bonds ini-
tially intended to be applied
to pay the cost of Phase I
of the Water Main will in-
stead be applied to pay the
cost of Sewer Rehabilitation
and a portion of the cost of
Phase III to the extent that
such proceeds are available
therefor.
Section 3. Authorization
end Terms of Bonds. 1.
Under the authority of the
constitution and laws of the
State. including particularly
the Authorizing Legislation.
there is hereby authorized
the issuance of revenue
bonds of the City to be de-
signated "Water and Sewer
System Refunding and Im-
provement Revenue Bonds,
Series 1992" in the princi-
pal amount of Ten Million
collars ($10,000,000). The
Bonds shall be special obli-
gations of the City and the
principal of and the interest
and any redemption pre-
mium on the Bonds shall
be secured by a pledge of
and payable solely from the
Net Revenues as provided
in this Ordinance. The prin-
cipal of and the interest and
any redemption premium
on the Bonds may also be
paid as herein provided
from other moneys in the
debt Service Reserve Fund
and certain other funds
created hereby, including
any income received from
the investment of moneys
deposited in such funds.
2. The Bonds shall be
dated August 15. 1992. and
interest thereon shall be
payable semiannually on Fe-
bruary 15 and August 15, of
each year, commencing Fe-
bruary 15, 1993. The Bonds
shall be issued as fully -
registered bonds, numbered
consecutively from R-1 up-
wards, and shall be in the
denomination of $5.000 or
any integral multiple
thereof. Each Bond shall
bear interest from the inter-
est payment date next pre-
ceding the date of authenti-
cation thereof unless it is
authenticated as of an inter-
est payment date, in which
event it shall bear interest
from such date, or unless it
is authenticated prior to the
first interest payment date.
in which event it shall bear
interest from its date, or
unless at the time of au-
thentication interest on the
Bonds shall be in default, in
which event it shall bear in-
terest from the date to
which interest has been
paid in full.
3. The Bonds shall be
issued in the principal
amounts, shall mature, un-
less sooner redeemed in
the manner in this Ordi-
nance set forth, shall con -
serest on each Bond 511
be made by the Regis[
on each interest paym
date to the person appe
ing on the rr{listrati
books otFthe City herein
ter provided for as the
gistered owner of su
Bond (or the previous Bo
or Bonds evidencing t
same debt as th
evidenced by such Bond)
the close of business
the record date for such
rarest, which shall be i
first (1st) day (whether
not a business day) of t
calendar month of such
serest payment date,
check mailed to such
son at his address as it
pears on such registrati
books. Payment of the
serest on the Bonds sh
be made by wire tra
far to the registered ow
of $1,000.000 or more
principal amount of t
Bonds upon the request
such owner.
6. The Bonds shall b
the facsimile signatures
the Mayor and City Clark
the City and a facsimile
the official seal of the C
shall be imprinted there
In case any officer a fec
mile of whose signatu
shall appear on any of t
Bonds shall cease to
such officer before t
Bonds shall have been
livered, such Bonds m
nevertheless, be deliver,
as herein provided and
be issued as if the pars
whose facsimile signatu
appears on such Bonds In
not ceased to hold such
fice. Any Bonds may b
the facsimile signatures
such persons who at t
time of the execution
such Bonds shall be d
authorized or hold t
proper office in the City
though at the date of t
Bonds such persons m
not have been so auth
ized or have held su
office.
7. The Bonds may be
changed and registered a
transfers of the Bonds m
be registered in accordan
with the provisions perta
ing thereto appearing in t
form of Bond hereinaft
set forth in this Ordinanc
8. No Bond shall be va
or become obligatory f
any purpose or be entitl
to any benefit or securi
under this Ordinance until
shall have authenticated
the execution by the Re
strar of the certificate
authentication endors
thereon.
Section 4. Bond For
The Bonds and the e
dorsements thereon sh
be in substantially the f
lowing forms and t
Mayor and City Clark of t
City are hereby authoriz
and directed to make all
cltala contained therein:
UNITED STATES OF
AMERICA
STATE OF ARKANSAS
COUNTY OF
WASHINGTON
No. R - $
be
be
being payable on February
15 and August 15 in each
rar year. at the Interest Rate
ant per annum specified 1,ove,
or- until payma8t of saio'4rinci-
efpal Amount. The interest so
payable on any such inter -
oh eat payment date will be
nd paid to the person in
ha whose name this bond (or
he the previous bond or bonds
at evidencing the same debt
on as that evidenced by this
n--closebond) is registered at the
he of business on the re -
e cord date for such interest.
he which shall be the first (1st)
in- day (whether or not a busi-
by ness day) of the calendar
fir- month next preceding such
aP- interest payment date, by
on check mailed to such per-
son at his address as it ap-
hall pears on the bond registra-
tion books of the City main-
ner tamed by the Registrar.
In Payment of the interest on
he this bond shall also be
of made by wire transfer to
the registered owner of this
bond upon the request of
of such owner if such owner
of is the registered owner of
of $1,000,000 or more in prin-
ity cipal amount of the bonds
on of the series of which this
Si- bond is one.
re This bond is one of a se -
he ries of bonds, designated
be "Water and Sewer System
he Refunding and Improve-
d ment Revenue Bonds, Se-
ries 1992" and aggregating
in principal amount Ten Mil -
ad lion Dollars ($10,000.000)
may (the "Bonds"). The Bonds
on have, been issued for the
re purpose of financing a por-
ad_ tion of the cost of refund-
ing all outstanding water
and sewer revenue bonds
of of the City financing a por-
he tion of the cost of making
of certain capital irnprove-
uly ments to the water and
he
at- sewer system of the City.
he funding a debt service re -
ay serve and paying certain ex-
)r- penses incidental thereto.
ch The Bonds have been
issued pursuant to and in
ax- full compliance with the
nd constitution and laws of the
sY State of Arkansas. including
ce particularly Title 14. Chapter
in- 234. Subchapter 2. Title 14,
he Chapter 235. Subchapter 2.
er Title 14. Chapter 164, Sub -
e. chapter 4. and Title 19.
lid Chapter 9. Subchapter 6 of
or the Arkansas Code of 1987
ed Annotated and pursuant to
ty Ordinance No. 3638 of the
it City adopted by the Board
by of Directors of the City on
gi- August 18, 1992 (the "Ordi-
of nonce"). The Ordinance par-
ed mits the City to issue.
under certain circum-
m. stances. Parity Indebted-
n- ness (as defined in the Or -
all dinance) which may be on
ol- a parity of security with the
ha Bonds and subordinated in -
he debtedness payable from
ad Net Revenues subordinate
re- to the Bonds and Parity In-
debtedness. Reference is
hereby made to the Ordi-
nance and to all ordinances
supplemental thereto for
the provisions, among
others, with respect to the
nature and extent of the
security, the rights, duties
and obligations of the City.
CITY OF FAYETTEVILLE the Registrar, the Trustee
WATER AND SEWER appointed under the Ordi-
SYSTEM REFUNDING nonce (the "Trustee") and
AND IMPROVEMENT the registered owners of
REVENUE BOND the Bonds, and the terms
SERIES 1992 upon which Bonds are
Rate of Interest: issued and secured. A copy
Maturity Date: of the Ordinance is on file
Dated Date: August 15, at the corporate trust office
1992 of the Trustee and, by the
CUSIP: acceptance of this bond,
Registered Owner: the registered owner hereof
Principal Amount: assents to all of the provi-
Dollars sions of the Ordinance.
Report on
Operations of the
Water and Sewer
Systems
FOR THE
City of Fayetteville,
Arkansas
1996
LAC : VEA CH
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BLACK & VEATCH
8400 Word Parkway, P.O. Box No. 8405, Kansas City, Missouri 64114, (913)339-2000
August 28, 1996
Honorable Fred Hanna
Mayor
City of Fayetteville
113 West Mountain
Fayetteville, Arkansas 72701
Dear Mayor Hanna:
In accordance with our agreement, we are submitting our "Report on Operations of the Water
and Sewer Systems" for the City of Fayetteville. The report includes the results , of an
engineering evaluation, financial analysis, and an evaluation of compliance with the provisions
of Ordinances Nos. 3638 and 3829, which authorized the Water and Sewer Refunding and
Improvement Revenue Bonds, Series 1992 and the Water and Sewer Revenue Bonds, Series
1994, respectively.
We appreciate the opportunity to be of service to the City of Fayetteville.
lmc
Very truly yours,
BLACK & VEATCH
La -
Blame W. Bickel
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Historical data presented in this report has been provided by the City
' of Fayetteville, Arkansas. Black & Veatch has not conducted detailed
verification tests of the data. In the preparation of the forecast of
future operations summarized in this report, Black & Veatch has made
certain assumptions with respect to conditions, events and circum-
stances which may occur in the future. The methodology utilized in
performing the analyses follows generally accepted practices for such
forecasts. While Black & Veatch believes the assumptions are
reasonable and the methodology valid, actual results may differ
materially from those forecast, as influenced by the conditions, events
and circumstances which actually occur.
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Contents
Introduction
Purpose
Scope
Engineering Evaluation
Introduction
Wastewater Treatment
City/OMI Relationship
Wastewater Collection System
Water Distribution System
Engineering
Findings
Financial Analysis - Water Utility Revenue
Water Sales Revenue Under Existing Rates
Other Water Revenue
Water Utility Revenue Requirements
Operation and Maintenance Expenses
Water Utility Major Capital Improvements
Water Utility Minor Capital Expense
Water Utility Debt Service Requirements
Recommended Water Revenue Adjustments
Capital Projects Funding
Wastewater Utility Revenue
Sewer Sales Revenue Under Existing Rates
Other Wastewater Revenue
Wastewater Utility Revenue Requirements
Operation and Maintenance Expenses
Wastewater Utility Major Capital Improvements
Wastewater Utility Minor Capital Expense
Wastewater Utility Debt Service Requirements
Recommended Wastewater Revenue Adjustments
Capital Projects Funding
Combined Water and Wastewater Utilities
Compliance
Issuance of Revenue Bonds
Establishment of Funds
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Contents (Continued)
Revenue Fund
Operation and Maintenance Fund
Bond Fund
Renewal and Replacement Fund
Debt Service Reserve Fund
Construction Fund
Insurance
Other Covenants
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Contents (Continued)
List of Tables
Page
Table
W- 1
Historical
and Projected Number of Accounts
11
Table
W-2
Historical
and Projected Billed Usage
12
Table
W-3
Historical
and Projected Revenues
13
Table
W-4
Summary
of Historical and Projected Operation
and Maintenance Expense
15
Table W-5 Proposed Major Capital Improvement Program
Expenditures 16
Table
W-6
Operating Fund Cash Flow Analysis
18
Table
S-1
Historical and Projected Number of Accounts
21
Table
S-2
Historical and Projected Billed Usage
22
Table
S-3
Historical and Projected Revenues
23
Table
S-4
Summary of Historical and Projected Operation
and Maintenance Expense
25
Table
S-5
Proposed Major Capital Improvement Program
Expenditures
26
Table
S-6
Operating Fund Cash Flow Analysis
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Table
C-1
Combined Utility - Operating Fund Cash Flow
Analysis
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Table
C-2
Insurance Coverage
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Introduction
The City of Fayetteville issued Water and Sewer System Refunding and Improvement
Revenue Bonds, Series 1992, dated August 15, 1992, to refund the City's Water and Sewer
Revenue Refunding Bonds, Series 1985 and to provide for improvements to the water and sewer
system. Ordinance No. 3638, which authorized the refunding and improvement issue, requires
that a report on the status of the water and wastewater system's assets and compliance with the
terms and provisions of the Ordinance be periodically prepared by a Consulting Engineer. The
City issued Water and Sewer Revenue Bonds, Series 1994, dated September 20, 1994, as a parity
issue to the Series 1992 Bonds. Ordinance 3829 authorized the issuance of the Series 1994
Bonds, and it also requires a periodic Consulting Engineer's report to be completed.
Purpose
The purpose of this report is to present the results of our analysis of the water and
wastewater systems of the City of Fayetteville in accordance with the provisions of Ordinance
No. 3638 and repeated in Ordinance No. 3829, which states in part:
Periodically the City shall cause a Consulting Engineer to prepare a report on the
status of the System's assets and compliance with the terms and provisions of the
Ordinance. Such report shall be prepared no less frequently than every three (3)
years and the first such Consulting Engineer's report shall be prepared prior to
September 1, 1993.
This report constitutes the second Report on Operations required by the Ordinances.
Scope
This report includes the results of an engineering evaluation, financial analysis, and an
evaluation of compliance with the provisions of the bond ordinances. The engineering
evaluation consists of onsite surveys of existing above ground or observable water and
wastewater facilities, including interviews of operation and maintenance personnel; review of
operation and maintenance records and techniques to analyze the effect on facility performance,
maintenance, and reliability; and review of the major capital improvement programs for the
water and wastewater systems.
The financial analysis section includes projection of customers served, water and
wastewater volumes, water and wastewater revenues, and water and wastewater revenue
requirements. A projected cash flow statement for a five year study period has been prepared
to identify any revenue deficiencies, show the timing and magnitude of required revenue
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increases, and determine the optimum combination of cash and debt financing required to meet
' total revenue requirements.
The section on compliance with the bond ordinances includes an evaluation of the
adequacy of projected revenues to meet required coverage tests, verification that all funds
' required by the ordinances have been established and that fund balances are in compliance with
requirements, review of insurance coverage, verification that no service is being provided
without charge, and review of records and books of accounts for compliance with the bond
ordinances.
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' Engineering Evaluation
Introduction
' In conjunction with other elements of this report on operations for water and wastewater
systems of the City of Fayetteville, Black & Veatch has conducted an engineering evaluation of
the City's operation and maintenance procedures for the wastewater treatment facilities, the
' wastewater collection system, the water distribution system, and the water pump stations. The
information for this section was obtained from on -site facility inspections conducted on July 16
and July 17, 1996, telephone interviews with representatives from the Beaver Water District,
Arkansas Department of Health, and the Environmental Protection Agency; and personal
' interviews with City employees and Operations Management International, Inc. (OMI)
personnel.
IWastewater Treatment
The City is responsible for treating waste discharged into its sanitary sewer system. The
' waste must be treated sufficiently to satisfy the National Pollutant Discharge Elimination System
(NPDES) permit issued for the City's Paul R. Noland wastewater treatment plant (WWTP). The
' WWTP is located on 500 acres, which includes a 170 million gallon storage pond. Influent
wastewater receives the following unit processes:
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• Screening
• Grease and grit removal
• Primary clarification
• Aeration and activated sludge treatment
• Secondary clarification
• Sand filtration
• Chlorination
The sludge produced at the WWTP is processed in the following manner:
• Gravity thickening
• Aerobic digestion
• Land application
Sludge storage basins are also utilized to assist with the treatment process. Sludge is applied
to 524 acres of bermuda grass which is harvested and sold on a regular basis.
Currently, OMI is contracted to operate the WWTP, lift stations, pretreatment program,
odor control equipment, and sludge processing facilities. In addition to wastewater operations,
OMI is responsible for operating the Supervisor Control and Data Acquisition (SCADA) system
at 12 potable water pump stations and/or storage reservoirs. OMI has continuously operated the
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WWTP since it was constructed in 1988. The original contract has expired and was renewed on
August 14, 1994 without interruption of service. The current contract expires December 31,
1999, but contains two successive five year renewal options.
Two outfalls are permitted for discharge by the City. Outfall 1 discharges to the White
River, which flows into Beaver Lake. Beaver Lake is used for recreation and as a source of raw
drinking water for several communities, including Fayetteville. Outfall 2 discharges into Mud
' Creek, which flows into the Illinois River, a scenic waterway. Because the WWTP discharges
to rivers that have other significant users, public scrutiny surrounds effluent quality.
The following sections describe some significant issues associated with the City's
wastewater treatment and sludge disposal operations.
' Odor Management. Historically, odor complaints have been an issue to residents living in
the vicinity of the WWTP. The City contracted with a consultant in 1992 to evaluate options and
' recommend an odor control strategy. After consideration and review by the City and OMI, an
odor control strategy was initiated and completed in 1996. The result was the installation of
' aluminum domes over three of the sludge digestors, with an associated chemical odor control
system at a cost of approximately $1,000,000.
OMI has operated a "Neighborhood Partners" program that involves the community with
' the odor management strategy. A review of the minutes of the meetings indicate that this
community involvement program is effective. The number of odor complaints dropped
' substantially and the odor control system was reported to be operating satisfactorily. The City
has taken appropriate action on the odor control situation.
' Metal Discharges. It was reported that the WWTP has received metal discharges from
industrial customers. Nickel is the metal most commonly detected in the system, but other
' metals have also been detected. Metal discharge is generally the result of an industrial operation
and is best addressed at the source through the industrial pretreatment program. Metals may
' impact the treatment process and, if not removed, may result in a permit violation. The City had
a violation of suspended solids and ammonia due to excessive metal in October 1994. Another
concern associated with metals is their impact on land applying sludge, because metals are
persistent and remain in the soil. This has.caused some operational difficulties, but no long-term
effects have been reported.
OMI has identified an industrial customer who is predominately responsible for metal
discharges into the system. Appropriate action has been taken, including a cease and desist order
that shut -down this industrial customer's operation for a short period of time. OMI personnel
stated that metal concerns have abated somewhat due to the stance taken with this particular
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industrial customer. It appears that the City will be able to address metal concerns through the
Industrial Pretreatment Program.
Plant Capacity. The plant's operating permit is based on a discharge of 12 million gallons per
day (mgd). The plant is capable of reliably processing average daily flows of up to 17 mgd. The
average monthly flow has historically exceeded the design capacity on a regular basis. Plant
flow can be a concern because of hydraulic capacity; however, this parameter is not regulated
by the EPA. It is common for wastewater treatment plants to operate above their hydraulic
capacity if they are able to satisfy the parameters of their NPDES permit. OMI personnel stated
that the excessive flow does not create substantial operational difficulties. Plant personnel also
stated that the plant can accommodate flows larger than those currently experienced. The design
biochemical oxygen demand (BOD) loading of the plant is 25,700 pounds per day (ppd).
The hydraulic loadings allowed at the plant have historically been exceeded, but the
maximum design mass loadings have consistently been within regulated limits. This may
indicate that infiltration and inflow are a concern. Low BOD loadings indicate that the WWTP
can accommodate additional organic loading. Fayetteville has expended about $10 million
recently to rehabilitate the collection system to eliminate rainfall infiltration. Approximately
90 percent of the rainfall overflows have been eliminated.
City officials stated that they are in the process of conducting a comprehensive sewer
system study. A consultant has been hired to perform this study which focuses on the feasibility
of several options, two of which are: expanding the current plant or adding an additional plant.
Plant personnel stated that the plant currently has sufficient capacity to accommodate existing
customers, but the City should expand treatment capacity in the future to accommodate growth.
Sludge Processing. OMI operates a 670 acre City -owned sludge processing farm, of which
' 524 acres are dedicated for hay production. The City's hay farm is similar to ordinary hay farms,
except digested sludge is used as fertilizer. Bermuda grass is grown on the hay farm and the
farm produces high quality hay which the City sells to local residents for animal food.
Sludge management practices are efficient and well managed. OMI operates the land
' application in accordance with acceptable sludge management practices. Hay produced at the
farm is sold at a better than average price because of its high quality.
One sludge management concern centers around the sludge storage reservoir. It was
' reported that additional sludge storage capacity would assist in operations. The City is currently
reviewing alternatives to increase the sludge reservoir capacity through its study.
City/OMI Relationship. The relationship between the City and OMI appears to be well suited
for proper operation of the Wastewater Treatment Facilities (WWTF). City staff stated that they
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are pleased with the operation of the WWTF and the on -site inspection by Black & Veatch
revealed that the WWTF were maintained in accordance with industry standards. To analyze the
' financial ramifications of contract operations, City staff have informally compared costs of
contract operations with estimated internal costs for similar work. This informal cost analysis
indicates that contract operations are more cost effective than having the City operate the plant.
Conclusions. Because the WWTP is relatively new, constructed in 1988, major plant
rehabilitation is currently not required. However, additional treatment capacity will need to be
added in the near future. OMI personnel have maintained the WWTP in a responsible manner.
The City has taken an active planning approach to system needs. Environmental compliance
continues to be outstanding, with the exception of a TSS violation in April 1996 that resulted
from excessively high rainfall. This was only the second such violation in the past six years.
The system appears to be maintained at or above industry standards in all categories of operation.
Wastewater Collection System
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As previously stated, OMI is responsible for operating and maintaining wastewater lift
stations. City staff is responsible for maintaining the remainder of the wastewater collection
system, which consists of approximately 420 miles of sewer lines. The City has experienced
substantial overflows from the wastewater system in the past. The number and frequency of
overflows have been significantly reduced, as evidenced by the following table of overflows:
1989
545
1990
348
1991
169
1992
164
1993
161
1994
123
1995
99
1996
86*
*Extrapolated based year-to-date figures and trends from the
previous three years.
In addition to the reduction in frequency, the severity of each occurrence has been reduced
dramatically. Because the way overflows are reported has changed, overflow reports do not fully
reflect the efforts made by the City in this area. The City now reports overflows on more strict
criteria. Prior to 1992, the City identified overflows by responding to calls, the City now
proactively identifies overflows. The City has made progress in reducing overflows, as
evidenced by all administrative orders being lifted and the elimination of approximately
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90 percent of the rainfall overflows. City crews perform some of the wastewater rehabilitation
and are assisted by outside contractors and consultants.
Water Distribution System
At present, the City operates approximately 325 miles of mains ranging in size from 2
inches to 42 inches, which provides water service to approximately 21,500 customers. The
system includes 6 booster pump stations and treated water storage capacity of approximately 27
million gallons in 12 water storage tanks distributed throughout the system. The system
currently consists of 5 pressure planes. Because the City buys its water from the Beaver Water
District, the City does not have any water purification facilities.
Representatives from the Arkansas Department of Health indicated that the Fayetteville
system is one of the best systems in the area. Because the City only operates a transmission and
distribution system, they are only regulated by bacteriological parameters and the Lead and
Copper Rule. The City has had no water quality violations in the past several years.
The next few sections address some of the key issues and projects since the previous
Operations Report was completed in 1993.
Expanded Transmission Facilities. The City has completed construction on Phase I of
water distribution system upgrades. Phase I of the project involved installing a 42 inch treated
water supply line to provide redundancy and extra capacity for the existing 36 inch treated water
supply line from the Beaver Water District's purification plant. Also, a 36 inch water line has
been installed to extend service from the new treated water supply line. These construction
projects were finalized in 1994.
Phase II of the water distribution system improvements involved continuing the extension
of the 36 -inch service lines adding smaller distribution lines to accommodate the additional flow
from Phase I and expanding treated water storage by approximately 12,000,000 gallons. Treated
water storage was expanded by installing two additional distribution reservoirs. Phase II was
completed in 1996 and is reported to be operating as expected.
Source of Supply. Black & Veatch conducted a telephone interview with the chief plant
operator at the Beaver Water District, the supplier of treated water to the City. The interview
indicated that the Beaver Water District has adequate capacity to satisfy the current and future
demands of the City. The current capacity of the plant is 80 mgd. The District is currently
reviewing alternatives to upgrade the plant to satisfy the future requirements of the Enhanced
' Surface Water Treatment Rule and Disinfection/Disinfection Byproducts Rule. The District
experiences large fluctuations in raw water quality, but is able to maintain the turbidity at its goal
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of 0.1 NTU most of the time. This is an outstanding goal because future regulations will, most
likely, not require treatment below that level.
Supervisory Control and Data Acquisition System. The Supervisory Control and Data
Acquisition System (SCADA) is minimally helpful in assisting water operations. Several
attempts have been made to improve the reliability of the SCADA system, but no substantial
progress has been made to date. Although not currently as helpful as it should be, the SCADA
system does not appear to negatively impact the water operations, except for resources spent
repairing it. The most recent version of the Water Master Planning Study suggested that the
water and wastewater SCADA systems need to be separated. To accomplish the separation, a
new SCADA system would need to be purchased.
System Water Loss. According to the 1989 Water Master Planning Study, the unmetered
and unaccounted -for -water averaged 17.8 percent with a high of 25.4 percent at that time.
Although this level of unaccounted -for -water is high, it is not uncommon to find utilities with
comparable system water loss. The report stated that the unaccounted -for -water concern is most
likely due to non-functional or under reading meters. City representatives stated that a metering
plan is in place and the situation should improve in the future. Further, City officials stated that
some of the unaccounted -for -water is not metered; therefore, it was estimated that the City can
account for all but approximately 10 percent of water production.
Metering. The Water and Sewer Services Supervisor was interviewed to determine
improvements and concerns in this area. The Meter Division has 16 budgeted positions. Meter
readers use hand-held recording devises to read meters. The City is currently investigating
methods for "radio read" which will allow meter reading personnel to remain in the truck during
a meter read and will substantially improve the effectiveness of the system. This system will be
expensive and a detailed cost/benefit analysis is recommended before purchasing and installing
any remote reading devises.
It was reported in staff interviews that the Meter Division has had difficulty recruiting
and retaining qualified personnel. It is recommended that pay scales be reviewed to ensure the
Division can be properly staffed.
Engineering
The Engineering Department currently has 15 employees, four of whom are graduate
engineers. The Department is responsible for establishing and prioritizing capital projects,
providing design services, and providing land agent services. Land agent services include
acquisition of right-of-way and sale of City property. Consulting engineers are utilized when
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in-house resources are not available to complete specific tasks. It was reported in staff
interviews that approximately 70 percent of the design work is performed by outside consultants.
The Department has requested additional staff to complete more design projects internally and
recently expanded the staff by two employees. The Engineering Department is responsible for
drafting and administering the wholesale sewer contract and the four wholesale water contracts.
The City provided Computer Aided Design (CAD) capabilities to the Engineering Department
in 1989, which is currently used extensively.
The City is supportive of the Engineering Department, as exemplified by engineers
regularly receiving continuing education reimbursed by the City. Overall, the Department
appears to be adequately staffed with competent employees, able to perform assigned tasks.
Findings
The findings of this report are based on field observations and discussions of operations
and maintenance policy and procedures with management personnel. It is concluded that the
City meets or exceeds industry standards for comparable utilities in the operation and
maintenance of its facilities.
This investigation of the City's water and wastewater facilities found that the systems
have been properly operated and maintained. Observation of active construction of water lines,
renewals, and replacements demonstrates that the City is actively pursuing its responsibility to
maintain the system in good repair.
Although the current operation and maintenance policies and procedures are successful,
the City needs to continue its efforts for quality improvements in several areas, such as the
following:
• Review painting policy for water storage tanks and ensure that they are
properly painted on a regular schedule.
• Continue to focus on employee training and to adapt the training programs
to changing needs.
• Plan for larger loadings at the WWTP, as necessary.
• Evaluate the water utility SCADA system and determine if it is cost effective
to repair. It most likely will need to be replaced.
• Review the sludge storage capacity requirements and determine whether
additional sludge storage capacity is currently required.
• Continue active planning for future growth.
• Continue efforts to mitigate overflows from the sewer collection system.
• Review the specific recommendations presented in the soon to be completed
Water Master Planning Study and Sewer Master Planning Study and
implement the recommendations that are feasible.
• Continue with plans to implement a GIS system.
• Review pay scales in certain areas, especially the Meter Reading Division.
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Financial Analysis
' Water Utility Revenue
The principal source of revenue for the water utility to meet annual costs of water service
' is from charges for service to water customers. Additional revenue is derived from fire
protection charges, rental income, interest income, and other miscellaneous sources.
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Water Sales Revenue Under Existing Rates
Table W- 1 presents a summary of the historical and projected average number of
customer accounts. The residential class includes residential, multi -unit, duplex and non-profit
accounts. The commercial class includes all construction, combination, commercial, govern-
ment, and irrigation accounts. Customer numbers are projected to increase by approximately
6.4 percent per year through the study period.
Table W-2 presents Historical and Projected Billed Usage. It is assumed that water sales
per customer will remain constant at a level consistent with the past four years of history.
Historical and Projected Revenue from water sales under existing rates, shown in Table W-3, is
based on the estimated number of accounts and the estimated water sales volumes presented in
Tables W- 1 and W-2, respectively. Projected revenues are based on current rates adopted on
January 1, 1994. Revenue from the sale of water is expected to increase an average of
4.6 percent per year due to the estimated increase in customer numbers and associated increase
in total water usage. The pace of revenue growth is slower than the growth in customer accounts
because the majority of the overall customer growth is concentrated in the residential class which
has a lower consumption per account relative to other customer classes.
Other Water Revenue
Revenues from fire protection charges are estimated at $200.000 per year, while other
operating income is estimated to total $219,000 per year. Included in other income are: water
connection fees, rural water taps, and penalty fees. Interest income, calculated at 4 percent of
the balances available for investment, is estimated to average approximately $88,100 per year
during the study period.
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Water Utility Revenue Requirements
The revenue required to adequately provide for the continued operation of the City's
water system must be sufficient to meet the cash requirements of operation and maintenance
expenses, principal, interest, and reserve payments on revenue bond indebtedness issued for
major capital improvements, recurring minor capital expense, and improvements to the system
which are not debt financed. Operation and maintenance expenses include the cost of purchased
water, personnel and materials required to operate and maintain the water utility system, plus the
costs of metering, billing, collecting, and administrative services. In estimating future costs,
historical costs by utility function are projected for the study period recognizing requirements
for service and estimated inflationary increases. Capital costs consist of debt service
requirements, cash financing of capital improvements, and operating reserves.
Operation and Maintenance Expenses
Historical and projected operation and maintenance expenses are shown in Table W-4.
Major cost items for each program include: personnel services, materials and supplies, service
and charges, and maintenance. Projected operation and maintenance expenses are based on
budgeted 1996 costs and an analysis of historical expense trends and anticipated future
conditions. Estimated increases in operating costs are due to anticipated increases in staffing
levels, inflationary increases, and increases in water usage. It is estimated for this study that
personnel growth and salaries will increase at 4 percent per year, and all other costs at 3 percent
per year. Operations and Administration expenses have been distributed 55 percent to the water
utility and 45 percent to the wastewater utility.
Water Utility Major Capital Improvements
The City has developed a six -year major capital improvement program for the water
utility covering its anticipated commitments for the period from 1995 through 2000. A complete
listing of capital projects is shown in Table W-5. The approved capital program reflects spent
or encumbered monies as well as planned expenditures for each year of the study period. The
proposed expenditures are primarily associated with extension of the transmission and
distribution system. Projected capital expenditures have been adjusted for inflation and are
expected to total $17,374,990.
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Water Utility Minor Capital Expense
' Minor capital expenses include equipment, system replacements, and system extensions
which occur on a recurring basis each year. Projected expenditures for minor capital expense
represent an allowance based on budgeted 1996 levels.
Water Utility Debt Service Requirements
' Existing debt service requirements, as shown below, consist of principal and interest on
the Water and Sewer System Refunding and Improvement Revenue Bonds, Series 1992, and
Water and Sewer System Revenue Bonds, Series 1994. Based on the facilities constructed with
' these original bond monies totaling $15,500,000, 93.4 percent of the total annual principal and
interest on both bond issues is allocated to the water utility. The balance of the debt service is
allocated to the wastewater utility.
Water Utility
Debt Service on Outstanding Bonds
Principal
Year and Interest
1996 $ 1,305,100
' 1997 1,309,100
1998 1,310,500
' 1999 1,313,500
2000 1,314,300
Recommended Water Revenue Adjustments
The pro forma operation statement or cash flow analysis presented in Table W-6 provides
a basis for evaluation of the adequacy of revenues under existing rates to meet the projected
revenue requirements of the Water Utility for the period 1996 through 2000. The indicated
increased revenue levels shown on Lines 3 through 7 of Table W-6 are based on the effective
dates and magnitude of required revenue adjustments considered necessary to meet the revenue
' obligations of the water utility, required revenue bond coverage provisions and City policy
objectives. The effective amount of increased revenues shown during the first year of each rate
adjustment includes an allowance for the effect of bill proration and billing lag arising from the
difference between the effective date of the increase and receipt of the additional revenue. Total
revenue from rates is projected to increase from the existing $9,310,800 level in 1996 to
$11,763,400, as shown on Line 9 of the table.
I
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Table W-6
' Water Utility
Operating Fund Cash Flow Analysis
(1) (2) (3) (4) (5)
Line Year Ending December 31
No. Description 1496 1997 1498 144.4 2040
$ $ $ $ $
OPERATING ACCOUNT
Revenues:
I Water Sales - Existing Rates 9.110.800 9,514.900 9,945,300 10.402,000 10,888.200
2 Fire Protection Charges 200,000 200,000 200,000 200,000 200,000
Additional Revenues Required:
Billings Months
' Date of Increase Increase Effective
3 (/1/1996 0.0% 12 0 0 0 0 0
4 7/1/1997 3.0% 6 132,600 304,400 318.100 332,600
5 1/1/1998 0.0% 12 0 0 0
' 6 (/1/1999 3.0% 12 298,100 342.600
7 1/1/2000 0.0% 12 0
8 Total Additional Revenues 0 132.600 304.400 616,200 675.200
9 Total Water Sales Revenues 9,310.800 9,847.500 10,449,700 11,218.200 11.763.400
10 Interest Income 117.000 82.200 76.500 76.100 88,700
1 I Other Income 219,000 219,000 219.000 219.000 219,000
12 Total Revenues and Other Income 9,646.800 10,148,700 10.745.200 11.513.300 12.071,100
Revenue Requirements:
13 Operating Expense 7,393.000 7,742.700 8,215,700 8.724.400 9,272.600
14 Net Earnings 2,253.800 2.406.000 2,529.500 2,788,900 2,798,500
Debt Service
15 Existing Revenue Bonds 1,305,100 1.309,100 1,310,500 1,313,500 1,314.300
16 Proposed Revenue Bonds 0 0 0 0 0
' 17 . Total Debt Service 1,305,100 1.309,100 1,310,500 1.313,500 1,314.300
18 Minor Capital Expense 239,000 246,200 253,500 261,100 269.000
I19 Transfer to Capital Project Fund 2,600,000 700.000 1,400.000 800.000 1.000.000
20 Bond Defeasance/Avoidance Cost 0 0 0 0 0
21 Total Revenue Requirements 11.537.100 9.998.000 11.179.700 11.099.000 11.855.900
I 22 Net Annual Balance (1,890.300) 150,700 (434.500) 414,300 215.200
23 Beginning of Year Balance 3.184,500 1,294.200 1.444.900 1.010.400 1,424,700
24 End of Year Balance 1,294,200 1,444,900 1,010.400 1,424.700 1.639,900
25 Required Operating Reserve 1,215.300 1,272.800 1,350,500 1,434,100 1.524,300
CAPITAL PROJECTS FUNDING
Sources of Funds
26 Funds Available at Beginning of Year 1,010.500 937.220 32,820 97,920 45,920
' 27 Transfer from Operating Fund 2.600,000 700,000 1,400,000 800,000 1.000.000
28 Sales Tax Revenue 862,000 236.500 165,000 462,500 1,187,500
29 Interest Income 21.700 14.700 0 0 0
' 30 Total Funds Available for Major Capital Improvements 4.494.200 1.888.420 1,597.820 1.360.420 2,233.420
Capital Fund Requirments
31 Major Capital Improvements 3.556.980 1,855,600 1,499,900 1.314.500 1,740.000
32 End of Year Balance 937,220 32,820 97,920 45,920 493,420
Debt Service Coverage:
33 Maximum Revenue Bond Debt Service 1.260.400 1.260,400 1,260,400 1.260,400 1,260,400
34 Revenue Bond Debt Service Coverage (Line 14/Linel7) 173% 184% 193% 212% 213%
18
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Operation and maintenance expenses and debt service requirements comprise about
' 74 percent of the water utility's total revenue requirements over the five year planning period.
The indicated revenue adjustments are designed to provide a year end balance in the
operating fund (Line 24) equal to approximately 60 days of operation and maintenance expenses
per bond covenant provisions.
Capital Projects Funding
Also shown on Table W-6 is a proposed capital improvement financing plan which
' indicates the sources and application of funds to be used to finance the capital improvement
program during the period 1996-2000. Funding sources include the use of operating revenue,
sales tax revenue, and interest income from the investment of construction funds.
'
The beginning of year estimated fund balance of $1,010,500 in the Capital Projects Fund
at January 1, 1996, represents the allocated share to the water utility of the total unencumbered
' monies available in the Water and Sewer Fund's Capital Projects Fund. This allocation was
based on the respective sales revenues generated by the water and sewer utilities in 1995. It is
1 anticipated the City will utilize $6,500,000 in operating revenue and $2,913,500 in City Sales
Tax funds to finance capital improvements over the projection period.
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Wastewater Utility Revenue
The principal source of revenue for the wastewater utility to meet annual costs of service
is from charges for service to wastewater customers. Additional revenue is derived from interest
income, and other miscellaneous sources.
Sewer Sales Revenue Under Existing Rates
Table S-1 presents a summary of the historical and projected average number of customer
accounts. The residential class includes residential, multi -unit, duplex and non-profit accounts.
The commercial class includes all construction, combination, commercial, government, and
irrigation accounts. Increases in the number of customers for the wastewater utility numbers are
projected to approximate those for the water utility. Total accounts are expected to increase by
approximately 6.7 percent per year through the study period.
Table S-2 presents Historical and Projected Billed Usage. It is assumed that wastewater
consumption per customer will remain constant at a level consistent with the past four years of
history. Historical and Projected Revenue from wastewater service under existing rates, shown
in Table S-3, is based on the estimated number of accounts and the estimated sewer sales
volumes presented in Tables S -I and S-2, respectively. Projected revenues are based on current
rates adopted on January 1, 1994. Revenues from wastewater service are expected to increase
an average of 5.1 percent per year due to the estimated increase in customer numbers and
associated increase in total billed usage. The pace of revenue growth is slower than the growth
in customer accounts because the majority of the overall customer growth is concentrated in the
residential class which has a lower consumption per account relative to other customer classes.
Other Wastewater Revenue
Revenues from other operating income, consisting of sewer connection fees and penalty
fees, are estimated to total $148,000 per year. Interest income, calculated at 4 percent of the
balances available for investment, is estimated to average approximately $99,000 per year during
the study period.
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23
C
Wastewater Utility Revenue Requirements
' The revenue required to adequately provide for the continued operation of the City's
wastewater system must be sufficient to meet the cash requirements of operation and
' maintenance expenses, principal, interest, and reserve payments on revenue bond indebtedness
issued for major capital improvements, recurring minor capital expense, and improvements to
the system which are not debt financed. Operation and maintenance expenses include the cost,
personnel and materials required to operate and maintain the sewer utility system, plus the costs
' of metering, billing, collecting, and administrative services. In estimating future costs, historical
costs by utility function are projected for the study period recognizing requirements for service
and estimated inflationary increases. Capital costs consist of debt service requirements, cash
tfinancing of capital improvements, and operating reserves.
Operation and Maintenance Expenses
Historical and projected operation and maintenance expenses are shown in Table S-4.
Major cost items for each program include: personnel services, materials and supplies, service
and charges, and maintenance. Projected operation and maintenance expenses are based on
budgeted 1996 costs and an analysis of historical expense trends and anticipated future
conditions. Estimated increases in operating costs are due to anticipated increases in staffing
levels, inflationary increases to the major cost items, and increases in sewer usage. It is
estimated for this study that personnel growth and salaries will increase at 4 percent per year, and
all other costs at 3 percent per year. Contract operation of the City's wastewater treatment plant
and lift stations is expected to experience annual 3 percent cost increases. Operations and
Administration expenses have been distributed 45 percent to the wastewater utility and
55 percent to the water utility.
' Wastewater Utility Major Capital Improvements
The City has developed a six -year major capital improvement program for the wastewater
utility covering its anticipated commitments for the period from 1995 through 2000. A complete
listing of capital projects is shown in Table S-5. The approved capital program reflects spent or
encumbered monies as well as planned expenditures for each year over the study period. The
' proposed expenditures are primarily associated with extension of the collection system.
Projected capital expenditures have been adjusted for inflation in later years and are expected
to total $21,421,243.
' 24
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' 26
I
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I
Wastewater Utility Minor Capital Expense
Minor capital expenses include equipment, system replacements, and system extensions
which occur on a recurring basis each year. Projected expenditures for minor capital expense
represent an allowance based on budgeted 1996 levels.
Wastewater Utility Debt Service Requirements
Existing debt service requirements, as shown below, consist of principal and interest on
the Water and Sewer System Refunding and Improvement Revenue Bonds, Series 1992, and
Water and Sewer System Revenue Bonds, Series 1994. Based on the facilities constructed with
these original bond monies totaling $15,500,000, 6.6 percent of the total annual principal and
interest on both bond issues is allocated to the wastewater utility.
Sewer Utility
Debt Service on Outstanding Bonds
' Principal
Year and Interest
1996 $ 92,300
' 1997 92,500
1998 92,600
1999 93,100
2000 93,400
I
j
I
I
I
I
Recommended Wastewater Revenue Adjustments
The pro forma operation statement or cash flow analysis presented in Table S-6 provides
a basis for evaluation of the adequacy of revenues under existing rates to meet the projected
revenue requirements of the wastewater utility for the period 1996 through 2000. The indicated
increased revenue levels shown on Lines 2 through 6 of Table S-6 are based on the effective
dates and magnitude of required revenue adjustments considered necessary to meet the revenue
obligations of the wastewater utility, required revenue bond coverage provisions and City policy
objectives. The effective amount of increased revenues shown during the first year of each rate
adjustment includes an allowance for the effect of bill proration and billing lag arising from the
difference between the effective date of the increase and receipt of the additional revenue. Total
revenue from rates is projected to increase from the existing $7,737,600 level in 1996 to
$10,001,600, as shown on Line 8 of the table.
I
27
I
Table S-6
11
[I
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1J
I
I
I
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I
I
I
I
I
I
Wastewater Utility
Operating Fund Cash Flow Analysis
OPERATING ACCOUNT
Revenues:
I Sewer Sales - Existing Rates
Additional Revenues Required:
Billings Months
Date of Increase Increase Effective
2 1/1/1996 0.0% 12
3 7/1/1997 3.0% 6
4 1/1/1998 0.0% 12
5 1/1/1999 3.0% 12
6 1/lf2000 0.0% 12
7 Total Additional Revenues
8 Total Sewer Sales Revenues
9 Interest Income
10 Other Income
II Total Revenues and Other Income
Revenue Requirements:
12 Operating Expense
13 Net Earnings
Debt Service
14 Existing Revenue Bonds
15 Proposed Revenue Bonds
16 Total Debt Service
17 Minor Capital Expense
18 Transfer to Capital Project Fund
19 Bond Defeasance/Avoidance Cost
20 Total Revenue Requirements
21 Net Annual Balance
22 Beginning of Year Balance
23 End of Year Balance
24 Required Operating Reserve
CAPITAL PROJECTS FUNDING
Sources of Funds
25 Funds Available at Beginning of Year
26 Transfer from Operating Fund
27 Sales Tax Revenue
28 Interest Income
29 Total Funds Available for Major Capital Improvements
Capital Fund Requinnents
30 Major Capital Improvements
31 End of Year Balance
Debt Service Coverage:
32 Maximum Revenue Bond Debt Service
33 Revenue Bond Debt Service Coverage (Line 13/Line16)
28
:,1,•111,.
t
7,737.600 8,119,200 8,527,600 8,962,700 9.427,500
0
0
0
0
0
110,800
255,800
268,900
282,800
0
0
0
252.000
291,300
0
0
110,800
255,800
520,900
574,100
7,737,600
8,230.000
8,783.400
9.483,600
10.001.600
87.400
66.500
94,500
121.900
133.300
148.000
148.000
148.000
148.000
148,000
7,973.000 8.444,500 9.025.900 9.753,500 10,282,900
5,706,500
5,903,800
6,108,800
6,322,500
6,545,000
2,266,500
2.540,700
2,917,100
3,431,000
3,737,900
92,300
92,500
92,600
93,100
93,400
0
0
0
0
0
92.300
92,500
92.600
93,100
93,400
21,000
21,500
22,100
22,700
23,300
3,400,000
1,700,000
1,500.000
2.500.000
2.800.000
500,000
610.800
755,800
1,020,900
1.074,100
9,719,800
8,328,600
8,479.300
9,959,200
10.535,800
(1,746.800)
115,900
546,600
(205.700)
(252,900)
2,691.000
944.200
1.060,100
1.606,700 ,
1,401.000
944,200
1.060,100
1.606,700
1,401.000
1,148,100
938,100
970.500
1,004,200
1,039.300
1,075,900
853,900
2.601,244
3.437,544
3,911,244
5,077,744
3,400.000
1,700,000
1.500,000
2.500,000
2,800,000
2,834.000
1,472.500
2,165,000
1.462.500
937,500
12,400
91,300
103,700
150,500
213,200
7.100.300
5,865,044
7,206,244
8.024,244
9,028,444
4,499.056
2.427.500
3.295,000
2.946,500
2,507,500
2,601,244
3,437,544
3.911,244
5.077.744
6.520,944
89.600
89,600
89,600
89,600
89,600
2456%
2747%
3150%
3685%
4002%
I
Operation and maintenance expenses and debt service requirements comprise about
' 65 percent of the wastewater utility's total revenue requirements over the five year planning
period.
The indicated revenue adjustments are designed to provide a year end balance in the
operating fund (Line 23) equal to approximately 60 days of operation and maintenance expenses
per bond covenant provisions.
Capital Projects Funding
I
I
I
I
I
I
I
I
I
I
1
Also shown on Table S-6 is a proposed capital improvement financing plan which
indicates the sources and application of funds to be used to finance the capital improvement
program during the period 1996-2000. Funding sources include the use of operating revenue,
Sales Tax revenue, and interest income from the investment of construction funds.
The beginning of year estimated fund balance of $853,900 in the Capital Projects Fund
at January 1, 1996, represents the allocated share to the wastewater utility of the total
unencumbered monies available in the Water and Sewer Fund's Capital Projects Fund. This
allocation was based on the respective sales revenues generated by the water and wastewater
utilities in 1995. It is anticipated the City will utilize $11,900,000 in operating revenue and
$8,871,500 in City sales tax funds to finance capital improvements over the projection period.
Combined Water and Wastewater Utilities
The projected cash flow tables for the water utility (Table W-6) and the wastewater utility
(Table S-6) are combined in this section to facilitate conducting the coverage tests required by
Bond Ordinance No. 3638 and No. 3829. The combined cash flow statement is shown in
Table C-1
The bond ordinances state that system gross revenues shall be at least 110 percent of the
amount required to pay operating expenses, principal and interest requirements, any registrar and
trustee fees, required deposits to the debt service reserve fund, and required deposits to the
renewal and replacement fund. As shown on Line 34 in Table C-1, the coverage requirement
is met assuming the proposed revenue increases are implemented as indicated.
In addition, the bond ordinances require that prior to issuing parity indebtedness net
revenues for each of the two fiscal years preceding issuance of additional parity indebtedness
must be no less than 120 percent of the maximum principal and interest requirements on all
Bonds and any parity indebtedness then outstanding and the proposed parity indebtedness. Net
revenues may be adjusted for rate increases adopted before the additional parity
I
29
iI
Line
' Ns. Description
J
LI
I
I
Table Cl
Combined Utility
Operating Fund Cash Flow Analysis
OPERATING ACCOUNT
Revenues:
I
Water/Sewer Sales - Existing Rates
2
Fire Protection Charges
Additional Revenues Required:
Billings
Date Increase
Months
3
of Increase
1/1/1996 0.0%
Effective
12
4
7/1/1997 3.0%
6
5
1/1/1998 0.0%
12
6
1/1/1999 3.0%
12
7
1/12000 0.0%
12
8
Total Additional Revenues
9
Total Water/Sewer Sales Revenues
10
Interest Income
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Other Income
12
Total Revenues and Other Income
Revenue Requirements:
13 Operating Expense
14 Net Earnings
Debt Service
15 Existing Revenue Bonds
16 Proposed Revenue Bonds
17 Total Debt Service
18 Minor Capital Expense
19 Transfer to Capital Project Fund
20 Bond Defeasance/Avoidance Cost
21 Total Revenue Requirements
22 Net Annual Balance
23 Beginning of Year Balance
24 End of Year Balance
25 Required Operating Reserve
CAPITAL PROJECTS FUNDING
Sources of Funds
26 Funds Available at Beginning of Year
24 Transfer from Operating Fund
28 Sales Tax Revenue
29 Interest Income
30 Total Funds Available for Major Capital Improvements
••�� ••
•��
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16,848,400
17.634,100
18,472,900
19,364.700
20,315,700
200,000
200,000
200,000
200,000
200.000
0
0
0
0
0
243,400
560,200
587,000
615,400
0
0
0
550,100
633.900
0
0
243,400
560,200
1.137.100
1,249.300
17,048,400
18.077,500
19,233.100
20,701,800
21,765,000
204,400
148,700
171,000
198.000
222,000
367,000
367,000
367,000
367,000
367,000
17,619,800 18,593,200 19,771,100 21.266,800 22,354,000
13,099,500
13.646,500
14,324,500
15,046,900
15,817,600
4,520,300
4,946,700
5,446,600
6,219.900
6,536,400
1,397,400
1,401,600
1,403.100
1,406,600
1,407.700
0
0
0
0
0
1,397,400
1,401,600
1,403,100
1,406,600
1.407,700
260.000
267,700
275,600
283,800
292,300
6,000.000
2,400.000
2,900,000
3.300,000
3.800,000
500.000
610,800
755.800
1.020.900
1.074,100
21,256,900
18,326,600
19.659,000
21.058,200
22,391,700
(3,637,100)
266.600
112,100
208,600
(37,700)
5,875.500
2.238,400
2,505.000
2.617,100
2,825.700
2,238.400
2.505,000
2,617,100
2.825,700
2.788,000
2.153,300
2.243,300
2,354,700
2,473.500
2,600,200
1,864,400
3,538,464
3,470,364
4.008,464
5.116,464
6,000.000
2,400.000
2.900,000
3.300,000
3,800,000
3,696,000
1.709,000
2.330,000
1,925.000
2.125.000
34,100
106,000
103,000
144,000
199,700
11,594.500 7,753,464 8.803,364 9,377,464 11,241,164
Capital Fund Requirments
31 Major Capital Improvements 8,056,036 4,283,100 4,794,900 4,261,000 4,247,500
32 End of Year Balance 3,538,464 3,470,364 4,008,464 5,116,464 6,993,664
Debt Service Coverage:
33 Maximum Revenue Bond Debt Service 1,350,000 1,350.000 1.350.000 1,350.000 1,350.000
34 Revenue Bond Debt Service Coverage (Line 14/Lincl7) 323% 353% 388% 442% 464%
[]
indebtedness are issued. Because no parity indebtedness is proposed for either utility during the
five year planning period, this coverage requirement test is not required.
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Compliance
In addition to the annual coverage test discussed in the preceding section of this report,
the bond ordinances contain provisions for the issuance of revenue bonds, the establishment of
certain funds, the City's covenant to maintain adequate insurance on the system facilities, and
other requirements to protect the interest of the bond holders. This section of the report
examines the City's compliance with the provisions of the bond ordinances.
Issuance of Revenue Bonds
The City is authorized under the constitution and laws of the State of Arkansas, including
particularly Title 14, Chapter 234, Subchapter 2; Title 14, Chapter 235, Subchapter 2; Title 14,
Chapter 164, Subchapter 4; and Title 19, Chapter 9, Subchapter 6 of the Arkansas Code of 1987
annotated to acquire, construct, equip, improve, maintain, operate and repair the system and to
issue its revenue bonds to finance capital improvements to the system or to refund any
outstanding bonds issued for the purpose of financing such capital improvements. There are no
proposed bonds issued during the projection period.
Establishment of Funds
The ordinances require the establishment of a Revenue Fund, Operation and Maintenance
Fund, Bond Fund, Renewal and Replacement Fund, Debt Service Reserve Fund, and
Construction Fund. The ordinances also require the establishment of two separate accounts in
the Bond Fund designated the "Bond Service Account" and the "Redemption Account." Each
of these funds is to be maintained as a segregated fund on the records of the City.
Revenue Fund
Gross revenues from the operation of the water and wastewater systems are deposited
into the Revenue Fund. Each month the City transfers from the Revenue Fund the following
amounts:
1. To the Operation and Maintenance Fund, an amount which will result in a
balance equal to the anticipated operating expenses for the next two months.
2. To the Bond Service Account in the Bond Fund, an amount equal to one -
sixth of the interest due on the next interest payment date, plus one -twelfth
of the principal due on the next principal payment date after taking into
account any amounts then held for the credit of the Bond Service Account.
3. To the Redemption Account in the Bond Fund, an amount equal to one -
twelfth of the Amortization Requirement with respect to the outstanding
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Term Bonds to be satisfied within the next succeeding twelve month period
ending on August 14 plus the premium, if any, on the respective principal
amount of Term Bonds which would be payable if such principal amount of
Term Bonds were to be redeemed during such period from moneys held for
the credit of the Redemption Account after taking into account amounts then
held in the Redemption Account.
4. To the Debt Service Reserve Fund, an amount at least equal to one -twelfth
of any deficiency until the balance in the Debt Service Reserve Fund is equal
to the Reserve Fund Requirement.
5. To the Renewal and Replacement Fund, to the extent money is available in
the Revenue Fund at least one -twelfth of the amount necessary to increase the
balance to $300,000.
Any money remaining in the Revenue Fund after the above transfers are made may be
used for any lawful purposes by the City.
Operation and Maintenance Fund
Money in the Operation and Maintenance Fund is to be used solely to pay operating
expenses. Operating expenses are defined as all ordinary and necessary expenses of operation,
repair, maintenance, and insuring of the system.
If in any month the amount transferred to the Operation and Maintenance Fund is less
than required, the deficiency is added to the amount required to be transferred the following
month.
Bond Fund
Monthly transfers from the Revenue Fund to the Bond Fund are equal to one -sixth the
next interest payment, plus one -twelfth the next principal payment, after taking into account
amounts held in the Bond Fund Account for the payment of such principal and interest. From
the Bond Fund, the trustee pays the amounts required to meet interest and principal payments
on the bonds. If there is insufficient money in the Bond Fund to meet the interest and principal
payments, the deficiency is made up first from transfers from the Debt Service Reserve Fund,
and second from transfers from the Renewal and Replacement Fund.
Renewal and Replacement Fund
The Renewal and Replacement Fund requirement of $300,000 was met in entirety from
funds on deposit for the security of the refunded series 1985 Bonds. Money in the Renewal and
Replacement Fund is to be used to pay the costs of necessary repairs or replacements due to
depreciation of the system and the costs of damage caused by unforeseen catastrophes.
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Debt Service Reserve Fund
The balance in the Debt Service Reserve Fund is to equal the Reserve Fund Requirement.
Money in the Debt Service Reserve Fund is to be used as necessary to meet deficiencies in the
Bond Fund. Any money in the Debt Service Reserve Fund which is in excess of the reserve
requirement may be transferred back to the Bond Fund.
Construction Fund
Proceeds of the Series 1992 and Series 1994 bonds in the amount specified in the
applicable ordinances shall be deposited to the credit of the Construction Fund created by the
ordinance. When improvement work has been completed, the balance in the Construction Fund
not reserved by the City for the payment of improvements shall be transferred to the Bond Fund
for the payment of principal and interest or retained in the Construction Fund and used to pay
the cost of additional capital improvements.
Fund Establishment Compliance
We have examined the financial statements of the water and wastewater utilities and find
that all required funds have been established. Deposits to, and withdrawals from the various
funds are in compliance with the bond ordinance.
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Insurance
The City has agreed to insure all properties other than mains and lines for the
transmission, distribution, or collection of wastewater, against loss or damage from fire,
lightning, tornado, winds, strike, malicious damage, explosion, and other causes customarily
insured against by private companies engaged in a similar type of business. Such insurance is
to remain in force as long as any of the bonds are outstanding. Table C-2 summarizes the
insurance policies now covering the water and wastewater systems.
' Other Covenants
The City is to pay the principal and interest on each Bond and all other indebtedness
issued at the places, on the dates and in the manner specified. Such principal, interest and
premium will be payable solely from the net revenues.
' All payments on the bonds are to be made only through a designated paying agent. The
designated paying agent for the 1992 Series Bonds is First Commercial Trust Company, in the
' City of Little Rock, Arkansas. The paying agent for the 1994 Series Bonds is the Bank of
Oklahoma, N.A., in the City of Tulsa, Oklahoma.
The City is to construct improvements in accordance with plans and specifications
approved by the City and required by law.
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All bonds paid or purchased either at or before maturity are to be canceled when payment
or purchase is made and held by the trustee or the City and are not to be reissued.
The system is to be operated on a fiscal year basis beginning January 1 and ending
December 31 of each year. Current audited financial statements reflect such a fiscal year.
The City is to perform all duties with reference to the system required by the Constitution
and laws of the State of Arkansas, including charging and collecting reasonable and sufficient
rates for services rendered, segregating gross revenues as provided in the ordinances, and
applying net revenues to the respective funds and accounts created by the ordinances. Our
investigations indicate the City is in compliance with these covenants.
The City is to maintain the system in good condition and operate it in an efficient manner
and at a reasonable cost. Maintenance and operation of the system is discussed in detail in the
Engineering Evaluation section of this report. While some recommendations have been made
regarding maintenance of the system, it is our opinion that the water and wastewater systemsare
generally in good working condition. It is also our opinion that the cost of water and wastewater
service is reasonable when compared with other cities in the area.
No free water service is being provided to any department or agency of the City.
The City may not mortgage, pledge, or otherwise dispose of any substantial portion of
the water or wastewater systems or any gross revenues as long as any of the Series 1992 or
Series 1994 Bonds are outstanding. The City has not mortgaged any portion of the water and
wastewater systems. The only assets which have been disposed of are those which are regularly
replaced at the end of their useful service lives.
In the event the offices of the Mayor, City Clerk or members of the City Council shall
be abolished or a vacancy in any office results, all powers conferred and obligations and duties
imposed upon such office shall be performed by the succeeding office or officer.
The City is to prepare a budget of proposed system capital costs and operating expenses
for each fiscal year of operation. Budgets have been completed as required.
A report on the status of the water and wastewater system's assets and compliance with
the terms and provisions of the ordinance is to be prepared by a consulting engineer no less
frequently than every three years. A copy of the report is to be delivered to the insurer of the
bonds. This report constitutes the second triennial Report on Operations.
The City is not to take any action which would cause the interest on the Series 1992 or
Series 1994 Bonds to be subject to federal income taxes. To the best of our knowledge, the City
is in compliance with this provision.
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Table C-2
Insurance Coverage
Line
No. Carrier (a)
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Ramsey,
Krug,
Farrell
& Lensing
Water Pump Building
2
Ramsey,
Krug,
Farrell
& Lensing
Water Department Equipment Bldg
3
Ramsey,
Krug,
Farrell
& Lensing
Water/Sewer Equipment Shed
4
Ramsey,
Krug,
Farrell
& Lensing
Water Booster Station
5
Ramsey,
Krug,
Farrell
& Lensing
Water/Sewer Maintenance Office
6
Ramsey,
Krug,
Farrell
& Lensing
Water Lift Stations
7
Ramsey,
Krug,
Farrell
& Lensing
Water/Sewer Warehouse
8
Ramsey,
Krug,
Farrell
& Lensing
Wastewater Lift Stations
9
Ramsey,
Krug,
Farrell
& Lensing
Wastewater Treatment Plant
10
Ramsey,
Krug,
Farrell
& Lensing
Sludge Management Site
II
Ramsey,
Krug,
Farrell
& Lensing
Water Storage Tanks
(a) Hartford Insurance is the underwriter.
Amount of
Policy
Period
Coves
Emm
TS2
45,000
01/01/96
12/31/96
231,000
01/01/96
12/31/96
62,000
01/01/96
12/31/96
193,000
01/01/96
12/31/96
391,000
01/01/96
12/31/96
192,000
01/01/96
12/31/96
609,000
01/01/96
12/31/96
3,409,000
01/01/96
12/31/96
22,000,000
01/01/96
12/31/96
898,000
01/01/96
12/31/96
4,900,000
01/01/96
12/31/96
36
CERTIFICATE OF PROJECT COMPLETION
Pursuant to Section 5 (Construction Fund), subsection 4, of City of Fayetteville,
Arkansas, Ordinance No. 3638, approved by the Fayetteville City Council on August
18, 1992, concerning the Series 1992, Water & Sewer System Refunding and
Improvement Revenue Bonds, (the "Series 1992 Bonds") the City Engineer must
complete a certificate evidencing the completion of the Improvements financed by the
bond proceeds.
I, Don Bunn, City Engineer for the City of Fayetteville, Arkansas, do hereby certify
that the work to be financed by the Series 1992 Bonds is complete as of September
22, 1994.
Do unn, G Engineer
Attest:
Brian Swain, Asst. to the Adm. Services Director
t-ze- Zf
Date
Date