HomeMy WebLinkAboutOrdinance 4554ORDINANCE NO. 4554
AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO
EXCEED $6,365,000 OF WATER AND SEWER SYSTEM REFUNDING
REVENUE BONDS, SERIES 2004, BY THE CITY OF FAYETTEVILLE,
ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S
OUTSTANDING WATER AND SEWER SYSTEM REFUNDING REVENUE
BONDS, SERIES 1999; AUTHORIZING THE EXECUTION AND DELIVERY
OF A FIRST SUPPLEMENTAL TRUST INDENTURE PURSUANT TO
WHICH THE SERIES 2004 BONDS WILL BE ISSUED AND SECURED;
AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL
STATEMENT PURSUANT TO WHICH THE SERIES 2004 BONDS WILL BE
OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A
BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE
SERIES 2004 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY
OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE
REDEMPTION OF THE SERIES 1999 BONDS; AUTHORIZING THE
EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE
AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING
THERETO.
WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class,
presently owns and operates a public water and sewer utility system (the "System") serving the
residents of the City and its environs; and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & 2003 Supp.) Sections 14-164-401 et
seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time
to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend
the proceeds thereof to finance the costs of acquisition, construction, equipping, improving,
maintaining, operating and repairing the System, and to refund any bonds issued under the Act or
any bonds issued under other applicable legislation payable from and secured by a pledge of
revenues derived from the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and
approved on April 20, 1999, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal
amount of $8,365,000, for the purpose of refunding outstanding bonds of the City previously
issued to finance and refinance the cost of improvements to the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4381 of the City, adopted and
approved on March 19, 2002, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002
Bonds"), in the original principal amount of $9,270,000, for the purpose of refunding
outstanding bonds of the City previously issued to finance and refinance the cost of
improvements to the System; and
WHEREAS, in accordance with the provisions of the Act, the City has determined to
issue its Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004
Bonds"), in the aggregate principal amount of not to exceed $6,365,000 for the purpose of
refunding all of the outstanding Series 1999 Bonds, establishing a debt service reserve for the
Series 2004 Bonds, and paying printing, underwriting, legal and other expenses incidental to the
issuance of the Series 2004 Bonds; and
WHEREAS, the City has determined to issue and secure the Series 2004 Bonds on a
parity basis with its outstanding Series 2002 Bonds pursuant to that certain Trust Indenture dated
as of May 1, 2002 (the "Original Indenture"), by and between the City and the Bank of
Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), as such Original Indenture may be
amended and supplemented pursuant to a First Supplemental Trust Indenture (the "First
Supplemental Indenture"), by and between the City and the Trustee, a form of which First
Supplemental Indenture has been presented to and is before this meeting; and
WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond
Purchase Agreement') in substantially the form presented to and before this meeting, with
Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), providing for the sale of the Series
2004 Bonds.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS THAT:
Section 1. The City Council hereby finds and declares that the current refunding of
the Series 1999 Bonds is in the best interests of the City and the customers of the System due to
(i) the reduction of the interest expense on the Series 1999 Bonds, (ii) the securing of low interest
rate long-term financing on the indebtedness represented by the Series 1999 Bonds, and (iii) the
revision of rate covenants with respect to System services following such refunding.
Section 2. Under the authority of the Constitution and laws of the State of Arkansas,
including particularly Amendment 65 to the Constitution of Arkansas and the Act, there is
hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer
System Refunding Revenue Bonds, Series 2004" (the "Series 2004 Bonds"). The Series 2004
Bonds shall be issued in the original aggregate principal amount of not to exceed Six Million
Three Hundred Sixty -Five Thousand Dollars ($6,365,000), shall mature not later than December
31, 2012, and shall bear interest at the rates specified in the Bond Purchase Agreement. The
average yield on the Series 2004 Bonds as a whole shall not exceed 4.00% per annum. The
proceeds of the Series 2004 Bonds will be utilized, along with other available moneys, to current
refund the outstanding Series 1999 Bonds, to establish a debt service reserve for the Series 2004
Bonds, to pay a premium for bond insurance, if deemed economically beneficial, and to pay
printing, underwriting, legal and other expenses incidental to the issuance of the Series 2004
Bonds. The Series 2004 Bonds shall be issued in the forms and denominations, shall be dated,
shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall
contain such other terms, covenants and conditions, all as set forth in the Original Indenture, as
amended and supplemented by the First Supplemental Indenture. The Series 2004 Bonds shall
be issued and secured by net revenues of the System on a parity basis with the pledge of net
revenues securing the outstanding Series 2002 Bonds.
2
The Mayor is hereby authorized and directed to execute and deliver the Series 2004
Bonds in substantially the form thereof contained in the First Supplemental Indenture submitted
to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the
Series 2004 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are
hereby authorized and directed to cause the Series 2004 Bonds to be accepted and authenticated
by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter, and
Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel"), in order to complete the Series 2004
Bonds in substantially the form contained in the First Supplemental Indenture submitted to this
meeting, with such changes as shall be approved by such persons executing the Series 2004
Bonds, their execution to constitute conclusive evidence of such approval.
Section 3. To prescribe the terms and conditions upon which the Series 2004 Bonds
are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby
authorized and directed to execute and acknowledge the First Supplemental Trust Indenture (the
"First Supplemental Indenture"), by and between the City and the Trustee, and the City Clerk is
hereby authorized and directed to execute and acknowledge the First Supplemental Indenture and
to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and
directed to cause the First Supplemental Indenture to be accepted, executed and acknowledged
by the Trustee. The First Supplemental Indenture is hereby approved in substantially the form
submitted to this meeting, including, without limitation, the provisions thereof pertaining to the
pledge of System net revenues to the Series 2004 Bonds and the terms of the Series 2004 Bonds.
The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in
order to complete the First Supplemental Indenture in substantially the form submitted to this
meeting, with such changes as shall be approved by such persons executing the First
Supplemental Indenture, their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the First Supplemental Indenture in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 4. There is hereby authorized and approved a Preliminary Official Statement
of the City, including the cover page and appendices attached thereto, relating to the Series 2004
Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the
meaning of U.S. Securities and Exchange Commission Rule 15c2-12. The distribution of the
Preliminary Official Statement is hereby approved and ratified. The Preliminary Official
Statement, as amended to conform to the terms of the Bond Purchase Agreement, including
Exhibit A thereto, 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," and the Mayor is
hereby authorized to execute the Official Statement for and on behalf of the City. The Official
Statement is hereby approved in substantially the form of the Preliminary Official Statement
submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the
Underwriter and Bond Counsel in order to complete the Official Statement in substantially the
form of the Preliminary Official Statement submitted to this meeting, with such changes as shall
be approved by such persons, the Mayor's execution to constitute conclusive evidence of such
approval.
(Advice is given that a copy of the Preliminary Official Statement is on file with the City
Clerk and is available for inspection by any interested person.)
3
Section 5. In order to prescribe the terms and conditions upon which the Series 2004
Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a
Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the
"Bond Purchase Agreement"), by and between the City and the Underwriter, and the Bond
Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and
the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to
complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with
such changes as shall be approved by such persons executing the Bond Purchase Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Bond Purchase Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 6. In order to provide for the redemption of the Series 1999 Bonds, the
Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as
of the date of its execution (the "Escrow Agreement"), by and between the City and Bank of
Oklahoma, N.A., as escrow trustee (the "Escrow Trustee"), and the Mayor is hereby authorized
and directed to cause the Escrow Agreement to be executed by the Escrow Trustee. The Escrow
Agreement is hereby approved in substantially the form submitted to this meeting, and the
Mayor is hereby authorized to confer with the Underwriter, Escrow Trustee and Bond Counsel in
order to complete the Escrow Agreement in substantially the form submitted to this meeting,
with such changes as shall be approved by such persons executing the Escrow Agreement, their
execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Escrow Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 7. In order to provide for continuing disclosure of certain financial and
operating information with respect to the City and the System in compliance with the provisions
of Rule 15c2-12 of the U. S. Securities and Exchange Commission, the Mayor is hereby
authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date
of its execution (the "Continuing Disclosure Agreement"), by and between the City and the
Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure
Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby
approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized
to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the
Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such
changes as shall be approved by such persons executing the Continuing Disclosure Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Continuing Disclosure Agreement in substantially the
form authorized to be executed is on file with the City Clerk and is available for inspection by
any interested person.)
Section 8. The rates for System Water Services enacted pursuant to Ordinance No.
4530 and 4540, adopted and approved on December 2, 2003 and February 3, 2004, and the rates
0
for System Sewer Services enacted pursuant to Ordinance No. 4536, adopted and approved on
December 30, 2003, are hereby ratified and confirmed.
Section 9. In order to secure lower interest rates on the Series 2004 Bonds, the
Underwriter has proposed that the City consider the purchase of a policy of bond insurance with
a portion of the proceeds of the Series 2004 Bonds, which policy would guarantee the payment
of the principal of and interest on the Series 2004 Bonds when due. If deemed economically
advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized
to execute an insurance commitment and to do any and all things necessary to accomplish the
delivery of a bond insurance policy with respect to the Series 2004 Bonds.
Section 10. The Mayor and City Clerk, for and on behalf of the City, are hereby
authorized and directed to do any and all things necessary to effect the issuance, sale, execution
and delivery of the Series 2004 Bonds and to effect the execution and delivery of the First
Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow
Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to
the tax exemption of interest on the Series 2004 Bonds, and to perform all of the obligations of
the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and
directed, for and on behalf of the City, to execute all papers, documents, certificates and other
instruments that may be required for the carrying out of such authority or to evidence the
exercise thereof.
Section 11. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as
Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2004
Bonds.
Section 12. The provisions of this Ordinance are hereby declared to be severable, and
if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such
declaration shall not affect the validity of the remainder of the sections, phrases or provisions of
this Ordinance.
Section 13. All ordinances, resolutions and parts thereof in conflict herewith are
hereby repealed to the extent of such conflict.
ADOPTED and APPROVED this the 6`" day of April, 2004.
FFYETrjk,
By: pm;d2 .
SONDRA
By:
5
6
40
NAME OF FILE: Ordinance No. 4554
CROSS REFERENCE:
Item # Date Document
1
03/11/04
memo to city council
2
draft ordinance
3
03/16/04
Staff Review Form
4
memo to Steve Davis
5
04/13/04
Affidavit of Publication
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
NOTES:
FAYETTEVILLE NIS �10-em Rat 1;16
THE CITY OF FAYETTEVILLE, ARKANSAS n _ . Cml ^ & J5
City Council Agenda April 6, 2004
DEPARTMENTAL CORRESPONDENCE
TO:
THROUGH
FROM:
DATE:
SUBJECT:
Recommendation
Fayetteville City Council
Dan Coody, Mayor
Hugh Earnest, Chief Administrative Officer
Stephen Davis, Finance & Internal Services Directo�k
March 11, 2004
City of Fayetteville, Arkansas Water and Sewer System Refunding
Revenue Bonds, Series 1999
Staff recommends City Council approve an ordinance authorizing the issuance of Water and Sewer
Refunding Revenue Bonds, Series 2004.
Background
The City issued water and sewer system revenue bonds in 1999 to refund portions of bond issues
originally issued in 1992 and 1994. The City's bond underwriter, Stephen's Inc, has provided the
City with an analysis that predicts a net present value benefit of $250,000 if the 1999 bonds were to
be re -financed.
Conclusion
City Staff and Dennis Hunt of Stephens, Inc will be present at the March 30, 2004 City Council
Agenda setting session to discuss the bond refunding proposal.
JADebt Financing\Water & Sewer 2004 Refunding\Water and Sewer Refunding Revenue Bonds, Series 2004.doc
KUTAK ROCK LLP
DRAFT 03/09/2004
ORDINANCE NO.
AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT
TO EXCEED $6,365,000 OF WATER AND SEWER SYSTEM
REFUNDING REVENUE BONDS, SERIES 2004, BY THE CITY OF
FAYETTEVILLE, ARKANSAS FOR THE PURPOSE OF REFUNDING
THE CITY'S OUTSTANDING WATER AND SEWER SYSTEM
REFUNDING REVENUE BONDS, SERIES 1999; AUTHORIZING THE
EXECUTION AND DELIVERY OF A FIRST SUPPLEMENTAL TRUST
INDENTURE PURSUANT TO WHICH THE SERIES 2004 BONDS WILL
BE ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND
DELIVERY OF AN OFFICIAL STATEMENT PURSUANT TO WHICH
THE SERIES 2004 BONDS WILL BE OFFERED; AUTHORIZING THE
EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT
PROVIDING FOR THE SALE OF THE SERIES 2004 BONDS;
AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW
DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF
THE SERIES 1999 BONDS; AUTHORIZING THE EXECUTION AND
DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT; AND
PRESCRIBING OTHER MATTERS RELATING THERETO.
WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class,
presently owns and operates a public water and sewer utility system (the "System") serving the
residents of the City and its environs; and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & 2003 Supp.) Sections 14-164-401 et
seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time
to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend
the proceeds thereof to finance the costs of acquisition, construction, equipping, improving,
maintaining, operating and repairing the System, and to refund any bonds issued under the Act or
any bonds issued under other applicable legislation payable from and secured by a pledge of
revenues derived from the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and
approved on April 20, 1999, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal
amount of $8,365,000, for the purpose of refunding outstanding bonds of the City previously
issued to finance and refinance the cost of improvements to the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4381 of the City, adopted and
approved on March 19, 2002, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002
Bonds"), in the original principal amount of $9,270,000, for the purpose of refunding
outstanding bonds of the City previously issued to finance and refinance the cost of
improvements to the System; and
10-58772.2
WHEREAS, in accordance with the provisions of the Act, the City has determined to
issue its Water and. Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004
Bonds"), in the aggregate principal amount of not to exceed $6,365,000 for the purpose of
refunding all of the outstanding Series 1999 Bonds, establishing a debt service reserve for the
Series 2004 Bonds, and paying printing, underwriting, legal and other expenses incidental to the
issuance of the Series 2004 Bonds; and
WHEREAS, the City has determined to issue and secure the Series 2004 Bonds on a
parity basis with its outstanding Series 2002 Bonds pursuant to that certain Trust Indenture dated
as of May 1, 2002 (the "Original Indenture"), by and between the City and the Bank of
Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), as such Original Indenture may be
amended and supplemented pursuant to a First Supplemental Trust Indenture (the "First
Supplemental Indenture"), by and between the City and the Trustee, a form of which First
Supplemental Indenture has been presented to and is before this meeting; and
WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond
Purchase Agreement') in substantially the form presented to and before this meeting, with
Stephens Inc., Fayetteville, Arkansas (the "Underwriter"), providing for the sale of the Series
2004 Bonds.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of
Fayetteville, Arkansas that:
Section 1. The City Council hereby finds and declares that the current refunding of
the Series 1999 Bonds is in the best interests of the City and the customers of the System due to
(i) the reduction of the interest expense on the Series 1999 Bonds, (ii) the securing of low interest
rate long-term financing on the indebtedness represented by the Series 1999 Bonds, and (iii) the
revision of rate covenants with respect to System services following such refunding.
Section 2. Under the authority of the Constitution and laws of the State of Arkansas,
including particularly Amendment 65 to the Constitution of Arkansas and the Act, there is
hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer
System Refunding Revenue Bonds, Series 2004" (the "Series 2004 Bonds"). The Series 2004
Bonds shall be issued in the original aggregate principal amount of not to exceed Six Million
Three Hundred Sixty -Five Thousand Dollars ($6,365,000), shall mature not later than December
31, 2012, and shall bear interest at the rates specified in the Bond Purchase Agreement. The
average yield on the Series 2004 Bonds as a whole shall not exceed 4.00% per annum. The
proceeds of the Series 2004 Bonds will be utilized, along with other available moneys, to current
refund the outstanding Series 1999 Bonds, to establish a debt service reserve for the Series 2004
Bonds, to pay a premium for bond insurance, if deemed economically beneficial, and to pay
printing, underwriting, legal and other expenses incidental to the issuance of the Series 2004
Bonds. The Series 2004 Bonds shall be issued in the forms and denominations, shall be dated,
shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall
contain such other terms, covenants and conditions, all as set forth in the Original Indenture, as
amended and supplemented by the First Supplemental Indenture. The Series 2004 Bonds shall
be issued and secured by net revenues of the System on a parity basis with the pledge of net
revenues securing the outstanding Series 2002 Bonds.
10-58772.2 2
The Mayor is hereby authorized and directed to execute and deliver the Series 2004
Bonds in substantially the form thereof contained in the First Supplemental Indenture submitted
to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the
Series 2004 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are
hereby authorized and directed to cause the Series 2004 Bonds to be accepted and authenticated
by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter, and
Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel"), in order to complete the Series 2004
Bonds in substantially the form contained in the First Supplemental Indenture submitted to this
meeting, with such changes as shall be approved by such persons executing the Series 2004
Bonds, their execution to constitute conclusive evidence of such approval.
Section 3. To prescribe the terms and conditions upon which the Series 2004 Bonds
are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby
authorized and directed to execute and acknowledge the First Supplemental Trust Indenture (the
"First Supplemental Indenture"), by and between the City and the Trustee, and the City Clerk is
hereby authorized and directed to execute and acknowledge the First Supplemental Indenture and
to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and
directed to cause the First Supplemental Indenture to be accepted, executed and acknowledged
by the Trustee. The First Supplemental Indenture is hereby approved in substantially the form
submitted to this meeting, including, without limitation, the provisions thereof pertaining to the
pledge of System net revenues to the Series 2004 Bonds and the terms of the Series 2004 Bonds.
The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in
order to complete the First Supplemental Indenture in substantially the form submitted to this
meeting, with such changes as shall be approved by such persons executing the First
Supplemental Indenture, their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the First Supplemental Indenture in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 4. There is hereby authorized and approved a Preliminary Official Statement
of the City, including the cover page and appendices attached thereto, relating to the Series 2004
Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the
meaning of U.S. Securities and Exchange Commission Rule 15c2-12. The distribution of the
Preliminary Official Statement is hereby approved and ratified. The Preliminary Official
Statement, as amended to conform to the terms of the Bond Purchase Agreement, including
Exhibit A thereto, 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," and the Mayor is
hereby authorized to execute the Official Statement for and on behalf of the City. The Official
Statement is hereby approved in substantially the form of the Preliminary Official Statement
submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee, the
Underwriter and Bond Counsel in order to complete the Official Statement in substantially the
form of the Preliminary Official Statement submitted to this meeting, with such changes as shall
be approved by such persons, the Mayor's execution to constitute conclusive evidence of such
approval.
(Advice is given that a copy of the Preliminary Official Statement is on file with the City
Clerk and is available for inspection by any interested person.)
10-58772.2 3
Section 5. In order to prescribe the terms and conditions upon which the Series 2004
Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a
Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the
"Bond Purchase Agreement'), by and between the City and the Underwriter, and the Bond
Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and
the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to
complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with
such changes as shall be approved by such persons executing the Bond Purchase Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Bond Purchase Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 6. In order to provide for the redemption of the Series 1999 Bonds, the
Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as
of the date of its execution (the "Escrow Agreement'), by and between the City and Bank of
Oklahoma, N.A., as escrow trustee (the "Escrow Trustee"), and the Mayor is hereby authorized
and directed to cause the Escrow Agreement to be executed by the Escrow Trustee. The Escrow
Agreement is hereby approved in substantially the form submitted to this meeting, and the
Mayor is hereby authorized to confer with the Underwriter, Escrow Trustee and Bond Counsel in
order to complete the Escrow Agreement in substantially the form submitted to this meeting,
with such changes as shall be approved by such persons executing the Escrow Agreement, their
execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Escrow Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 7. In order to provide for continuing disclosure of certain financial and
operating information with respect to the City and the System in compliance with the provisions
of Rule 15c2-12 of the U. S. Securities and Exchange Commission, the Mayor is hereby
authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date
of its execution (the "Continuing Disclosure Agreement'), by and between the City and the
Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure
Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby
approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized
to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the
Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such
changes as shall be approved by such persons executing the Continuing Disclosure Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Continuing Disclosure Agreement in substantially the
form authorized to be executed is on file with the City Clerk and is available for inspection by
any interested person.)
Section 8. The rates for System Water Services enacted pursuant to Ordinance No.
4530 and 4540, adopted and approved on December 2, 2003 and February 3, 2004, and the rates
10-58772.2 4
for System Sewer Services enacted pursuant to Ordinance No. 4536, adopted and approved on
December 30, 2003, are hereby ratified and confirmed.
Section 9. In order to secure lower interest rates on the Series 2004 Bonds, the
Underwriter has proposed that the City consider the purchase of a policy of bond insurance with
a portion of the proceeds of the Series 2004 Bonds, which policy would guarantee the payment
of the principal of and interest on the Series 2004 Bonds when due. If deemed economically
advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized
to execute an insurance commitment and to do any and all things necessary to accomplish the
delivery of a bond insurance policy with respect to the Series 2004 Bonds.
Section 10. The Mayor and City Clerk, for and on behalf of the City, are hereby
authorized and directed to do any and all things necessary to effect the issuance, sale, execution
and delivery of the Series 2004 Bonds and to effect the execution and delivery of the First
Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow
Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to
the tax exemption of interest on the Series 2004 Bonds, and to perform all of the obligations of
the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and
directed, for and on behalf of the City, to execute all papers, documents, certificates and other
instruments that may be required for the carrying out of such authority or to evidence the
exercise thereof.
Section 11. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as
Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2004
Bonds.
Section 12. The provisions of this Ordinance are hereby declared to be severable, and
if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such
declaration shall not affect the validity of the remainder of the sections, phrases or provisions of
this Ordinance.
Section 13. All ordinances, resolutions and parts thereof in conflict herewith are
hereby repealed to the extent of such conflict.
ADOPTED AND APPROVED THIS DAY OF 52004.
APPROVED:
Mayor
ATTEST:
City Clerk
(SEAL)
10-58772.2 5
• S•
XX AGENDA REQUEST STAFF REVIEW FORM
CONTRACT REVIEW
GRANT REVIEW
For the Fayetteville City Council Meeting of: April 6,2004
FROM:
Stephen Davis
Name
Finance & Internal Services Div.
Division
Finance & Internal Services
Department
ACTION REQUIRED: Approval of an ordinance authorizing the issuance and sale of not to exceed $6,365,000 of
Water and Sewer System Refunding Revenue Bonds, Series 2004.
COST TO CITY:
Cost of issuance is deducted from bond proceeds
Cost of this request
Account Number
Project Number
BUDGET REVIEW:
G
Funds Used to Date
Remaining Balance
Budgeted Item
Budget Manager Date
CONTRACT/GRANT/LEASE REVIEW:
Accounting Manager Date
City Attorney Date
STAFF RECOMMENDATION: Approval of ordinance.
Division Head Date
DDeepp/pa11r'/rrtt"/;ment Director Date
Finance & Internal Dir. Date
_ Das
Date
Program Category / Project Name
Program / Project Category Name
Fund Name
Budget Adjustment Attached
Internal Auditor
Purchasing Manager
Cross Reference
New Item: Yes
Previous Ord/Res#:
Orig. Contract Date
Orig. Contract Number
*FiR=
Date
No
• Staff Review Form - Page 2 is
Description
Comments:
Budget Manager
Accounting Manager
City Attorney
7
Purchasing Manager
ADA Coordinator
Internal Auditor
Grants Coordinator
Meeting Date
Reference Comments:
kN O CO A _iPll
T2 a. a i to 4 1�F(.,� lrtl �. 04 1. 4`5-24 ,
FAYETTEVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
DEPARTMENTAL CORRESPONDENCE
To: Steve Davis
Finance & Internal Services
From: Clarice Buffalohead-Pearmanl
City Clerk Division
Date: April 6, 2004
Re: Ordinance No.4554
Attached is a copy of the above ordinance passed by the City Council April 61 2004, authorizing
the issuing and sale of refunding revenue bonds and other processes regarding the water and
sewer system refunding revenue bonds, Series 1999, Series 2004.
This item will be recorded in the city clerk's office and microfilmed. If anything else is needed
please let the clerk's office know.
lcbp
attachments
cc: Nancy Smith, Internal Auditor
A&insas Demomt 19(filazeW
AFFI
PUBLICATION
I, UJ do solemnly swear that I am
LegAl Clerk of the Arkansas Democrat-Gazette/Northwest•Arkansas
Times newspaper, printed and published in Lowell, Arkansas, and that
from my own personal knowledge and reference to the files of said
publication, that advertisement of:
aZdL.� �FJ`✓J� was inserted in the regular editions on
PO# 04,58
** Publication Charge: $
Subscribed. and sworn to before me this
Q
day of AP r)j 2004.
0
Notary Public
My Commission Expires: 07 do/
** Please do
not
pay
from Affidavit.
An invoice
will
be
sent.
Official Seal
SEAN-MICHAEL ARGO
Notary Public -Arkansas
WASHINGTON COUNTY
My Commission Expires 07.25-2013
RECEIVED
APR 14 2W
CITY OF FAYETTEVILLE
CITY CLERICS OFFICE
212 NORTH EAST AVENUE a P.O. BOX 1607 a FAYETTEALLE, ARKANSAS 72702 o (501) 442-1700
ORDIMMCE 00. 45B4 _
AN ORDINANCE AL HORZING THE ISSUANCE AND SALE OF
NOT TO EXCEED$6,365,000 OF WATER AND SEWER SYSTEM
REFUNDING REVENUE BONDS, SERIES 2004 jiy IHE CRY OF
FAYETTEVILLE, ARKANSAS FOR TN$''PURPOSE OF
REFUNDING THE CRVS OUTSTANDING WATER AND SEWER
SYSTEM REFUNDING REVENUE BONDS, SERIES 1999;
AUTHORONG THE EXECUTION AND DELMEFY OF A FIRST
SUPPLEMENTAL TRUST INDENTURE PURSUANT TO WHICH THE SERIES 2004 BONDS WILL BE
ISSUED AND SECURED; AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL
STATEMENT PURSUANT TO WHICH THE SERIES 2004 DONDS WILL BE OFFERED; AUTHORIZING
THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE
OF THE SERIES 20D4 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW
DEPOSIT AGREEMENT PROVIDING FOR THE REDEMPTION OF THE SERIES 1989 BONDS;
AUTHORILNG THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE AGREEMENT;
AND PRESCRIBING OTHER MATTERS RELATING THERETO.
WHEREAS, The City of Fayahavile, Arkansas (Me'Cityl, a city 0 the first dam, presenty owns and
operates a public water and sewer UNITY ehtem (Me -Systems seMng the residents of the City and its
environs; aria
WHEREAS. The City a authorized and empowered under the provisions of vie Constitution and laws of
the State of Arkansas, including paniculary Amendment 65 to the Constilutlon and Arkansas Code
Annotated IT 998 Repl. 8 2003 Supp.) Sections 14-164-401 et seq., Sections 14-234-201 at seq. and
Secnns 14-235-201 Of seq. (cdlectNey and as from time to time amended Me -Actj, to issue and sell
its water and sever revenue bonds and to expend the proceeds thereof to finance the Diets of
aoauisitlon, construction, equipping, Improving. mantartlrlg, operating and repairing the System, and to
refund any bonds issued under vie Act or arry bonds issued under other applicable legislation payable
from and severed by a pledge of reveruss derived from the System; and
WHERBAB, pursuant to The provisions of Ordinance No. 4159 of the City, adopted and approved on
April 20. 1999, the Gry has previously asued its Water and Sealer System Refunding Revenue Bonds,
Series 1999 (the -Serlas 19% Bonds, In the original pdncipd amount of S8,365,0D), for the purpose
of refunding outstanding bons of the City previously Issued to finance and refinance the cost of
improvements to the System; and
pursuant to the provisions of Onco ance No. 4381 of the City adopted and Sat
02, the City has previously issued its Water and Sewer System Refunding Revenn
and Sense 2002E (Colectively, the -Series 2002 Bonn, In the original pnndp
), far The purpose of refunding outstanding bonds of the CITY previously issued
the cast of improvements to the System; end
in accordance with vie provisions of the Act, the City has determined to issue
stem Refunding Revenue Bonds, Sens 2004 (the'Senes 2004 Bonds, In tine:
unt of not to exceed $6,365,000 for the purpose of refunding 0 of the oulstand
establishing a debt service reserve for tho Sens 200l Prodsend ruvinr
T URUAS, Vie GAY has detemlined to issue and Secure the Series 2004 Bolds on a parity basis with
ITS outstanding Sense 2002 Bonds pursuant to that certain Trust Indenture dated as of May 1, 2002 (the
'Original Indenture, by end between the City and the Bank of Oklahoma, N.A., Tulsa, Oklahoma, as
trustee (Me'Trustee'), as Such Original Indenture rosy be amended and Supplemented pursuant to a
First Supplemental Trust Indenture (in'First Supplemental Indenture'), by and beavi The City and In
Trustee. 8 form Of which Rst Supplemental Indenture has been presented to and is before this meeting;
and
WHEREAS, the City proposes to enter into a Bond Purehoss Agreement the `Bond Purchase
Agreement's In substantialy the form presented to and before the metal with Stephens Inc.,
Fayetteville. Arkansas The "Underviter"). providing for the sole of the Series 2004 Bonds.
HOW, THEREFORE, BB R ORDAINED BY THE CRY COUNCIL OF THE CRT OF
PAVETTOVILLO, ARKANSAS THAT.
Section 1. The City CouncH hereby finds anal declares that the current refunding of the Sens 1998
Bonds is In the best Interests of the City and the wsianers of the System due to W the retluction of the
Interest expense on the Sense 1099 Boos, (I) the secul of ow interest rate long-term franc rig on
Ice Indebtedness represented by vie Sense 1999 Bonds, end III) vie revision of rate covenants with
respect to System services folbwing won refunding.
Section 2. Under the authority of the Constitution and laws of the State of Arkansas, indWing
partai Amendment 65 to the Constitution of Arkansas and the Act, there is hereby aurnorized Ma
Issuance of bonds of the City to be designated as RNater and Salver System Refunding Revenue Bonds,
Series 2004' (the 'Se os 2004 Bonds. The Sens 20D4 Bonds shall o eased In the anginal aggregate
pflrldpal amount of not to exceed Su Much Thee Hundred Silly -Five Thousand Dollars ($6,365,000),
shall mature not later Ilan December 31, 2012, and anal bear interest at the rates specified in the Bond
Purchase Agreement. The average yield on the Series 2004 Bonds as a whole shall not exceed 4.009E
per annum. The proceeds of ice Series 2004 Bonds Wit be udized, along with other available morays,
to current mfund The Outstadng Sens 1999 Bonds, to establish a debt service reserve for the Sens j
?004 Bons, to pay a premium for bond insurance, lf deemed economically beneficial, and to pay
pnntJng, underwriting, legal and other expenses incidental to the issuance of the Sees 2004 Bonds. The
Series 21 Bonds shell be issued n the forms aW denominations, shall be clated, seal be numbered,
Met mature, shall be subject to redemption poor to maturity, and shall contain such other terms,
covenants and conditions, all as set forth in the Original Indenture, as amended and Supplemented by
the First Supplemental Indenture. The Series 2004 Bonds shall be Issued anal securetl by net revenues
of the System on a parry bads with The pledge of net revenues securing the outstanding Sens 2002
Bonds.
The Mayor is hereby authorized and directed to execute and deliver tie Series 2004 Bonds in
substerttialy the forth Mali contained In the First Supplemental Indenture Submitted to this meeting,
and the City perk Is hereby authorzed and directed to execute and deliver the Series 2004 Bonds and
to affix the seal of the City thereto, end the Maya and City Clerk are hereby authorized and directed to
cause the Series 2004 Bands to be accepted and authenticated by The Trustee. The Maya is hereby
cut dried to confer wflh the Trusted, the Underwriter, and Kuak Rock LLP, U le Rock, Arkansas Mod
Courser, In order to complete the Series 2004 Boos In substantlay the forth contained In the First
Supplements] Indenture submitted to this meeting, with such changes as shall be approved by Such
persons executing the Sexes 20D4 Bonds, their execution to constitute condLeiVe evidence of such',
pproval.
COCnM A 10 PhISCiICe Me I%ma and cOMifbls UPOrl Which the Series 2004 Bonds are to be
executed, authenticated, ladled, accepted, held and seared, the Mayor is hereby suVlprood an
directed to OXOCUIe and WITOMed9e the First Supplemental Trust Indenture (the 'First Supplemental
Indenture, by and between the City and the Trustee, end The City Clerk Is hereby authorized and
directed to execute and adminvedge the First Supplemental Indenture and to affix the seal of the City
thereto, and the Mayor end the City Clark are hereby authorized and draded to cause tho Frsl
Supplemental Indent= to be accepted, executed and admoMedged by the Trustee. The Frel
wIIhout limitation, the provisions thereof pertaining to the pledge of System rat revenues to the Series
2004 Bonds and the terms of Me Sens 20D4 Bonds. The Mayor is hereby authorized to confer with
the Trustee, the Undenvnter and Bond Counsel in order to complete the First Supplemental Indenture in
substantially the form submitted to This meeting, with such changes as shall be approved by suds
persons executing the First Supplemental Indenture, Mir execution to constitute conclusive evidence of
(Advice is given that a copy Of the Rrst Supplemental Indenture in substannly the farm auhorized to be
executed IS on file with the City park and is available for Inspection by any interested person.)
Section 4. There is hereby au horized and approved a Preliminary Official Statement of Me Cgy
Including the cover page and appendices attached thereto, relating to the Series 20D4 Bonds. The
Preliminary Official Statement Is hereby "deemed final' by the City within the meaning of U.S. Securities
and Exchange Commission Rule 15c2-12. The distribution of the Preliminary Official Statement is hereby
approved and rMfled. The Pmnmary Official Statement, as amended to conform to the terra of the
Bond Purchase Agreement, including E diibit A thereto, Shot with such other charges and amendments
as are mutuaty agreed to by the City and The Undex+ker, is herein refered to ac Me 'Official Statement;
and the Mayor Is hereby authorzed to execute in Official Statemens for and an befell of the Gty. The
Official Statement Is hereby approved In substantially the farm of the Preliminary Official Statement
submitted to This meeting, and the Mayor is hereby eWprized to confer with the Trustee, the Undervrtiler
and Boot Counsel in Order to complete the Official Statement in Substantially the farm of the Preliminary
Official Statement submitted to this meeting, with such charges as shall be approved by such persons,
the Mayor9 execution to corlsHMe conclusive evidence of such approval.
pi:MOS is given that a copy of the Preliminary Of cul Statement is on fie with the City Clerk Shot Is
available for inspection by any interested person.)
Section 6. In order to prescribe the terms and conditions upon which the Sees 2" Bonds are to be
sold to the Underwater, the Mayo Is hereby authorized and directed to execute a Bond Purchase
Agreement on behalf of the City, to be dated as of the date of its execution (the'Bond Purchase
Agreement, by and between the City and Me underwriter, and the Bond Purchase Agreement is hereby
approved in substantially the form Submitted to this meeting, and the Mayo Is hereby authorized to
confer with the Underwnter and Bond Counsel in order to complete the Bored Purchase Agreement in
substantaly the form submitted to this meeting, vam such changes as shall be approved by such
persons executing the Bond Purchase Agreement, their execution to constitute conclusive evidence of
such approval.
(AtlWce is given that a copy of Me Bond Purchase Agreement In substantlely the farm aumonzed to be
executed Is on file with file City perk and is available for inspection by any interested person.)
Section S. In order to provide for the redemption of the Sense 1999 Bonds, the Mayor Is hereby
auhoized and directed to execute an Escrow Deposit Agreement to be defeat as of the date of its
execution (the 'Escrow Agreerni by Shot between the City and Bank of Oldahoma, N.A., as escrow
trustee (the 'Escrow Thal and the Mayor a hereby aumorzed and directed to cause the Escrow
Agreement to be executed by the Escrow Tmstee. The Escrow Agreement is hereby approved In
Substantially Me forth submitted to am meeting, and the Mayor Is hereby authorized to confer with the
Untlerwrhe, Emmyy Trustee and Bond Counsel in order to complete the Escrow Agreement in
Substantially the forth Submitted to this meeting, with such charges as shall be approved by Such
persons exerting the Escrow Agreement, their execution to constiMe concl evidence of such
Is given that a copy of the Escrow Agreement in substantially the torte authorized to be executed
P with the City Clerk and is avolable far inspection by any interested person.)
n T. In order to provide for continuing disdosure of retain firandal and operating Information
pact to the City and the System n compliance with the Provisions of Rule 15c2-12 of the U. S.
a and! Exchange Commission, the Mayo is hereby authorized and directed to execute a
ing Dacosure Agreement to be dated as of the date of IS execution (the 'Continuing Disclosure
erlt'), by and between the City and the Trustee, and the Mayor is hereby authorized and directed
I the Continuing Disclosure Agreement to W executed by the Tmstee. The Contirxing Disccan o
am is hereby approved In substantialy the forth submitted to this meeting, and the Mayor Is
authorized to center win the Trustee, the Undewater end Bad Counsel in order to complete
mining Disclosure Agreement in substantially the forth submitted to this meeting, with such
I as shall be approve by Such persons executing the Continuing Disclosure Agreement, Their
in to constitute corcludve evidence of such approval,
is given Mat a copy of the Continuing Disclosure Agreement in substantially the form authorzed
ecuted Is on file whh the Gry Clerk and s available for inspection by any interested person J
4 S. The rates for System Water Services enacted pursuant to Onc dance No. 4530 and 4540,
1 Shot approved an December 2, 2003 and February 3, 2004, and the rates for System Sewsr
r enacted pursuant to Ordnance No. 4536, adoptetl and approved on December 30, 2003, are
the Mayor is hereby au horized to execute an insurshoo commitment and io ed airy and atl things necessary
to eccarnplish The delivery of a bond nsurance policy with respect to the Series 2004 Bonds. I
Section 10. The Mayor and City perk, far and on behalf of the City are hereby authored and abetted
to do any and all things necessary to effect the Issuance, sale, execution and delivery of the Serbs ZOD4
Bonds and to effect the execulbn and delivery of the First Suppartenta Indenture, the Bond Purchase
Agreement, Val Olflpal Statement, the Escrow Agreement, the Continuing Dsdosure Agreement and a Tax
Regulatory Agreement relating to the tax exemption of interest on the Series 2004 Bonds, and to perform
all of the obligations of the ply undo and pursuant Vani The Mayor and The City perk she furma
authorized and directed for and on tx3alf of the City, to execute at papery documents. cofificates and
other instruments that may be rerluired for the carrying on of such authority or to avitlerxe Me exerose
Thereof.
Section 11. Kuak Rock LLP, Little Rock Aransas, is hereby appointed to act as Bond Counsel on balaM
of the City in connection vAth Me issuarm and sale of trial Series 2004 Boras.
Section 12. The provisions of this Ordirarce are hereby declared to be Several and If arty section,
phrase or provision anal for any reason be declared W be illegal Or irrvao, Such declaration shal not affect
the validity of the remainder of the sections, phresav or provisions of this Ordnance.
Section 13. All ordinances, resolutions and Para thereof in confin4 tlere.NTh are hereby repeated to the
extent of such conflict.
APPROVED this the sill day of April. 200c
io
4•
$6,0909000
CITY OF FAVETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BONDS
SERIEs2004
TRANSCRIPT OF PROCEEDINGS
Dated as of May 1, 2004
Prepared By:
KUTAK ROCK LLP
425 West Capitol, Suite 1100
Little Rock, Arkansas 72201
10-58771.1
• $6,0909000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BONDS
SERIES 2004
CLOSING INDEX
Proceedings and Certificates Related to Issuance
Closing Certificate and Request of the City of Fayetteville,
Arkansas (the "City")
Exhibit A - Ordinance No. 4536 adopted December 30, 2003, —
fixing rates to be charged for services of the City's
sewer system
. Exhibit B — Ordinance No. 4530 adopted December 2, 2003, and _
Ordinance No. 4540 adopted February 3, 2004, each fixing
rates to be charged for services of the City's water system
•
KW
Exhibit C - Ordinance No. 4554 adopted April 6, 2004,
authorizing the issuance of water and sewer system
refunding revenue bonds 4
Exhibit D - Minutes of City Council meeting held April 6, 2004,
reciting adoption of Ordinance No. 4554
Exhibit E - Proof of Publication of Ordinance No. 4554 in the North
Arkansas edition of the Arkansas Democrat -Gazette on April 12, 2004 6
Exhibit F - Costs of Issuance
7
Form 8038-G and Proof of Mailing to Internal Revenue Service 8
Principal Documents
Bond Purchase Agreement dated April 23, 2004, by and
between the City and Stephens Inc. (the "Underwriter") 9
10-58771.1
• TAB
Trust Indenture dated as of May 1, 2002, by and between the
City and the Bank of Oklahoma, N.A., as trustee (the "Trustee") 10
First Supplemental Trust Indenture dated as of May 1, 2004,
by and between the City and the Trustee 11
Escrow Deposit Agreement dated May 1, 2004, by and
between the City and Bank of Oklahoma, N.A., as
escrow trustee (the "Escrow Trustee") 12
Tax Regulatory Agreement dated May 1, 2004, by and
between the City and the Trustee 13
Copies of Bonds 14
Preliminary Official Statement 15
Official Statement 16
Opinions
Approving Opinion of Bond Counsel 17
Supplemental Opinion of Bond Counsel 18
Defeasance Opinion of Bond Counsel 19
Opinion of Counsel to the City 20
Bond Insurance
Bond Insurance Policy 21
Certificate of Bond Insurer 22
Opinion of Counsel to Bond Insurer 23
Miscellaneous
Continuing Disclosure Agreement 24
Trustee's Certificate 25
Escrow Trustee's Certificate 26
• Certificate of Underwriter 27
10-58771.1 2
• TAB
Trustee's Receipt and Certificate as to Application of Funds 28
•
Escrow Trustee's Receipt 29
Underwriter's Receipt for Bonds 30
Accountant's Consent Letter 31
Accountant's Parity Letter 32
DTC Letter of Representation 33
Standard & Poor's Rating Letters . 34
Transcripts delivered to:
Ambac Assurance Corporation (2 bound)
City of Fayetteville, Attn: Mr. Steve Davis (1 bound)
Bank of Oklahoma, N.A., Attn: Ms. Cynthia Wilkinson (1 bound)
Stephens Inc., Attn: Mr. Dennis Hunt (1 bound)
Fayetteville City Attorney, Attn: Kit Williams, Esq. (1 bound)
• Kutak Rock LLP (1 bound)
10-58771.1 3
• CLOSING CERTIFICATE AND REQUEST OF THE CITY
The undersigned Mayor and City Clerk of the City of Fayetteville, Arkansas, a duly
organized municipality and political subdivision of the State of Arkansas (the "City"), do hereby
certify, covenant and request as follows:
1. The undersigned are the duly elected, qualified and acting Mayor and City Clerk
of the City, and as such officials have in their possession or have access to the official books and
corporate records of the City. This certificate is executed in connection with the issuance by the
city of its $6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the
"Bonds").
2. Attached hereto as Exhibit A is a true, complete and correct copy of Ordinance
No. 4536 (the "Sewer Rate Ordinance"), duly adopted by a majority of the City Council at a duly
called meeting of the City Council, open to the public, held December 30, 2003. The Sewer Rate
Ordinance sets the rates to be charged for sewer services of the City's water and sewer system
(the "System"), and the Sewer Rate Ordinance is in full force and effect and has not been altered,
amended or repealed as of the date hereof No petition or petitions to refer the Sewer Rate
Ordinance to the people under Amendment No. 7 to the Constitution of the State of Arkansas
have been filed as of the date hereof, and the City Council has not referred the Sewer Rate
Ordinance to the people for adoption or rejection.
. Attached hereto as Exhibit B is (i) a true, complete and correct copy of Ordinance
. No. 4530 ("Ordinance No. 4530"), duly adopted by a majority of the City Council at a duly
called meeting of the City Council, open to the public, held December 2, 2003, and (ii) a true,
complete and correct copy of Ordinance No. 4540 ("Ordinance No. 4540," and together with
Ordinance No. 4530, the "Water Rate Ordinance"), duly adopted by a majority of the City
Council at a duly called meeting of the City Council, open to the public, held February 3, 2004.
The Water Rate Ordinance sets the rates to be charged for water services of the System, and the
Water Rate Ordinance is in full force and effect and has not been altered, amended or repealed as
of the date hereof. No petition or petitions to refer the Water Rate Ordinance to the people under
Amendment No. 7 to the Constitution of the State of Arkansas have been filed as of the date
hereof, and the City Council has not referred the Water Rate Ordinance to the people for
adoption or rejection.
Attached hereto as Exhibit C is a true, complete and correct copy of Ordinance No. 4554
(the "Bond Ordinance"), duly adopted by a majority of the City Council at a duly called meeting
of the City Council, open to the public, held April 6, 2004. The Bond Ordinance authorizes the
issuance, sale and delivery of the Bonds, and the Bond Ordinance is in full force and effect and
has not been altered, amended or repealed as of the date hereof. No petition or petitions to refer
the Bond Ordinance to the people under Amendment No. 7 to the Constitution of the State of
Arkansas have been filed as of the date hereof, and the City Council has not referred the Bond
Ordinance to the people for adoption or rejection.
Attached hereto as Exhibit D is a true, complete and correct copy of the minutes of a
. meeting of the City Council held April 6, 2004, showing adoption of the Bond Ordinance, as said
mraLraui
•
0
•
minutes appear in the official records of the City. At said meeting a quorum was present and
acted throughout.
Attached hereto as Exhibit E is a publisher's affidavit showing publication of the Bond
Ordinance in the Northwest Arkansas edition of the Arkansas Democrat -Gazette, a newspaper
published and having general circulation in the City, on April 12, 2004.
No authority or proceeding in connection with the issuance, sale and delivery of the
Bonds has been repealed, revoked or rescinded.
3. The following described instruments, as executed and delivered by the Mayor
and/or the City Clerk, are in substantially the same form and text as the copies of such
instruments which were before and approved by the City Council at the April 6, 2004 meeting
referred to in paragraph 2 above, with such changes not inconsistent with the Bond Ordinance as
have been approved by the officers executing the same.
Document Date Other Party or Parties
First Supplemental Trust May 1, 2004 Bank of Oklahoma, N.A., as
Indenture trustee (the "Trustee")
Escrow Deposit Agreement May 20, 2004 Bank of Oklahoma, N.A., as
escrow trustee (the "Escrow
Trustee")
Tax Regulatory Agreement May 1, 2004 Trustee
Continuing Disclosure May 20, 2004 Trustee
Agreement
Bond Purchase Agreement
April
23,
2004
Stephens Inc. (the "Underwriter")
Official Statement
April
23,
2004
None
The First Supplemental Trust Indenture, the Escrow Deposit Agreement, the Tax
Regulatory Agreement, the Continuing Disclosure Agreement, the Bond Purchase Agreement
and the Official Statement are hereinafter collectively referred to as the City Documents.
4. The persons named below were on the date or dates of the execution of the City
Documents, and are on the date hereof, the duly qualified and acting incumbents of the offices of
the City set forth opposite their respective names. The undersigned, or their successors in office,
are the authorized representatives of the City for all purposes of the Bond Ordinance and the City
Documents.
Title Name
Mayor Dan Coody
City Clerk Sondra Smith
IOfi1620.1
5. The undersigned Mayor of the City did manually execute the City Documents and
the undersigned City Clerk of the City did manually attest the Indenture and the Escrow Deposit
Agreement. The undersigned Mayor of the City did manually execute and the undersigned City
Clerk of the City did manually attest $6,090,000 aggregate principal amount of the Bonds, issued
in the form of fully registered typewritten bonds numbered from R04-1 through R04-9, inclusive,
for Series 2004, initially dated as of May 1, 2004.
6. The City has duly adopted the Sewer Rate Ordinance, the Water Rate Ordinance
and the Bond Ordinance (and has duly pledged the Net Revenues described therein) and has duly
authorized, executed and delivered the Bonds and each of the City Documents by all necessary
action under the Constitution and laws of the State of Arkansas, including particularly
Amendment 65 and Arkansas Code Annotated §§ 14-234-201 et seq.; Arkansas Code Annotated
§§ 14-235-201 et seq.; and Arkansas Code Annotated §§ 14-164-401 et seq. (collectively, the
"Authorizing Legislation"). As of the date hereof, the Sewer Rate Ordinance, the Water Rate
Ordinance, the Bond Ordinance, the Bonds and each of the City Documents are in full force and
effect and each constitutes the valid, binding and enforceable obligation of the City, except to the
extent their enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally or by the availability of equitable remedies, and the City is
entitled to the benefits of the same. The City has complied in all respects with the provisions of
the Authorizing Legislation and has full legal right, power and authority to issue the Bonds for
the purposes stated in the Authorizing Legislation and to enter into the Bond Purchase
Agreement, to adopt the Bond Ordinance, to issue, sell and deliver the Bonds as provided in the
Bond Purchase Agreement, and to carry out and consummate all other transactions contemplated
by the City Documents.
7. Any certificate signed by an officer of the City (including this certificate) and
delivered to the Trustee or the Underwriter shall be deemed a representation and warranty by the
City to the Trustee or the Underwriter as to the statements made therein (and herein).
8. The seal affixed to this certificate is the legally adopted, proper and only official
seal of the City, and an impression thereof has been placed on each of the Bonds.
9. The meetings of the City Council of the City referred to in paragraph 2 hereof
were open to the public in compliance with the provisions of Arkansas law.
10. The present officials of the City and their respective terms are as follows:
Date
of
Expiration
Name
Office
of Term
Dan Coody
Mayor
12-31-04
Sondra Smith
City Clerk
12-31-04
Kit Williams
City Attorney
12-31-06
Bob Davis
Alderman
12-31-04
Lioneld Jordan
Alderman
12-31-04
Robert Reynolds
Alderman
12-31-06
Kyle Cook
Alderman
12-31-06
Brenda Thiel
Alderman
12-31-04
10-61620.1
. Date of Expiration
Name Office of Term
Shirley Lucas Alderman 12-31-06
Don Marr Alderman 12-31-04
Robert Rhoades Alderman 12-31-06
11. The City has not and will not engage in any activity which might result in the
income of the City becoming taxable to it or any interest on the Bonds becoming taxable to the
recipients thereof under the Federal income tax laws. This covenant is made to all owners of the
Bonds, their successors and assigns, as a further inducement for the purchase of the Bonds.
12. All of the conditions, covenants and agreements required in the Trust Indenture
dated as of May 1, 2002, as amended and supplemented by the First Supplemental Trust
Indenture (the "Indenture"), and the Bond Purchase Agreement to be satisfied or performed by
the City at or prior to the issuance of the Bonds have been complied with, satisfied or performed
in the manner and with the effect contemplated in the Indenture and the Bond Purchase
Agreement. Each of the City's representations, warranties and covenants contained in the Bond
Purchase Agreement are true and correct as of the date of this certificate.
13. Since December 31, 2003, 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, other than such changes which are disclosed in
the Official Statement, and since such date the City has not incurred any liability material to the
City, except as disclosed in the Official Statement. The information in the Official Statement
40 relating to the City and the System, their organization, properties, operations and financial
condition, and the description of the Bonds, the Bond Ordinance, the Sewer Rate Ordinance, the
Water Rate Ordinance and the Revenues (as defined in the Bond Ordinance) 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 contained in the
Official Statement, in light of the circumstances under which they were made, not misleading.
To the best knowledge of the undersigned officials of the City, no event affecting the City or the
System has occurred since the date of the Official Statement which should be disclosed in the
Official Statement for the purposes for which it is used that is necessary to disclose therein in
order to make the statements and information therein not misleading in any material respect.
•
14. There are hereby delivered to the Trustee nine (9) typewritten Series 2004 Bonds,
one for each maturity, in the aggregate principal amount of $6,090,000 to be registered in the
name of Cede & Co. The Trustee is hereby requested to authenticate the Series 2004 Bonds and
to receipt for and deliver the Series 2004 Bonds upon the order of the Underwriter on behalf of
the City after authentication and upon payment therefor of $6,083,730.95, plus accrued interest
from May 1, 2004 to the date of delivery in the amount of $10,051.26, for a total purchase price
of $6,093,782.21. The Trustee is hereby directed to disburse the Bond proceeds as follows:
(i) Deposit the accrued interest on the Series 2004 Bonds in the amount of
$10,051.26 into the Bond Fund;
10-61620.1 4
(ii) Transfer the sum
of $5,222,145.07
to the Escrow Trustee for use in refunding the
City's Water and
Sewer System
Refunding Revenue Bonds, Series
1999;
(iii) Deposit the sum of $786,432.50 into the Debt Service Reserve Fund;
(iv) Transfer the sum of $24,410.10 to Ambac Assurance in payment of the premium
for the Financial Guaranty Insurance Policy;
(v) Deposit the sum of $50,640.10 into the Cost of Issuance Fund and immediately
pay therefrom those costs of issuance of the Bonds set forth on Exhibit F hereto;
and
(vi) Deposit the balance of the Bond proceeds (viz. the sum of $103.18) into the Bond
Fund.
15. The City is a city of the first class pursuant to Title 14, Subtitle 3, Chapter 43 of
the Arkansas Code Annotated. The City is operating under the mayor -council form of
government pursuant to Title 14.
16. No action, suit, proceeding, inquiry or investigation is pending, or, to the
knowledge of the undersigned, is there any basis therefor, in any way (i) restraining or enjoining
the issuance, sale or delivery of any of the Bonds or the collection of any moneys or property
pledged under the Bond Ordinance or the pledge thereof, or (ii) questioning or affecting the
validity or enforceability of the Bonds, the Sewer Rate Ordinance, the Water Rate Ordinance, the
Bond Ordinance or any of the City Documents, or (iii) questioning or affecting the validity of
any of the proceedings for the authorization, execution, authentication, sale or delivery of the
Bonds or the assignment by the City of any of the moneys, revenues, instruments or other rights
pledged under the Bond Ordinance, or (iv) questioning or affecting the corporate existence or
organization of the City or the title to office of any of the officers or officials thereof or any
powers of the City, or (v) questioning or affecting the power and authority of the City to issue
the Bonds or adopt the Sewer Rate Ordinance, the Water Rate Ordinance or the Bond Ordinance.
17. The City will apply the proceeds from the sale of the Series 2004 Bonds to pay
the costs of a current refunding of the City's Water and Sewer System Refunding Revenue
Bonds, Series 1999, to fund a debt service reserve securing the Bonds, to pay the premium for a
financial guaranty insurance policy, and to pay the costs of issuing the Bonds. The Net
Revenues (as defined in the Bond Ordinance) are not pledged or hypothecated in any manner or
for any purpose other than for the payment of the Bonds and the City's outstanding Water and
Sewer System Refunding Revenue Bonds, Series 2002, except as otherwise provided in the Bond
Ordinance, the Indenture and the Official Statement.
18.
In
the City,
the time for filing a referendum petition is fixed at 30 days after the
publication
of the
measure
upon which the referendum
is sought.
19. The adoption of the Sewer Rate Ordinance, the Water Rate Ordinance and the
Bond Ordinance, the execution and delivery of the City Documents, the authorization, execution
is contemplated
delivery of the Bonds, and compliance with the provisions thereof under the circumstances
contemplated thereby does not and will not in any material respect conflict with, or constitute on
10-61620.1
I
•
CF.ATlF1Cnnn��
aEsperformed this actiatt•;functioaaatllnrrevicw• j!ti
iy.g a Revolvins Loan for n'te referenccd project under pro%'s:, .:.
:!e Vl of the Clean Water Act as a_mcnd_d (CWA) and cenitics ..;i
:ir: forth in the Operating Agreement the Act and applicable regn
The Code of Federal Regulations publishcd pursuant thereto and policies
Complied with_
(Title i to—i 1
ORDINANCE NO. 4536
AN ORDINANCE AMENDING § 51.137 OF THE CODE OF
FAYETTEVMLE, TO ADJUST SEWER RATES.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, A.RKANSAS:
Section 1..That § 51.137 of the Code of Fayetteville is hereby repealed, and
Exhibit "A" attached hereto and made a part hereof, is inserted in its stead.
A YE PASSED and APPROVED this 30th day of December, 2003.
APPROVED:
By:
By:
SONDRA SMITH, City Clerk
DAN COODY, Mayor
CERTIFICATE OF RECORD
State of Arkansas t
City of Fayetteville f ss•
I, Sondra Smith, City ClerWTreasurer for the City
Of Fayetteville, do hereby certify that the
foregoing instrument is a true and correct . copy
Of the original �d`wn..:t it yS4C
fil in my office on the-3�(, day of
=� Witness rtty
ftartd and seal thisii� b day Of.DaAUWAJL eaM
0
EXHIBIT A
. 51.137 Monthly Sewer Rates
(A)Monthly sewer rates. All monthly sewer charges shall be calculated from the
customer's monthly water usage. The following monthly rates are hereby fixed as "—
rates to be charged for sewer services:
•
(1) Monthly sewer quantity charge:
Table E-1
Monthly Sewer Quantity Charge - Usage Rates Per 1,000 Gallons
Beginning February 9, 2004
(*Across -the -Board Percentage; **Cost of Service Methodology)
Residential* $ 2.61
Commercial/Industrial* 2.04
Outside city limits** 6.63
Elkins" 5.24
Table E-2
Monthly Sewer Quantity Charge - Usage Rates Per 1,000 Gallons
After December 31, 2004
Residential*
CommerciaVIndustrial*
$ 2_84
2.22
Outside city ]'units**
6.57 .
Elkins**
5.71
Table E-3
Monthly Sewer Quantity Charge - Usage Rates Per 1,000 Gallons
After December 31, 2005
Residential?
$3.10
CommerciaUlndustrial•
2:42
Outside city limits'*
7.16
Elkins**
6.22
I
EXHIBIT A
• (1) Monthly service charge:
Table F-1 Monthly Sewer Service Charge Table F-2 Monthly Sewer Service Charge
Beginning February 9, 2004 After December 31, 2004
Meter Size
Inside City
Outside Cityt
5/8 inch
$ . 8.72
$ 8.72
3/4 inch
10.08
11.87
1 inch
11.34
16.28
1'/: inch
15.85
28.90
2 inch
21.10
41.51
3 inch
46.31
97.02
4 inch
77.51
160.09
6 inch
14926
317.78
8 inch
232.26
475.47
Meter Size
Inside City
Outside Cityt
5/8 inch
$ 9.50
$ 9.50
3/4 inch
10.99
12.94
I inch
12.36
17.75
1'/2 inch
17.27
31.50
2 inch
23.00
45.25
3 inch
50.77
105.75
4 inch
84.49
174.50
6 inch
163.64
346.38
8 inch
253.16
518.26
• Table F-3 Monthly Sewer Service Charge
After December 31, 2005
Meter Size
1C t
Inside City
Outside Cityt
5/8 inch
$ 10.36
$ 10.35
3/4 inch
11.98
14.10
I inch
13.47
19.35
1 %i inch
21.99
34.33
2 inch
31.44
49-32
3 inch
73.01
115.27
4 inch
120.26
190.21
6 inch
23837
377.56
8 mch
356.48
564.90
f
os o Sernce Methodology required by contract
(B) Determination of charge for domestic customers. In the case of domestic customers,
the average monthly water consumption for the preceding months of December,
. January, and February shall be computed separately for each customer, and a uniform
monthly charge for each customer shall be determined by applying the schedule of
rates set out in subsection (A) of this section to such average monthly water
Pd
EXHIBIT A
• consumption. In the case of a domestic user for whom a uniform monthly charge has
been established and who moves to a new location the same uniform monthly charge
shall apply at the new location. In the case of new domestic users, the schedule of
rates shall be applied to monthly water usage until an average monthly water
consumption has been established. This methodology shall not. apply to multi -family
structures containing five (5) or more units in a contiguous building.
(C)Determination of charge for commercial and industrial customers. In the case of
commercial and industrial customers the monthly sewer charge shall be determined
by -applying the schedule of rates prescribed in subsection (A) of this section to the
monthly water usage of such customers. In the event that a commercial or industrial
customer discharging waste into the city's sanitary sewer system produces evidence
to the water and sewer superintendent demonstrating that a substantial portion of the
total amount of water from all sources used for all purposes does not reach the
sanitary sewer which is in excess of the factors used in establishing the rates in
subsection (A) of this section, an estimated percentage of total water consumption to
be used in computing charges may be established by the water and sewer
superintendent. The factors used in establishing said rates are on file in the office of
the water and sewer superintendent and are incorporated herein by reference thereto.
Any rate so adjusted by the water and sewer superintendent shall be effective for a
12-month period beginning with the billing for the month when rates adjudged
. hereby go into effect.
(D)Extra Strength Surcharge. For all commercial and industrial customers whose
wastewater discharge is greater than 300 mg/l of BOD5 and/or TSS, the City shall
levy an Extra Strength Surcharge .for each parameter in accordance with the
following unit charges:
Beginning u Ai
FebruaryAfter
9, 2004 Decanbu 3I, 2004 December 32, 2005
(1) Extra Strength BOD5 -- $0.2246/lb. 0.2449/Ib. 0.2669/ib..
(2) Extra Strength TSS ---- $0.1123/lb. 0.1224/lb. 0.1334/lb.
Extra Strength Surcharges shall be trilled monthly and shall be computed on the basis
of water meter reading (wastewater discharge volume).
(E) Definitions.
For the purpose of this division the following definitions shall apply unless the
context clearly indicates or requires a different meaning:
(1) Commercial, industrial customer or user. All retail stores, restaurants, office
buildings, laundries, and other private business and service establishments .
. which contributes wastewater to. the cit}�s wastewater treatment plant. It shall
include any nongovernmental, nonresidential user of publicly owned
treatment works which is identified in the Standard Industrial Classification
9
Manual, 1972, Office of Management and Budget, as amended and
supplemented,. under the following divisions; Division A -Agriculture,
Forestry, and Fishing; Division B-Mining; Division D-Manufacturing;
Division E-Transportation, Communications, Electric, Gas and Sanitary; and -
Division I -Services, It also includes social, charitable, religious, and
educational activities such as schools, churches, hospitals, nursing homes,
penal institutions and similar institutional users; legislative, judicial,
administrative; and . regulatory activities of federal, state and local
governments.
(2) Domestic customer or user. Any contributor of wastewater to the city's
treatment works whose lot, parcel, or real estate, or building is used. for
domestic dwelling purposes only.
(3) Infiltration/in, low. The total quantity of water. other than wastewater from
both infiltration and inflow without distinguishing the source from defective
pipes, pipe joints, connections, manholes, roofleaders, cellar drains, yard
drains, area drains, foundation drains, drains from springs and swampy area,
cross connections, catch basins, cooling towers, storm waters, surface runoffs,
street wash water, or drainage.
(4) Municipality. A city, town, county, parish, district, association, or other
public body (including an inter -municipal agency of two or more of the
foregoing entities) created under state law having jurisdiction over disposal of
sewage, industrial waste or other waste. The definition includes special
districts such as water, sewer, sanitary, utility, drainage, transport, or disposal
of liquid waste of the general public in a particular geographic area.
(5) Operation and maintenance. Those functions that result in expenditures
during the useful life of the treatment works for materials, labor, utilities, and
other items which are necessary for managing and which such works were
designed and constructed. The term "operation and maintenance" includes
replacement.
(6) Replacement. Expenditures for obtaining and installing equipment,
accessories, or appurtenances which are necessary: during the useful life of the
treatment works to maintain the capacity and performance for which such
works were designed and constructed.
(7) Treatment works. Any devices and systems for the storage, treatment,
recycling, and. reclamation of municipal sewage, domestic sewage, or .liquid
industrial wastes. These include intercepting sewers, outfall sewers, sewage
collection systems, pumping, power, and other equipment and their
appurtenances; extensions improvement; remodeling, additions, and
alterations thereof, elements essential to provide a reliable recycled supply
such as standby treatment units and clear well facilities; and any works,
E)CMBIT A
• including site acquisition of the land that will be an integral part of the
treatment process or is used for ultimate disposal of residues resulting from
such treatment (including land for composting sludge, temporary storage of
such compost, and land used for the storage of treated wastewater in land
treatment systems before land application); or any other method or system for
preventing, abating, reducing, storing, treating, separating, or disposing of
municipal waste or industrial waste, including waste in combined storm water
and sanitary sewer systems.
(8) Useful life. The estimated period during which a treatment works will be
operated.
(9) User charge. That portion of the total wastewater service charge which is
levied. in a proportional and adequate manner for the cost of operation,
maintenance and replacement of the wastewater treatment works.
(10) Water meter. A water volume measuring and recording device, furnished
and installed by the water department of the city.
(F) Deposit of revenues; fund.
• (1) The revenues from charges collected by the city shall be deposited in a
separate non -lapsing fund known as the operation, maintenance, and
replacement fund.
(2) Fiscal year-end balances in the operation, maintenance and replacement fund
shall be used for no other purpose than those designated. Moneys which may
be transferred from other sources to meet temporary- shortages in the
operations, maintenance, and replacement fund shall be returned to their
respective accounts upon appropriate adjustment of the user charge.rates. The
user charge rates shall be adjusted so that the transferred moneys will be
returned to their respective accounts within six months of the fiscal year in
which moneys were borrowed.
(3) Application for review, adjustments to user.
(a) Any user who feels that the volume used to determine his bill is incorrect may
make written application to the Director of Water and Wastewater requesting
a review of his bill. The written request shall, where necessary, show actual
or estimated flows and/or strength of .his wastewater, including how the
measurements were made.
(b) A review of the request shall be made by the Water and Wastewater Director
• and if substantiated, the charges for that user shall be recomputed based on the
revised flow and/or strength characteristics. In no case, however, shall
allowances or adjustments be made for claims of sewage strengths less than
9
• 51.136 Monthly Water Rates
0
0
Effective as of the first billing statements issued after December 31, 2003, the following
monthly rates shall be fixed as rates to be charged for water furnished by the waterworks
system of the city, which rates the City Council finds and declares to be reasonable and
necessary mummun rates to be charged:
(A) Monthly treated water rates.
(1) The water usage of each customer shall be determined each month by meter
measurement and the amount per 1,000 gallons to be paid for water usage by each
customer shall be computed on the basis of the following schedule of rates. The
minimum billing shall be 1,000 gallons per month.
Table A
Monthly Water Rates
Inside City
Outside City
t29O,OOO
$2.81
$3.52
2.42
3.03
Next
4,70%000
1.76
220
Over
5,000,000
1.60
1.98
(2) All bills under such schedule shall be computed by adding the applicable meter
service charge prescribed by subsection (B) to the amount determined to be due
for water usage under this schedule. Applicable sales tax and franchise fees shall
be added to the bill so computed.
(3)When a common facility/building is served by multiple water meters and the water
usage is for the same purpose, customers may petition the Water & Wastewater
Director and/or the Finance & Internal Services Director to have the water
consumption aggregated and have the tiered rates apply to the aggregated
quantity.
(B) Monthly meter service charge.
(1) In addition to the above, each customer shall pay a monthly meter service charge
in accordance with the following schedule:
EXHIBIT A
• Table B
Monthiv Water Meter Service Charne
I
Meter Size
Inside City
Outside City
5/8 inch
$ 4.16
$ 5.20
3/4 inch
4.42
5.54
1 inch
5.67
7.12
1 % inch
9.68
12.22
2 inch
13.97
17.67
3 inch
32.18
40.79
4 inch
53.08
6733
6 inch
105.88
134.39
8 inch
158.68
201.44
(2) The monthly treated water rates and the monthly meter service charge rates
prescribed by subsections (A) and (B) of this section shall commence as of the first
billing statements issued after December 31, 2003. Customers served through the
white river water district system will pay the outside city rate plus an additional $5.94
per month. The Safe Drinking Water Act fee shall be added to these Monthly Water
Meter Service Charges.
(C) Monthly standhy fire protection service charge. Charges for un-metered service
connections inside the city limits for standby fire protection and fire hydrants shall
be:
Table C
Monthly Standbv Fire Protection Service Char¢e
Line Size
Inside City
Outside City
2 inch
$ 6.60
$ 6.60
3 inch
19.80
19.80
4 inch
39.60
39.60
6 inch
110.00
110.00
8inch
231.00
231.00
10 inch
396.00
396.00
2
I
I
D i l
(E) Monthly wholesale treated water rates outside city limits shall be:
Table D
Monthly Wholesale Treated Water Rates - Outside City Limits
Usage Rate Per 1,000
Gallons
S 2.01
Reduced demand
1.81
Meter charge
55.55
(Based on Cost of Service Methodology)
(1) Monthly charge for fire hydrants provided water by the city for municipalities and/or districts
outside the city limits for billing statements issued after December 31, 2003 shall be $7.70
per hydrant per month.
51.137 Monthly Sewer Rates.
(A) Monthly sewer rates. All monthly sewer charges shall be calculated from the customer's
monthly water usage. The following monthly rates are hereby fixed as rates to be charged for
sewer services:
(1) Monthly sewer quantity charge:
Table E-1
Monthly Sewer Quantity Charge -Usage Rates Per 1,000 Gallons Beginning December 31, 2003
('Across -the -Board Percents e; ""Cost of Service Methodology)
Residential*
$ 2.61
Commercial/Industrial"
2.04
Outside city limits""
6.03
Elkins"
5.24
Table &2
Monthly Sewer QuaoH Charge - Usage Rates Per 1000 Gallons Begin . ng December 31, 2004
Residential"
$ 2.94
CommerciaMndustrial"
2.22
Outside city limits""
6.57
Elkins"
5.71
Table &3
Monthly Sewer Quantity Charge - Usage Rates Per 1000 Gallons Begin ning December 31, 200S
Residential"
$ 3.10
Commercial/lndushial"
2.42
Outside city limits**
7.16
Elkins"
6.22
•
•
EXHIBIT A
(2) Monthly service charge:
Table F-1 Monthly Sewer Service Charge
After December 31, 2003
Meter Size
Inside City
Outside Cityt
5/8 inch
$ 8.72
$ 8.72
3/4 inch
10.09
11.87
I inch
11.34
16.28
I'f inch
15.85
28.90
2 inch
21.10
41.51
3 inch
46.31
97.02
4 inch
77.51
160.09
6 inch
149.26
317.78
flinch
232.26
475.47
Table F-2 Monthly Sewer Service Charge
After December 31, 2004
Meter Size
Inside City
Outside Cityt
5/8 inch
$ 9.50
$ 9.50
3/4 inch
10.99
12.94
1 inch
12.36
17.75
1 h inch
17.27
31.50
2 inch
23.00
45.25
3 inch
50.77
105.75
4 inch
84A9
174.50
6 inch
163.64
346.38
8 inch
253.16
51826
Table F3 Monthly Sewer Service Charge
After December 31, 2005
Meter Size
Inside City
Outside Cityt
518 inch
$ 10.36
$ 10.35
3/4 inch
11.98
14.10
1 inch
13.47
19.35
1%inch
21.99
34.33
2 inch
31.44
49.32
3 inch
73.01
115.27
4 inch
120.26
19021
6 inch
238.37
377.56
8 inch
356.48
564.90
tCost of Service Methodology required by contracL
(B) Determination of charge for domestic customers.
(1) In the case of domestic customers, the average monthly water consumption for
the preceding months of December, January, and February shall be computed
separately for each customer, and a uniform monthly charge for each customer
shall be determined by applying the schedule of rates set out in subsection (A)
EXHIBTT A
of this section to such average monthly water consumption. In the case of a
domestic user for whom a uniform monthly charge has been established and
who moves to a new location the same uniform monthly charge shall apply at
the new location. In the case of new domestic users, the schedule of rates
shall be applied to monthly water usage until an average monthly water
consumption has been established. This methodology shall not apply to multi-
family structures containing five (5) or more units in a contiguous building.
(2) Each domestic customer shall be required to make a $50.00 service deposit
with each application for sewer service. This service deposit shall be retained
in trust, without interest, by the city finance department. When service to the
depositor is discontinued permanently, said service deposit shall be applied to
the final billing and the remainder, if any, returned to the depositor.
(C) Determination of charge for commercial and industrial customers. In the case of
commercial and industrial customers the monthly sewer charge shall be
determined by applying the schedule of rates prescribed in subsection (A) of this
section to the monthly water usage of such customers. In the event that a
commercial or industrial customer discharging waste into the city s sanitary sewer
system produces evidence to the water and sewer superintendent demonstrating
that a substantial portion of the total amount of water from all sources used for all
purposes does not reach the sanitary sewer which is in excess of the factors used
in establishing the rates in subsection (A) of this section, an estimated percentage
of total water consumption to be used in computing charges may be established
by the water and sewer superintendent. The factors used in establishing said rates
are on file in the office of the water and sewer superintendent and are
incorporated herein by reference thereto. Any rate so adjusted by the water and
sewer superintendent shall be effective for a 12-month period beginning with the
billing for the month when rates adjudged hereby go into effect.
(D)Extra Strength Surcharge. For all commercial and industrial customers whose
wastewater discharge is greater than 300 mg/l of BOD5 and/or TSS, the City shall
levy an Extra Strength Surcharge for each parameter in accordance with the
following unit charges:
After AJffir AJter
DecembQ31,2003 Deeember31,2004 Decemb�31,2005
(1) Extra Strength BOD5 --- $0.2246/lb. 0.2449/lb. 0.2669/lb.
(2) Extra Strength TSS ----- $0.1123/lb. 0.1224/lb. 0.1334/lb.
Extra Strength Surcharges shall be billed monthly and shall be computed on the basis
of water meter reading (wastewater discharge volume).
(E) Definitions.
For the purpose of this division the following definitions shall apply unless the
5
1
EXHIBIT A
context clearly indicates or requires a different meaning:
(1) Commercial, industrial customer or user. All retail stores, restaurants, office
buildings, laundries, and other private business and service establishments
which contributes wastewater to the city's wastewater treatment plant. It shall
include any nongovernmental, nonresidential user of publicly owned
treatment works which is identified in the Standard Industrial Classification
Manual, 1972, Office of Management and Budget, as amended and
supplemented, under the following divisions; Division A -Agriculture,
Forestry, and Fishing; Division B-Mining; Division D-Manufacturing;
Division E-Transportation, Communications, Electric, Gas and Sanitary; and
Division I -Services. It also includes social, charitable, religious, and
educational activities such as schools, churches, hospitals, nursing homes,
penal institutions and similar institutional users; legislative, judicial,
administrative, and regulatory activities of federal, state and local
governments.
(2) Domestic customer or user. Any contributor of wastewater to the city's
treatment works whose lot, parcel, or real estate, or building is used for
domestic dwelling purposes only.
(3) Infltrationlinfaw. The total quantity of water other than wastewater from
both infiltration and inflow without distinguishing the source from defective
pipes, pipe joints, connections, manholes, roofleaders, cellar drains, yard
drains, area drains, foundation drains, drains from springs and swampy area,
cross connections, catch basins, cooling towers, storm waters, surface runoffs,
street wash water, or drainage.
(4) Municipality. A city, town, county, parish, district, association, or other
public body (including an inter -municipal agency of two or more of the
foregoing entities) created under state law having jurisdiction over disposal of
sewage, industrial waste or other waste. The definition includes special
districts such as water, sewer, sanitary, utility, drainage, transport, or disposal
of liquid waste of the general public in a particular geographic area
(5) Operation and maintenance. Those functions that result in expenditures
during the useful life of the treatment works for materials, labor, utilities, and
other items which are necessary for managing and which such works were
designed and constructed. The term "operation and maintenance" includes
replacement.
(6) Replacement. Expenditures for obtaining and installing equipment,
accessories, or appurtenances which are necessary during the useful life of the
treatment works to maintain the capacity and performance for which such
works were designed and constructed.
i
EIMTT A
• (7) Treatment works. Any devices and systems for the storage, treatment,
recycling, and reclamation of municipal sewage, domestic sewage, or liquid
industrial wastes. These include intercepting sewers, outfall sewers, sewage
collection systems, pumping, power, and other equipment and their
appurtenances; extensions improvement; remodeling, additions, and
alterations thereof; elements essential to provide a reliable recycled supply
such as standby treatment units and clear well facilities; and any works,
including site acquisition of the land that will be an integral part of the
treatment process or is used for ultimate disposal of residues resulting from
such treatment (including land for composting sludge, temporary storage of
such compost, and land used for the storage of treated wastewater in land
treatment systems before land application); or any other method or system for
preventing, abating, reducing, storing, treating, separating, or disposing of
municipal waste or industrial waste, including waste in combined storm water
and sanitary sewer systems.
(8) Useful life. The estimated period during which a treatment works will be
operated.
(9) User charge. That portion of the total wastewater service charge which is
levied in a proportional and adequate manner for the cost of operation,
maintenance and replacement of the wastewater treatment works.
• (10) Water meter. A water volume measuring and recording device, furnished
and installed by the water department of the city.
(F) Deposit ofrevenues; fund.
(1) The revenues from charges collected by the city shall be deposited in a
separate non -lapsing fund known as the operation, maintenance, and
replacement fund.
(2) Fiscal year-end balances in the operation, maintenance and replacement fund
shall be used for no other purpose than those designated. Moneys which may
be transferred from other sources to meet temporary shortages in the
operations, maintenance, and replacement fund shall be returned to their
respective accounts upon appropriate adjustment of the user charge rates. The
user charge rates shall be adjusted so that the transferred moneys will be
returned to their respective accounts within six months of the fiscal year in
which moneys were borrowed.
(3) Application for review; adjustments to user.
(a) Any user who feels that the volume used to determine his bill is incorrect may
make written application to the Director of Water and Wastewater requesting
a review of his bill. The written request shall, where necessary, show actual
EXHIBIT A
• or estimated flows and/or strength of his wastewater, including how the
measurements were made.
i
(b) A review of the request shall be made by the Water and Wastewater Director
and if substantiated, the charges for that user shall be recomputed based on the
revised flow and/or strength characteristics. In no case, however, shall
allowances or adjustments be made for claims of sewage strengths less than
300 mg/1 suspended solids and 300 mg/1 of BODS.
(c) Any adjustments will be applicable to the next billing period.
(4) Annual review by city; revision ofrates; notification of user.
(a) The city shall review the charges at least annually and revise the rates as
necessary to ensure that adequate revenues are generated to pay the cost of
operation, maintenance, and replacement, and that the system continues to
provide for the proportional distribution of operation, maintenance, and
replacement costs among users and user classes.
(b) The city shall notify each user at least annually, in conjunction with a regular
bill, of the rates being charged for operation, maintenance and replacement of
the treatment works.
M
• ORDINANCE NO. 4540
AUCROFILMED
AN ORDINANCE AMENDING TABLE B MONTHLY
WATER METER SERVICE CHARGE OF SECTION
51.136 OF THE FAYETTEVILLE CODE AND DECLARING
AN EMERGENCY
WHEREAS, the Safe Drinking Water Act monthly household fee of 25 cents
was mistakenly both included in Table B Monthly Water Meter Service Charge of
§51.136 and "added to those Monthly Water Service Charges"; and
WHEREAS, the 10% across the board water rate increase should not have
applied to the Safe Drinking Water Act fee.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF
THE CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby
repeals Table B Monthly Water Meter Service Charge of §51.136 of the Fayetteville
Code and enacts a replacement Table B Monthly Water Meter Service Charge (attached
as Exhibit A) which reduces all rates by 28 cents per month.
• Section 2: Emergency Clause. That the City Council of the City of Fayetteville,
Arkansas has determined that immediate amendment of the Water Rate Ordinance to
reduce the water rates to comply with the Safe Drinking Water Act and the City's rate
study is essential to the public peace, health and safety. Therefore, the City Council of
Fayetteville, Arkansas declares this ordinance being necessary to preserve the public
peace, health and safety, constitutes an emergency so that this ordinance shall be in full
force and effect from the date of its passage and approval.
ATTEST:
0
and APPROVED this the 3'a day of February, 2004.
By:
APPROVED:
•
I i.l.11t Y a
Table B -Monthly Water Meter Service Charge
Size
F
Inside City
Outside City
h
S 3.88
S 4.92
3/4 inch
4.14
526
1 inch
5.39
6.84
1 '.4 inch
9.40
11.94
2 inch
13.69
17.39
3 inch
31.90
40.51
4 inch
52.80
67.05
6 inch
105.60
134.11
8 inch
158.40
201.16
9
• ORDINANCE NO. 4554
AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF NOT TO
EXCEED $6,365,000 OF WATER AND SEWER SYSTEM REFUNDING
REVENUE BONDS, SERIES 2004, BY THE CITY OF FAYETTEVILLE,
ARKANSAS FOR THE PURPOSE OF REFUNDING THE CITY'S
OUTSTANDING WATER AND SEWER SYSTEM REFUNDING REVENUE
BONDS, SERIES 1999; AUTHORIZING THE EXECUTION AND DELIVERY
OF A FIRST SUPPLEMENTAL TRUST INDENTURE PURSUANT TO
WHICH THE SERIES 2004 BONDS WILL BE ISSUED AND SECURED;
AUTHORIZING THE EXECUTION AND DELIVERY OF AN OFFICIAL
STATEMENT PURSUANT TO WHICH THE SERIES 2004 BONDS WILL BE
OFFERED; AUTHORIZING THE EXECUTION AND DELIVERY OF A
BOND PURCHASE AGREEMENT PROVIDING FOR THE SALE OF THE
SERIES 2004 BONDS; AUTHORIZING THE EXECUTION AND DELIVERY
OF AN ESCROW DEPOSIT AGREEMENT PROVIDING FOR THE
REDEMPTION OF THE SERIES 1999 BONDS; AUTHORIZING THE
EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE
AGREEMENT; AND PRESCRIBING OTHER MATTERS RELATING
THERETO.
WHEREAS, the City of Fayetteville, Arkansas (the "City"), a city of the first class,
presently owns and operates a public water and sewer utility system (the "System") serving the
residents of the City and its environs; and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Rep]. & 2003 Supp.) Sections 14-164-401 et
seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time
to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend
the proceeds thereof to finance the costs of acquisition, construction, equipping, improving,
maintaining, operating and repairing the System, and to refund any bonds issued under the Act or
any bonds issued under other applicable,legislation payable from and secured by a pledge of
revenues derived from the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and
approved on April 20, 1999, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds', in the original principal
amount of $8,365,000, for the purpose of refunding outstanding bonds of the City previously
issued to finance and refinance the cost of improvements to the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4381 of the City, adopted and
approved on March 19, 2002, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the "Series 2002
Bonds"), in the original principal amount of $9,270,000, for the purpose of refunding
outstanding bonds of the City previously issued to finance and refinance the cost of
• improvements to the System; and
WHEREAS, in accordance with the provisions of the Act, the City has determined to
issue its Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004
Bonds'), in the aggregate principal amount of not to exceed $6,365,000 for the purpose of
refunding all of the outstanding Series 1999 Bonds, establishing a debt service reserve for the
Series 2004 Bonds, and paying printing, underwriting, legal and other expenses incidental to the
issuance of the Series 2004 Bonds; and
WHEREAS, the City has determined to issue and secure the Series 2004 Bonds on a
parity basis with its outstanding Series 2002 Bonds pursuant to that certain Trust Indenture dated
as of May 1, 2002 (the "Original Indenture'), by and between the City and the Bank of
Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee'), as such Original Indenture may be
.amended and supplemented pursuant to a First Supplemental Trust Indenture (the "First
Supplemental Indenture"), by and between the City and the Trustee, a form of which First
Supplemental Indenture has been presented to and is before this meeting; and
WHEREAS, the City proposes to enter into a Bond Purchase Agreement (the "Bond
Purchase Agreement') in substantially the form presented to and before this meeting, with
Stephens Inc., Fayetteville, Arkansas (the "Underwriter), providing for the sale of the Series
2004 Bonds.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS THAT:
Section 1. The City Council hereby finds and declares that the current refunding of
the Series 1999 Bonds is in the best interests of the City and the customers of the System due to
(i) the reduction of the interest expense on the Series 1999 Bonds, (ii) the securing of low interest
rate long-term financing on the indebtedness represented by the Series 1999 Bonds, and (iii) the
revision of rate covenants with respect to System services following such refunding.
Section 2. Under the authority of the Constitution and laws of the State of Arkansas,
including particularly Amendment 65 to the Constitution of Arkansas and the Act, there is
hereby authorized the issuance of bonds of the City to be designated as "Water and Sewer
System Refunding Revenue Bonds, Series 2004" (the "Series 2004 Bonds"), The Series 2004
Bonds shall be issued in the original aggregate principal amount of not to exceed Six Million
Three Hundred Sixty -Five Thousand Dollars ($6,365,000), shall mature not later than December
31, 2012, and shall bear interest at the rates specified in the Bond Purchase Agreement. The
average yield on the Series 2004 Bonds as a whole shall not exceed 4.00% per annum. The
proceeds of the Series 2004 Bonds will be utilized, along with other available moneys, to current
refund the outstanding Series 1999 Bonds, to establish a debt service reserve for the Series 2004
Bonds, to pay a premium for bond insurance, if deemed economically beneficial, and to pay
printing, underwriting, legal and other expenses incidental to the issuance of the Series 2004
Bonds. The Series 2004 Bonds shall be issued in the forms and denominations, shall be dated,
shall be numbered, shall mature, shall be subject to redemption prior to maturity, and shall
contain such other terms, covenants and conditions, all as set forth in the Original Indenture, as
amended and supplemented by the First Supplemental Indenture. The Series 2004 Bonds shall
be issued and secured by net revenues of the System on a parity basis with the pledge of net
revenues securing the outstanding Series 2002 Bonds
2
• The Mayor is hereby authorized and directed to execute and deliver the Series 2004
Bonds in substantially the form thereof contained in the First Supplemental Indenture submitted
to this meeting, and the City Clerk is hereby authorized and directed to execute and deliver the
Series 2004 Bonds and to affix the seal of the City thereto, and the Mayor and City Clerk are
hereby authorized and directed to cause the Series 2004 Bonds to be accepted and authenticated
by the Trustee. The Mayor is hereby authorized to confer with the Trustee, the Underwriter, and
Kutak Rock LLP, Little Rock, Arkansas ("Bond Counsel'), in order to complete the Series 2004
Bonds in substantially the form contained in the First Supplemental Indenture submitted to this
meeting, with such changes as shall be approved by such persons executing the Series 2004
Bonds, their execution to constitute conclusive evidence of such approval.
Section 3. To prescribe the terms and conditions upon which the Series 2004 Bonds
are to be executed, authenticated, issued, accepted, held and secured, the Mayor is hereby
authorized and directed to execute and acknowledge the First Supplemental Trust Indenture (the
"First Supplemental Indenture'), by and between the City and the Trustee, and the City Clerk is
hereby authorized and directed to execute and acknowledge the First Supplemental Indenture and
to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and
directed to cause the First Supplemental Indenture to be accepted, executed and acknowledged
by the Trustee. The First Supplemental Indenture is hereby approved in substantially the form
submitted to this meeting, including, without limitation, the provisions thereof pertaining to the
pledge of System net revenues to the Series 2004 Bonds and the terms of the Series 2004 Bonds.
The Mayor is hereby authorized to confer with the Trustee, the Underwriter and Bond Counsel in
• order to complete the First Supplemental Indenture in substantially the form submitted to this
meeting, with such changes as shall be approved by such persons executing the First
Supplemental Indenture, their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the First Supplemental Indenture in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 4. There is hereby authorized and approved a Preliminary Official Statement
of the City, including the cover page and appendices attached thereto, relating to the Series 2004
Bonds. The Preliminary Official Statement is hereby "deemed final" by the City within the
meaning of U.S. Securities and Exchange Commission Rule 150-12. The distribution of the
Preliminary Official Statement is hereby approved and ratified. The Preliminary Official
Statement, as amended to conform to the terms of the Bond Purchase Agreement, including
Exhibit A thereto, 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," and the Mayor is
hereby authorized to execute the Official Statement for and on behalf of the City. The Official
Statement is hereby approved in substantially the form of the Preliminary Official Statement
submitted to this meeting, and the Mayor is hereby authorized to confer with the Trustee., the
Underwriter and Bond Counsel in order to complete the Official Statement in substantially the
form of the Preliminary Official Statement submitted to this meeting, with such changes as shall
be approved by such persons, the Mayor's execution to constitute conclusive evidence of such
approval.
(Advice is given that a copy of the Preliminary Official Statement is on file with the City
Clerk and is available for inspection by any interested person.)
• Section 5. In order to prescribe the terms and conditions upon which the Series 2004
Bonds are to be sold to the Underwriter, the Mayor is hereby authorized and directed to execute a
Bond Purchase Agreement on behalf of the City, to be dated as of the date of its execution (the
`Bond Purchase Agreement'), by and between the City and the Underwriter, and the Bond
Purchase Agreement is hereby approved in substantially the form submitted to this meeting, and
the Mayor is hereby authorized to confer with the Underwriter and Bond Counsel in order to
complete the Bond Purchase Agreement in substantially the form submitted to this meeting, with
such changes as shall be approved by such persons executing the Bond Purchase Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Bond Purchase Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.)
Section 6. In order to provide for the redemption of the Series 1999 Bonds, the
Mayor is hereby authorized and directed to execute an Escrow Deposit Agreement to be dated as
of the date of its execution (the "Escrow Agreement'), by and between the City and Bank of
Oklahoma, N.A., as escrow trustee (the "Escrow Trustee'; and the Mayor is hereby authorized
and directed to cause'the Escrow Agreement to be executed by the Escrow Trustee. The Escrow
Agreement is hereby approved in substantially the form submitted to this meeting, and the
Mayor is hereby authorized to confer with the Underwriter, Escrow Trustee and Bond Counsel in
order to complete the Escrow Agreement in substantially the form submitted to this meeting,
with such changes as shall be approved by such persons executing the Escrow Agreement,their
execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Escrow Agreement in substantially the form
authorized to be executed is on file with the City Clerk and is available for inspection by any
interested person.) .
Section 7. In order to provide for continuing disclosure of certain financial and
operating information with respect to the City and the System in compliance with the provisions
of Rule 15c2-12 of the U. S. Securities and Exchange Commission, the Mayor is hereby
authorized and directed to execute a Continuing Disclosure Agreement to be dated as of the date
of its execution (the "Continuing Disclosure Agreement"), by and between the City and the
Trustee, and the Mayor is hereby authorized and directed to cause the Continuing Disclosure
;Agreement to be executed by the Trustee. The Continuing Disclosure Agreement is hereby
approved in substantially the form submitted to this meeting, and the Mayor is hereby authorized
to confer with the Trustee, the Underwriter and Bond Counsel in order to complete the
Continuing Disclosure Agreement in substantially the form submitted to this meeting, with such
changes as shall be approved by such persons executing the Continuing Disclosure Agreement,
their execution to constitute conclusive evidence of such approval.
(Advice is given that a copy of the Continuing Disclosure Agreement in substantially the
form authorized to be executed is on file with the City Clerk and is available for inspection by
any interested person.)
Section 8. The rates for System Water Services enacted pursuant to Ordinance No.
4530 and 4540, adopted and approved on December 2, 2003 and February 3, 2004, and the rates
0
• for System Sewer Services enacted pursuant to Ordinance No. 4536, adopted and approved on
December 30, 2003, are hereby ratified and confirmed.
Section 9. In order to secure lower interest rates on the Series 2004 Bonds, the
Underwriter has proposed that the City consider the purchase of a policy of bond insurance with
a portion of the proceeds of. the Series 2004 Bonds, which policy would guarantee the payment
of the principal of and interest on the Series 2004 Bonds when due. If deemed economically
advantageous by the Mayor, upon the advice of the Underwriter, the Mayor is hereby authorized
to execute an insurance commitment and to do any and all things necessary to accomplish the
delivery of a bond insurance policy with respect to the Series 2004 Bonds.
Section 10. The Mayor and City Clerk, for and on behalf of the City, are hereby
authorized and directed to do any and all things necessary to effect the issuance, sale, execution
and delivery of the Series 2004 Bonds and to effect the execution and delivery of the First
Supplemental Indenture, the Bond Purchase Agreement, the Official Statement, the Escrow
Agreement, the Continuing Disclosure Agreement and a Tax Regulatory Agreement relating to
the tax exemption of interest on the Series 2004 Bonds, and to perform all of the obligations of
the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and
directed, for and on behalf of the City, to execute all papers, documents, certificates and other
instruments that may be required for the carrying out of such authority or to evidence the
exercise thereof.
Section 11. Kutak Rock LLP, Little Rock, Arkansas, is hereby appointed to act as
Bond Counsel on behalf of the City in connection with the issuance and sale of the Series 2004
Bonds.
Section 12. The provisions of this Ordinance are hereby declared to be severable, and
if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such
declaration shall not affect the validity of the remainder of the sections, phrases or provisions of
this Ordinance.
Section 13. All ordinances, resolutions and parts thereof in conflict herewith are
hereby repealed to the extent of such conflict.
ADOPTED and APPROVED this the 6'" day of April, 2004.
By.
&.. /%
SONDRA SMITH, City Clerk I
City Council Meeting Minutes
April 6, 2004
Page 1 of 20
• City Council
Meeting Minutes
April 6, 2004
A meeting of the Fayetteville City Council will be held on April 6, 2004 at 6:00 p.m. in Room
219 of the City Administration Building located at 113 West Mountain Street, Fayetteville,
Arkansas.
PRESENT:
Alderman Reynolds, Thiel, Cook, Marr, Rhoads,
Davis,
Lucas, Jordan, Mayor
Coody, City
Attorney Kit Williams, City Clerk Sondra Smith,
Staff,
Press, and Audience.
The meeting was called to order by Mayor Coody,
Alderman Marr was absent during the roll call only.
Earth Day Proclamation: Mayor Coody read the Proclamation.
Nominating Committee Report: No report was given at this meeting.
CONSENT:
Approval Of The Minutes: Approval of the March 16, 2004 meeting minutes.
Fire Department Uniform Purchase: A resolution awarding Bid #04-18 to Cruse Uniform
Company in the amount of $21,334.00 to provide new uniforms for Fayetteville Fire Department
personnel.
Resolution 43-04 as Recorded in the Office of the City Clerk.
Fire Department Fitness Equipment: A resolution awarding Bid #04-24 to Push Pedal Pull in
the amount of $34,408.00 for the purchase of commercial grade fitness equipment for use in the
Fayetteville Fire Department's Wellness Program.
Resolution 44-04 as Recorded in the Office of the City Clerk.
Central Emergency Medical Services, Inc.: A resolution approving renewal of the contract for
services in the amount of $156,000.00 between the City of Fayetteville and Central Emergency
Medical Services, Inc. to operate and maintain an emergency ambulance service to serve the
residents of Fayetteville.
Alderman Marr asked that this item be removed from Consent.
City Council Meeting Minutes
April 61 2004
Page 2 of 20
Springwoods Subdivision Revised Interceptor Sewer Alignment: A resolution to approve an
agreement with Legacy Project, LLC for interceptor sewer realignment for Springwoods
Subdivision.
Resolution 45-04 as Recorded in the Office of the City Clerk.
RJN Group, Inc. Springwoods Amendment No. 1: A resolution to approve Amendment No. 1
to the engineering services contract with RJN Group, Inc. in the amount of $4,000.00
Resolution 46-04 as Recorded in the Office of the City Clerk.
Environmental Consulting Operations Springwoods Amendment No. 1: A resolution to
approve Amendment No. 1 to the environmental consulting contract with ECO, Inc. in the
amount of $5,000.00.
Resolution 47-04 as Recorded in the Office of the City Clerk.
Selective Traffic Enforcement Grant: A resolution accepting a continuation of the Selective
Traffic Enforcement Program Grant (STEP) in the amount of $32,000.00 for the purpose of
paying overtime to officers engaged in DWUDUI and Seatbelt Enforcement; and approving a
budget adjustment.
Resolution 48-04 as Recorded in the Office of the City Clerk.
ADEQ Post Closure Trust Fund: A resolution authorizing the City to accept $40,500.00 in
funds from the Landfill Post -Closure Trust Fund for the "Site Characterization Study", approve a
budget adjustment for the receipt of this $40,500.00 and approve the Memorandum of
Agreement between the Arkansas Department of Environmental Quality and the City of
Fayetteville.
Resolution 49-04 as Recorded in the Office of the City Clerk.
Solid Waste Forklift Truck Purchase: A resolution approving the purchase of a Nissan
CL80LP Forklift Truck by the Solid Waste & Recycling Division from Lift Truck Service Center
in the amount of $36,208.75
Resolution 50-04 as Recorded in the Office of the City Clerk.
McClelland Engineers Task Order #4 Taxiway: A resolution approving Task Order No. 4
with McClelland Consulting Engineers in the amount of $84,110.00 to design and provide
engineering services for the extension of Taxiway "A" to meet the extension of Taxiway "E" at
the Fayetteville Municipal Airport
Resolution 51-04 as Recorded in the Office of the City Clerk.
City Council Meeting Minutes
April 6, 2004
Page 3 of 20
• Sweetser Construction, Center Prairie Multi -Use Trail Construction: A resolution to
approve the award of the construction contract for Center Prairie Trail to the low bidder, Jerry D.
Sweetser, Inc. in the amount of $374,530.55 with a project contingency of $37,453.00 and
approval of a budget adjustment of $411,984.00.
Resolution 52-04 as Recorded in the Office of the City Clerk.
White River Baseball Complex Lighting: A resolution to approve a contract with the low
bidder, Lillich Bossler, Inc. to provide and install new ball field lighting at the White River
Baseball Complex for the amount of $250,000.00 plus a contingency of $25,000.00 and to
approve a budget adjustment of $67,955.00.
Resolution 53-04 as Recorded in the Office of the City Clerk.
Alderman Davis moved to approve the Consent Agenda with Item # 4 Central Emergency
Medical Services, Inc. removed. Alderman Jordan seconded the motion. Upon roll call the
motion passed unanimously.
The Following Consent Item Was Pulled From Consent For Discussion.
Central Emergency Medical Services, Inc.: A resolution approving renewal of the contract for
services in the amount of $156,000.00 between the City of Fayetteville and Central Emergency
Medical Services, Inc. to operate and maintain an emergency ambulance service to serve the
residents of Fayetteville.
Alderman Marr asked about the response time.
Chief Bosch: We have been trying to get the response time from Central EMS and should have
it by the next meeting.
Alderman Jordan moved to table this resolution until the April 20, 2004 City Council
meeting. Alderman Marr seconded the motion. Upon roll call the motion to table passed
unanimously.
OLD BUSINESS:
Rules of Order and Procedure, Public Notification and Participation: A resolution
amending the Rules of Order and Procedure for the Fayetteville Mayor/City Council, Section A.
City Council Meetings, Subsection 6. Public Notification and Participation.
This resolution was tabled at the March 16, 2004 City Council meeting to the April 6, 2004
City Council meeting.
9 Alderman Reynolds asked the City Attorney to read the resolution.
City Council Mwing Minutes
April 6, 2004
Page 4 of 20
Kit
Williams:
Do you want me to
read it as it was originally proposed or with the deletion of
• the
section that
stated the Mayor and
Alderman can not respond.
Alderman Reynolds: Please delete the section that stated the Mayor and Aldermen can not
respond.
Kit Williams: This is in the Rules and Procedures that deals with public participation. What
has been added is that no statement shall exceed 3 minutes in duration unless the City Council
by unanimous consent agrees to extend further time to the speaker (this is during a regular
meeting). A new paragraph has been proposed to be added which would be after the last item
on the agenda has been acted upon by the City Council, members of the public shall be
accorded the right to address the City Council on any topic of the speakers choosing for a
period of three minutes each not to exceed 30 minutes total Those were the two changes
proposed.
Alderman Cook: Read a letter from Cyrus Young regarding this resolution.
Alderman Reynolds moved to approve the resolution. Alderman Thiel seconded. Upon
roll call the resolution failed 3-5. Alderman Reynolds, Thiel and Cook voting yes.
Alderman Marr, Rhoads, Davis, Lucas and Jordan voting no.
The Resolution Failed
•
NEW BUSINESS:
Transportation Division Hiring 6 Full Time Employees: A resolution authorizing the hiring
of 6 full-time employees (patch and asphalt preparation crews) in the Transportation Division;
and approving a budget adjustment in the amount of $340,811.00 for same.
Terry Gulley:
Budget has reviewed this and made the cost
projection
for the next five years
from the Street
Fund. We will still have a remaining balance
at the end
of the five year period.
This will up our projected amount of paving for this year from
13.4 miles
to around 17.5 miles.
Mr. Gulley
spoke of a
long term
plan to maintain the streets. He also gave an overview of his
plans for the
additional
personnel
for the remainder of this year.
Alderman Davis: What will these individuals be doing during the off season when they can not
do the asphalt work.
Mr. Gulley: We can also use them on the sidewalk program and any of the other programs that
we have. We have plenty of items that we can accomplish with these additional employees.
Alderman Marr: You gave us a report of the proposed overlay funding program. The
. additional overlay projects in the ward, are these projects the ones that are going to be done with
this additional funding?
City Council Meeting Minutes
April 6, 2004
Page 5 of 20
• Mr. Gulley: That is correct.
Alderman Marr: Did these projects go through the Street Committee for prioritization by
ward?
Mr. Gulley: The Street Committee did not prioritize them but they have been seen and
approved by the Street Committee.
Alderman Marr: I would like to ask the Street Committee if the additional items on this list as
additional items for this funding have you evaluated these items against the entire list to
prioritize this.
Alderman Davis: We approved the list that is correct. The committee at that point in time
agreed to recommend this to the City Council.
Alderman Jordan: Projects that were slated to be done in 2003 if they were not done, how does
that work?
Mr. Gulley: We went back and reevaluated everything; some streets deteriorate faster than
others so some moved up in priority.
Alderman Jordan: I guess what I am asking is if it was not done in 2003 then that does not
necessarily mean that it will be done in 2004.
Mr. Gulley: Not everyone, but most of them are currently on this list. Not all are because other
streets are now in greater need of repair and took their replace. We revised the list when we
reevaluated. These are the ones we feel we need to get repaired immediately after reviewing the
entire 2003 and 2004 list.
Alderman Rhoads: How do you know when you are where you want to be on the streets?
Mr. Gulley: What
we did to come up with
the 15 year plan is we looked at an asphalt
deterioration curve.
It really stops
dropping off
after about a nine or ten year period if there is
not any maintenance
done.
We are
trying
to stay
above 40 percent deterioration.
Alderman Rhoads: How much quicker do you get to that point by adding these employees?
Mr. Gulley: In a 15 year period we will have been there and ready to roll back on the first street
again. We are also going to put in other programs to hopefully extend the 15 year period. We
are constantly getting more streets every year on every subdivision that is approved so our
number of streets is continually growing. We are hoping we can get an increase in the life
expectancy and that will off set the increase in the amount of roads that we are receiving over
that period.
Mayor Coody: Your
crew
has done a remarkable job. You have done a
good job with the
department. This is a
.
long
term sustainable program that I think everyone
is going to benefit
City Council Meeting Minutes
April 6, 2004
Page 6 of 20
• from. This is a good way to get a lot of work done at the best possible price. We appreciate your
help.
Alderman Davis: The concern I continue to hear from the people that have called me is that this
is a recurring expense from a budget that has $2 million in reserves and that has nothing going
back into the budget. The question has been instead of overlaying the current street, which really
doesn't help the traffic congestion that we are having, why not look at the traffic study that we
had completed and try to take these dollars toward an item in the traffic study that would be a
one time expense.
Mayor Coody: This money comes from the fuel tax that is refunded back to the city, so this
money keeps getting replenished every year.
A discussion followed on the project.
Gary Dumas: We constantly struggle with maintaining the streets that we have so that it
doesn't deteriorate and building new capacity in the system. Those are the two functions that we
have to balance on how to allocate the resources. We have a tremendous asset in the pavement
we have on the street now, we can not replace that. If we allow it to deteriorate without
continual maintenance the street system will eventually end up like or worse than South School
Street. What we want to try to do is get to a point where streets are not like that but are above
that 40% deterioration as Terry talked about. That is one use of our resources; the other use is to
• build capacity in our street system where there are capacity constraints. The capacity issue
problems are much more expensive to solve than a maintenance program that attacks the entire
system. There are many ways that we can begin to attach the congestion problem. I don't have
an answer, we all recognize that there is a problem. To abandon the maintenance would create a
worse problem and it would not significantly impact the congestion issues that we are all aware
of.
Mayor Coody: On state highways we are talking to the highway department about turn lanes
and we are looking at doing a partnership with the highway department in doing a cost share
arrangement. We are trying to do what we can to take care of both, the quality of the existing
roads and congestion. It is not easy since we are the lowest taxing city in Northwest Arkansas.
A discussion followed on the project.
Aldrerman Thiel: In Ward 1 we appreciate the overlay program. I think it is very important
that we do try to get ahead of the curve. I think if this is what it takes to do so then I think it is
something that is well worth the funding.
Alderman Marr: A few months ago Steve Davis talked about the new GASB accounting
principles and the depreciation of city assets and used roads as an example. He stated we would
have to begin to take off our asset list roads that depreciate in value because of their need for
repair. This allows us to have a program to maintain more of those assets at a higher value. That
is one reason I
support this. The number one
issue on the citizen survey was not
only new roads
• but the overlay
of our current system. I think
this accomplishes both of these.
City Council Meeting Minutes
April 6, 2004
Page 7 of 20
Alderman Jordan: I agree. It is like you have this great big huge need and you have very little
money to work' with, so you have to pick and choose what you can do. It is a very difficult
decision making process that we have with the amount of money that we have. Roads and
drainage is what I hear the most about in my ward.
Alderman Davis: Ward 3 does appreciate the overlay program. These are just comments that I
received from local citizens, they were not all from Ward 3.
Randy Allen stated he had a problem with spending funds from an unreserved fund balance with
no defined source of revenue to regenerate that income. He stated that he does not think we have
the revenue stream to carry this many people in transportation.
Steve Davis, Finance and Internal Services Director: Adding these employees will use the
Street''Fund reserve. The financial policy that this City Council adopted for the General Fund
has a target of 60 days expenditures in reserves at all times. At the end of 2008 we will still be
well above that target number for the. Street Fund. It is an expenditure and reserve management
policythat this Council has chosen to adopt for General Fund. We haven't formally asked you to
adopt the same policy for the Street Fund. It is the same kind of policy that is incorporated into
the Water and Sewer Bond Indentures that we operate our Water and Sewer utility out of as well.
Mayor Coody:We could keep all of the money in the bank but if we are collecting it for roads
why wouldn't we put it on roads where the tax payers can actually benefit from it. I think that is
why the City Council voted on this minimum fund balance as the good government rule of
thumb' that most governments try to do. A lot of states make it illegal for cities to collect a bunch
of tax money and just keep it in the bank and not use it as it was intended.
Steve Davis: There can be questions if you have too large of a reserve, that you are not
providing enough services and that you may not need all the money you are collecting.
Alderman Marr: If I understood Mr. Allen right he said this reserve was a nest egg for some
future major capital project. Have we done that in the past with the amounts that have been in
the account? Have we pulled funds out to do a major capital project to bring it back down to the
60 days?
Steve (Davis: There have been occasions where we have pulled money out to build specific
streets.
Alderman Lucas: As we grow and get more streets it just seems reasonable that we are going to
have to spend more money for people and materials to keep up with the growth. I am in favor of
this.
Alderman Jordan:
If I remember the
highway study
correctly we
needed
approximately $44
million from now to
the next 10 years.
We are going to
have to have
another
revenue source.
0
City Council Meeting Minutes
April 6, 2004
Page 8 of 20
Mayor Coody: We
collect
13/4 percent sales
tax where our neighbors collect 2 percent. That
one fourth per cent is
about 3
million a year to
the city.
Alderman Davis moved to approve the resolution. Alderman Lucas seconded. Upon roll
call the resolution passed unanimously.
Resolution 54-04 as Recorded in the Office of the City Clerk.
Fayetteville Library Building Purchase: A resolution to purchase the Fayetteville Public
Library building from the Library Board of Trustees for an appraised value of $1,200,000.00.and
to approve a budget adjustment for $1,220,000.00.
Patty Besom stated that unless the city has a clear purpose for the building she does not want us
to purchase the building. She also suggested the city sell the annex. She also said that putting a
children's museum in the building would be a very costly venture. She stated that ticket sales do
not substain a museum. She does not see a children's museum to be a public need in our area.
She does not support the city pursuing this, if a private entity wants to pursue this then she would
not have a problem with it.
Karen Reece, a member of the Children's Museum Coalition requested that the city purchase
the library building for a children's museum. She stated that she has received several calls and
emails in support of a children's museum in this building. She said they hired consultants to
study the building for this use. She thinks this will generate money for the City of Fayetteville.
She also stated that they have some individuals that are willing to donate funds toward the
operation of a children's museum.
Jim Key with Key Architects said he was hired to conduct a study of the building. He spoke on
the cost to rehabilitate this structure for a children's museum. He talked about the items that
need to be repaired or replaced in the future. He said this buildings load bearing would support
using this building as a children's museum. He also said nothing would have to be done to bring
this building up to the current code if this building is used as a children's museum. He said they
feel the library was not in too bad of disrepair and thinks the building is useable as is. He
presented the City Council with a report that his firm prepared. He asked the City Council to
consider purchasing this building.
Mayor Coody: This looks like a very thorough assessment that you have prepared.
Alderman Rhoads: What would it cost to use this building as a museum?
Jim Key: We were not asked to complete a detailed cost estimate.
Alderman Rhoads: Do you have a rough estimate?
Jim Key: $10,000 to $20,000. To do renovations or specific repairs that amount of funding has
• not been determined.
City Council Meeting Minutes
April 6, 2004
Page 9 of 20
Rick McKinney spoke in favor of the city purchasing the building for the use of a museum.
Margo Ganster spoke in favor of the city purchasing this building for a children's museum.
Brian Gott spoke in favor of the city purchasing this building for a children's museum.
Bob Nickel said if this building is not purchased for this purpose there are other buildings that
can be redone and converted for less cost. He feels whoever purchases this building is going to
have to spend a lot of money to update the building. He is not in favor of the city purchasing this
building at this time.
Mayor Coody: We looked at doing a justice center in the building because that is our number
one need. Realistically that is not a compatible use for the neighborhood so that would be the
most expensive thing that we could do. I hope it was made clear to everyone that while it was
examined to see how much it would cost, knowing that if we did purchase it that really would
not be a compatible use for the neighborhood. That just gave us the worst case scenario as far as
the cost of rehab.
Kathy Thompson asked for the Council's help to keep that building. She asked that we figure
out as a city, neighborhood and a community what can be done to make that building a part of
the community.
Nanette Balmick said it is not everyday that the city has an opportunity to get a building like
this. She said there are numerous ways of using that building. She asked the city to not pass up
this opportunity.
Mayor Coody: We do not own the land; the Library Board owns a little over two thirds of that
property. If the city were to purchase the building we would have to pay about $1.2 million for
the building. We own the western annex building but everything from that building to the east is
owned by the Library Board of Trustees.
Alderman Davis: How many dollars of pledges have you received at this point in time?
Karen Reece: I can't come to you with a business plan and a dollar amount tonight. I can't tell
you who we have supporting us because there seems to be sides on this and people do not want
to come out publicly against the library. We have verbal commitments. I believe we can cover
all the operating expenses and the renovations and the displays with the funds that we will raise.
Alderman Davis: Can you tell us how much you expect the monthly fees to cost.
Karen Reece: I
think we are looking
at a ball park figure of several
hundred thousand dollars a
year. I think we
can keep generating
that. We would like to lease the building from you. We
probably can not
generate the funds to
set up the museum and buy the
physical space.
• Alderman Davis: Should you fall short who are you going to be leaning on to pick up the
difference?
City Council Meeting Minutes
April 6, 2004
Page 10 of 20
Karen Reece: If this project doesn't fly you have buyers for the building. If we can't come
back to you next month with a firm business plan and the pledges in hand can you not just sell it
to one of those parties then?
Alderman Thiel: How many people are in this organization?
Karen Reece: You have
a list in
the back
of you packet of the people who are members of the
coalition. I think about 20
people
or so.
Alderman Thiel: Why didn't you come up with this earlier?
Karen Reece: It was only recently that we heard that the building might be used for office
space.
Alderman Jordan: Is the building okay according to our fire code?
Chief Bosch: When a building of that nature changes occupancy if it stays close to or within the
same occupancy type I do not believe we require it to be brought up to a different code, it can
stay within the same code range. I would assume that if it is currently being used and it is
meeting the code requirements then it is okay.
Alderman Jordan: Louise what is your time frame on selling this building?
40 Louise Schaper: We are out of time we need to move forward.
Alderman Jordan: So we do not have a lot of time to spend on this?
Louis Gottsponer Library Board President: We need to make a decision today, we have to
move out by August. If the city is not going to buy the building then we will begin the RFP
process and that process will take us to late July or August to get completed. We do not have the
funds available to operate or maintain two buildings. We need to move forward.
Alderman Jordan: Steve Davis where is the money going to come from to purchase the library
building?
Steve Davis: The General Fund Reserve Account.
Alderman Jordan: If we purchase this and it does not work out what happens then.
Steve Davis: The city has an established ordinance on how to dispose of public property. We
have to advertise it, post it and take bids.
Kit Williams: We exempted the part that we own at this point in time so that we would be able
to sell it together with the library. If you purchase the library then the current ordinance that you
• have passed to sell property requires two appraisals, sealed bids and we have to take the highest
bid. One reason you did not want to do that in this case is you wanted to have some restrictions.
City Council Meeting Minutes
April 6, 2004
Page 11 of 20
. Alderman Jordan: We would also have to include any repairs that we might have to make if
they have not been made.
Mayor Coody: Steve, a couple of times tonight we referred to the funding for the streets, that
fund does get replenished with gasoline tax doesn't it.
Steve Davis: The Street Fund does get replenished with gasoline taxes but we would be
spending down the reserve account.
Mayor Coody: I understand that but it is not like there isn't any money going into that fund
from here on.
Steve Davis: That is correct.
Mayor Coody: We would all like to see a public use for this building. It would cost the city
approximately $3 million for the city to get this building up to use. I would like the City Council
to take a little more time, two weeks and give Ms. Reece time to come up with a plan. If there is
a serious group of people out there, they haven't called any of us, but I don't want to close the
door if there are donors out there that want to participate. If you have people that are wanting to
back this, now is the time, they can't be reluctant to step forward. Can you have them call me
tomorrow?
• Louis Gottsponer: The reason time is of the essence is we have to finish the building and part
of paying for the building is foundation funds that are going to come in over a three to six year
period so we do not have all of those funds available to us today. The sale of this building is
highly important to us to be able to finish the new building. Our next board meeting is in two
weeks.
Mayor Coody: If we decide not to buy this building tonight then if we could get this hammered
out within the next two weeks to where these donors can come in and talk to you that would still
be a feasible thing to have happen.
Louis Gottsponer: That would be correct. Just because we start the RFP process doesn't mean
the city can not buy the building during that process. The city can take part in that process and
bid.
Mayor Coody: It would be highly unlikely for us to pony up the money for this but if there are
private funds out there then we would certainly encourage them to step forward as soon as
possible.
Alderman Thiel: I think the Library Board needs to go forward with advertising the bids and if
we want to hold off making this decision on whether or not we want to purchase it, I don't think
it's critical that we do so.
Alderman Davis:
In the event
the city goes
ahead and buys
this
building, we make the
improvements that
are suggested,
at that point in
time the citizens
have
paid approximately $2.2
City Council Meeting Minutes
April 6, 2004
Page 12 of 20
million. Is the library before you open or any time after you open going to come back and ask us
for additional funds?
Louise Schaper: Yes. That was presented to the Council with the 2005 budget numbers.
Alderman Davis: What were those numbers?
Louise Schaper: A bare bones additional funding of $435,000 to a partial funding of $635,000
to full funding of $850,000. I think what you saw was about $500,000.
Alderman Reynolds questioned the asbestos that might be in the building.
Mayor Coody stated that he did not think there is an asbestos problem unless some remodeling
is done. Once it is distributed then you have a problem.
Alderman Marr said he loves the idea of a children's museum. He discussed the Downtown
Plan and the primary focus that the Council has been asked to look at which is infrastructure,
parking, services related to the area and encouraging private development. He talked about the
core services within the city and that they should be their number one priority. He said when
they get into other items the Council has to prioritize those things that are currently being funded
versus the things they are going to add to the funding. He has received calls from citizens that
like the public use of the facility but has also heard that about other building structures that may
come before us this year. He does not think our core competency is development or real estate.
He thinks our core competency is services, health, safety and welfare for the city. He is
concerned about no financial commitment towards this project. He thinks private funding should
be used for this building. He does not support tabling this because he does not think it is the
city's responsibility to be in the private functional side.
Mayor Coody: I think we should let Ms. Reece and her group have two weeks to get their
business plan and their people together.
Alderman Marr: I hope we learned a lesson; this was talked about more than a year ago. We
really needed to do something a year ago.
Alderman Jordan: I struggle with this too. The area of town I come from thinks about good
schools for their children, repair of their roads, adequate fire protection, sprawl and the over
crowding of our roads. I heard an Alderman say on this Council one time that the most
important thing that an Alderman does is to properly manage the money of the city. I think this
is a great vision but for every vision that we have someone has to pay for that vision. I hope that
this can be funded privately. I have concerns about taking $1.2 to $2 million dollars out of our
General Fund to do this. If something else could be worked out I would support that but I would
hate for this to come out of the General Fund.
Alderman Thiel: I think the concept of a children's museum came about because of wanting to
• save that building and find a use for it. I don't believe I can support that. I hope you don't give
up the idea of the children's museum.
City Council Mating Minutes
April 6, 2004
Page 13 of 20
Alderman
Lucas: A children's
museum sounds great;
it troubles
me
that it
was just brought up
• to save the
building. I don't see
the city in this role. I
encourage
the
group
to stay together and
raise funds.
If we knew
what we were definitely going
to use this for we might think
differently about
it.
Alderman Davis: I agree with everyone else it is hard to allocate the funds at this point in time
to this type of project.
Alderman Cook: I would hate to see this building go to something that is not a civic or cultural
use, I would also hate to see city funds go towards it. I think we should give it a little longer to
see if they can come up with pledges. This property was originally given by the Fulbright family
for a cultural use. I don't think two weeks is going to make that much difference.
Alderman Cook moved to table the resolution until the April 20, 2004 City Council
meeting. Alderman Marr seconded. Upon roll call the motion to table passed 4-4. The
Mayor voted yes and broke the tie. Alderman Marr, Jordan Thiel and Cook voting yes.
Alderman Rhoads, Davis, Lucas and Reynolds voting no.
Mayor Coody: We will table this for two weeks and make a definite vote on this in two weeks.
Alderman Marr: Didn't we hear in the debate that the Library Board can go forward with their
RFP and that our discussion is on whether we are going to make a bid and buy the building?
• Mayor Coody: Yes.
Alderman Marr: So they can act on what they want to act on and we can decide whether we
are going to bid on it or not.
Mayor Coody: Yes.
Alderman Lucas: Does that affect the annex?
Alderman Davis: Yes.
Mayor Coody: We voted but I guess I can open this back up for the Library Board to discuss
the annex.
Kit Williams: You can if you want to have a motion to reconsider, otherwise it is over.
Mayor Coody:
Yes,
it's over
but you
may address the question
about
the
annex, we are not
going to revote
on this.
Did you
want to
address the question on the
annex
Mr.
Gottsponer?
Louis Gottsponer: We all know that the sale of those two buildings together as a unit is what's
going to generate the highest price. Selling them separately will not generate the highest price.
• So I do not think we can go forward with our RFP with both buildings together unless we have a
City Council Meeting Minutes
April 6, 2004
Page 14 of 20
• decision prior to doing that. We would have to go forward on the RFP process just on our
building.
Mayor Coody: What could we do here?
Kit Williams:
If you wish to continue discussing this someone
who voted in
favor of tabling
needs to move
to reconsider because otherwise you can not debate
this further.
Mayor Coody: Alright so we can not discuss this any more.
Alderman Thiel moved to reconsider the motion to table. Alderman Jordan seconded.
Upon roll call the motion to reconsider passed 6-2. Alderman Rhoads, Davis, Lucas,
Jordan, Reynolds and Thiel voting yes. Alderman Marr and Cook voting no.
Alderman
Thiel: Their
meeting is
in
two weeks, our meeting is in two
weeks, and they are not
going to do
anything for
two weeks.
I
don't understand the problem.
Mayor
Coody: I bet
we will know before two
weeks is up if there is legitimate concern of folks
coming
forward with
some funds.
Alderman Thiel: Well it would have to be a public meeting though.
• Alderman Davis: Mayor, I guess I am a little lost. Most of us said we saw a problem with
spending dollars that we feel like should go to infrastructure and now it appears we are
reconsidering our thoughts.
Mayor Coody: No, that is not at all the case. The only reason that we reconsidered is so that
we could have a discussion about the annex. We couldn't even discuss it without reconsidering.
I don't think we are reconsidering spending the money, I think all of us agree that we can't buy
the building; we are just trying to find a way.
Alderman Davis: That is what we are voting on tonight.
Mayor Coody: Kit, if we had to vote to reconsider to discuss this do we have to vote again?
Kit Williams: At this point yes, there has not been any decision made. You can vote to table
again, vote on the original resolution whether to pass it or not, we are back to where we were
before the motion to table.
Alderman Marr: We passed an ordinance that waived selling the city property, yes or no?
Kit Williams: You did waive the ordinance expressing your intent to sell it as a piece, that is
correct.
City Council Meeting Minutes
April 6, 2004
Page 15 of 20
• Alderman Marr: What I am hearing is the annex portion it has not been decided whether we
are selling it or not because this item relates to whether we are going to make a bid on the library
portion, it still doesn't address the annex issue if that wasn't decided previously.
Mayor Coody: Yes.
Alderman Marr: I'm sorry I misunderstood, I thought when we waived it we were going to sell
our piece of the building and that that was going to go with the Library Board sale. Today our
discussion was if we were going to bid on the library piece that we didn't own so that if we chose
to table it for two weeks to see if they could get funding, the RFP still could have been written I
thought for the entire building because we had already authorized the sale of our annex. Have
we had a vote that authorized the sale of the annex building?
Kit Williams: Not technically, the City Council has not actually sold the building. You have
expressed an intent that you are going to sell it together with the Library Board's building; you
have not said you are selling it.
Alderman Marr: We have passed a resolution of our intent to sell?
Kit Williams: If I remember correctly when you passed the ordinance to waive the
requirements on selling property that expressed your intent that you would sell the annex as part
of the main building.
• Alderman Marr: If we passed that, we have already expressed our intent to sell our piece, so
writing the RFP can move forward. If we make a bid on the building we are making a bid on the
entire project anyway.
A discussion followed on the project.
Louise Schaper: Because there are two different owners then two RFP's need to be completed.
Karen Reece: If you have decided that you are not going to buy the building then don't give us
two weeks. We can't buy the building and fund the museum. We came to you to ask you to buy
the building. In two weeks I think I can come to you for the funding for the museum but not
with the funding to purchase the building.
Alderman Rhoads moved to approve the resolution. Alderman Jordan seconded. Upon
roll call the resolution passed 1-7. Alderman Cook voting yes. Alderman Marr, Rhoads,
Davis, Lucas, Jordan, Reynolds and Thiel voting no.
The Resolution Failed
Mobile Vision, Inc.: An ordinance waiving the requirements of formal competitive bidding and
approving the purchase of 4 additional in -car video systems from Mobile -Vision, Inc. in the
• amount of $15,940.90.
City Council Meeting Minutes
April 6, 2004
Page 16 of 20
• Mr. Williams read the ordinance.
Alderman Davis moved to suspend the rules and go to the second reading. Alderman
Jordan seconded. Upon roll call the motion passed unanimously.
Mr. Williams read the ordinance.
Alderman
Davis
moved to
suspend the
rules and
go to
the third and final reading.
Alderman
Jordan
seconded.
Upon roll call
the motion
passed
unanimously.
Mr. Williams read the ordinance.
Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed
unanimously.
Ordinance 4551 as Recorded in the Office of the City Clerk
ANX 03-5.00 (Dunnerstock Development): An ordinance confirming the annexation to the
City of Fayetteville, Arkansas of certain property owned by Dunnerstock Development, Inc.
located on Rupple Road north of Wedington Drive containing approximately 17.19 acres.
Mr. Williams read the ordinance.
• Jim McCord representing the applicant: These 17 acres are part of a large island within the
city limits. It is an area that will be proposed for the city to annex. Staff and Planning
recommends annexation. The city's own annexation policy recommends annexation. I am just
concerned as to what the questions are and why the Council does not want to act on this tonight.
Alderman
Jordan:
I
never pass
these usually
on the
first night.
That gives the people time in
that
area to
call me.
I
am already
getting some
calls.
Jim McCord: There was some reference to a potential 68 lots on these 17 acres. By the time
you get the streets and all the infrastructure in place there will be 48 lots one of which is a
detention pond not 68 lots.
The Ordinance was Left on the First Reading.
RZN 03-33.00 (Dunnerstock): An ordinance rezoning that property described in rezoning
petition RZN 03-33.00 as submitted by James McCord on behalf of Dunnerstock Development,
Inc. for property located on Rupple Road north of Wedington Drive from R-A, Residential
Agricultural to RSF-4, Residential Single Family, four units per acre.
Mr. Williams read the ordinance.
0
The Ordinance was Left on the First Reading.
City Council Meeting Minutes
April 6, 2004
Page 17 of 20
. ANX 03-06.00 (Hoskins/Schlegel): An ordinance confirming the annexation to the City of
Fayetteville, Arkansas of certain property located north of the proposed Crystal Springs Phase III
Subdivision, west of Deane Solomon Road and south of Salem Road containing approximately
72.50 acres.
Mr. Williams read the ordinance.
The Ordinance was Left on the First Reading.
RZN 03-34.00 (Hoskins/Schlegel): An ordinance rezoning that property described in rezoning
petition RZN 03-34.00 as submitted by Milholland Company on behalf of Tracy Hoskins for
property located north of the proposed Crystal Springs Phase III Subdivision, west of Deane
Solomon Road and south of Salem Road containing approximately 72.50 acres from R-A,
Residential Agricultural to RSF-4, Residential Single Family, four units per acre.
Mr. Williams read the ordinance.
The Ordinance was Left on the First Reading.
RZN 04-2.00 (Chance & Tuggle): An ordinance rezoning that property described in rezoning
petition RZN 04-02.00 as submitted by Geoff Bates of Keystone Consultants on behalf of David
Chance and John Tuggle for property located at West Tackett and Genevieve Avenue containing
approximately 7.94 acres from R-A, Residential Agricultural to RSF-4, Residential Single
Family, four units per acre.
Mr. Williams read the ordinance.
Alderman Thiel: Access will be provided along Genevieve, Tackett and 54 h Street. If this
project is submitted will they have to make improvements on all those streets?
Dawn Warrick, Planning: I can't tell you that definitely, we will have to review the
development proposal that has been submitted and look at what they are proposing. The impact
of the number of vehicle trips per day would be generated and would determine what is roughly
portional to the impact of that development with regard to infrastructure improvements. There
will likely be some off site improvements necessary for this site.
A discussion followed on the project.
The Ordinance was Left on the First Reading.
RZN 04-3.00 (Fitzgerald): An ordinance rezoning that property described in rezoning petition
RZN 04-03.00 as submitted by James McCord on behalf of Donald and Frances Fitzgerald for
property located at the northwest corner of Wedington Drive and 5151 Avenue containing
approximately 1.51 acres from R-A, Residential Agricultural to RSF-4, Residential Single
Family, four units per acre.
City Council Meeting Minutes
April 6, 2004
Page 18 of 20
. Mr. Williams read the ordinance.
Jim McCord representing the applicants requested that the City Council adopt this ordinance
tonight. It is only one lot.
Alderman Jordan moved to suspend the rules and go to the second reading. Alderman
Lucas seconded. Upon roll call the motion passed unanimously.
Mr. Williams read the ordinance.
Alderman
Jordan moved to
suspend the rules
and go to the third and final reading.
Alderman
Reynolds seconded.
Upon roll call the
motion passed unanimously.
Mr. Williams read the ordinance.
Alderman Thiel: I
see that
the
applicant wants to divide this property into three single family
lots. Will those lots
front on
540'
Street?
Jim McCord: That is correct.
Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed
unanimously.
. Ordinance 4552 as Recorded in the Office of the City Clerk
Amend Title 3, Purchase and Sale of City Property: An ordinance to amend Section 34.25
Sales of the Code of Fayetteville to allow the City Council to waive the requirements for public
auction or formal competitive bidding for the sale of city assets with a fair market value of less
than $10,000.00.
Mr. Williams read the ordinance.
Alderman Thiel: The one that is in our package is it the one that we had at the agenda meeting?
Kit Williams: Yes. I read the amended version.
Alderman Thiel: Would you read the part again that you corrected.
Kit Williams: The only part that is changing is this new part that is being added the City
Council may waive the requirements for public auction or formal competitive bids for sales of
personnel property below $10,000 in fair market value in exceptional situations where such
procedures are deemed not feasible nor practical.
Alderman Reynolds: Why are we doing this? The auction seemed to work well last year.
11
City Council Meeting Minutes
April 6, 2004
Page 19 of 20
• Gary Dumas: The auction worked very well but the Equipment Committee and the City
Council also instructed us to transfer one of the blue vans that the Boys and Girls Club was using
to the Boys and Girls Club. We have been working diligently to do that. We can't do it without
this ordinance.
Kit Williams: You can not just waive your ordinance. Your ordinance right now states that it
must be competitively bid or auctioned. The only way to do this is to actually change the
ordinance to give the City Council the power to waive formal competitive bidding or auction.
You will still have to do a resolution to allow this sale.
A discussion followed on the ordinance.
Alderman Jordan moved to suspend the rules and go to the second reading. Alderman
Davis seconded. Upon roll call the motion passed unanimously.
Mr. Williams read the ordinance.
Alderman Jordan moved to suspend the rules and go to the third and final reading.
Alderman Davis seconded. Upon roll call the motion passed unanimously.
Mr. Williams read the ordinance.
Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed
unanimously.
Ordinance 4553 as Recorded in the Office of the City Clerk
Water and Sewer System Refunding Revenue Bond Issue: An ordinance authorizing the
issuance and sale of not to exceed $6,365,000 of Water and Sewer System Refunding Bonds,
Series 2004, by the City of Fayetteville, Arkansas for the purpose of refunding the City's
outstanding Water and Sewer System Refunding Revenue Bonds, Series 1999; authorizing the
execution and delivery of a First Supplemental Trust Indenture pursuant to which the Series 2004
Bonds will be issued and secured; authorizing the execution and delivery of an official statement
pursuant to which the Series 2004 Bonds will be offered; authorizing the execution and delivery
of a Bond Purchase Agreement providing for the sale of the Series 2004 Bonds; authorizing the
execution and delivery of an Escrow Deposit Agreement providing for the redemption of the
Series 1999 Bonds; authorizing the execution and delivery of a Continuing Disclosure
Agreement; and prescribing other matters relating thereto.
Mr. Williams read the ordinance.
Alderman Davis moved to suspend the rules and go to the second reading. Alderman
Jordan seconded. Upon roll call the motion passed unanimously.
0
Mr. Williams read the ordinance.
Cisy Council Mcesing Minuses
April 6, 2004
Page 20 of 20
Alderman Davis: How much money are we saving the taxpayers by doing this?
• Dennis Hunt: A net present value savings of around $250,000. Actually the savings over the
life of the issue is more than that.
Alderman Davis: Is there a difference in the maturity time of the bonds?
Dennis Hunt: No sir.
Alderman
Reynolds moved
to suspend the rules and go to
the third and final reading.
Alderman
Jordan seconded.
Upon roll call the motion passed
unanimously.
Mr. Williams read the ordinance.
Mayor Coody asked shall the ordinance pass. Upon roll call the ordinance passed
unanimously.
Ordinance 4554 as Recorded in the Office of the City Clerk
Meeting Adjourned at 9:25 PM.
Sondra Smith
City Clerk
0
I
NORTHWEST
Aikc* isasamomow0azette
AFFRAJT OF PUBLICATION
I, U-l., do solemnly swear that I am
Leg I Clerk of the Arkansas Democrat-Gazette/Northwest -Arkansas
Times newspaper; printed and published in Lowell, Arkansas, and that
from my own personal knowledge and reference to the files of said
publication, that advertisement of:
�F SOU was inserted in the regular editions on
_3
**.. Publication Charge: $
Subscribed -and sworn to before me this
day of A4 r) 2004.
My Commission Expires: 07la5YAOI
'* Please do not pay from Affidavit.
An invoice will be sent.
RECEIVED
Official Seal APR 14 2M
-MICHAEL ARGO
Public -Arkansas CX CLEHK'SOFFlILLE
INGTON COUNTY
[m:y:::
CE
Commission Expires 07-25.2013
212 NORTH EAST AVENUE P.O. BOX 1607. • FAYETTEMLLE, ARKANSAS 72702 • (501) 442-1700
E
7
•
. EXHIBIT F
COSTS OF ISSUANCE
Bond Counsel Fee and Expenses (estimated through closing and
transcript preparation)
Kutak Rock LLP
425 West Capitol Avenue, Suite 1100
Little Rock, AR 72201 $379000.00
Rating Fee
Standard & Poor's Corporation
2542 Collection Center Drive
Chicago, IL 60693 8,000.00
Trustee Acceptance Fee
Bank of Oklahoma, N.A.
Bank of Oklahoma Tower
P. O. Box 2300
Tulsa, OK 74192 25750.00
Escrow Trustee Fee
isBank of Oklahoma, N.A.
Bank of Oklahoma Tower
P. O. Box 2300
Tulsa, OK 74192 29000.00
Official Statement Printing
Document Solutions
400 West Capitol Avenue
Little Rock, AR 72201 890.10
Total: $50.640.10
10-61620.1 F-1
•
•
KUTAK ROCK LLP
LITTLE ROCK, ARKANSAS
Telephone 501-975-3000
Facsimile 501-975-3001
Federal ID 47-0597598
May 20, 2004
City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, AR 72701
Check Remit To:
Kutak Rock LLP
PO Box 30057
Omaha, NE 68103-1157
Wire Transfer Remit To:
ABA #104000016
First National Bank of Omaha
Kutak Rock LLP
A/C # 24-690470
Invoice No. 850732
Matter No. 1123401-I 1
$6,090,000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
SERIES 2004
For Professional Legal Services Rendered as Bond Counsel in connection
with the issuance of $6,090,000 City of Fayetteville, Arkansas Water and
Sewer System Refunding Revenue Bonds, Series 2004
Estimated expenses through Closing and Transcript Distribution
TOTAL FEES AND ESTIMATED EXPENSES DUE
$35,000.00
2,000.00
10-62401.1
04/12/04 MON 13:56 FAX 5017187490
&POORIS
ff TeMcGtow WOCw-roan-
MR. DENNIS HUNT
STEPHENS INC.'
'3425 NORTH FUTRALL DRIVE STE 201
FAYETTEVILLE AR :72703
STEPHENS NW AR
Standard & Poor's Ratings Services
Federal I.D.: 13-1026995
101325 ANALYTICAL SERVICES RENDERED IN CONNECTION WITH:
USS6.135.000 City of Fayetteville, Arkansas,
Water and Sewer System Refunding Revenue Bonds,
Series 2004, dated: May 1. 2004, due: August 15,
2012
PLEASE NOTE NEW REMITTANCE ADDRESS BELOW
INQUIRIES' CONTACT:...:.
ELA FACCIOLO ,
L: 1.800.767-1896 EXT #4
FAX: 1-212-438-5178
CARMELLA FACCIOLO@SANDP.COM
Services Provided To:
f6 002
Invoice No.:
10033647
Aoct. No.:
1000012791
Date:
04/09/04
Page:
1
Purchase Order.
MR. DENNIS HUNT
STEPHENSINC.
3425 NORTH FUTRALL DRIVE STE 201
FAYETTEVILLE AR 72703
$8,000.00
TOTAL
Special Instructions
AMOUNT
DUE
$8,000.00 USD
This Invoice Due and
Payable As Of:
04/09/04
. _
• Make,Checks
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invoice,No.::-,100313647
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MR. DENNIS HUNT BANK OF AMERICA STANDARD AND POOR'S
STEPHENS INC. SAN FRANCISCO CA 2542 COLLECTION CENTER DRIVE
3425 NORTH FUTRALL DRIVE STE 201 STANDARD AND POOR 'S CHICAGO,,IL 60693
FAYETTEVILLE AR 72703 ACCOUNT NO. 12334-02500
ABA NO-121000358
PLEASE REFERENCE INVOICE P
• TOTAL
AMOUNTDUE
10000127912 10033647 00800000 1 700 '10 07 0404 4 AMOUNT $8,000.00 USD
ENCLOSED
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PLEASE PAY FROM THIS INVOICE
•
ivize nalive
,Do W. Capitol, Suite 101 B • Little Rock, Arkansas 72201
Phone: (501) 376-8000 • Fax: (501) 376-8001
1.866-390-5890 0Tax ID# 62-1703732
xoTo: KUTAK ROCK LLP
425 WEST CAPITOL AVENUE, SUITE 1100
LITTLE ROCK, AR 72201
ORDERED BY: PAT
CUSTOMER I.D. PURCHASE ORDER
QUANTITY ITEM NUMBER DESCRIPTION
11 r960 405 STRAIGHT RUN
115 454 FASTBACK BINDING
0
THANKYOU FOR CHOOSING MIZE
Payment is due upon recelpt. No exceptions for third party payments. It invoice
is not paid within 30 days, 3 five percent (5%) finance charge may be added.
INVOICE DATE: 04/27/04
INVOICE NUMBER 75142
PAYMENT TERMS
UNIT PRICE
0.050
2.000
Item Total:
Sales Tax:
Shipping:
SALESPERSON I.D.
70—
EXTENSION
598.00
230.00
62.10
0.00
890.10
C
F1
•
n
I
•
Information Return for Tax -Exempt Governmental Obligations
Form $03$-G
► Under Internal Revenue Code section 149(e) I OMB No. 1545-0720
(Rev. November 2000) ► See separate Instmctions.
I:t aev nuc-scvi a I Caution: ff the issue price is under $100,000, use Form 8038-GC,
1 Issuer's name
City of Fayetteville, Arkansas
lmenaea Return, check here ► [
Issuer's employer identification number
71 ; 6018462
a
Numoer and street for P.U. box it mail is not delivered to street address)
113 West Mountain Street
Room/suite
4
Report number
3 01
5
City, town, or post once, state, and ZIP code
Fayetteville, AR 72701
6
Date of issue
5/20/04
7
Name of issue
Water and Sewer System Refunding Revenue Bonds, Series 2004
8
CUSIP number
312693 GE 8
9
Name and tide of officer or legal representative whom the IRS may call for more information
GordonM. Wilboum, Esq., Bond Counsel
10 Telephone number of officer or legal represenatae
( 501 ) 975-3000
LCOML
11
T e of Issue (check applicable box(es) and enter the issue rice) See instructions
❑ Education . . . . . .
and attach schedule
12
13
14
15
16
77
18
El Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . .
❑ Transportation . . . . . . . . . . . RECE'IVED'
❑ Public safety. . . . . . . . . . . .
.
❑ Housing .MAY `� 5 ZOO4
❑ Environment (including sewage bonds) . . . . . . :ons
Utilities . . . . . rZI ff
El Other. Describe ►
12
13
14
15
1s
17
6,150,721
18
19
20
If obligations are TANS or RANs, check box la ❑ If obliga 'a e. ►
If obligations are in the form of a lease or installment sale. chii
Description of Obligations.
Complete for the
entire issue for which this form is bein filed.
(a) Final maturity date
(b) Issue Once
(e) stated redemption
price at matunry
(m Weighted
average maturity
le) Yield
21
12.
8-15-12 5 6,150,721 6 S ,090,000 ars 3,5.225 e1394 %
Uses of Proceeds of Bond Issue Including underwriters' discount
22
Proceeds used for accrued interest . . . . . . . .
10,051
23
Issue price of entire issue (enter amount from line 21, column (b)) .
6,150,721
24
Proceeds used for bond issuance costs (including underwriters' discount) 24
25 Proceeds used for credit enhancement . . . . . . . . . . 25
26
Proceeds allocated to reasonably required reserve or replacement fund 26
45t2220145
27
Proceeds used to currently refund prior issues . . . . . . . 2728
Proceeds used to advance refund prior issues . . . . . . .
2829
30
.
Total (add lines 24 through 28) .
Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here
Description of Refunded Bonds (Complete this part only for refunding bonds.)
6,150,618
30
103
1W1rjannrj9 welyineu average maturity of the bonds to be currently refunded .
. . ► _ 4.975 years
32
Enter the
remaining weighted average maturity of the bonds to be advance refunded
► years
33
Enter the
last date on which the refunded bonds will be called .
• _
► 8-15-04
34
Enter the
date(s)
the refunded bonds were issued ►
•
5-Y7-99
35
Enter the amount of the state volume cap allocated to the issue under section 141(b)(5)
35
-0-
36a
Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions)
36a
-0-
b
Enter the final maturity date of the guaranteed investment contract No,
37
Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units
37a
-0-
b
If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑
and enter
the name of the
issuer ► and the date of the issue ►
38
If the issuer has designated the issue under section 265(b)(3)(B)(q(III) (small issuer exception), check box
► 0
39
If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box .
.
► ❑
40
If the issuer has identified a hedge. check box
'
. ' ' ►
❑
under penalties of perjury. I declare that I have examined this return and accompanying schedules and staternanm.
and belief. they arg4rue, correct. and cymplete.
and to me test of my knowledge
• Sign /
Here Dan Coody, Mayor
Signature of issuer's authorized representative Date Type or print name and true
For Paperwork Reduction Act Notice, see pag f the Instructions. cat. No. 637735 Form 8038-G (Rev. 11-2000)
•
•
0
I
SENDER: COMPLETE THIS SECTION
■ Complete items 1, 2, and 3. Also complete
item 4 if Restricted Delivery is desired.
■ Print your name and address on the reverse
so that we can return the card to you.
■ Attach this card to the back of the mailpiece,
or on the front if space permits.
1. Article Addressed to:
j Internal Revenue Service
Ogden_ Utah 84201
A. Signature
X ❑ Agent
❑ Addressee
B. Received by ( Printed Name) ' C. Date of Delivery
D. Is delivery address different from Rem 17 ❑ Yes
`If YES, enter delivery address below: ❑ No
3. Service Type
'Y I i 8 RBplfteryp. it
Ipsuredldajl
�"t •- a! Res6leted DMivs
0 Express Mau
❑ Return Receipt for Merchandise
(Extra Fee) ❑ Yes
2. Article Number 7099 3®Qjt 01,6 41 20',, r32;2v1
mansfer from service law
PS Form 3811, August 2001 Domestic Rehm Receipt ,ozseso2-moats
KUTAK ROCK LLP
ATLANTA
CHICAGO
•
SUITE 1100
DENVE
OENVER
425 WEST CAPITOL AVENUE
Dee MOINES
iAYETTEVILLE
NORTHWEST ARKANSAS OFFICE
LITTLE ROCK. ARKANSAS 72201-3409
IRVINE
THE THREE SISTERS BUILDING
501-975-3000
KANSAE CITY
214 WEST DICKSON STREET
FACSIMILE 501-975-3001
LINCOLN
FAYETTEVILLE. ARKANSAS 73701-6111
KLAH O
KLAHOMA CITY
479•a73-4E00
www.kutakrock.com
OMAHA
FASADENA
RICHMOND
SCOTTSDALE
WASHINGTON
GORDON M. WILSOURN
May 20, 2004
goldon.wilboum@kulakmck.com
(501)975-3101
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Receipt#70993400001641226132
Internal Revenue Service Center
Ogden, Utah 84201
$6,090,000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
. SERIES 2004
Ladies and Gentlemen:
1]
I have enclosed for filing an original and one copy of Form 8038-G, with respect to the
above -captioned matter. Please return the copy, showing your file mark, in the enclosed prepaid,
self-addressed envelope.
paj
Enclosures
Very truly yours,
I
on M. Wilboum
10-62400.1
E
EXECUTION COPY
BOND PURCHASE AGREEMENT
April 23, 2004
City of Fayetteville
113 West Mountain
Fayetteville, Arkansas 72701
$65090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds,
Series 2004
Ladies and Gentlemen:
On the basis of the representations, warranties and agreements and upon the terms and
conditions contained herein, the undersigned, Stephens Inc. (the "Underwriter"), hereby offers to
enter into this Bond Purchase Agreement (this "Bond Purchase Agreement") with the City of
Fayetteville, Arkansas (the "City") which, upon your acceptance of this offer, will be binding
upon you and upon the Underwriter. Terms not otherwise defined herein shall have the same
meanings as set forth in the Authorizing Ordinance defined and described below.
. This offer is made subject to your acceptance of this Bond Purchase Agreement on or
before midnight on April 23, 2004.
1. General. Upon the terms and conditions and in reliance upon the respective
representations, warranties and covenants herein, the Underwriter hereby agrees to purchase
from the City, and the City hereby agrees to sell to the Underwriter, all (but not less than all) of
$6,090,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds,
Series 2004 (the "Bonds"), at the purchase price (the "Purchase Price") of $6,083,730.95 (equal
to the par amount of the Bonds plus a net reoffering premium of $60,720.95 and less
underwriter's discount of $66,990.00) plus accrued interest, if any, from May 1, 2004, to the
Closing Date (hereinafter defined).
The Bonds shall be issued by the City pursuant to the provisions of the Constitution and
laws of the State of Arkansas, including, particularly, Amendment 65 to the Constitution and
Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-234-201 et seq., §§14-235-201
et seq. and §§ 14-164-401 et seq. (collectively, the "Authorizing Legislation").
The Bonds will constitute special and limited obligations of the City, secured solely by
and payable solely from (1) a pledge of and lien on the net revenues (the "Net Revenues") of the
City's combined water and sewer system (the "System") and (2) moneys on deposit in the Bond
Fund and the Debt Service Reserve Fund established by that certain Trust Indenture dated as of
May 1, 2002, as amended and supplemented by a First Supplemental Trust Indenture to be dated
as of May 1, 2004 (as amended and supplemented, the "Indenture"), each by and between the
City and Bank of Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), all as more
10-58773.3
particularly described in the Indenture. The pledge of Net Revenues securing the Bonds is on a
parity basis with an existing pledge of Net Revenues securing the City's outstanding Water and
Sewer System Refunding Revenue Bonds, Series 2002 (the "Series 2002 Bonds").
The Bonds shall be issued and secured pursuant to an ordinance of the City Council of
the City (the "Authorizing Ordinance") which was adopted on April 6, 2004, and pursuant to the
Indenture. The Bonds shall have the maturities and interest rates as set forth in Exhibit A hereto.
The Bonds shall be subject to redemption as set forth in the Indenture and in the Official
Statement (hereinafter defined).
The proceeds of the Bonds will be utilized (i) to effect a current refunding of $6,365,000
outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds,
Series 1999 (the "Refunded Bonds"), (ii) to fund a debt service reserve, (iii) to pay the premium
on a policy of municipal bond insurance, and (iv) to pay the costs of issuance of the Bonds.
A portion of the proceeds of the Bonds will be deposited pursuant to an Escrow Deposit
Agreement to be dated as of the date of delivery of the Bonds (the "Escrow Agreement"),
between the City and Bank of Oklahoma, N.A., Tulsa, Oklahoma, as escrow trustee (the "Escrow
Trustee"), and will be held, invested and utilized (along with other available moneys) to redeem
the Refunded Bonds at the times and in the amounts provided in the Escrow Agreement. The
City will undertake, pursuant to a Continuing Disclosure Agreement to be dated as of the date of
delivery of the Bonds (the "Continuing Disclosure Agreement"), to provide certain annual
• financial and operating information and notices of the occurrence of certain events, if material, as
required by Section (b)(5)(i) of Rule 15c2-12 under the Securities Exchange Act of 1934, as
amended (the "Rule"). A description of this undertaking is set forth in the Preliminary Official
Statement and will also be set forth in the Official Statement (each hereinafter defined). The
City is not in default with respect to any of its obligations under previous undertakings pursuant
to the Rule.
E
In order to ensure compliance with the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the City will enter into a Tax Regulatory Agreement dated as of the
date of delivery of the Bonds (the "Tax Regulatory Agreement").
2. Bona Fide Public Offering. The Underwriter agrees to make a bona fide public
offering of all of the Bonds at the offering prices set forth on the cover of the final Official
Statement described below.
3. Delivery of Official Statement. (a) The City has previously provided the
Underwriter with copies of its Preliminary Official Statement, including the cover page
and the appendices thereto, dated April 15, 2004, relating to the Bonds (the "Preliminary
Official Statement"). As of its date, the Preliminary Official Statement is "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."
10-58773.3
• (b) The City agrees to deliver to the Underwriter, at such address as the
Underwriter shall specify, as many copies of the final Official Statement dated April 23,
2004, relating to the Bonds as the Underwriter shall reasonably request as necessary to
comply with paragraph (b)(4) of the Rule (as defined above) and with Rule G-32 and all
other applicable rules of the Municipal Securities Rulemaking Board. The City agrees to
deliver such final Official Statement within seven (7) business days after the execution
hereof.
(c) The City hereby authorizes and approves the Preliminary Official
Statement and the final Official Statement, consents to their distribution and use by the
Underwriter and authorizes the execution of the final Official Statement by a duly
authorized officer of the City.
(d) The Underwriter shall give notice to the City on the date after which no
participating underwriter, as such term is defined in the Rule, remains obligated to deliver
final Official Statements pursuant to paragraph (b)(4) of the Rule.
4. City's Representation and Warranties. The City represents and warrants to the
Underwriter that:
(a) The City is a duly organized and existing political subdivision under the
Constitution and laws of the State of Arkansas (the "State"). The City is authorized by
the provisions of the Authorizing Legislation to issue the Bonds for the purpose of
refunding the Refunded Bonds.
(b) The City has the full legal right, power and authority (i) to adopt the
Authorizing Ordinance authorizing the issuance of and sale of the Bonds, (ii) to enter into
this Bond Purchase Agreement, the Indenture, the Escrow Agreement, the Continuing
Disclosure Agreement and the Tax Regulatory Agreement, (iii) to issue, sell and deliver
the Bonds to the Underwriter as provided herein, (iv) to deposit the proceeds of the
Bonds with the Escrow Trustee pursuant to the Escrow Agreement for the purpose of
refunding the Refunded Bonds, (v) to pledge irrevocably the Net Revenues to the
payment of the principal of, premium, if any, and interest on the Bonds, and (vi) to carry
out and consummate all other transactions contemplated by each of the aforesaid
documents, and the City has complied with all provisions of applicable law, including the
Authorizing Legislation, in all matters relating to such transactions.
(c) The City has duly authorized (i) the execution and delivery of the Bonds
and the execution, delivery and due performance of this Bond Purchase Agreement, the
Indenture, the Escrow Agreement, the Continuing Disclosure Agreement and the Tax
Regulatory Agreement, (ii) the distribution and use of the Preliminary Official Statement
and the execution, delivery and distribution of the final Official Statement, and (iii) the
taking of any and all such actions as may be required on the part of the City to carry out,
give effect to and consummate the transactions contemplated by such instruments. All
consents orapprovals necessary to be obtained by the City in connection with the
foregoing have been received, and the consents or approvals so received remain still in
full force and effect.
I0-58773.3 3
• (d) The Authorizing Ordinance has been duly adopted by City Council of the
City, is in full force and effect and constitutes the legal, valid and binding act of the City;
and this Bond Purchase Agreement, the First Supplemental Trust Indenture, the Escrow
Agreement, the Continuing Disclosure Agreement and the Tax Regulatory Agreement,
when executed and delivered, will constitute legal, valid and binding obligations of the
City, and this Bond Purchase Agreement, the First Supplemental Trust Indenture, the
Escrow Agreement, the Continuing Disclosure Agreement and the Tax Regulatory
Agreement are enforceable against the City in accordance with their respective terms,
except as enforceability thereof may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally.
(e) When delivered to or at the direction of the Underwriter, the Bonds will
have been duly authorized, executed, authenticated, issued and delivered and will
constitute legal, valid and binding obligations of the City in conformity with the laws of
the State of Arkansas, including the Authorizing Legislation, and will be entitled to the
benefit and security of the Authorizing Ordinance and the Indenture.
(f) The City has duly approved and authorized the distribution and use of the
Preliminary Official Statement and the execution, delivery and distribution of the Official
Statement.
(g) The information contained in the Preliminary Official Statement is, and as
. of the Closing Date such information in the final Official Statement will be, true and
correct in all material respects, and the Preliminary Official Statement does not and the
final Official Statement will not contain any untrue or misleading statement of a material
fact or omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(h) If, at any time prior to the earlier of (i) receipt of notice from the
Underwriter pursuant to Section 3(d) hereof that Official Statements are no longer
required to be delivered under the Rule or (ii) 25 days after the Closing Date, any event
occurs as a result of which the Official Statement, as then amended or supplemented,
might include an untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading, the City shall promptly notify the Underwriter in writing of
such event. Any information supplied by the City for inclusion in any amendments or
supplements to the Official Statement will not contain any untrue or misleading statement
of a material fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
Upon the request of the Underwriter therefor, the City shall prepare and deliver to the
Underwriter, at the City's expense, as many copies of an amendment or supplement to the
Official Statement which will correct any untrue statement or omission therein as the
Underwriter may reasonably request.
(i) Neither the adoption of the Authorizing Ordinance, the execution and
• delivery of this Bond Purchase Agreement, the Bonds, the First Supplemental Trust
Indenture, the Escrow Agreement, the Continuing Disclosure Agreement or the Tax
10-58773.3 4
• Regulatory Agreement, nor the consummation of the transactions contemplated herein or
therein or the compliance with the provisions hereof or thereof will conflict with, or
constitute on the part of the City a violation of, or a breach of or default under, (i) any
statute, indenture, mortgage, commitment, note or other agreement or instrument to
which the City is a party or by which it is bound, (ii) any provision of the Constitution of
the State of Arkansas, or (iii) any existing law, rule, regulation, ordinance, judgment,
order or decree to which the City (or the members of its City Council or any of its
officers in their respective capacities as such) is subject. All consents, approvals,
authorizations and orders of governmental or regulatory authorities, if any, which are
required for the City's execution and delivery of, consummation of the transactions
contemplated by, and compliance with the provisions of this Bond Purchase Agreement,
the Authorizing Ordinance, the Bonds, the Indenture, the Escrow Agreement, the
Continuing Disclosure Agreement and the Tax Regulatory Agreement have been
obtained.
6) The City has never been in default at any time as to the payment of
principal of or interest on any obligation which it has issued, including those which it has
issued as a conduit for another entity, except as specifically disclosed in the Official
Statement.
(k) Except as is specifically disclosed in the Official Statement, there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
. court, public board or body, pending or, to the best knowledge of the City, threatened,
which in any way questions the powers of the City referred to in subparagraph 4(b)
above, or the validity of any proceeding taken by the City in connection with the issuance
of the Bonds, or wherein an unfavorable decision, ruling or finding could materially
adversely affect the transactions contemplated by this Bond Purchase Agreement, or of
any other document or instrument required or contemplated by the Bond financing, or
which, in any way, could adversely affect the validity or enforceability of the Authorizing
Ordinance, the Bonds, the Indenture, the Escrow Agreement, the Continuing Disclosure
Agreement, the Tax Regulatory Agreement or this Bond Purchase Agreement or, to the
knowledge of the City, which in any way questions the exclusion from gross income of
the recipients thereof of the interest on the Bonds for federal income tax purposes or in
any other way questions the status of the Bonds under federal or State of Arkansas tax
laws or regulations.
(1) Any certificate signed by any official of the City and delivered to the
Underwriter shall be deemed a representation and warranty by the City to the
Underwriter as to the truth of the statements therein contained.
(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.
(n) The audited general purpose financial statements and supplemental
• financial statements of the City for the year ended December 31, 2002, and the unaudited
financial statements of the City's Water and Sewer Fund for the year ended
10-58773.3
F1
• December 31, 2003, included in the Official Statement, present fairly the financial
position of the City and its Water and Sewer Fund as of the dates indicated and the results
of the City's and its Water and Sewer Fund's operations for the periods specified, and
such financial reports and statements have been prepared in conformity with generally
accepted governmental accounting principles consistently applied in all material respects
to the periods involved, except as otherwise stated in the notes thereto. There has been no
material change in the general affairs, management, properties, financial position,
capitalization or results of operations of the City or its Water and Sewer Fund since the
date of such financial statements except as set forth in the Official Statement.
(o) The City will not knowingly take or omit to take any action, which action
or omission will in any way cause the proceeds from the sale of the Bonds to be applied
in a manner other than as provided in the Indenture or the Escrow Agreement, or which
would cause the interest on the Bonds to be includable in gross income for federal
income tax purposes.
5. City's Covenants. The City covenants with the Underwriter as follows:
(a) The City will cooperate with the Underwriter in qualifying the Bonds for
offer and sale under the securities or Blue Sky laws of such jurisdictions of the
United States as the Underwriter may request; provided, however, that the City shall not
be required to consent to suit or to service of process in any jurisdiction. The City
• consents to the use by the Underwriter in the course of its compliance with the securities
or Blue Sky laws of the various jurisdictions of the documents relating to the Bonds,
subject to the right of the City to withdraw such consent for cause by written notice to the
Underwriter.
(b) Prior to the earlier of (i) receipt of notice from the Underwriter pursuant to
Section 3(d) hereof that final Official Statements are no longer required under the Rule or
(ii) 25 days after the Closing Date, the City shall provide the Underwriter with such
information regarding the City, its Water and Sewer Fund, and the current financial
condition and ongoing operations of the City and its Water and Sewer Fund , all as the
Underwriter may reasonably request.
6. Closing. At 10:00 a.m. Fayetteville time on May 20, 2004, or at such other time
and/or date as shall have been mutually agreed upon by the City and the Underwriter (the
"Closing Date"), the City will deliver the Bonds, or cause the Bonds to be delivered, to or at the
direction of the Underwriter, said Bonds to be in definitive form duly executed by the City and
authenticated by Bank of Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), together
with the other documents hereinafter mentioned; and the Underwriter will accept such delivery
and pay the Purchase Price of the Bonds by making a wire transfer of federal funds payable to
the order of the Trustee for the account of the City.
The Bonds shall be delivered to The Depository Trust Company in New York,
New York, and the activities relating to the final execution and delivery of the Authorizing
• Ordinance, the First Supplemental Trust Indenture, the Escrow Agreement, the Continuing
Disclosure Agreement and the Tax Regulatory Agreement and the other documents related to the
10-58773.3 6
• Bonds and the payment for the Bonds and the delivery of the certificates, opinions and other
instruments as described in Section 8 of this Bond Purchase Agreement shall occur in the offices
of Kutak Rock LLP, 425 West Capitol Avenue, Suite 1100, Little Rock, Arkansas ("Bond
Counsel") or at such other place as shall have been mutually agreed upon between the City and
the Underwriter. The payment for the Bonds and simultaneous delivery of the Bonds to or at the
direction of the Underwriter is herein referred to as the "Closing."
7. Underwriter's Right to Cancel. The Underwriter shall have the right to cancel
its obligation to purchase the Bonds hereunder by notifying the City in writing or by telegram of
its election to do so between the date hereof and the Closing, if at any time hereafter and prior to
the Closing:
(i) the House of Representatives or the Senate of the Congress of the
United States, or a committee of either, shall have pending before it, or shall have passed or
recommended favorably, legislation introduced previous to the date hereof, which
legislation, if enacted in its form as introduced or as amended, would have the purpose or
effect of imposing federal income taxation upon revenues or other income of the general
character to be derived by the City or by any similar body under the Authorizing Ordinance
or the Indenture or similar documents or upon interest received on obligations of the general
character of the Bonds or the Bonds, or of causing interest on obligations of the general
character of the Bonds, or the Bonds, to be includable in gross income for purposes of
federal income taxation, and such legislation, in the Underwriter's opinion, materially
adversely affects the market price of the Bonds; or
(ii) a tentative decision with respect to legislation shall be reached by a
committee of the House of Representatives or the Senate of the Congress of the
United States, or legislation shall be favorably reported or rereported by such a committee or
be introduced, by amendment or otherwise, in or be passed by the House of Representatives
or the Senate, or recommended to the Congress of the United States for passage by the
President of the United States, or be enacted or a decision by a federal court of the
United States or the United States Tax Court shall have been rendered, or a ruling, release,
order, regulation or official statement by or on behalf of the United States Treasury
Department, the Internal Revenue Service or other governmental agency shall have been
made or proposed to be made having the purpose or effect, or any other action or event shall
have occurred which has the purpose or effect, directly or indirectly, of adversely affecting
the federal income tax consequences of owning the Bonds or of any of the transactions
contemplated in connection herewith, including causing interest on the Bonds to be included
in gross income for purposes of federal income taxation, or imposing federal income
taxation upon revenues or other income of the general character to be derived by the City or
by any similar body under the Authorizing Ordinance or the Indenture or similar documents
or upon interest received on obligations of the general character of the Bonds, or the Bonds
which, in the opinion of the Underwriter, materially adversely affects the market price of or
market for the Bonds; or
• (iii) legislation shall have been enacted, or actively considered for enactment
with an effective date prior to the Closing, or a decision by a court of the United States shall
have been rendered, the effect of which is that the Bonds, including any underlying
10-58773.3
7
obligations, or the Indenture, as the case may be, is not exempt from the registration,
qualification or other requirements of the Securities Exchange Act of 1933, as amended and
as then in effect, 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
(iv) a stop order, ruling, regulation or official statement by the Securities and
Exchange Commission or any other governmental agency having jurisdiction of the subject
matter shall have been issued or made or any other event occurs, the effect of which is that
the issuance, offering or sale of the Bonds, including any underlying obligations, or the
execution and delivery of the Indenture as contemplated hereby or by the Official Statement,
is or would be in violation of any provision of the federal securities laws, including the
Securities Act of 1933, as amended and as then in effect, 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
(v) any event shall have occurred or any information shall have become known
to the Underwriter which causes the Underwriter to reasonably believe that the Official
Statement as then amended or supplemented includes an untrue statement of a material fact,
or omits to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(vi) there shall have occurred any outbreak of hostilities or any national or
international calamity or crisis, including a financial crisis, the effect of which on the
financial markets of the United States is such as, in the reasonable judgment of the
Underwriter, would materially adversely affect the market for or market price of the Bonds;
or
(vii) there shall be in force a general suspension of trading on the New York
Stock Exchange, the effect of which on the financial markets of the United States is such as,
in the reasonable judgment of the Underwriter, would materially adversely affect the market
for or market price of the Bonds; or
(viii) a general banking moratorium shall have been declared by federal,
New York or State authorities; or
(ix) any proceeding shall be pending or threatened by the Securities and
Exchange Commission against the City; or
(x) 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; or
(xi) the New York Stock Exchange or other national securities exchange, or any
governmental authority, shall impose, as to the Bonds or obligations of the general character
of the Bonds, any material restrictions not now in force, or increase materially those now in
• force, with respect to the extension of credit by, or the charge to the net capital requirements
of the Underwriter.
10-58773.3
• 8. Conditions to Underwriter's Obligations. The obligation of the Underwriter to
purchase the Bonds shall be subject (a) to the performance by the City of its obligations to be
performed hereunder at and prior to the Closing, (b) to the accuracy of the representations and
warranties of the City herein as of the date hereof and as of the time of the Closing, and (c) to the
following conditions, including the delivery by the City of such documents as are enumerated
herein in form and substance satisfactory to the Underwriter:
(a) The Bonds shall have been duly authorized, executed and delivered in the
forms approved by the City in the Indenture with only such changes therein as the
Underwriter and the City shall mutually agree upon, which shall in all instances be as
described in the final Official Statement;
(b) At the time of Closing, (i) the Official Statement, this Bond Purchase
Agreement, the Indenture, the Authorizing Ordinance, the Escrow Agreement, the
Continuing Disclosure Agreement and the Tax Regulatory Agreement shall be in full
force and effect and shall not have been amended, modified or supplemented from the
date hereof, except as may have been agreed to in writing by the Underwriter, (ii) the
proceeds of the sale of the Bonds and other funds shall be deposited and applied as
described in the Indenture and the Escrow Agreement, (iii) no default or event of default
under the Indenture shall have occurred and be continuing, and (iv) no material adverse
change affecting the City or its water and sewer system (the "System") shall have
occurred, nor shall any development involving a prospective and material adverse change
in, or affecting the business, financial condition, results of operations, prospects or
properties of the City or the System have occurred;
(c) Receipt of fully executed originals of the First Supplemental Trust
Indenture, the Continuing Disclosure Agreement, the Escrow Agreement and the Tax
Regulatory Agreement at or prior to the Closing;
(d) At or prior to the Closing, the Underwriter shall receive the following
documents in such number of counterparts as shall be mutually agreeable to the
Underwriter and Bond Counsel:
(1) A final approving opinion of Bond Counsel, dated the Closing
Date, in substantially the form set forth in Exhibit B hereto;
(2) A supplemental opinion of Bond Counsel, addressed to the City,
the Trustee and the Underwriter and dated the Closing Date, in substantially the
form set forth in Exhibit C hereto;
(3) An opinion of Bond Counsel, addressed to the City and the trustee
for the Refunded Bonds, to the effect that upon deposit of the moneys as
described under the Escrow Agreement with the Escrow Trustee, the Refunded
Bonds will be deemed to be paid and discharged and the lien on revenues and net
revenues of the System securing the Refunded Bonds will be released;
s(4) The Official Statement executed by a duly authorized officer of the
City;
10-58773.3 9
• (5) Certified copies of the Authorizing Ordinance and all other
ordinances and resolutions of the City relating to the Bonds;
(6) Photocopies of the Bonds as executed and delivered;
(7) A letter or letters from Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., to the effect that the Bonds have
been assigned a rating of no less than "AAA" based on the delivery of the Policy
(as defined below) and an underlying rating of "A", which ratings shall be. in
effect as of the Closing Date;
(8) The Financial Guaranty Insurance Policy (the "Policy") issued by
Ambac Assurance Corporation ("Ambac"), together with such supporting
certificates of Ambac and opinions of counsel to Ambac as shall be satisfactory to
Bond Counsel;
(9) A letter from.BKD, LLP, independent certified public accountants,
in which consent is given to the use of its report on the audited financial
statements of the City in the Official Statement and to the references made to the
firm in the Official Statement;
(10) A letter from BKD, LLP, independent certified public accountants,
stating the results of the application of certain procedures to the financial
. statements of the City, which results satisfy the requirements regarding the
issuance of additional bonds contained in Section 213 of the Indenture, pursuant
to which the Series 2002 Bonds are insured and secured;
(11) A certificate, in form and substance satisfactory to the
Underwriter, of any duly authorized officer or official of the City satisfactory to
the Underwriter, dated as of the Closing Date, to the effect that: (i) each of the
City's representations, warranties and covenants contained herein are true and
correct as of the Closing Date; (ii) the City has duly adopted the Authorizing
Ordinance by all action necessary under the Authorizing Legislation and the laws
and Constitution of the State of Arkansas, and has duly authorized the execution,
delivery and due performance of the Bonds, the First Supplemental Trust
Indenture, the Escrow Agreement, the Continuing Disclosure Agreement, the Tax
Regulatory Agreement, the Official Statement and this Bond Purchase
Agreement; (iii) no litigation is pending, or to the knowledge of the officer or
official of the City signing the certificate after due investigation and inquiry,
threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way
affecting any authority for or the validity of the Bonds, the Official Statement, the
Authorizing Ordinance, the Indenture, the Escrow Agreement, the Continuing
Disclosure Agreement, the Tax Regulatory Agreement, or this Bond Purchase
Agreement; (iv) the Bonds, the First Supplemental Trust Indenture, the Escrow
Agreement, this Bond Purchase Agreement, the Continuing Disclosure
Agreement
and
the Tax
Regulatory Agreement, as executed and delivered by
the
. City, are in
the
form or
in substantially the form
approved for such execution
by
10-58773.3 10
appropriate proceedings of the City; (v) since December 31, 2003, there has not
been any material adverse change in the financial condition or results of
operations of the City or the System whether or not arising in the ordinary course
of business, other than as set forth in the Official Statement; (vi) the Authorizing
Ordinance has not been amended, modified or repealed as of the Closing Date,
and the Authorizing Ordinance remains in full force and effect; (vii) none of the
proceedings of the City taken preliminary to the issuance of the Bonds, as
certified in such certificate, has been in any manner repealed, amended or
changed; (viii) the City has complied in all respects with the provisions of the
Authorizing Legislation and has full legal right, power and authority to issue the
Bonds for the purposes stated in the Authorizing Legislation and to enter into this
Bond Purchase Agreement, to adopt the Authorizing Ordinance, to issue, sell and
deliver the Bonds as provided in this Bond Purchase Agreement, and to carry out
and consummate all other transactions contemplated by this Bond Purchase
Agreement, the Authorizing Ordinance, the Indenture, the Escrow Agreement, the
Continuing Disclosure Agreement and the Tax Regulatory Agreement;
(ix) neither the Official Statement nor any amendment or supplement thereto
contains any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading; and (x) to the best
knowledge of the officer or official of the City signing the certificate, no event
affecting the City or the System has occurred since the date of the Official
. Statement which should be disclosed in the Official Statement for the purposes for
which it is used that is necessary to disclose therein in order to make the
statements and information therein not misleading in any respect;
(12) An opinion of Kit Williams, Esq., City Attorney, dated the Closing
Date and addressed to the Underwriter, Bond Counsel and the Trustee, to the
effect that (i) the City is a duly organized and validly existing political
subdivision and city of the first class, organized under the laws of the State of
Arkansas, with full power and authority to adopt the Authorizing Ordinance and
to execute and deliver the Bonds, the Indenture, the Escrow Agreement, the
Continuing Disclosure Agreement, the Tax Regulatory Agreement and this Bond
Purchase Agreement; (ii) the City has duly approved the Preliminary Official
Statement and the Official Statement; (iii) the Authorizing Ordinance has been
duly adopted by the City by all action necessary under the Authorizing
Legislation and the laws and Constitution of the State of Arkansas, and remains in
full force and effect; (iv) the Indenture, the Escrow Agreement, the Continuing
Disclosure Agreement, the Tax Regulatory Agreement and this Bond Purchase
Agreement have been duly authorized, approved, executed and delivered by the
City 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, constitute valid and binding agreements of the City
enforceable in accordance with their terms; (v) the information in the Official
. Statement under the captions "THE CITY," "THE SYSTEM" and "LEGAL
MATTERS" (apart from financial or statistical data contained or incorporated
therein, as to which no view need be expressed) is fair, accurate and complete and
10-58773.3 11
. does not omit any matter which, in such counsel's opinion, for the purposes for
which the Official Statement is to be used, should be included or referred to
therein; (vi) excepting those matters discussed in the Official Statement, there is
no action, suit or proceeding at law or in equity before or by any court, 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 Authorizing Ordinance, the Indenture, the Escrow
Agreement, the Continuing Disclosure Agreement, the Tax Regulatory
Agreement or this Bond Purchase Agreement and, to the best of such counsel's
knowledge, there is no investigation, pending or threatened, and no threatened
action, suit or proceeding involving any of the matters hereinabove mentioned in
this clause (vi); (vii) the execution and delivery of the Indenture, the Escrow
Agreement, the Continuing Disclosure Agreement, the Tax Regulatory
Agreement and this Bond Purchase Agreement, and compliance with the
provisions hereof and thereof, under the circumstances contemplated hereby and
thereby, do not and will not in any material respect conflict with or constitute on
the part of the City a breach of or default under any agreement or other instrument
to which the City is a party or any existing law, regulation, court order or consent
decree to which the City is subject; and (viii) based upon the examinations which
such counsel has made as counsel to the City, which shall be specified, nothing
has come to such counsel's attention which would lead such counsel to believe
that the Official Statement (except for the financial statements and other financial
• data included in the Official Statement, as to which no view need be expressed)
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 the
light of the circumstances under which they were made, not misleading;
(13) Evidence that Federal Form 8038-G has been executed by the City
and is ready for filing with the Internal Revenue Service.
(14) Evidence that, except as disclosed in the Official Statement, all
necessary approvals, whether legal or administrative, have been obtained from
applicable federal, state and local entities and agencies; and
(15) Such additional legal opinions, certificates, proceedings,
instruments and other documents as the Underwriter and Bond Counsel may
reasonably request to evidence compliance by the City with legal requirements,
the truth and accuracy, as of the time of Closing, of the representations of the City
herein contained and the due performance or satisfaction by the City at or prior to
such time of all agreements then to be performed and all conditions then to be
satisfied.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter
contained in this Bond Purchase Agreement, or if the obligation of the Underwriter to purchase
and accept delivery of the Bonds shall be terminated for any reason permitted by this Bond
• Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the Underwriter
10-58773.3 12
nor
the City shall be under
further obligation hereunder; except that
the respective obligations to
pay
expenses, as provided in
Section 12 hereof, shall continue in full
force and effect.
9.
Conditions
to
Obligations of the City. The obligations of the City hereunder are
subject to
the performance
by
the Underwriter of its obligations hereunder.
10. Survival. All representations, warranties and agreements of the City shall remain
operative and in full force and effect, regardless of any investigations made by or on behalf of
the Underwriter, and shall survive the Closing. The obligations of the City under Sections I I or
12 hereof shall survive any termination of this Bond Purchase Agreement by the Underwriter
pursuant to the terms hereof.
11. Indemnification. The City, to the extent permitted by law, agrees to indemnify
and hold harmless the Underwriter, each member, officer, director, partner or employee of the
Underwriter and each person who controls the Underwriter within the meaning of Section 15 of
the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended (collectively called the "Indemnified Parties"), against any and all losses, claims,
damages, liabilities or expenses (including any legal or other expenses incurred by an
Indemnified Party in connection with investigating any claims against an Indemnified Party and
defending any actions) whatsoever caused by any untrue statement or misleading statement or
alleged untrue statement or alleged misleading statement of a material fact contained in the
Official Statement or caused by any omission or alleged omission from the Official Statement of
. any material fact required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not misleading insofar as
such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading
statement or omission or alleged untrue or misleading statement or omission in the information
contained in the Official Statement; provided, however, that the City shall not be liable to an
Indemnified Party in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any of such documents in reliance upon and in conformity
with written information furnished to the City by the Underwriter specifically for use therein.
No Indemnified Parties shall be indemnified hereunder for any losses, claims, damages or
liabilities resulting from the negligence of such Indemnified Parties.
12. Payment of Expenses. The City will pay or cause to be paid all reasonable
expenses incident to the performance of its obligations under this Bond Purchase Agreement,
including, but not limited to, expenses of mailing or delivery of the Bonds, costs of printing the
Bonds, the Preliminary and final Official Statements, any amendment or supplement to the
Preliminary or final Official Statement and this Bond Purchase Agreement, fees and
disbursements of Bond Counsel, any fees charged by investment rating agencies for the rating of
the Bonds, bond insurance premiums, if any, fees of the Trustee and any paying agent fees, and
any fees and disbursements in connection with the qualification of the Bonds for sale under the
securities or "Blue Sky" laws of the various jurisdictions and the preparation of "Blue Sky"
memoranda. In the event this Bond Purchase Agreement shall terminate because of the default
of the Underwriter, the City will, nevertheless, pay, or cause to be paid, all of the expenses
specified above. The Underwriter shall pay all advertising expenses in connection with the
public offering of the Bonds, and all other expenses incurred by it in connection with the public
10-58773.3 13
0
offering and distribution of the Bonds, including the fees and expenses of any counsel retained
by the Underwriter. If the City defaults under this Bond Purchase Agreement, the Underwriter
may bring whatever legal action it may have against the City to recover damages, if any, incurred
by the Underwriter.
13. Notices. Any notice or other communication to be given to the City under this
Bond
Purchase Agreement may be given
by delivering the same in
writing at the address set
forth
above, and any notice or other communication to be given to the Underwriter under this
Bond
Purchase Agreement may be given
by delivering the same in
writing to Stephens Inc.,
3425
North Futrall, Suite 201, Fayetteville,
AR 72703, Attention: Mr.
Dennis Hunt.
14. Nonassignability. This Bond Purchase Agreement is made solely for the benefit
of the City and the Underwriter (including any successor or assign of the Underwriter), and no
other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or
by virtue hereof.
15. Applicable Law. This Bond Purchase Agreement shall be governed by and
construed in accordance with the laws of the State of Arkansas.
16. Counterparts. This Bond Purchase Agreement shall become effective upon your
acceptance hereof and may be executed in counterparts, each of which shall be regarded as an
original and all of which shall constitute one and the same document.
Very truly yours,
STEPHENSINC.
By: C,C. 4==&
Authoriz d Representative
Accepted and agreed to as of
the date first above written:
CITY OF FAYETTEVILLE, ARKANSAS
By:
Title: Mayor
10-58773.3
14
W
• EXHIBIT A
CI
MATURITY SCHEDULE
SERIES 2004 BONDS
(August 15)
Principal
Interest
(August 15)
Principal
Interest
Maturity
Amount
Rate
Price
Maturity
Amount
Rate
Price
2004
$130,000
1.00%
100.000%
2009
$655,000
2.80%
99.611%
2005
5859000
2.50%
101.366%
2010
670,000
3.05%
99.434%
2006
5953000
2.50%
101.371%
2011
690,000
3.30%
99.359%
2007
615,000
3.00%
102.578%
2012
19515,000
4.00%
101.888%
2008
6353000
3.00%
101.713%
(with accrued interest on all Series 2004 Bonds from May 1, 2004)
10-58773.3 A-1
. EXHIBIT B
PROPOSED FORM OF BOND COUNSEL APPROVING OPINION
Upon delivery of the Series 2004 Bonds in definitive form, Kutak Rock LLP, Little Rock,
Arkansas, proposes to deliver its approving opinion in substantially the following form:
May 20, 2004
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephens Inc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
• $6,0905000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance and sale by the City of
Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its
$6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Bonds").
The Bonds are being issued pursuant to the provisions of the Constitution and laws of the
State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998
Repl. & Supp. 2003) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201
et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), pursuant
to Ordinance No. 4554 of the City, duly adopted and approved on April 6, 2004 (the "Bond
Ordinance" ), and pursuant to a Trust Indenture dated as of May 1, 2002, as amended and
supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended and
supplemented, the "Indenture"), by and between the City and Bank of Oklahoma, N.A., as
trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures
supplemental thereto for the provisions, among others, with respect to the conditions for the
issuance of parity debt by the City, the nature and extent of the security for the Bonds, the rights,
• duties and obligations of the City, the Trustee and the holders of the Bonds, and the terms upon
which the Bonds are issued and secured.
10-58773.3 B-1
. Reference is made to an opinion of even date herewith of Kit Williams, Esq., City
Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the
status and valid existence of the City, the power of the City to adopt the Bond Ordinance and
enter into and perform its obligations under the Indenture, the valid adoption of the Bond
Ordinance and the due authorization, execution and delivery of the Indenture by the City, and
with respect to the Indenture being enforceable upon the City.
We have examined the law and such certified proceedings and other papers as we have
deemed necessary to render this opinion. As to questions of fact material to our opinion, we
have relied upon the representations of the City contained in the Bond Ordinance and the
Indenture and in the certified proceedings and other certifications of public officials furnished to
us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly created and validly existing as a municipal corporation of the
State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including,
particularly, Amendment 65 and the Authorizing Legislation, the City is empowered to adopt the
Bond Ordinance, to execute and deliver the Indenture, to perform the agreements on its part
contained therein, and to issue the Bonds.
2. The Bond Ordinance has been duly adopted by the City and constitutes a valid
and binding obligation of the City enforceable upon the City in accordance with its terms.
3. The Indenture has been duly authorized, executed and delivered by the City and is
a valid and binding obligation of the City enforceable upon the City in accordance with its terms.
4. The Bonds have been validly authorized, executed, issued and delivered by the
City and represent valid and binding special obligations of the City. The principal, premium, if
any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and
pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's
water and sewer system, subject to a parity pledge of Net Revenues. securing the City's Water
and Sewer System Refunding Revenue Bonds, Series 2002, and any Additional Bonds (as
defined in the Indenture) issued hereafter.
5. The Net Revenues have been duly and validly assigned and pledged to the Trustee
under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest
in the Net Revenues.
6. Interest on the Bonds is excluded from gross income for federal income tax .
purposes and is not a specific preference item for purposes of the federal alternative minimum
tax. The opinion described in the preceding sentence assumes the accuracy of certain
representations and compliance by the City with covenants designed to satisfy the requirements
of the Internal Revenue Code of 1986, as amended, that must be met subsequent to the issuance
• of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of
the Bonds. The City has covenanted to comply with such requirements.
10-58773.3 B-2
. 7. The interest on the Bonds is exempt from all state, county and municipal taxes in
the State of Arkansas.
0
8.
The Bonds are exempt from
registration pursuant
to the Securities Act of 1933, as
amended, and
the Indenture is not required
to be qualified under
the Trust Indenture Act of 1939,
as amended, in connection with the offer and sale of the Bonds.
It is to be understood that the rights of the registered owners of the Bonds and the
enforceability of the Bonds, the Bond Ordinance and the Indenture may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting creditors' rights
heretofore or hereafter enacted to the extent constitutionally applicable and that their
enforcement may also be subject to the exercise of judicial discretion in appropriate cases.
Very truly yours,
10-58773.3 B-3
• EXHIBIT C
PROPOSED FORM OF BOND COUNSEL SUPPLEMENTAL OPINION
May 20, 2004
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephenslnc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
This opinion supplements our bond approving opinion, dated the date hereof, relating to
the above -captioned bonds (the "Bonds"). Except as otherwise defined herein, the terms used
herein shall have the meanings prescribed for them in said opinion. In addition to the documents
specifically mentioned in that opinion, we have examined the portions of the Official Statement
dated April 23, 2004, with respect to the Bonds (the "Official Statement"), .captioned
"INTRODUCTORY STATEMENT," "THE SERIES 2004 BONDS," "SECURITY FOR THE
BONDS," "ESTIMATED SOURCES AND USES OF FUNDS," "DEFINITIONS OF
CERTAIN TERMS," "SUMMARY OF THE INDENTURE," "SUMMARY OF THE
CONTINUING DISCLOSURE AGREEMENT," "TAX EXEMPTION," and "APPENDIX C —
Form of Opinion of Bond Counsel' (the "Relevant Captions") insofar as they relate to this
opinion.
In connection with this opinion, we have also examined:
(a) An executed counterpart of the Trust Indenture dated as of May 1, 2002,
as amended and supplemented by a First Supplemental Trust Indenture dated as of
May 1, 2004 (as amended and supplemented, the "Indenture"), by and between the City
and Bank of Oklahoma, N.A., as trustee (the "Trustee");
. (b) An executed counterpart of the Escrow Deposit Agreement dated May 20,
2004 (the "Escrow Agreement'), by and between the City and Bank of Oklahoma, N.A.,
as escrow trustee (the "Escrow Trustee");
10-58773.3
C-1
. (c) An executed counterpart of the Continuing Disclosure Agreement dated
May 20, 2004 (the "Continuing Disclosure Agreement'), by and between the City and the
Trustee;
(d)
An executed counterpart
of the Tax Regulatory Agreement dated
May 1,
2004 (the "Tax
Regulatory Agreement'),
by and between the City and the Trustee;
and
(e) An executed counterpart of the Bond Purchase Agreement dated April 23,
2004 (the "Bond Purchase Agreement'), by and between the City and Stephens Inc. (the
"Underwriter").
Based on our examination, we are of the opinion, as of the date hereof and under existing
law, as follows:
1. The statements contained in the Official Statement under the Relevant
Captions, insofar as such statements purport to summarize certain provisions of the
Bonds, the Indenture and the Continuing Disclosure Agreement, or conclusions of law
and, legal opinions, are true, accurate and correct summaries thereof in all material
respects and do not omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.
2. The Indenture has been duly authorized, executed and delivered by the
City and, assuming due authorization, execution and delivery by the Trustee, the
• Indenture represents the valid and binding agreement of the City enforceable in
accordance with its terms.
3. The Escrow Agreement has been duly authorized, executed and delivered
by the City and, assuming due authorization, execution and delivery by the Escrow
Trustee, the Escrow Agreement represents the valid and binding agreement of the City
enforceable in accordance with its terms.
4. The Continuing Disclosure Agreement has been duly authorized, executed
and delivered by the City and, assuming due authorization, execution and delivery by the
Trustee, the Continuing Disclosure Agreement represents the valid and binding
agreement of the City enforceable in accordance with its terms.
5. The Tax Regulatory Agreement has been duly authorized, executed and
delivered by the City and, assuming due authorization, execution and delivery by the
Trustee, the Tax Regulatory Agreement represents the valid and binding agreement of the
City enforceable in accordance with its terms.
6. The Bond Purchase Agreement has been duly authorized, executed and
delivered by the City and, assuming due authorization, execution and delivery by the
Underwriter, the Bond Purchase Agreement represents the valid and binding agreement
of the City enforceable in accordance with its terms.
10-58773.3 - C-2
• The obligations of the parties, and the enforceability thereof, with respect to the
documents and other items described above are subject, in part, to the provisions of the
bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors' rights generally,
now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also
subject to general equity principles, which may limit the specific enforcement of certain
remedies but which do not affect the validity of such item.
•
•
This opinion is being rendered to you solely for your benefit.
Very truly yours,
10-58773.3 C-3
CITY OF FAYETTEVILLE, ARKANSAS
to
BANK OF OKLAHOMA, N.A.
as Trustee
TRUST INDENTURE
Dated as of May 1, 2002
_ Providing for:
$2,730,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series2002A
m
$6,5407000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series2002B
Prepared by:
Kutak Rock LLP
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
EXECUTION COPY
10-32371.04
0 ON
TABLE OF CONTENTS
(This Table of Contents is not a part of the Trust
Indenture and is only for convenience of reference.)
Parties.............................................................................................................................................. I
Recitals....................................................................................................................................:.......
1
GrantingClauses
.............................................................................................................................2
ARTICLE I
DEFINITIONS
Section101.
Definitions........................................................................................................5
Section102.
Use of Words.................................................................................................
12
/\[ K411f8i1
THE BONDS
Section
201.
Security for the Bonds...................................................................................12
Section
202.
Authorized Amount of Bonds........................................................................
13
Section
203.
Details of Series 2002 Bonds.........................................................................13
Section204.
Form................................................................................................................14
Section205.
Payment..........................................................................................................
14
Section206.
Execution.......................................................................................................14
Section207.
[RESERVED]................................................................................................
15
Section208.
Authentication................................................................................................15
Section
209.
Delivery of the Bonds....................................................................................
15
Section
210.
Mutilated, Destroyed or Lost Bonds..............................................................17
Section
211.
Registration and Transfer of Bonds...............................................................
17
Section212.
Cancellation...................................................................................................18
Section
213.
Additional Bonds...........................................................................................18
Section
214.
Superior Obligations Prohibited....................................................................19
Section
215.
Subordinate Obligations.................................................................................
19
Section216.
Temporary Bonds...........................................................................................
20
Section
217.
Book -Entry Bonds; Securities Depository .....................................................20
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section
301.
Redemption of Series 2002 Bonds.................................................................21
Section302.
Notice.............................................................................................................
21
i
10-32371.04
Section
303.
Selection of Bonds to be Redeemed..............................................................
22
Section
304.
Surrender of Bonds Upon Redemption..........................................................
22
Section
305.
Redemption in Part........................................................................................
22
Section
306.
Redemption of Additional Bonds..................................................................
22
Section
401.
Section
402.
Section
403.
Section
404.
Section
405.
Section
406.
Section
407.
Section
408.
Section
409.
Section
410.
Section
411.
Section
412.
Section
413.
Section
414.
Section
415.
Section
416.
Section
417.
Section
418.
Section
501.
Section
502.
Section
503.
Section
504.
Section
505.
Section
506.
Section
507.
Section
508.
Section
509.
Section 601
ARTICLE IV
GENERAL COVENANTS AND REPRESENTATIONS
Payment of Principal, Premium, if any, and Interest ..................................... 23
Performance of Covenants...........................................................4.................
23
Instruments of Further Assurance.......................................4.4.4............4.........
23
Recordation and Filing.... .... 4 .......... 4 .... 4 ......................... 6 ....... 4m..4..4 .......
m .... 0 .... 23
Inspection of Books...............................................................................6.......
23
TaxCovenants...... ......... o ............................. 4 .... m ...... 4m ......... m ..... m ............
0 ....... 24
Rates and Charges.. .................. o ............... m .............................. o .... m ...............
m. 24
Taxes, Charges and Assessments... ...... m .... 4 ....... m ... 4- ...... m .............. m
............... 24
Construction of Facilities; Certification of Completion Date. .......
o ........ 4 ...... 24
Encumbrances................................................................................................
25
Insurance........................................................................................................
25
Damage or Destruction; Condemnation.......................................................0.
25
Revenues To Be Used As Provided In Indenture...............................6..........
26
Accounting; Reports.........................................................................6............
26
AnnualBudget ............. ............................. ....... :............... ........... 6...
4..............26
Operation and Maintenance of System; Disposition of System Assets.........
26
Continuing Disclosure................................................................6................v.
27
Security for the Bonds...................................................................................
27
ARTICLE V
FUNDS AND DEPOSITS
Revenue Fund.............................................................
Operation and Maintenance Fund ...............................
BondFund...................................................................
Debt Service Reserve Fund .........................................
Renewal and Replacement Fund .................................
Surplus........................................................................
Costs of Issuance Fund ...............................................
RebateFund................................................................
Separate Accounts Authorized ....................................
ARTICLE VI
................................. 28
................................. 28
................................. 28
................................. 29
................................. 30
....................4............ 30
................................. 30
................................. 31
................................. 31
CUSTODY AND APPLICATION OF PROCEEDS OF BONDS
Creation of Construction Fund....................................................................... 32
10-32371.04
Section
602.
Payments into Construction Fund..................................................................
32
• Section
603.
Disbursements from Construction Fund ........................................................
32
Section
604.
Balance in Construction Fund........................................................................
33
ARTICLE VII
INVESTMENTS
Section
701.
Investment of Moneys....................................................................................
34
Section
702.
Investment Earnings.......................................................................................
34
Section
703.
Valuation of Funds.........................................................................................
34
Section
704.
Responsibility of Trustee ............. ................. .............. ....
........ A ... 6.... ........ A..... 35
ARTICLE VIII
DISCHARGE OF LIEN
Section 801. Discharge of Lien........................................................................................... 35
Section 802. Bonds Deemed Paid.......................................................................................35
Section 803. Non -Presentment of Bonds............................................................................ 36
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 901. Events of Default........................................................................................... 36
Section902. Acceleration................................................................................................... 37
Section 903. Other Remedies; Rights of Bondholders....................................................... 37
Section 904. Right of Bondholders to Direct Proceedings ................................................. 38
Section 905. Appointment of Receiver............................................................................... 38
Section906. Waiver............................................................................................................ 38
Section 907. Application of Moneys.................................................................................. 38
Section 908. Remedies Vested in Trustee........................................................................... 39
Section 909. Rights and Remedies of Bondholders............................................................ 39
Section 910. Termination of Proceedings........................................................................... 40
Section 911. Waivers of Events of Default......................................................................... 40
ARTICLE X
TRUSTEE AND PAYING AGENTS
Section
1001.
Acceptance of Trusts......................................................................................
41
Section
1002.
Fees, Charges and Expenses of Trustee and Paying Agents;
Trustee's
PriorLien
43
.......................................................................................................
Section
1003..
Additional Duties of Trustee..........................................................................
43
Section
1004.
Notice to Bondholders of Default
Section
1005.
..................................................................44
Intervention by Trustee.............................................•--..................................
44
Section
1006.
Merger or Consolidation of Trustee...............................................................44
10-32371.04
iii
Section 1007.
Section 1008.
Section 1009.
Section 1010.
Section 1011.
Section 1012.
Section 1013.
Resignation by Trustee ................................................
Removal of Trustee ......................................................
Appointment of Successor Trustee ..............................
Concerning Any Successor Trustee .............................
Reliance Upon Instruments ..........................................
Appointment of Co -Trustee .........................................
Designation and Succession of Paying Agents............
ARTICLE XI
SUPPLEMENTAL INDENTURES
.............4...........4...... 45
.........................0.0.... 45
........A....................... 45
........ A ....................... 45
................................ 45
................................ 46
...0............................ 46
Section 1101. Supplemental Indentures Not Requiring Consent of Bondholders ................ 47
Section 1102. Supplemental Indentures Requiring Consent of Bondholders ....................... 48
Section 1103. Effect of Supplemental Indentures................................................................. 48
ARTICLE XII
FINANCIAL GUARANTY INSURANCE POLICY
Section 1201. Consent of Ambac Assurance........................................................................ 49
Section 1202. Notices/Information to be Given to Ambac Assurance.................................49
Section 1203. Payment Procedure........................................................................................ 50
Section 1204. Trustee -Related Provisions............................................................................ 52
Section 1205. Interested Parties............................................................................................ 52
I4:i11["*44111
MISCELLANEOUS
Section
1301.
Consents, etc. of Bondholders.......................................................................
53
Section1302.
Notices...........................................................................................................
53
Section
1303.
Limitation of Rights.......................................................................................
54
Section1304.
Severability.....................................................................................................54
Section
1305.
Applicable Provisions of Law......................................................0..0...........0..
54
Section1306.
Counterparts...................................................................................................54
Section
1307.
Successors and Assigns...........................................................................4......
54
Section1308.
Captions.........................................................................................................
54
Section
1309.
Photocopies and Reproductions.....................................................................
54
Section
1310.
Bonds Owned by the City..............................................................................
54
Exhibit
A
Form of Series 2002A Bond.. ......................
6 .........................................
o .... v. A -I
Exhibit
B
Form of Series 2002B Bond.........................................................................
B-1
10-32371.O4 Iv
W.
TRUST INDENTURE
THIS TRUST INDENTURE dated as of May 1, 2002, by and between the CITY OF
FAYETTEVILLE, ARKANSAS (the "City"), a city of the first class organized under and
existing by virtue of the laws of the State of Arkansas, and BANK OF OKLAHOMA, N.A., as
trustee (the "Trustee"), a banking corporation organized under and existing by virtue of the laws
of the United States of America and having its principal corporate trust office in Tulsa,
Oklahoma;
WITNESSETH:
WHEREAS, the City presently owns a public water and sewer utility system (which
system, together with all capital improvements thereto, is herein collectively called the
"System") serving the residents of the City and its environs; and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & 2001 Supp.) Sections 14-164-401 et
seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time
to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend
the proceeds thereof to finance the costs of acquisition, construction, equipping, improving,
maintaining, operating and repairing the System, and to refund any bonds issued under the Act or
q any bonds issued under other applicable legislation payable from and secured by a pledge of
y" revenues derived from the System; and
WHEREAS, pursuant to the. provisions of Ordinance No. 3829 of the City, adopted and
approved on September 20, 1994,, the City has previously issued its Water and Sewer System
Revenue Bonds, Series 1994 (the "Series 1994 Bonds"), in the original principal amount of
$5,500,000, for the purpose of financing the cost of improvements to the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and
approved on April 20, 1999, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal
amount of $8,365,000, for the purpose of refunding outstanding bonds of the City previously
issued to finance and refinance the cost of improvements to the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4276 of the City, adopted and
approved on October 17, 2000, the City has previously issued its Water and Sewer System
Subordinate Revenue Bonds, Series 2000 (the "Series 2000 Bonds"), in the original principal
amount of $10,000,000, for the purpose of financing the cost of improvements to the System;
and
WHEREAS, in accordance with the provisions of the Act, the City proposes to issue its
Water and Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B
(collectively, the "Series 2002 Bonds"), in the aggregate principal amount of $9,270,000 for the
rpurpose of refunding all of the outstanding Series 1994 Bonds and Series 2000 Bonds,
establishing a debt service reserve for the Series 2002 Bonds, and paying printing, underwriting,
10-32371.04
`:. legal and other expenses incidental to the issuance of the Series 2002 Bonds, such Series 2002
Bonds to be payable solely from and secured by a pledge of the net revenues of the System on a
junior and subordinate basis to the pledge of System net revenues securing the Series 1999
Bonds; and
WHEREAS, the City has further determined to enter into this Indenture to authorize the
issuance of and to secure the Series 2002 Bonds by granting to the Trustee a pledge and
assignment of the interests and other rights herein contained, and certain funds created hereby;
and
WHEREAS, the Series 2002 Bonds are
to be
dated, bear interest, mature and
be subject
to redemption as hereinafter in this Indenture set
forth
in detail; and
WHEREAS, provision is made in this Indenture for the issuance of Additional Bonds
(hereinafter defined) upon compliance with certain conditions set forth herein; and
WHEREAS, the execution and delivery of this Indenture and the issuance of the Series
2002 Bonds have been in all respects duly and validly confirmed, authorized and approved by
Ordinance No. 4381, adopted and approved by the City Council of the City on March 19, 2002;
and
WHEREAS, all things necessary to make the Series 2002 Bonds, when authenticated by
the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of
the City according to the import thereof, and to constitute this Indenture a valid pledge of the Net
Revenues (hereinafter defined) to the payment of the principal of, premium, if any, and interest
on the Series 2002 Bonds, as specified in and in accordance with the provisions hereof, have
been done and performed, and the creation, execution and delivery of this Indenture and the
creation, execution, issuance and delivery of the Series 2002 Bonds, subject to the terms hereof,
have in all respects been duly authorized;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS
INDENTURE WITNESSETH:
That the City, in consideration of the premises and the acceptance by the Trustee of the
trusts hereby created, the issuance of the Financial Guaranty Insurance Policy (hereinafter
defined) by Ambac Assurance (hereinafter defined), and of the purchase and acceptance of the
Series 2002 Bonds by the holders and owners thereof, and the sum of Ten Dollars ($10.00),
lawful money of the United States of America, to it duly paid by the Trustee, at or before the
execution and delivery of these presents, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to secure the payment of the principal of,
premium, if any, and interest on the Series 2002 Bonds and all Additional Bonds (hereinafter
defined) according to their tenor and effect, to secure the reimbursement to Ambac Assurance of
all amounts reimbursable pursuant to the Financial Guaranty Insurance Policy, and to secure the
performance and observance by the City of all the covenants expressed or implied herein and in
t the Bonds, does hereby grant, bargain, sell, convey, mortgage, assign, transfer and pledge unto
the Trustee, and unto its successor or successors in trust, and to them and their assigns forever,
10-32371.04
for the securing of the performance of the obligations of the City hereinafter set forth the
following:
1.
Subject only to (i) the prior pledge thereof and lien thereon securing the Series 1999
Bonds and (ii) the provisions of this Indenture permitting the application thereof for the purposes
and on the terms and conditions set forth herein, the Net Revenues (hereinafter defined),
including particularly the moneys in and pledged to the Bond Fund (hereinafter defined) and the
Debt Service Reserve Fund (hereinafter defined) established by this Indenture, including the
investment earnings thereon, if any.
2.
All moneys, securities and obligations from time to time held by the Trustee under the
terms of this Indenture (except for moneys, securities or obligations deposited with or paid to the
Trustee for the redemption or payment of Bonds which are deemed to have been paid in
accordance with Article VIII hereof), and any and all real and personal property, rights and
interests of every kind and nature from time to time which have been, are hereby, or hereafter
are, by delivery or by writing or transfer of any kind, conveyed, mortgaged, pledged, assigned or
transferred, as and for additional security hereunder, by the City or by any other person, firm or
corporation, or with the written consent of the City, to the Trustee, which is hereby authorized to
1 receive any and all such properties, rights and interests at any time and at all times and to hold
and apply the same subject to the terms hereof.
3.
Arkansas Code Annotated Section 14-164-412 provides that the Indenture may state the
nature and extent of any lien on the System securing the Bonds and, therefore, proceeding under
that authorization, it is hereby determined and stated that:
Subject to the conditions and covenants hereinafter set forth, the owners of the Bonds
shall not have a foreclosable lien on the System but shall have a lien to the full extent necessary
to protect the rights for or pertaining to Trustee receivership and mandamus and the other
covenants, rights, priorities and remedies set forth in this Indenture with respect to the System,
including particularly Article IX hereof. As provided herein, except for Permitted Encumbrances
(hereinafter defined), the City cannot confer a lien, pledge or right on the System which would,
or could, result in any person obtaining a prior lien, pledge or right on the System or the Net
Revenues, or a lien, pledge or right ranking on a parity with any outstanding Bonds issued
hereunder except in accordance with the provisions of this Indenture pertaining to Additional
Bonds (hereinafter defined) and except for the prior pledge and lien securing the Series 1999
Bonds.
TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby
conveyed and assigned, or agreed or intended so to be, to the Trustee and its successors in said
trusts and to them and their assigns forever;
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IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal
and proportionate benefit, security and protection of all owners of the said Bonds issued under
and secured by this Indenture without privilege, priority or distinction as to lien or otherwise of
any of the Bonds over any of the other Bonds; provided, however, that if the City, its successors
or assigns, shall well and truly pay, or cause to be paid, the principal of, premium, if any, and
interest due on the Bonds, at the times and in the manner provided in the Bonds, according to the
true intent and meaning thereof, and shall make the payments as required under this Indenture or
shall provide, as permitted hereby, for the payment thereof by depositing or causing to be
deposited with the Trustee the entire amount due or to become due thereon, and shall well and
truly keep, perform and observe all of the covenants and conditions pursuant to the terms of this
Indenture to be kept, and shall pay to the Trustee all sums of money due or to become due to it in
accordance with the terms and provisions hereof, and shall pay all amounts due to Ambac
Assurance by way of reimbursement or otherwise, then upon such final payments or deposits this
Indenture and the lien and rights hereby granted shall cease, determine and be void; otherwise,
this Indenture is to be and remain in full force and effect.
THIS INDENTURE FURTHER WITNESSETH that, and it is expressly declared that,
all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all
revenues and income hereby pledged are to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the City has agreed and covenanted, and does hereby agree and
covenant, with the Trustee and with the respective owners from time to time of the Bonds or any
part thereof, as follows, that is to say:
[END OF RECITALS AND GRANTING CLAUSES]
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ARTICLE I
DEFINITIONS
Section 101. Definitions. In addition to the words and terms elsewhere defined in this
Indenture, the following words and terms as used in this Indenture shall have the following
meanings:
"Act" means collectively, Arkansas Code Annotated (1998 Repl. & Supp. 2001) Sections
14-164-401 et seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq., as from time to
time amended.
"Additional Bonds" mean Bonds in addition to the Series 2002 Bonds which are issued
under the provisions of Section 213 of this Indenture.
"Ambac Assurance" means Ambac Assurance Corporation, a Wisconsin -domiciled stock
insurance company.
"Annual Debt Service" means, with respect to all or any particular amount of Bonds,
Series 1999 Bonds or Subordinate Obligations, as the case may be, the Debt Service. for any
particular Fiscal Year required to be paid or set aside during such Fiscal Year, less the amount of
such payment which is provided from the proceeds of the sale of Bonds, Series 1999 Bonds or
Subordinate Obligations or from sources other than Net Revenues.
"Authorizing Ordinance"
means Ordinance No. 4381,
adopted by
the
City on March 19,
2002, which authorized
the issuance of the Series 2002 Bonds
pursuant to
this
Indenture.
"Bond Counsel" means any firm of nationally recognized municipal bond counsel
selected by the City and acceptable to the Trustee.
"Bond Fund" means the fund by that name created and established in Section 502 of this
Indenture.
"Bonds" mean the Series 2002 Bonds and all Additional Bonds issued by the City
pursuant to this Indenture.
"Book -Entry System" means the book -entry system maintained by the Securities
Depository described in Section 217 of this Indenture.
"Budget" means the annual budget to be prepared and filed pursuant to Section 415 of
this Indenture.
"City" means the City of Fayetteville, Arkansas, a municipality and political subdivision
under the laws of the State of Arkansas.
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10-32371.04
"City Clerk" means the person holding the office and performing the duties of the City
• Clerk of the City.
"Closing Date" means, with respect to any series of Bonds, the date upon which there is
an exchange of such series of Bonds for the proceeds representing the purchase price for such
series of Bonds by the original purchaser or purchasers thereof.
"Code" means the Internal Revenue Code of 1986, as from time to time amended, and
applicable regulations issued or proposed thereunder.
"Completion Date" means the date upon which Facilities are first ready for normal
continuous operation or the date upon which damaged Facilities are replaced in normal
continuous operation as determined by a Qualified Engineer.
"Construction Fund" means the fund by that name created and established in Section 601
of this Indenture.
"Continuing Disclosure Agreement" means, collectively, each Continuing Disclosure
Agreement between the City and the Trustee, dated the date of issuance and delivery of a series
of Bonds, as originally executed and as amended from time to time in accordance with the terms
thereof.
^> "Costs of Construction" mean all costs paid or incurred by the City in connection with
acquiring, constructing and equipping of Facilities and placing of the same in operation or the
reconstruction and re -equipping of damaged Facilities and replacing them in operation,
including, without limitation, paying all or a portion of the interest on any series of Bonds issued
for such purpose; paying into the Debt Service Reserve Fund from the proceeds of Bonds all or a
portion of the amount or amounts required to make the amounts therein equal to the Reserve
Requirements with respect to the particular series of Bonds being issued; paying or reimbursing
the City or any fund for expenses of the City incident and properly allocable to such acquisition,
construction, and equipping or reconstruction and re -equipping and the placing or replacing of
the Facilities in operation; and all other expenses incident and properly allocable to the
acquisition, construction, and equipping or the reconstruction and re -equipping of Facilities, the
financing of the same, and the placing of the same in operation.
"Costs of Issuance Fund" means the fund by that name created and established in Section
507 of this Indenture.
"Debt Service" means, with respect to all or any particular amount of Bonds, Series 1999
Bonds or Subordinate Obligations, as the case may be, the total as of any particular date of
computation and for any particular period of the scheduled amount of interest and amortization
of principal payable on such Bonds, Series 1999 Bonds and Subordinate Obligations, excluding
amounts scheduled during such period which relate to principal which has been retired before the
beginning of such period.
c:
"Debt Service Reserve Fund" means the fund by that name created and established in
Section 504 of this Indenture.
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.; ,. "Depository" means a national or state banking corporation or association (which may
include the Trustee and any Paying Agent) which holds membership in the Federal Deposit
Insurance Corporation.
"Escrow Agreement" means the Escrow Deposit Agreement dated May 1, 2002, between
the City and the Escrow Trustee, providing for the redemption of the Series 1994 Bonds and the
Series 2000 Bonds.
"1994 Escrow Fund" means the fund established under the Escrow Agreement for deposit
of moneys and investment securities to be held for redemption of the Series 1994 Bonds.
"2000 Escrow Fund"
means the
fund
established under the Escrow Agreement for deposit
of moneys and/or investment
securities
to be
held for redemption of the Series 2000 Bonds.
"Escrow Trustee" means Bank of Oklahoma, N.A., in its capacity as escrow trustee under
the Escrow Agreement.
"Event of Default" means any event of default specified in Section 901 hereof.
"Facilities" mean land, buildings, structures, machinery, equipment and all related or
necessary property, tangible or intangible, constituting the System, including, but not limited to,
consumables, rights, easements, franchises, and common facilities (being facilities used in
common by the City in the fumishing of water or sewer services) which are used or useful in the
W collection, storage, distribution, treatment, sale or other use of water or wastewater, and to which
the City has right, title or ownership, in whole or undivided part, and, if in undivided part, then to
the extent of the City's right, title or ownership therein.
"Financial Guaranty Insurance Policy" means the financial guaranty insurance policy
issued by Ambac Assurance insuring the payment when due of the principal of and interest on
the Series 2002 Bonds as provided therein.
"Fiscal Year" means the 12-month period used, at any time, by the City for accounting
purposes with respect to the System, which may be the calendar year.
"Government Securities" means (i) bonds, notes, certificates of indebtedness, treasury
bills or other securities constituting direct obligations of, or obligations on which the full and
timely payment of principal and interest is fully and unconditionally guaranteed by, the United
States of America (including any such securities issued or held in book -entry form on the books
of the Department of Treasury of the United States of America), and (ii) evidences of direct
ownership or proportionate or individual interest in future interest or principal payments on
specified direct obligations of, or obligations on which the full and timely payment of principal
and interest is fully and unconditionally guaranteed by, the United States of America, which
obligations are held by a bank or trust company organized and existing under the laws of the
United States of America or any state thereof in the capacity of custodian in form and substance
satisfactory to the Trustee.
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"Holder" or "bondholder" or "owner of the Bonds" means the registered owner of any
Bond.
"Indenture" means this Trust Indenture dated as of May 1, 2002, between the City and
the Trustee, pursuant to which the Bonds are issued, and any amendments and supplements
hereto.
"Investment Securities" means, if and to the extent the same are at the time legal for
investment of funds held under this Indenture:
(1) Government Securities;
(2) Direct obligations of any of the following federal agencies which obligations are not
fully guaranteed by the full faith and credit of the United States of America:
— Senior debt obligations issued by the Federal National Mortgage
Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC).
— Obligations of the Resolution Funding Corporation (REFCORP).
— Senior debt obligations of the Federal Home Loan Bank System.
— Senior debt obligations of other Government Sponsored Agencies
approved by Ambac Assurance;
(3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances
with domestic commercial banks which have a rating on their short term certificates
of deposit on the date of purchase of "P-l" by Moody's and "A-l" or "A-l+" by
S&P and maturing no more than 360 calendar days after the date of purchase.
(Ratings on holding companies are not considered as the rating of the bank.);
(4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by
S&P;
(5) Pre -refunded Municipal Obligations defined as follows: any bonds or other
obligations of any state of the United States of America or of any agency,
instrumentality or local govemmentalunit of any such state which are not callable at
the option of the obligor prior to maturity or as to which irrevocable instructions
have been given by the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrow account or fund (the
"escrow"), in the highest rating category of Moody's or S&P or any
successors thereto; or
(B) (i) which are fully secured as to principal and interest and redemption
premium, if any, by an escrow consisting only of cash or obligations
described in paragraph A(2) above, which escrow may be applied only to the
ye, payment of such principal of and interest and redemption premium, if any,
on such Obligations or other obligations on the maturity date or dates thereof
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10-32371.04
.' or the specified redemption date or dates pursuant to such irrevocable
instructions, as appropriate, and (ii) which escrow is sufficient, as verified by
a nationally recognized independent certified public accountant, to pay
principal of and interest and redemption premium, if any, on the bonds or
other obligations described in this paragraph on the maturity date or dates
specified in the irrevocable instructions referred to above, as appropriate;
(6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a
rating of at least "A2/A" or higher by both Moody's and S&P.
(7) Investment agreements approved in writing by Ambac Assurance (supported by
appropriate opinions of counsel); and
(8) Other forms of investments (including repurchase agreements) approved in writing
by Ambac Assurance.
"Mayor" means the person holding the office and performing the duties of the Mayor of
the City.
"Moody's" means Moody's Investors Service, Inc., and any successor thereto.
"Net Revenues" means, for any period, Revenues less Operation and Maintenance
Expenses.
"Operation and Maintenance 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 there shall not be included (i) any allowance for depreciation,
(ii) any deposits or transfers to the credit of (a) the Bond Fund or to any fund or account created
for the payment of debt service on the Series 1999 Bonds or any Subordinate Obligations, (b) the
Debt Service Reserve Fund or any debt service reserve fund or account created in connection
with the Series 1999 Bonds or any Subordinate Obligations, or (c) the Renewal and Replacement
Fund, or (iii) any payments with respect to obligations not payable in whole or in part under any
circumstances from Revenues. Operating Expenses shall specifically include obligations of the
City to the Beaver Water District of Benton and Washington Counties, Arkansas.
"Operation and Maintenance Fund" means the fund by that name confirmed and
described in Section 502 of this Indenture.
"Original Purchaser" means the first purchaser(s) of a series of Bonds from the City.
"Outstanding" means, when used with reference to the Bonds, as of any particular date,
the aggregate of all Bonds authenticated and delivered under this Indenture except:
(a) Bonds cancelled at or prior to such date or delivered to or acquired by the
Trustee at or prior to such date for cancellation;
I0-32371.04
(b) Bonds deemed to be paid in accordance with Article VIII of this
Indenture; and
(c)
Bonds in
lieu
of or in exchange or substitution for which other Bonds shall
have been
authenticated
and
delivered pursuant to this Indenture.
Notwithstanding the provisions of (a), (b) and (c), Series 2002 Bonds, the principal of
and/or interest on which has been paid by Ambac Assurance pursuant to the Financial Guaranty
Insurance Policy, shall be deemed to remain Outstanding for all purposes.
"Participants" means those financial institutions for whom the Securities Depository
effects book -entry transfers and pledges of securities deposited with the Securities Depository in
the Book -Entry System, as such listing of Participants exists at the time of such reference.
"Paying Agent" means any bank or trust company named by the City as the place at
which the principal of and premium, if any, and interest on the Bonds are payable.
"Permitted Encumbrances" mean (i) any mortgage lien for the security of the Bonds or
the Series 1999 Bonds; (ii) liens for taxes, assessments and other governmental charges not then
delinquent or which can be paid without penalty, (iii) unfiled, inchoate mechanics' and
materialmen's liens, (iv) workmen's, repairmen's, warehousemen's, and carriers' liens and
others similar liens, if any, arising in the ordinary course of business, and (v) any easements,
restrictions, mineral, oil, gas and mining rights and reservations, zoning laws and defects in title
ti;i or other encumbrances to which Facilities may be subject because of their acquisition,
construction and installation as part of the System.
"Person" means any natural person, firm, association, corporation, limited liability
company, partnership, joint stock company, joint venture, trust, unincorporated organization or
firm, or a government or any agency or political subdivision thereof or other public body..
"Qualified Accountant" means an independent certified public accountant or firm of
independent certified public accountants not in the regular employ of the City.
"Qualified Engineer" means an independent consulting engineer or firm of independent
consulting engineers not in the regular employ of the City.
"Rating Agency" means Moody's Investors Service, Inc., Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc., or Fitch, Inc., and their respective
successor and assigns. If any such corporation ceases to act as a securities rating agency, the
City may appoint any nationally recognized securities rating agency as a replacement.
"Rebate Fund" means the fund by that name created and established in Section 508 of
this Indenture.
"Record Date" means with respect to any interest payment date of the Bonds, the first day
of the calendar month in which such interest payment date falls.
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10-32371.04
"Renewal and Replacement Fund" means the fund by that name confirmed and described
in Section 505 of this Indenture.
"Reserve Requirement" means, at any particular time, an.amount equal to 50% of the
aggregate maximum Annual Debt Service in any Fiscal Year thereafter with respect to
Outstanding Bonds of all series.
"Revenue Fund" means the fund by that name confirmed and described in Section 501 of
this Indenture.
"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. Revenues shall specifically include, but shall not be
limited to, revenues from water sales, sewer service charges, fire protection charges and interest
income on Revenue Fund balances. Notwithstanding the foregoing, 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.
"S&P" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc., and any successor thereto.
1 "Securities Depository" means The Depository Trust Company, New York, New York, or
s" its nominee, and its successors and assigns.
"Series 1994 Bonds"
means
City
of Fayetteville, Arkansas Water and Sewer System
Revenue Bonds, Series 1994,
issued
in the
original aggregate principal amount of $5,500,000, to
be refunded with the proceeds
of the
Series
2002A Bonds.
"Series 1999 Bonds" means City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bonds, Series 1999, issued in the original aggregate principal amount of
$81365,000.
"Series 2000 Bonds" means City of Fayetteville, Arkansas Water and Sewer System
Subordinate Revenue Bonds, Series 2000, issued in the original aggregate principal amount of
$10,000,000, to be refunded with the proceeds of the Series 2002B Bonds.
"Series 2002 Bonds" means, collectively, the Series 2002A Bonds and the Series 2002B
Bonds.
"Series 2002A Bonds" means one of the initial series of Bonds being issued under and
secured by this Indenture in the aggregate principal amount of $2,730,000 for the purpose of
refunding the Series 1994 Bonds.
"Series 2002B Bonds" means one of the initial series of Bonds being issued under and
secured by this Indenture in the aggregate principal amount of $6,540,000 for the purpose of
refunding the Series 2000 Bonds.
IDDT#PIROM
. "Subordinate Obligations" mean debt obligations of the City secured by a pledge of Net
Revenues that is subordinate to the lien thereon securing the payment of the Bonds and the
Series 1999 Bonds, permitted by the provisions of Section 215 of this Indenture.
"System" means the City's combined water and sewer utility system.
"Tax Regulatory Agreement" means with respect to any series of Bonds, that Tax
Regulatory Agreement of the City relating to maintenance of the excludability of interest on such
Bonds from gross income for federal income tax purposes, delivered in connection with the
issuance of such series of Bonds.
"Trustee" means the banking corporation or association designated as Trustee in the
Indenture, and its successor or successors as such Trustee. The original Trustee is Bank of
Oklahoma, N.A., Tulsa, Oklahoma.
"Trust Estate" means the property described in the granting clauses of this Indenture.
Section 102. Use of Words. Words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders. Unless the context
shall otherwise indicate, the words "Bond", "owner", "holder" and "person" shall include the
plural, as well as the singular, number.
ARTICLE II
THE BONDS
Section 201. Security for the Bonds. The Bonds are special and limited obligations of
the City payable as to principal, premium, if any, and interest solely out of the Trust Estate
(including the Net Revenues), which Trust Estate shall be, and the same hereby is, pledged and
charged to such payment in accordance with the provisions of this Indenture, and the Bonds do
not constitute an indebtedness for which the faith and credit of the State of Arkansas or the City
is pledged within the meaning of any Constitutional or statutory limitation. The Bonds shall
never constitute an obligation of or a charge against the general credit or taxing powers of the
City. The Bonds shall be secured by such pledge and charge and by a lien on the Net Revenues
and by the trusts and assignments herein made or made pursuant hereto, all in accordance with
and subject to the conditions and provisions of this Indenture. This pledge, charge and lien shall
be inferior and subordinate to the pledge, charge and lien on the Net Revenues securing the
Series 1999 Bonds and such pledge, charge and lien shall- not prevent the application of such
pledged moneys and revenues for the purposes and on the terms set forth in this Indenture.
The pledge, charge, lien, trusts and assignments made herein and hereby shall be valid
and binding, and shall be deemed continuously perfected from the time of issuance of the Series
2002 Bonds, and the Net Revenues shall thereupon be immediately subject to the pledge, charge,
lien, trust and assignment created hereby upon receipt thereof by or for the City or by the Trustee
or the Paying Agent hereunder, without any physical delivery, segregation thereof or further act,
and such pledge, charge, lien, trust and assignment shall be valid and binding as against all
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10-32371.04
parties having claims of any kind in tort, contract or otherwise against the City, irrespective of
whether such parties have notice thereof.
The Bonds shall be equally and ratably payable and secured hereunder without priority
by reason of date of adoption of this Indenture or any Supplemental Indenture authorizing their
issuance or by reason of their series, number, date, date of issue, execution, authentication or
sale, or otherwise. No Bonds may be issued under the provisions of this Indenture except in
accordance with this Article II.
Section 202. Authorized Amount of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article H. The total principal amount
of Bonds that may be issued is hereby expressly limited to $9,270,000, except as provided in
Section 210 and Section 213 hereof.
Section 203. Details of Series 2002 Bonds. (a) The Series 2002A Bonds (i) shall be
designated "City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue Bonds,
Series 2002A," (ii) shall be in the aggregate principal amount of $2,730,000, (iii) shall be dated
as of May 1, 2002, (iv) shall bear interest from such date at the rates hereinafter provided until
paid, payable semiannually on February 15 and August 15 of each year, commencing August 15,
2002, (v) shall be issued in denominations of $5,000 each, or any integral multiple thereof,
(vi) shall be numbered from R02A-1 upwards in order of issuance according to the records of the
Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this Indenture set forth,
on August 15 in each of the years and in the amounts set forth in the following table, which table
�=' also sets forth the interest rates for the Series 2002A Bonds:
Year
(August 15)
Principal Amount
Interest Rate
2002
$ 85,000
2.00%
2003
410,000
2.35
2004
420,000
3.00
2005
430,000
3.35
2006
445,000
3.60
2007
460,000
3.90
2008
480,000
4.05
(b) The Series 2002B Bonds (i) shall be designated "City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds, Series 2002B," (ii) shall be in the
aggregate principal amount of $6,540,000, (iii) shall be dated as of May 1, 2002, (iv) shall bear
interest from such date at the rates hereinafter provided until paid, payable semiannually on
February 15 and August 15 of each year commencing August 15, 2002, (v) shall be issued in
denominations of $5,000 each, or any integral multiple thereof, (vi) shall be numbered from
R0213-1 upwards in order of issuance according to the records of the Trustee, and (vii) shall
mature, unless sooner redeemed in the manner in this Indenture set forth, on August 15 in each
+= of the years and in the amounts set forth in the following table, which table also sets forth the
interest rates for the Series 2002B Bonds:
l3
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Year
(August 15) Principal Amount Interest Rate
2002 $605,000 2.00%
2003 257000 2.35
2004 253000 3.00
2005 307000 3.35
2006 30,000 3.60
2007 357000 3.90
2008 35,000 4.05
2009 535,000 4.15
2010 555,000 4.30
2011 5805000 4.45
2012 6057000 4.55
2013 6355000 4.65
2014 660,000 4.75
2015 695,000 4.85
2016 7257000 4.90
2017 765,000 4.95
Section 204. Form. The Series 2002 Bonds shall be issued as registered Bonds without
coupons. The Series 2002A Bonds and the Trustee's certificate of authentication to be endorsed
WEDY thereon shall be in substantially the form set forth in Exhibit A hereto, with appropriate
variations, insertions and omissions as permitted or required by this Indenture. The Series 2002B
Bonds and the Trustee's certificate of authentication to be endorsed thereon shall be in
substantially the form set forth in Exhibit B hereto, with appropriate variations, insertions and
omissions as permitted or required by this Indenture.
Section 205. Payment. 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
premium, if any, on the Bonds shall be payable upon surrender thereof at the principal corporate
trust office of the Trustee. Payment of interest on each Bond shall be made by check or draft
mailed to the registered owner of such Bond as of the applicable Record Date at his address as it
appears on the registration books maintained by the Trustee. For purposes of this Indenture,
interest on the Bonds shall be deemed to accrue on the basis of a 360 day year of twelve 30 day
months. So long as the Securities Depository or its nominee is the sole registered owner of the
Bonds, payment of interest thereon shall be made by wire transfer of immediately available
funds by the Paying Agent to the Securities Depository or its nominee. All payments shall be
made in lawful money of the United States of America.
Section 206. Execution. The Bonds shall be executed on behalf of the City by the
manual or facsimile signatures of its Mayor and City Clerk and shall have impressed or
imprinted thereon the seal of the City. A facsimile signature shall have the same force and effect
as if manually signed. In case any officer whose manual signature or a facsimile of whose
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10-32371.04
signature shall appear on the Bonds shall cease to be such officer before the delivery of such
Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all
purposes, the same as if such official had remained in office until delivery.
Section 207. [RESERVED]
Section 208. Authentication. Only such Bonds as shall have endorsed thereon a
certificate of authentication substantially in the form set forth in Exhibit 'A and Exhibit B
attached hereto duly executed by the Trustee shall be entitled to any right or benefit under this
Indenture. No Bond shall be valid and obligatory for any purpose unless and until such
certificate of authentication shall have been duly executed by the Trustee, and such certificate of
the Trustee upon any such Bond shall be conclusive evidence that such Bond has been
authenticated and delivered under this Indenture. The Trustee's certificate of authentication on
any Bond shall be deemed to have been executed if signed by an authorized officer of the
Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on
all of the Bonds issued hereunder.
Section 209. Delivery of the Bonds. The City shall execute and deliver to the Trustee
and the Trustee shall authenticate the Bonds of any series and deliver said Bonds to the original
purchaser or purchasers thereof as may be directed in this Section 209, in Section 213 hereof or
in any supplemental indenture.
(1) Prior to the delivery or original issuance by the Trustee of any authenticated
Bonds of any series, there shall be delivered to the Trustee:
(a) An original executed counterpart of this Indenture or, in the case of
Additional Bonds, a supplemental indenture by and between the City and the Trustee
setting forth the details concerning such Additional Bonds;
(b) A written order to the Trustee by the City to authenticate and deliver the
Bonds to the original purchaser or purchasers thereof upon payment to the Trustee, but
for the account of the City, of a sum specified in such order plus accrued interest thereon,
if any, to the date of delivery;
(c) A copy, duly certified by the City Clerk, of the proceedings of the City
authorizing the issuance of the Bonds;
(d) A written opinion of Bond Counsel approving the legality of the Bonds;
(e) In the case of any series of Additional Bonds, a certificate signed by the
Mayor of the City certifying that (i) the City is not then in default in the performance of
any of the covenants, conditions, agreements or provisions contained in this Indenture,
and (ii) the City is current as to all required deposits at that time in all the funds described
in Article V of this Indenture or hereafter created by supplemental indentures, or if the
City is in default or is not so current, certifying in the case of (i) or (ii) as to that fact and
that upon the application of the proceeds of the sale of such Additional Bonds as
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10-32371.04
provided in the supplemental indenture authorizing the issuance thereof, the City will not
be in default or will be current thereafter; and
(f) In the case of any series of Additional Bonds, a written opinion of Bond
Counsel to the effect that the exemption from federal income tax of the interest on the
Series 1999 Bonds, the Series 2002 Bonds and any Additional Bonds theretofore issued
will not be adversely affected by the issuance of the Additional Bonds being issued.
(2) Simultaneously with the delivery of the Series 2002A Bonds, the Trustee shall
apply the proceeds thereof as follows:
(a)
The amount,
if
any,
received as accrued interest on the Series 2002A
Bonds shall
be deposited in
the
Bond
Fund;
(b)
An amount equal
to $118,276.44,
the proportionate share of the Reserve
Requirement,
shall be deposited
in the
Debt Service Reserve Fund;
(c)
An
amount equal to $2,543,741.80 shall be transferred
to the Escrow
Trustee to
be held
in the 1994 Escrow Fund for redemption of Series 1994
Bonds;
(d) An amount equal to $7,203.54 shall be paid to Ambac Assurance as a
proportionate share of the premium for the Financial Guaranty Insurance Policy;
(e) An amount equal to $23,560.00 shall be deposited in the Costs of Issuance
Fund for payment of Costs of Issuance pursuant to the written direction of the City; and
(f) The balance of said proceeds in the amount of $4,458.22 shall be
deposited in the Bond Fund.
(3) Simultaneously with the delivery of the Series 2002B Bonds, the Trustee shall
apply the proceeds thereof as follows:
(a) The amount, if any, received as accrued interest on the Series 2002B
Bonds shall be deposited in the Bond Fund;
(b) An amount equal to $283,343.56, the proportionate share of the Reserve
Requirement, shall be deposited in the Debt Service Reserve Fund;
(c) An amount equal to $6,098,650.35 shall be transferred to the Escrow
Trustee to be held in the 2000 Escrow Fund for redemption of the Series 2000 Bonds;
(d) An amount equal to $22,517.34 shall be paid to Ambac Assurance as a
proportionate share of the premium for the Financial Guaranty Insurance Policy;
(e) An amount equal to $56,440.00 shall be deposited in the Costs of Issuance
Fund for payment of Costs of Issuance pursuant to the written direction of the City; and
_.
16
10-32371 b4
The balance of said proceeds in the amount of $568.75 shall be deposited
in the Bond Fund.
Section 210. Mutilated, Destroyed or Lost Bonds. In case any Bond issued hereunder
shall become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause
to be executed and the Trustee may authenticate and deliver a new Bond of like series, date,
number, maturity and tenor in exchange and substitution for and upon cancellation of such
mutilated Bond, or in lieu of and in substitution for such Bond destroyed or lost, upon the
holder's paying the reasonable expenses and charges of the City and the Trustee in connection
therewith, and, in the case of a Bond destroyed or lost, filing by the holder with the Trustee
evidence satisfactory to the Trustee that such Bonds were destroyed or lost, and of the holder's
ownership thereof, and furnishing the City and Trustee with indemnity satisfactory to them. The
Trustee is hereby authorized to authenticate any such new Bond. In the event any such Bonds
shall have matured, instead of issuing a new Bond, the City may pay the same without the
surrender thereof. Upon the issuance of a new Bond under this Section 210, the City may
require the payment of a sum sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Section 211.
Registration and Transfer
of Bonds. The City hereby constitutes
and
appoints the Trustee
as Bond registrar of the City,
and as Bond registrar the Trustee shall
keep
books for the registration and for the transfer of the Bonds as provided in this Indenture at the
5 principal corporate trust office of the Trustee. The person in whose name any Bond shall be
registered shall be deemed and regarded as the absolute owner thereof for all purposes and
payment of or on account of the principal of and interest on any such Bond shall be made only to
or upon the order of the registered owner thereof, or the owner's legal representative, and neither
the City, the Trustee nor the Bond registrar shall be affected by any notice to the contrary, but
such registration may be changed as herein provided. All such payments shall be valid and
effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so
paid.
Bonds may be transferred on the books of registration kept by the Trustee by the
registered owner in person or by the owner's duly authorized attorney, upon surrender thereof,
together with a written instrument of transfer duly executed by the registered owner or the
owner's duly authorized attorney. Upon surrender for transfer of any Bond at the principal
corporate office of the Trustee, the City shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Bond or Bonds of the same series and
in the same aggregate principal amount and of any authorized denomination or denominations.
Bonds may be exchanged at the principal corporate trust office of the Trustee for an equal
aggregate principal amount of Bonds of any other authorized denomination or denominations of
the same series with corresponding maturities. The City shall execute and the Trustee shall
authenticate and deliver Bonds which the bondholder making the exchange is entitled to receive,
bearing numbers not contemporaneously then outstanding. The execution by the City of any
Bond of any denomination shall constitute full and due authorization of such denomination and
the Trustee shall thereby be authorized to authenticate and deliver such Bond.
17
10-32371.04
Such transfers of registration or exchanges of Bonds shall be without charge to the
holders of such Bonds, but any taxes or other governmental charges required to be paid with
respect to the same shall be paid by the holder of the Bond requesting such transfer or exchange
as a condition precedent to the exercise of such privilege.
The Trustee shall not be required to transfer or exchange any Bond during the period
from and including a Record Date to the next succeeding interest payment date of such Bond nor
to transfer or exchange any Bond after the mailing of notice calling such Bond for redemption
has been made, and prior to such redemption.
If the Securities Depository or its nominee is the sole registered owner of the Bonds,
transfers of ownership and exchanges shall be effected on the records of the Securities
Depository and its Participants pursuant to rules and procedures established by the Securities
Depository and its Participants. In such case, the Trustee shall deal with the Securities
Depository as representative of the beneficial owners of the Bonds for purposes of exercising the
rights of Bondholders hereunder, and the rights of the beneficial owners of such Bonds held by
the Securities Depository or its nominee shall be limited to those established by law and
agreements between such beneficial owners and the Securities Depository and its Participants.
Requests, consents and directions from, and votes of, the Securities Depository or its nominee as
representative shall not be deemed inconsistent if they are made with respect to different
Participants or beneficial owners.
z Section 212. Cancellation. All Bonds surrendered for payment, redemption, transfer or
' exchange, if surrendered to the Trustee, shall be promptly cancelled by it, and, if surrendered to
any person other than the Trustee, shall be delivered to the Trustee and, if not already cancelled,
shall be promptly cancelled by it. The City may at any time deliver to the Trustee for
cancellation any Bonds previously authenticated and delivered hereunder, which the City may
have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled
by the Trustee. All cancelled Bonds held by the Trustee shall be disposed of as directed by the
City. Whenever in this Indenture provision is made for the cancellation by the Trustee and the
delivery to the City of any Bonds, the Trustee may, upon the written request of the City, in lieu
of such cancellation and delivery, destroy such Bonds in the presence of any officer of the City
(but only if the City shall so require), and deliver a certificate of such destruction to the City.
Section 213. Additional Bonds. The City may issue from time to time one or more
series of Additional Bonds for the purpose of (i) financing Costs of Construction in connection
with the acquisition, construction or equipping of Facilities, (ii) refunding the Series 1999 Bonds,
the Series 2002 Bonds or any series of Additional Bonds or Subordinate Obligations, in whole or
in part, or (iii) any combination thereof. Additional Bonds shall be secured equally and ratably
with the Series 2002 Bonds and any other series of Additional Bonds theretofore issued and then
Outstanding, except insofar as any terms or conditions of redemption or purchase established
under this Indenture may afford additional benefit or security for the Bonds of any particular
series. Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the
items required for the issuance of Bonds by Section 209 hereof, plus a statement by a Qualified
4' Accountant reciting the opinion, based upon necessary investigation, that the Net Revenues of
the System for the Fiscal Year immediately preceding the Fiscal Year in which such Additional
18
10-323371.04
Bonds are to be issued were not less than (i) 130% of the average Annual Debt Service on all
then outstanding Bonds, Series 1999 Bonds and Subordinate Obligations, plus the Additional
Bonds then proposed to be issued, (ii) the amount, if any, needed to make required deposits to
the Debt Service Reserve Fund and any debt service reserve funds with respect to the
Series 1999 Bonds and Subordinate Obligations, and (iii) the amount, if any, needed to make
required deposits to the Renewal and Replacement Fund.
If any changes have been made, and are in effect on the date of issuance of the Additional
Bonds, in any rates and charges imposed by the City for System services which were not in
effect during the entire preceding Fiscal Year, the Qualified Accountant may, if such changes
resulted in increases in such rates and charges, and shall, if such changes resulted in reductions in
such rates and changes, adjust the Net Revenues for the preceding Fiscal Year to reflect any
changes in such Net Revenues which would have occurred if the changed rates and changes had
been in effect during the entire preceding Fiscal Year.
Notwithstanding
anything herein to the
contrary,
no Additional Bonds shall be issued
unless there is no default
at the time of issuance
under this
Indenture.
Section 214. Superior Obligations Prohibited. Except to the extent permitted in
Section 213 hereof for the issuance of Additional Bonds, from and after the issuance of any of
the Bonds and for so long as any of the Bonds are Outstanding, the City shall not create or permit
the creation of any indebtedness, or issue any bonds, notes, warrants, certificates or other
obligations or evidences of indebtedness payable in any manner from the Revenues or Net
Revenues or otherwise from the Trust Estate which (i) will in any way be superior to or rank on a
parity with the Bonds, or (ii) will in any way be secured by a lien and charge on the Revenues or
Net Revenues or on the moneys deposited in or to be deposited in the Revenue Fund, prior to or
equal with the lien, pledge and charge created herein for the security of the Bonds, or (iii) will be
payable prior to or equal with the payments to be made from the Revenues and the Revenue
Fund into the Bond Fund and Debt Service Reserve Fund or from said Bond Fund and Debt
Service Reserve Fund for the payment of the Bonds. The City hereby specifically covenants not
to issue any additional indebtedness secured on a parity basis with the Series 1999 Bonds.
Section 215. Subordinate Obligations. Nothing in this Indenture shall prevent the City
from authorizing and issuing bonds, notes, bond anticipation notes, warrants, certificates or other
obligations or evidences of indebtedness, the payment of the principal of and premium, if any,
and interest on which shall be made from Revenues or Net Revenues or from a special fund to be
established and maintained from Revenues or Net Revenues, provided payments from Revenues
or Net Revenues or from Revenues or Net Revenues into such special fund, and the lien and
charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien,
pledge and charge created herein for the security and payment of the Bonds and other payments
under this Indenture, including, without limitation, the following payments out of Revenues
specified by this Indenture: (i) payments of Operation and Maintenance Expenses; (ii) payments
into the Bond Fund; (iii) payments into the Debt Service Reserve Fund; and (iv) payments into
ANO the Renewal and Replacement Fund.
19
10-32371.04
Notwithstanding anything herein to the contrary, no Subordinate Obligations shall be
issued unless there is no default at the time of issuance under this Indenture.
Section 216. Temporary Bonds. Until Bonds in definitive form are ready for delivery,
the City may execute, and upon the request of the City, the Trustee shall authenticate and deliver,
subject to the provisions, limitations and conditions set forth herein, one or more Bonds in
temporary form, whether printed, typewritten, lithographed or otherwise produced, substantially
in the form of the definitive Bonds, with appropriate omissions, variations and insertions, and in
authorized denominations. Until exchanged for Bonds in definitive form, such Bond in
temporary form shall be entitled to the lien and benefit of this Indenture. Upon the presentation
and surrender of any Bond or Bonds in temporary form, the City shall, without unreasonable
delay, prepare, execute and deliver to the Trustee and the Trustee shall authenticate and deliver,
in exchange therefor, a Bond or Bonds in definitive form. Such exchange shall be made by the
Trustee without making any charge therefor to the holder of such Bond in temporary form.
Section 217. Book -Entry Bonds; Securities Depository. The Bonds shall initially be
registered to Cede & Co., the nominee for The Depository Trust Company, New York, New York'
(the "Securities Depository"), and no beneficial owner will receive certificates representing their
respective interests in the Bonds, except in the event the Trustee issues replacement bonds as
provided in this Section 217. It is anticipated that during the term of the Bonds, the Securities
Depository will make book -entry transfers among its Participants and receive and transmit
payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and
unless the Trustee authenticates and delivers replacement bonds to the beneficial owners as
I:
described in the following paragraph.
If the City or the Trustee determines (A) that the Securities Depository is unable to
properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified
to act as a securities depository and registered clearing agency under the Securities and Exchange
Act of 1934, as amended, or (C) that the continuation of a Book -Entry System to the exclusion of
any Bonds being issued to any bondholder other than Cede & Co. is no longer in the best
interests of the beneficial owners of the Bonds, or (2) if the Trustee receives written notice from
Participants representing interests in not less than 50% of the Bonds Outstanding, as shown on
the records of the Securities Depository (and certified to such effect by the Securities
Depository), that the continuation of a Book -Entry System to the exclusion of any Bonds being
issued to any bondholder other than Cede & Co. is no longer in the best interests of the beneficial
owners of the Bonds, then the Trustee shall notify the bondholders of such determination or such
notice and of the availability of certificates to bondholders requesting the same, and the Trustee
shall register in the name of and authenticate and deliver replacement bonds to the beneficial
owners or their nominees in principal amounts representing the interest of each; provided, that in
the case of a determination under (A) or (B) of this paragraph, the City or the Trustee may select
a successor securities depository in accordance with the following paragraph to effect book -entry
transfers. In such event, all references to the Securities Depository herein shall relate to the
period of time when the Securities Depository has possession of at least one Bond. Upon the
�a issuance of replacement bonds, all references herein to obligations imposed upon or to be
performed by the Securities Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such replacement bonds. If the Securities
20
10-32371.04
Depository resigns and the City, the Trustee or bondholders are unable to locate a qualified
successor of the Securities Depository in accordance with the following paragraph, then the
Trustee shall authenticate and cause delivery of replacement bonds to bondholders, as provided
herein. The Trustee may rely conclusively on information from the Securities Depository and its
Participants as to the names and addresses of the beneficial owners of the Bonds. The cost of
printing, registration, authentication, and delivery of replacement bonds shall be paid for by the
City.
In the event the Securities Depository resigns, is unable to properly discharge its
responsibilities, or is no longer qualified to act as a securities depository and registered clearing
agency under the Securities and Exchange Act of 1934, as amended, the City may appoint a
successor Securities Depository provided the Trustee receives written evidence satisfactory to the
Trustee with respect to the ability of the successor Securities Depository to discharge its
responsibilities. Any such successor Securities Depository shall be a securities depository which
is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or
other applicable statute or regulation that operates a securities depository upon reasonable and
customary terms. The Trustee upon its receipt of a Bond or Bonds for cancellation shall cause
the delivery of Bonds to the successor Securities Depository in appropriate denominations and
form as provided herein.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 301. Redemption of Series 2002 Bonds. The Series 2002 Bonds shall be
subject to redemption prior to maturity as follows:
(a) The Series 2002A Bonds shall not be subject to redemption prior to
maturity.
(b) The Series 2002B Bonds are subject to redemption prior to maturity, at the
option of the City, on and after August 15, 2012, in whole at any time or in part in inverse
order of maturity (and selected by the Trustee by lot within a maturity) on any interest
payment date, from funds from any source, at a redemption price of 100% of the
principal amount of the Series 2002B Bonds being redeemed, plus accrued interest to the
date of redemption.
Section 302. Notice. Notice of the call for any redemption, identifying the Bonds or
portions thereof being called and the date on which they shall be presented for payment, shall be
mailed by the Trustee by first class mail (or, so long as the Securities Depository or its nominee
is the sole registered owner of the Bonds, by any other means acceptable to the Securities
Depository, including facsimile) to the registered owner of each such Bond addressed to such
registered owner at his registered address and placed in the mails not less than thirty (30) nor
more than sixty (60) days prior to the date fixed for redemption; provided, however, that failure
to give such notice by mailing, or any defect therein, shall not affect the validity of any
21
10-32371.O4
proceeding for the redemption of any Bond with respect to which no such failure or defect has
occurred.
Any notice mailed as
provided in this Section
302 shall be
conclusively
presumed to have
been duly given, whether or
not the registered owner
receives the
notice.
Section 303. Selection of Bonds to be Redeemed. If less than all of the Bonds of like
series, maturity, interest rate and otherwise identical payment terms shall be called for
redemption, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by
the Trustee in such manner as the Trustee in its discretion may deem fair and appropriate;
provided, however, that the portion of any Bond of a denomination of larger than the minimum
denomination may be redeemed in the principal amount of such minimum denomination or a
multiple thereof, and that for purposes of selection and redemption, any such Bond of a
denomination larger than the minimum denomination shall be considered to be that number of
separate Bonds of such minimum denomination which is obtained by dividing the principal
amount of such Bond by such minimum denomination. So long as the Securities Depository or
its nominee is the sole registered owner of a series of Bonds, the procedures established by the
Securities Depository shall control with respect to the selection of the particular Bonds of such
series to be redeemed.
Section 304. Surrender of Bonds Upon Redemption. Notice having been given in the
manner and under the conditions hereinabove provided, and moneys for payment of the
''
redemption price being held by the Trustee as provided in this Indenture (i) the Bonds or portions
of Bonds so called for redemption shall, on the date fixed for redemption designated in such
notice, become due and payable at the redemption price provided for redemption of such Bonds,
and interest on such Bonds or portions of Bonds so called for redemption shall cease to accrue,
(ii) upon surrender of the Bonds or portions of Bonds so called for redemption in accordance
with such notice, such Bonds or portions of Bonds shall be paid at the applicable redemption
price, (iii) such Bonds or portions of Bonds shall cease to be entitled to any lien, benefit or
security under this Indenture, and (iv) the owners of said Bonds or portions of Bonds shall have
no rights in respect thereof except to receive payment of the redemption price thereof.
Section 305. Redemption in Part. Any Bond which is to be redeemed only in part shall
be surrendered to the Trustee (with, if the City or the Trustee so requires, due endorsement by, or
a written instrument of transfer in form satisfactory to the City and the Trustee duly executed by,
the owner thereof or his attorney duly authorized in writing), and the appropriate officials of the
City shall execute and the Trustee shall authenticate and deliver to the owner of such Bond,
without service charge, a new Bond or Bonds of the same series, of any authorized denomination
or denominations, having the same maturity and interest rate as requested by such owner, in
aggregate principal amount equal to and in exchange for the unredeemed portion of the principal
of the Bond so surrendered.
Section 306. Redemption of Additional Bonds. Additional Bonds may be made
I
subject to optional, extraordinary and mandatory sinking fund redemption, in whole or in part, in
r such manner, at such times and at such prices as may be provided in the Supplemental Indenture
providing for their issuance.
10-32371.04
ARTICLE IV
GENERAL COVENANTS AND REPRESENTATIONS
Section 401. Payment of Principal, Premium, if any, and Interest. The City
covenants that it will promptly pay or cause to be paid the principal of and premium, if any, and
interest on every Bond issued under this Indenture at the place, on the dates and in the manner
provided herein and in the Bonds according to the true intent and meaning thereof. The
principal, premium, if any, and interest (except interest paid from the proceeds from the sale of
the Bonds and accrued interest) are payable solely from the Trust Estate which is hereby
specifically pledged to the payment thereof in the manner and to the extent herein specified, and
nothing in the Bonds or this Indenture should be considered as assigning or pledging any funds
or assets of the City other than the Trust Estate. Anything in this Indenture to the contrary
notwithstanding, it is understood that whenever the City makes any covenants involving
financial commitments it pledges no funds or assets other than the Trust Estate in the manner and
to the extent herein specified, but nothing herein shall be construed as prohibiting the City from
using any other funds or assets.
1.
Section 402. Performance of Covenants. The City covenants that it will faithfully
perform at all times any and all covenants, undertakings, stipulations and provisions contained in
this Indenture, in any and every Bond executed, authenticated and delivered hereunder, and in all
ordinances pertaining hereto. The City covenants that it is duly authorized under the
Constitution and laws of the State of Arkansas, including particularly and without limitation the
Act, to issue the Bonds authorized hereby and to execute this Indenture and to make the pledge
of Net Revenues and to make the covenants in the manner and to the extent herein set forth, that
all action on its part for the issuance of the Bonds and the execution and delivery of this
Indenture has been duly and effectively taken, and that the Bonds in the hands of the holders and
owners thereof are and will be valid and enforceable obligations of the City according to the
import thereof.
Section 403. Instruments of Further Assurance. The City covenants that it will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered
such indenture or indentures supplemental hereto and such further acts, instruments and transfers
as the Trustee may reasonably require for the better assuring, transferring, mortgaging, pledging,
assigning and confirming unto the Trustee of the Trust Estate.
Section 404. Recordation and Filing. To the extent necessary, the City covenants that
it will cause this Indenture, such security agreements, financing statements, and all supplements
thereto and other instruments as may be required from time to time to be kept, to be recorded and
filed in such manner and in such places as may be required by law in order to fully preserve and
protect the security of the owners of the Bonds and the rights of Trustee hereunder, and to perfect
the security interest created by this Indenture.
Section 405. Inspection of Books. All books and documents in the possession of the
City relating to the System and the Revenues shall at all reasonable times be open to inspection
23
10-3237 L(W
by such accountants or other agencies as the Trustee may from time to time designate and by any
Qualified Engineer and the Qualified Accountant required pursuant to the provisions hereof.
Section 406. Tax Covenants. The City shall not use or permit the use of any Bond
proceeds or any other funds of the City, directly or indirectly, in any manner, and will not take or
permit to be taken any other action or actions which would adversely effect the exclusion of
interest on any Bond from gross income for federal income tax purposes. No part of the
proceeds of the Bonds shall at any time be used, directly or indirectly, to acquire securities or
obligations the acquisition of which would cause any of such Bonds to be an "arbitrage bond" as
defined in Sections 148(a) and (b) of the Code. The City agrees that so long as any of the Bonds
remain Outstanding, it will comply with the provisions of each applicable Tax Regulatory
Agreement.
Section 407. Rates and Charges. The rates charged for services of the System
heretofore fixed by ordinances of the City and the conditions, rights and obligations pertaining
thereto, as set forth in said ordinances, are ratified, confirmed and continued by the Authorizing
Ordinance.
The City covenants that rates for System services will never be reduced
while any
of the
Bonds are Outstanding unless
there is obtained from a
Qualified Accountant a
certificate
to the
effect that Net Revenues, with
the reduced rates, in the
current Fiscal Year will
be at least
equal
to (i) 125% of the average Annual Debt Service on all Bonds, Series 1999 Bonds and
Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt
Service Reserve Fund and any debt service reserve funds with respect to the Series 1999 Bonds
and Subordinate Obligations, and (iii) the amount, if any, needed to make required deposits to
the Renewal and Replacement Fund. The City further covenants that the rates for System
services shall, if and when necessary, from time to time, be increased in such manner as will
produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all
Bonds, Series 1999 Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make
required deposits to the Debt Service Reserve Fund and any debt service reserve funds with
respect to the Series 1999 Bonds and Subordinate Obligations, and (iii) the amount, if any,
needed to make required deposits to the Renewal and Replacement Fund.
Section 408. Taxes, Charges and Assessments. The City covenants that it will
promptly pay all lawful taxes, charges, assessments, imposts and governmental charges at any
time levied or assessed upon or against the System, its Revenues or any part thereof; provided,
however, that nothing contained in this Section 408 shall require the City to cause to be paid any
such taxes, assessments, imposts or charges so long as the validity thereof is being contested in
good faith and by appropriate legal proceedings.
Section 409. Construction of Facilities; Certification of Completion Date. The City
covenants that in the case of each series of Additional Bonds issued to finance Costs of
Construction in connection with the acquisition, construction or equipping of Facilities, it will
n
forthwith proceed to acquire, construct and equip the Facilities for which the Bonds of such
series shall be issued, in accordance with applicable plans and specifications and in conformity
with law and all requirements of all governmental authorities having jurisdiction thereover, and
74
10-32371.04
that it will complete the acquiring, constructing and equipping of such Facilities with all
expedition practicable. Promptly after the Completion Date, the City shall submit to the Trustee
the certificate of a Qualified Engineer which shall specify the Completion Date and shall state
that acquisition, construction and equipping of the Facilities have been completed and the Costs
of Construction have been paid, except for any Costs of Construction which have been incurred
but are not then due and payable, or the liability for the payment of which is being contested or
disputed by the City, and for the payment of which the Trustee is directed to retain specified
amounts of moneys in specified accounts within the Construction Fund. Notwithstanding the
foregoing, such certificate may state that it is given without prejudice to any rights against third
parties which exist at the date thereof or which may subsequently come into being.
Section 410. Encumbrances. The City covenants that it will not create or suffer to be
created any lien or charge upon the System or any part thereof (other than Permitted
Encumbrances) or upon the Revenues, except in accordance with the provisions of this
Indenture, and that, from Revenues, it will pay or cause to be discharged, or will make adequate
provision to satisfy and discharge, within ninety (90) days after the same shall accrue, all lawful
claims and demands for labor, materials, supplies or other objects which, if unpaid, might by law
become a lien upon the System or any part thereof or upon the Revenues; provided, however,
that nothing in this Section 410 contained shall require the City to pay or cause to be discharged,
or make provision for, any such lien or charge so long as the validity thereof shall be contested in
good faith and by appropriate legal proceedings.
1 Section 411. Insurance. 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 of Arkansas to assume the risk
thereof, all properties of the System, other than water storage tanks, mains and lines for the
transmission, distribution or collection of water or wastewater, against loss or damage from fire,
lightning, tornado, winds, strike, malicious damage or 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 Bond Fund and the bond funds for the
Series 1999 Bonds, pro rata, in relation to the then outstanding principal amounts of the Bonds
and the Series 1999 Bonds, 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 Section 506 hereof.
Section 412. Damage or Destruction; Condemnation. The City covenants and agrees
that in the event of damage to or destruction of the System, or if all or any part of the System
shall be taken under the exercise of eminent domain, it will immediately notify the Trustee.
All insurance money paid or net amounts awarded shall be paid to the City, and the City
shall proceed to restore, repair, replace or rebuild the Facilities of the System as nearly as
-'% possible to the condition they were in immediately prior to such damage or condemnation, to the
25
10-32371.04
extent that the same may be feasible, subject to such alterations as the City may elect to make. If
the insurance money or net amounts awarded shall be insufficient to pay all costs of the
restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the
restoration and pay the cost thereof. Any balance of the insurance or condemnation proceeds
remaining over and above the cost of the restoration shall be deposited into the Revenue Fund.
The City's obligations to make all payments set forth herein and to perform all other
covenants and agreements on its part to be performed shall not be affected by any such damage
or destruction or condemnation.
Notwithstanding the foregoing provisions of this Section 412, the City shall not be
required to repair, restore, replace or rebuild the Facilities of the System, or any part thereof, if
the City shall elect to redeem prior to maturity on the next possible redemption date all of the
Bonds and Series 1999 Bonds then Outstanding, together with accrued interest to the redemption
date, and to pay all charges, fees and expenses necessarily incurred and required to be incurred in
connection with such redemption, and all other amounts then owing by the City. In that event,
the proceeds of all insurance or condemnation awards shall be placed in and become part of the
Bond Fund and any bond fund for the Series 1999 Bonds. If there be any deficiency in the
moneys on deposit in the Bond Fund after the deposit of all such proceeds, the City shall
immediately deposit therein the amount of the deficiency.
h Section 413. Revenues To Be Used As Provided In Indenture. The City covenants
that no Revenues will be used for any purpose other than as provided in this Indenture, and that
no contract or contracts will be entered into or any action taken by which the rights of the
Trustee or of the bondholders might be impaired or diminished. The City further covenants that
it will adopt such resolutions and such rules and regulations as may be necessary or appropriate
to carry out the obligations of the City under the provisions of this Indenture and the Act.
Section 414. Accounting; Reports. The City covenants that it will keep the funds and
accounts of the System separate from all other funds and accounts of the City, and that it will
keep accurate records of all items of cost and of all expenditures relating to the System, and of
the collection and application of Revenues, in accordance with generally accepted accounting .
principles. Such records and accounts shall be open to inspection by the Trustee under
reasonable circumstances.
The City further covenants that at the end of each Fiscal Year it will cause an audit to be
made of the books and accounts for that Fiscal Year pertaining to the System by a Qualified
Accountant. Costs of such audits so incurred shall be considered Operation and Maintenance
Expenses.
Section 415. Annual Budget. The City shall prepare an annual Budget for System
operations for each Fiscal Year. A copy of each Budget shall be filed with the Trustee and a
copy shall be maintained in the office of the Administrative Services Director of the City.
" M Section 416. Operation and Maintenance of System; Disposition of System Assets,
"` The City covenants that it will continuously operate the System in a diligent fashion in
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accordance with prudent utility practice and as a revenue -producing undertaking in compliance
with all applicable laws and regulations and all the covenants and obligations under this
Indenture.
The City further covenants that it will maintain the System in sound condition and repair,
that it will not sell or otherwise dispose of any property necessary to the proper operation of the
System or to the maintenance of Revenues, and that it will not enter into any lease or agreement
which will impair or impede the operation of the System or adversely affect the rights of the
bondholders.
Section 417. Continuing Disclosure. The City hereby covenants and agrees that it will
comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Indenture to the contrary, failure of the City or the
Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event
of Default hereunder; however, the Trustee may (and at the request of the Original Purchaser of a
series of Bonds or the owners of at least 25% in aggregate Outstanding principal amount of such
series of Bonds, shall) or any Beneficial Owner may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the City
or the Trustee, as the case may be, to comply with its obligations under this Section 417. For
purposes of this Section 417, `Beneficial Owner" shall mean any Person which (a) has the
power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of,
`K any Bonds (including Persons holding Bonds through nominees, depositories or other
intermediaries) or (b) is treated as the owner of Bonds for federal income tax purposes.
Section 418. Security for the Bonds. (a) This Indenture creates a valid and binding
pledge and assignment of and security interest in the Net Revenues in favor of the Trustee as
security for payment of the Bonds, enforceable by the Trustee in accordance with the terms
hereof.
(b) Under the laws of the State of Arkansas, such pledge, assignment and security
interest, and each pledge, assignment and security interest in the Net Revenues made to secure
the Series 1999 Bonds, is and shall be prior to any judicial lien hereafter imposed on the Net
Revenues to enforce a judgment against the City on a simple contract. By the date of issue of the
Series 2002 Bonds, the City will have filed all financing statements describing, and transferring
such possession or control over, such collateral (and for so long as any Bond is Outstanding, the
City will file, continue and amend all such financing statements, if any, and transfer such
possession and control) as may be necessary to establish and maintain such priority in each
jurisdiction in which the City is organized or in which such collateral may be located or that may
otherwise be applicable pursuant to Article 9 of the Uniform Commercial Code as enacted in the
State of Arkansas.
(c) The City has not heretofore made a pledge of, granted a lien on or security interest
in, or made an assignment or sale of the Net Revenues that ranks on a parity with or prior to the
pledge, assignment and security interest granted hereby, except for the pledge, assignment and
security interest granted to secure the Series 1999 Bonds. The City shall not hereafter make or
±% suffer to exist any pledge or assignment of, lien on, or security interest in the Net Revenues that
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•,_ ranks prior to or on a parity with the pledge, assignment and security interest granted hereby, or
file any financing statement describing any such pledge, assignment, lien or security interest,
except as expressly permitted hereby.
ARTICLE V
FUNDS AND DEPOSITS
Section 501. Revenue Fund. (a) There is hereby confirmed and continued a special
fund in the name of the City, designated as the "Revenue Fund" (the "Revenue Fund"), created
by Ordinance No. 3638 of the City, adopted August 18, 1992.
(b) All Revenues shall, as and when received, be deposited into the Revenue Fund.
All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and
Maintenance Expenses of the System, the payment of Annual Debt Service on the Bonds, the
Series 1999 Bonds, and any Subordinate Obligations, the maintenance of the Debt Service
Reserve Fund and any debt service reserve fund for the Series 1999 Bonds and any Subordinate
Obligations, and the providing of the Renewal and Replacement Fund, in the order, at the times
and in the amounts set forth below.
Section 502. Operation and Maintenance Fund. (a) There is hereby confirmed and
continued a special fund in the name of the City, designated "Operation and Maintenance Fund"
(the "Operation and Maintenance Fund"), created by Ordinance No. 3638 of the City, adopted
August 18, 1992.
(b) Prior to making the required payments into the bond funds and debt service
reserve funds with respect to the Series 1999 Bonds, into the Bond Fund and Debt Service
Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate
Obligations, and into the Renewal and Replacement Fund, there shall be paid from the Revenue
Fund into the Operation and Maintenance Fund, not later than the fifth business day preceding
the fifteenth day in each month while any of the Bonds shall be Outstanding, an amount
sufficient to cause amounts on deposit therein to equal projected Operation and Maintenance
Expenses for the next two succeeding months (as shown by the Budget of proposed Operation
and Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall
be made only for those purposes. Fixed annual charges such as insurance premiums and the cost
of major repair and maintenance expenses may be computed and set up on an annual basis, and
1/12 of the amount thereof may be paid into the Operation and Maintenance Fund each month.
(c) If in any month for any reason there shall be a failure to transfer and pay the
required amount into the Operation and Maintenance Fund, the amount of any deficiency shall
be added to the amount otherwise required to be transferred and paid into the Operation and
Maintenance Fund in the next succeeding month.
Section 503. Bond Fund. (a) There is hereby created and ordered established with the
Trustee a special fund, in the name of the City, to be designated "Water and Sewer System
Revenue Bond Fund" (the "Bond Fund").
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• (b) Immediately following the making of the required deposits into the Operation and
Maintenance Fund and into the bond funds and debt service reserve funds with respect to the
Series 1999 Bonds, there shall be paid from the Revenue Fund into the Bond Fund, beginning on
the fifth business day preceding the fifteenth day of the first month following delivery of the
Series 2002 Bonds (unless delivery of the Series 2002 Bonds occurs on or prior to the fifth
business day preceding the fifteenth day in a given month, in which case the date of
commencement shall be the fifth business day preceding the fifteenth day of the month of
delivery of the Series 2002 Bonds), and continuing not later than the fifth business day preceding
the fifteenth day of each month thereafter until all outstanding Bonds with interest thereon have
been paid in full, or provision made for such payment, a sum equal to (i) 1/6 of the installment of
interest coming due on the Bonds (whether at maturity, upon mandatory redemption, or
otherwise) during the then next six (6) months, and (ii) 1/12 of the installment of principal
coming due on the Bonds (whether at maturity, upon mandatory redemption, or otherwise)
during the then next twelve (12) months, (provided, however, that the first payments hereunder
into the Bond Fund with respect to a series of Bonds shall be prorated from the date of issuance
of such series of Bonds and subsequent payment obligations shall be reduced to the extent of
investment earnings and other moneys credited to the Bond Fund from sources other than
monthly payments). All moneys in the Bond Fund shall be used solely for the purpose of paying
Annual Debt Service on the Bonds or for any redemption of the Bonds, except as herein
specifically provided. The Trustee shall withdraw from the Bond Fund, on the date of any
principal or interest payment, an amount equal to the amount of such payment for the sole
purpose of paying the same, which direction the Trustee hereby accepts.
(c) If the Revenues are insufficient to make the required payment into the Bond Fund,
the amount of any such deficiency in the payment made shall be added to the amount otherwise
required to be paid into the Bond Fund not later than the fifth business day preceding the
fifteenth day of the next succeeding month.
(d) When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall
be and remain sufficient to pay in full the principal of and premium, if any, and interest on all
Bonds then Outstanding, there shall be no obligation to make further payments into the Bond
Fund.
Section 504. Debt Service Reserve Fund. (a) There is hereby created and ordered
established with the Trustee a special fund, in the name of the City, to be designated "Water and
Sewer System Revenue Bond Debt Service Reserve Fund" (the "Debt Service Reserve Fund").
(b) Except as provided below, from the proceeds of sale of each series of Bonds there
shall be deposited into the Debt Service Reserve Fund that amount which, together with the
amounts then on deposit therein, will be equal to the Reserve Requirement with respect to all
Outstanding Bonds.
If the amount in the Debt Service Reserve Fund is reduced below the Reserve
Requirement, it shall be reimbursed to the Reserve Requirement through monthly payments,
beginning not later than the fifth business day preceding the fifteenth day of the month
immediately following the month in which the Debt Service Reserve Fund was reduced below
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•. the Reserve Requirement, and continuing not later than the fifth business day preceding the
fifteenth day of each month thereafter until such reimbursement shall have been accomplished,
from any funds in the Revenue Fund (after making the required deposits into Operation and
Maintenance Fund and into the Bond Fund and the bond funds and debt service reserve funds
with respect to the Series 1999 Bonds), in an amount equal to 1/12 of the Reserve Requirement
deficiency. If a surplus shall exist in the Debt Service Reserve Fund over and above the Reserve
Requirement, such surplus shall be deposited into the Bond Fund.
(c) The amount on deposit in the Debt Service Reserve Fund (i) shall be used to the
extent necessary to prevent a default in the payment of Annual Debt Service on the Bonds and
Trustee's and Paying Agent's fees and (ii) may be used, together with other available funds, to
provide for the payment at maturity or to redeem prior to maturity all, but not less than all, of the
Outstanding Bonds.
Section 505. Renewal and Replacement Fund. (a) There is hereby confirmed and
continued a special fund in the name.of the City, designated "Renewal and Replacement Fund"
(the "Renewal and Replacement Fund"), created by Ordinance No. 3638 of the City, adopted
August 18, 1992.
(b) After making the required payments into the Operation and Maintenance Fund,
into the bond fund and debt service reserve fund with respect to the Series 1999 Bonds, into the
Bond Fund and the Debt Service Reserve Fund, and into the bond funds and debt service reserve
funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund
into the Renewal and Replacement Fund not later than the fifth business day preceding the
fifteenth day of each month while any of the Bonds are Outstanding, an amount sufficient to
cause the amount on deposit therein to equal $300,000 or such greater amount as the City may
determine from time to time is appropriate, provided that the amount to be deposited in any
month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in
the Renewal and Replacement Fund shall be used solely for the purpose of paying the costs of
necessary repairs or replacements due to 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 506. Surplus. Any surplus in the Revenue Fund after making all disbursements
and providing for all funds described above may be used, at the option of the City, for any lawful
purpose.
Section 507. Costs of Issuance Fund. (a) There is hereby created and ordered to be
established with the Trustee, a special fund, in the name of the City, to be designated "Water and
Sewer System Revenue Bond Costs of Issuance Fund" (the "Costs of Issuance Fund").
(b) That portion of the proceeds from the issuance and sale of a series of Bonds as
shall be specified in Section 209 hereof and such other amounts as shall be delivered by the City
for deposit therein shall be deposited into the Costs of Issuance Fund.
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•, (c) Moneys at any time held in the Costs of Issuance Fund shall be used for and
applied solely to pay costs of issuance of the Bonds, including consultants, legal and financial
advisory fees and expenses.
(d) Payments from the Costs of Issuance Fund shall be made by the Trustee, upon
receipt of written authorization, signed by the Mayor or Administrative Services Director of the
City. Upon receipt of each such authorization, the Trustee shall pay each such item directly to
the person or party entitled thereto as named in such authorization, or, if directed by the City,
shall deliver to the City a check, draft or warrant in an amount sufficient for the payment thereof.
(e) Upon delivery of a certificate of the Mayor or Administrative Services Director of
the City stating that all costs of issuance of the series of Bonds from which moneys in the Costs
of Issuance Fund was derived have been paid, the Trustee shall transfer the balance of moneys in
the Costs of Issuance Fund to the Bond Fund for use in payment of interest on the related series
of Bonds on the next interest payment date and the Costs of Issuance Fund shall be closed.
Section 508. Rebate Fund. (a) There is hereby created and ordered to be established
with the Trustee, a special fund, in the name of the City, to be designated "Water and Sewer
System Revenue Bond Rebate Fund" (the "Rebate Fund"), which fund is not pledged to the
payment of any Bonds.
(b) There shall be deposited in the Rebate Fund the amount of all income or gain on
moneys deposited in any of the funds and accounts established by this Indenture which is
required to be rebated to the United States and is designated for deposit therein, as calculated by
the City to be owing to the United States pursuant to the Tax Regulatory Agreement, which shall
be delivered by the City concurrently with the issuance of a series of Bonds.
(c) The Trustee, upon receipt of written instructions from the Mayor or
Administrative Services Director of the City, shall pay to the United States out of amounts in the
Rebate Fund such amounts as are required pursuant to the Tax Regulatory Agreement.
(d) Any moneys remaining in the Rebate Fund after payment to the United States,
within sixty (60) days after the date on which the last Bond is redeemed, of one hundred percent
(1001/6) of the rebate amount as described in Section 148(f)(2) of the Code, shall be transferred to
the Revenue Fund.
Section 509. Separate Accounts Authorized. A Supplemental Indenture authorizing
the issuance of Additional Bonds may provide for the creation of separate accounts within the
Bond Fund, Debt Service Reserve Fund, Construction Fund, Costs of Issuance Fund and Rebate
Fund for such series of Bonds and such other accounts as the City may direct; provided, that the
creation of such separate accounts shall be solely for the ease of administration and shall in no
event affect the equal and ratable security of the Bonds of each series.
If any Supplemental Indenture authorizing the issuance of Additional Bonds provides for
the establishment of separate accounts for a series of Bonds, then such Supplemental Indenture
shall require that the Revenues received by the City shall be deposited pursuant to written
direction of the City into each of the accounts within the Bond Fund and Debt Service Reserve
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Fund for each series of Bonds on the basis of the installments of principal, premium, if any, and
interest on each series of Bonds and the amounts required to be deposited in the accounts within
the Debt Service Reserve Fund during the applicable period, to the end that the Bonds of each
series shall be equally and ratable secured by the Revenues.
Any Supplemental Indenture authorizing the issuance of Additional Bonds may provide
that any proceeds of such series of Bonds and investment earnings thereon remaining after some
specified date, or after the construction of all Facilities to be financed with the proceeds of such
series of Bonds, shall be applied to the redemption of such series of Bonds.
ARTICLE VI
CUSTODY AND APPLICATION OF PROCEEDS OF BONDS
Section 601. Creation of Construction Fund. There is hereby created and ordered to
be established with the Trustee a special fund, in the name of the City, to be designated "Water
and Sewer System Revenue Bond Construction Fund" (the "Construction Fund").
Section 602. Payments into Construction Fund. The proceeds from the issuance and
sale of each series of Additional Bonds issued to finance the acquisition, construction or
equipping of Facilities shall be deposited into the Construction Fund, except as follows:
l (a) There shall be deposited into the Bond Fund (i) the accrued interest, if
any, on such Bonds to the date of delivery thereof paid by the Original Purchaser or
Purchasers thereof, and (ii) the future interest to be paid on such Bonds from the proceeds
thereof as specified in delivery instructions from the City to the Trustee on the Closing
Date;
(b) There shall be deposited into the Debt Service Reserve Fund the amount
required by Section 504 hereof,
(c) There shall be deposited in the Costs of Issuance Fund the amount
specified in delivery instructions from the City to the Trustee on the Closing Date to be
necessary to pay the costs of issuance of the series of Bonds issued and delivered on that
date; and
(d) Proceeds of Bonds issued for refunding purposes shall be deposited into a
.separate fund or funds with the Trustee or with another banking corporation or
association to be usedfor such purpose as specified in delivery instructions from the City
to the Trustee on the Closing Date.
Section 603. Disbursements from Construction Fund. Moneys in the Construction
Fund shall be disbursed by the Trustee to pay Costs of Construction on the basis of requisitions
signed by the Mayor, the Administrative Services Director or any other person designated to the
Trustee in writing by the Mayor or the Administrative Services Director. Each requisition shall
' specify:
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made;
(a) The name of the person, firm or corporation to whom payment is to be
(b) The amount of the payment;
(c) The purpose of the payment;
(d) That the payment is for a proper Cost of Construction, with a copy of
invoice, statement or other evidence attached as appropriate;
(e) That the disbursement shall not render inaccurate any of the
representations or covenants with respect thereto contained in this Indenture; and
(f) That the requisition has not been the basis of, any previous disbursement
from the Construction Fund.
The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all
disbursements therefrom and shall file an accounting thereof with the City.
Section 604. Balance in Construction Fund. On the applicable Completion Date, any
balance then remaining in the Construction Fund (except for amounts retained by the Trustee at
the City's direction for Costs of Construction not then due and payable, to remedy defects, or for
seasonal completion) shall be disbursed by the Trustee in payment or reimbursement of any part
of Costs of Construction not theretofore paid or reimbursed to the City. Any portion of the
balance then remaining in the Construction Fund (in excess of amounts, if any, retained by the
Trustee as above provided) shall be segregated by the Trustee for (a) the redemption of Bonds of
the same series of Bonds from which such moneys were derived on or prior to the earliest
redemption date permitted by the Indenture without a premium or penalty in accordance with the
provisions of this Indenture; (b) the payment of a portion of the annual principal due on Bonds of
the same series from which such moneys were derived in years before such Bonds are subject to
redemption, in years when such Bonds are subject to redemption but only in an amount in excess
of the unexpended proceeds of such Bonds, or in years when such Bonds are subject to
redemption but a call premium or penalty is required for early redemption; provided, however,
that the portion of the annual principal payment due on such Bonds that may be paid hereunder
shall not exceed an amount that bears the same ratio to the annual principal due that the total
unexpended proceeds of such Bonds (exclusive of investment earnings) bear to the face amount
of such Bonds; or (c) any other purpose provided that the Trustee is furnished with an opinion of
Bond Counsel to the effect that such use is lawful under the Act and will not adversely affect the
exclusion from federal income taxes of interest on any of the Bonds. Until used for one or more
of the foregoing purposes, such segregated amount may be invested as permitted by this
Indenture but may not be invested, without an opinion of Bond Counsel to the effect that such
investment will not adversely affect the exclusion from federal income taxes of interest on any of
the Bonds, to produce a yield greater than the yield on the Bonds, all in accordance with Section
148 of the Code and the regulations promulgated thereunder.
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• ARTICLE VII
INVESTMENTS
Section 701. Investment of Moneys. At the direction of the City or absent such
direction, the Trustee shall invest moneys in funds or accounts held by the Trustee in Investment
Securities with maturity or redemption dates consistent with the times at which said moneys will
be required for the purposes provided in this Indenture; provided, however, the stated maturity
dates of Investment Securities of Debt Service Reserve Fund moneys shall not exceed five years
from the date of investment therein. Moneys in separate funds or accounts may be commingled
for the purpose of investment. The City may invest moneys held in the Revenue Fund,
Operation and Maintenance Fund and Renewal and Replacement Fund in any investment
obligations permitted by Arkansas law.
Obligations purchased as an investment of moneys in any fund or account created by this
Indenture shall be deemed at all times to be a part of such fund or account, and any income or
loss due to an investment thereof shall be charged to the respective fund or account for which the
investment was made except as otherwise provided in this Indenture.
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 Securities credited to such fund or
account at the price at which such Investment Securities are redeemable by the holders or owners
°s thereof at their option if so redeemable, or, if not so redeemable, at the lesser of (i) the cost of
such Investment Securities minus the amortization of any premium or plus the amortization of
any discount thereon and (ii) the market value of such Investment Securities, provided that
Investment Securities 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 702. Investment Earnings. Subject to the provisions of the Tax Regulatory
Agreement and Article V hereof, Investment Securities purchased with moneys held in or
attributable to any fund or account held by the City or the Trustee under the provisions of this
Indenture shall be deemed at all times to be a part of such fund or account and the income or
interest earned, profits realized or losses suffered by a fund or account due to the investment
thereof shall be retained in, credited or charged, as the case may be, to such fund or account
unless otherwise provided pursuant to this Indenture.
Section 703. Valuation of Funds. In determining the value of any fund or account held
by the Trustee under this Indenture, the Trustee shall credit Investment Securities at the fair
market value thereof. The Trustee shall determine the fair market value based on accepted
industry standards and from accepted industry providers. Accepted industry providers shall
include, but are not limited to, pricing services provided by Financial Times Interactive Data
Corporation, Merrill Lynch, Salamon Smith Barney, Bear Stearns or Lehman Brothers. As to
certificates of deposit and bankers' acceptances, fair market value shall mean the face amount
thereof, plus accrued interest thereon, and as to any other investment not specified above, fair
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l ; market value is the value thereof as established by prior agreement among the City, the Trustee
and Ambac Assurance. No less frequently than annually, and in any event within thirty (30)
days prior to the end of each Fiscal Year, the Trustee shall determine the value of each fund and
account held hereunder and shall report such determination to the City.
The Trustee shall sell or present for redemption any Investment Securities as necessary in
order to provide money for the purpose of making any payment required hereunder, and the
Trustee shall not be liable for any loss resulting from any such sale.
Section 704. Responsibility of Trustee. The Trustee shall not be responsible or liable
for any loss suffered in connection with any investment of moneys made by it at the direction of
the City.
ARTICLE VIII
DISCHARGE OF LIEN
Section 801. Discharge of Lien. If the City shall pay or cause to be paid to the owners
of the Bonds the principal, premium, if any, and interest to become due thereon at the times and
in the manner stipulated therein, and if the City shall keep, perform and observe all and singular
r the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed
and observed by it on its part, then these presents and the estate and rights hereby granted shall
y cease, determine and be void, and thereupon the Trustee shall cancel and discharge the lien of
this Indenture, and execute and deliver to the City such instruments in writing as shall be
requisite to satisfy the lien hereof, and reconvey to the City the estate hereby conveyed, and
assign and deliver to the City any property at the time subject to the lien of this Indenture which
may then be in its possession, except moneys or Government Securities held by it for the
payment of the principal of and premium, if any, and interest on the Bonds.
Section 802. Bonds Deemed Paid. Any Bond shall be deemed to be paid within the
meaning of this Article VIII when payment of the principal of and premium, if any, and interest
on such Bond (whether at maturity or upon redemption as provided in this Indenture, or
otherwise), either (i) shall have been made or caused to be made in accordance with the terms
thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust
and irrevocably set aside exclusively for such payment, (1) moneys sufficient to make such
payment or (2) Government Securities (provided that such deposit will not affect the tax-exempt
status of the interest on any of the Bonds or cause any of the Bonds to be classified as "arbitrage
bonds" within the meaning of Section 148(a) of the Code, as reflected in an opinion of Bond
Counsel delivered to the Trustee), maturing as to principal and interest in such amount and at
such times as will provide sufficient moneys to make such payment, and all necessary and proper
fees, compensation and expenses of the Trustee and any Paying Agent pertaining to the Bonds
with respect to which such deposit is made shall have been paid or the payment thereof provided
for to the satisfaction of the Trustee and any said Paying Agent.
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Notwithstanding anything in this Indenture to the contrary, in the event that the principal
and/or interest due on the Series 2002 Bonds shall be paid by Ambac Assurance pursuant to the
Financial Guaranty Insurance Policy, the Series 2002 Bonds shall remain Outstanding for all
purposes, shall not be defeased or otherwise satisfied and shall not be considered paid by the
City, and the pledge and assignment of the Trust Estate and all covenants, agreements and other
obligations of the City to the registered owners shall continue to exist and shall run to the benefit
of Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such registered
owners.
Section 803. Non -Presentment of Bonds. In the event any Bonds shall not be
presented for payment when the principal thereof becomes due, either at maturity or otherwise,
or at the date fixed for redemption thereof, if there shall have been deposited with the Trustee for
that purpose, or left in trust if previously so deposited, funds sufficient to pay the principal
thereof, and premium, if any, together with all interest unpaid and due thereon, to the due date
thereof, for the benefit of the holder thereof, all liability of the City to the holder thereof for the
payment of the principal thereof, premium if any, and interest thereon, shall forthwith cease,
determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold
such fund or funds, without liability for interest thereon, for the benefit of the holder of such
Bonds, who shall thereafter be restricted exclusively to such fund or funds, for any claim of
whatever nature on his part under this Indenture or on, or with respect to, the Bonds.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES
OF TRUSTEE AND BONDHOLDERS
Section 901. Events of Default. Each of the following events shall constitute and is
referred to in this Indenture as an "Event of Default":
(a) Default in the due and punctual payment of any interest on any Bond or
Series 1999 Bond;
(b) Default in the due and punctual payment of the principal of or premium, if
any, on any Bond or Series 1999 Bond, whether at the stated maturity thereof, or upon
proceedings for redemption thereof, or upon the maturity thereof by declaration;
(c) Default in the payment of any other amount required to be paid under this
Indenture or the performance or observance of any other of the covenants, agreements or
conditions contained in this Indenture, or in the Bonds issued hereunder, and continuance
thereof for a period of sixty (60) days after written notice specifying such failure and
requesting that it be remedied shall have been given to the City by the Trustee, which
may give such notice in its discretion and shall give such notice at the written request of
bondholders of not less than 51% in aggregate principal amount of the Bonds then
Outstanding, unless the Trustee, or the Trustee and holders of an aggregate principal
amount of Bonds not less than the aggregate principal amount of Bonds the holders of
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which requested such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, if the failure stated in the notice
cannot be corrected within the applicable period, the Trustee will not unreasonably
withhold its consent to an extension of such time if corrective action is instituted by the
City within such period and is being diligently pursued; and
(d) The filing of a petition in bankruptcy by or against the City under the
United States Bankruptcy Code or the commencement of a proceeding by or against the
City under any other law concerning insolvency, reorganization or bankruptcy.
The term "default" as used in clauses (a), (b) and (c) above shall mean default by the City
in the performance or observance of any of the covenants, agreements or conditions on its part
contained in this Indenture or in the Bonds Outstanding hereunder, exclusive of any period of
grace required to constitute a default an "Event of Default' as hereinabove provided.
Section 902. Acceleration. Upon the occurrence of an Event of Default, the Trustee
may, and upon the written request of the holders of not less than 51% in aggregate principal
amount of Bonds Outstanding hereunder shall, by notice in writing delivered to the City, declare
the principal of all Bonds then Outstanding, together with the interest accrued thereon,
immediately due and payable, and such principal and interest shall thereupon become and be
immediately due and payable.
Section 903. Other Remedies; Rights of Bondholders. Upon the occurrence of an
Event of Default, the Trustee may, as an alternative, pursue any available remedy by suit at law
or in equity, including, without limitation, mandamus to enforce the payment of the principal of
and premium, if any, and interest on the Bonds then Outstanding hereunder.
If an Event of Default shall have occurred, and if it shall have been requested so to do by
the holders of not less than 5 1 % in aggregate principal amount of Bonds Outstanding hereunder
and if it shall have been indemnified as provided in Section 1001 hereof, the Trustee shall be
obligated to exercise such one or more of the rights and powers conferred upon it by this Section
903 as the Trustee, being advised by counsel, shall deem most expedient in the interests of the
bondholders.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to
the bondholders) is intended to be exclusive of any other remedy, but each and every such
remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now
or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default or Event
of Default shall impair any such right or power or shall be construed to be a waiver of any such
default or Event of Default or acquiescence therein; and every such right and power may be
exercised from time to time and as often as may be deemed expedient.
No waiver of any default or Event of Default hereunder, whether by the Trustee or by the
bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall
impair any rights or remedies consequent thereon.
37
10-32371.04
•' Section 904. Right of Bondholders to Direct Proceedings. Anything in this Indenture
to the contrary notwithstanding, the holders of not less than 51% in aggregate principal amount
of Bonds Outstanding hereunder shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the method and place of
conducting all proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other proceeding
hereunder; provided that such direction shall not be otherwise than in accordance with the
provisions of law and of this Indenture.
Section 905. Appointment of Receiver. Upon the occurrence of an Event of Default,
and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights
of the Trustee and of the bondholders under this Indenture, the Trustee shall be entitled to the
appointment of a receiver or receivers of the System and of the tolls, rents, revenues, issues,
earnings, income, products and profits thereof, including, without limitation, the Trust Estate,
pending such proceedings with such powers as the court making such appointment shall confer.
Section 906. Waiver. In case of an Event of Default on its part, as aforesaid, to the
extent that such rights may then lawfully be waived, neither the City nor anyone claiming
through the City or under the City shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption laws now or thereafter in force, in order
to prevent or hinder the enforcement of this Indenture, but the City, for itself and all who may
claim through or under it, hereby waives, to the extent that it lawfully may do so, the benefit of
all such laws and all right of appraisement and redemption to which it may be entitled under the
laws of the State of Arkansas.
Section 907. Application of Moneys. Available moneys remaining after discharge of
costs, charges and liens prior to this Indenture shall be applied by.the Trustee as follows:
(a) Unless the principal of all the Bonds shall have become or shall have been
declared due and payable, all such moneys shall be applied:
First: To the payment to the persons entitled thereto of all
installments of interest then due, in the order of the maturity of the installments of
such interest, and, if the amount available shall not be sufficient to pay in full any
particular installment, then to the payment ratably, according to the amounts due
on such installment, to the Persons entitled thereto, without any discrimination or
privilege;
Second: To the payment to the Persons entitled thereto of the unpaid
principal of any of the Bonds which shall have become due (other than Bonds
called for redemption for the payment of which moneys are held pursuant to the
provisions of this Indenture), in the order of their due dates, with interest on such
Bonds from the respective dates upon which they become due, and, if the amount
available shall not be sufficient to pay in full Bonds due on any particular date,
together with such interest, then to the payment ratably, according to the amount
of principal due on such date, to the Persons entitled thereto without any
38
10-3237 L04
discrimination or privilege of any Bond over any other Bond and without
preference or priority of principal over interest or of interest over principal; and
Third: To the payment of the interest on and the principal of the
Bonds, and to the redemption of Bonds, all in accordance with the provisions of
Article V of this Indenture.
(b) If the principal of all the Bonds shall have become due or shall have been
declared due and payable, all such moneys shall be applied first to the payment of the
interest then due and unpaid upon the Bonds, and then to the payment of the principal
then due and unpaid upon the Bonds, in each case without preference or priority of any
Bond over any other Bond, ratably, according to the amounts due respectively for
principal and interest, to the person entitled thereto.
(c) If the principal of all the Bonds shall have been declared due and payable,
and if such declaration shall thereafter have been rescinded and annulled under the
provisions of this Article IX then, subject to the provisions of paragraph (b) of this
Section 907, in the event that the principal of all the Bonds shall later become due or be
declared due and payable, the moneys shall be applied in accordance with the provisions
of paragraph (a) of this Section 907.
Whenever moneys are to be applied by the Trustee pursuant to the provisions of this
Section 907, such moneys shall be applied by it at such times, and from time to time, as it shall
determine, having due regard to the amount of such moneys available for application and the
likelihood of additional moneys becoming available for such application in the future. Whenever
the Trustee shall apply such funds, it shall fix the date (which shall be an interest payment date
unless it shall deem another date more suitable) upon which such application is to be made and
upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue.
The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such
moneys and of the fixing of any such date and shall not be required to make payment to the
holder of any Bond until such Bond shall be presented to the Trustee for appropriate
endorsement or for cancellation if fully paid.
Section 908. Remedies Vested in Trustee. All rights of action (including the right to
file proof of claim) under this Indenture or under any of the Bonds may be enforced by the
Trustee without the possession of any of the Bonds or the production thereof in any trial or other
proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee, without the necessity of joining as plaintiffs or defendants any
holders of the Bonds hereby secured, and any recovery of judgment shall be for the equal benefit
of the holders of the Outstanding Bonds.
Section 909. Rights and Remedies of Bondholders. No holder of any Bond shall have
any right to institute any suit, action or proceeding in equity or at law for the enforcement of this
Indenture or for the execution of any trust hereof or for the appointment of a receiver or any
other remedy hereunder, unless a default has occurred of which the Trustee has been notified as
provided in subsection (g) of Section 1001, or of which by said subsection it is deemed to have
39
10-32371.O4
notice, nor unless such default shall have become an Event of Default and the holders of not less
than 51% in aggregate principal amount of Bonds Outstanding hereunder shall have made
written request to the Trustee and shall have offered it reasonable opportunity either to proceed
to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its
own name, nor unless also they have offered to the Trustee indemnity as provided in
subsection (1) of Section 1001, nor unless the Trustee shall thereafter fail or refuse to exercise the
powers hereinbefore granted, or to institute such action, suit or proceeding in its own name; and
such notification, request and offer of indemnity are hereby declared in every such case, at the
option of the Trustee, to be conditions precedent to the execution of the powers and trusts of this
Indenture, and to any action or cause of action for the enforcement of this Indenture or for the
appointment of a receiver or for any other remedy hereunder; it being understood and intended
that no one or more holders of the Bonds shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien of this Indenture by action of the holder or holders or to
enforce any right hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted, held and maintained in the manner herein provided for the equal
benefit of the holders of all Bonds Outstanding hereunder. Nothing in this Indenture contained
shall, however, affect or impair the right of any bondholders to enforce the payment of the
principal of and premium, if any, and interest on any Bonds at and after the maturity thereof, or
the obligation of the City to pay the principal of and premium, if any, and interest on each of the
Bonds issued hereunder to the respective holders thereof at the time and place ip said Bonds
expressed.
Section 910. Termination of Proceedings. In case the Trustee shall have proceeded to
enforce any right under this Indenture by the appointment of a receiver or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Trustee, then and in every such case the City and the Trustee shall be
restored to their former positions and rights hereunder with respect to the property herein
conveyed, and all rights, remedies and powers of the Trustee shall continue as if no such
proceedings had been taken, except to the extent the Trustee is legally bound by such adverse
determination.
Section 911. Waivers of Events of Default. The Trustee may, and upon the written
request of the holders of not less than 51% in principal amount of all Bonds Outstanding
hereunder shall, waive any Event of Default hereunder and its consequences and rescind any
declaration of maturity of principal; provided, however, there shall not be waived any Event of
Default described in clause (a) or (b) of the first paragraph of Section 901 hereof, unless prior to
such waiver or rescission all arrears of principal (due otherwise than by declaration) and interest,
and all expenses of the Trustee and Paying Agent, shall have been paid or provided for. In case
of any such waiver or rescission the City, Trustee and the bondholders shall be restored to their
former positions and rights hereunder respectively, but no such waiver or rescission shall extend
to any subsequent or other default, or impair any right subsequent thereon.
40
io-;z;n.w
ARTICLE X
TRUSTEE AND PAYING AGENTS
Section 1001. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed
upon it by this Indenture and agrees to perform said trusts, but only upon and subject to the
following expressed terms and conditions:
(a) The Trustee may execute any of the trusts or powers hereof and perform
any duties required of it by or through attorneys, agents, receivers or employees, and
shall be entitled to advice of counsel concerning all matters of trusts hereof and its duties
hereunder, and may in all cases pay reasonable compensation to all such attorneys,
agents, receivers and employees as may reasonably be employed in connection with the
trusts hereof. Reimbursement of such compensation paid by the Trustee is subject to the
provisions of Section 1002 hereof. The Trustee may act upon the opinion or advice of
any attorney, surveyor, engineer or accountant selected by it in the exercise of reasonable
care, or, if selected or retained by the City prior to the occurrence of a default of which
the Trustee has been notified as provided in subsection (g) of this Section 1001, or of
which by said subsection the Trustee is deemed to have notice, approved by the Trustee
in the exercise of such care. The Trustee shall not be responsible for any loss or damage
resulting from an action or nonaction in accordance with any such opinion or advice.
(b) The Trustee shall not be responsible for any recital herein, or in the Bonds
(except in respect to the certificate of authentication of the Trustee endorsed on such
Bonds), or for insuring the System or collecting any insurance moneys, or for the validity
of the execution by the City of this Indenture or of any supplemental indentures or
instruments of further assurance, or for the sufficiency of the security for the Bonds
issued hereunder or intended to be secured hereby, or for the value of the title of the
property herein conveyed or otherwise as to the maintenance of the security hereof;
except that in the event the Trustee enters into possession of a part or all of the property
herein conveyed pursuant to any provision of this Indenture, it shall use due diligence in
preserving such property; and the Trustee shall not be bound to ascertain or inquire as to
the performance or observance of any covenants, conditions and agreements aforesaid as
to the condition of the property herein conveyed.
(c)
The Trustee
may
become the owner of Bonds secured hereby with the
same rights
which it would
have
if not Trustee.
(d) The Trustee shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram or other paper or document believed by it, in
the exercise of reasonable care, to be genuine and correct and to have been signed or sent
by the proper person or persons. Any action taken by the Trustee pursuant to this
Indenture upon the request or authority or consent of the owner of any Bond secured
hereby, shall be conclusive and binding upon all future owners of the same Bond and
upon Bonds issued in exchange therefor or in place thereof.
41
10-32371.04
., (e) As to the existence or nonexistence of any fact or as to the sufficiency or
validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon
a certificate of the City signed by its Mayor and attested by the City Clerk as sufficient
evidence of the facts therein contained and, prior to the occurrence of a default of which
it has been notified as provided in subsection (g) of this Section 1001, or of which by that
subsection it is deemed to have notice, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction, or action is necessary or
expedient, but may at its discretion, at the reasonable expense of the City, in every case
secure such further evidence as it may think necessary or advisable but shall in no case be
bound to secure the same. The Trustee may accept a certificate of the City Clerk of the
City under its seal to the effect that a resolution in the form therein set forth has been
adopted by the City as conclusive evidence that such resolution has been duly adopted,
and is in full force and effect.
(f) The permissive right of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty of the Trustee, and the Trustee shall be
answerable only for its own gross negligence or willful misconduct.
(g) The Trustee shall not be required to take notice or be deemed to have
notice of any default hereunder (except for defaults under clause (a) or (b) of the first
paragraph of Section 901 hereof as to which the Trustee shall be deemed to have notice)
- unless the Trustee shall be specifically notified in writing of such default by the City or
by the holders of at least 10% in aggregate principal amount of Bonds Outstanding
hereunder, and all notices or other instruments required by this Indenture to be delivered
to the Trustee must, in order to be effective, be delivered to the principal corporate trust
office of the Trustee, and in the absence of such notice so delivered, the Trustee may
conclusively assume there is no such default except as aforesaid.
(h) The Trustee shall not be personally liable for any debts contracted or for
damages to persons or to personal property injured or damaged, or for salaries or non-
fulfillment of contracts during any period in which it may be in the possession of or
managing the System as in this Indenture provided.
(i) At any and all reasonable times the Trustee, and its duly authorized agents,
attorneys, experts, engineers, accountants and representatives, shall have the right fully to
inspect any and all of the property herein conveyed, including all books, papers and
records of the City pertaining to the System and the Bonds, and to take such memoranda
from and in regard thereto as may be desired.
0) The Trustee shall not be required to give any bond or surety in respect of
the execution of the said trusts and powers or otherwise in respect of the premises.
(k) Notwithstanding anything elsewhere in this Indenture contained, the
Trustee shall have the right, but shall not be required, to demand, in respect of the
authentication of any Bonds, the withdrawal of any cash, the release of any property, or
lei %' any action whatsoever within the purview of this Indenture, any showings, certificates,
42
10-32371.04
opinions, appraisals or other information, or corporate action or evidence thereof, in
addition to that by the terms hereof required as a condition of such action by the Trustee,
deemed desirable for the purpose of establishing the right of the City to the authentication
of any Bonds, the withdrawal of any cash, the release of any property, or the taking of
any other action by the Trustee.
(1) Before taking such action hereunder, the Trustee may require that it be
furnished an indemnity bond satisfactory to it for the reimbursement to it of all expenses
to which it may be put and to protect it against all liability, except liability which is
adjudicated to have resulted from the gross negligence or willful misconduct of the
Trustee, by reason of any action so taken by the Trustee.
Section 1002. Fees, Charges and Expenses of Trustee and Paying Agents; Trustee's
Prior Lien. (a) Subject to subsection (b) of this Section 1002, the City shall, from moneys
lawfiilly available therefor, pay to the Trustee and any Paying Agent reasonable compensation
for all services performed hereunder and also all reasonable expenses, charges and other
disbursements and those of their attorneys, agents and employees incurred in and about the
administration and execution of the trusts hereby created and the performance of the 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 (a), the Trustee may make such payment from any
moneys in its possession under the provisions of this Indenture 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.
(b) The City shall pay to the Trustee compensation for its services as described in this
Section 1002 in accordance with a separate agreement between the City and the Trustee,
provided that such compensation, together with all expenses, charges and other disbursements of
the Trustee and its attorneys, agents and employees and all reimbursements to the Trustee for all
costs and other disbursements as described in Section 1001(a) hereof shall not exceed $10,000
(not including the initial acceptance fee) 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 $10,000 annually, then such counsel
shall have to be acceptable to the City and such fees shall have to be approved by the City as
described above.
Section 1003. Additional Duties of Trustee. (a) In addition to the other duties of the
Trustee described in this Indenture, it shall be the duty of the Trustee, on or before the tenth day
of each month after the month in which the Series 2002 Bonds are delivered, to file with the City
a statement setting forth in respect of the preceding calendar month:
43
10-32371.04
(i) 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 Indenture;
(ii) the amount on deposit with it at the end of such month to the credit of each such
fund and account;
(iii) a brief description of all obligations held by it as an investment of moneys in each
such fund and account;
(iv) the amount applied to the purchase or redemption of Bonds under the provisions
of this Indenture and a description of the Bonds or portions of Bonds so purchased or
redeemed; and
(v) any other information that 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.
(b) The Trustee additionally shall be responsible for the preparation and timely
distribution of any and all forms and reports required by law to all bondholders, the State of
Arkansas and the Internal Revenue Service in connection with the payment to the bondholders of
interest on the Bonds.
a
Section 1004. Notice to Bondholders of Default. If a default occurs of which the
Trustee is pursuant to the provisions of Section 1001(g) deemed to have or is given notice, the
Trustee shall promptly make demand upon the City and give notice to each owner of Bonds then
Outstanding.
Section 1005. Intervention by Trustee. In any judicial proceeding to which the City is
a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the
interests of 'holders of Bonds issued hereunder, the Trustee may intervene on behalf of
bondholders and shall do so if requested in writing by the holders of at least 51% of the
aggregate principal amount of Bonds Outstanding hereunder. The rights and obligations of the
Trustee under this Section 1005 are subject to the approval of the court having jurisdiction in the
premises.
Section 1006. Merger or Consolidation of Trustee. Any bank or trust company to
which the Trustee may be merged, or with which it may be consolidated, or to which it may sell
or transfer its trust business and assets. as a whole or substantially as a whole, or any bank or trust
company resulting from any such sale, merger, consolidation or transfer to which it is a party,
ipso facto, shall be and become successor trustee hereunder and vested with all of the title to the
whole property or Trust Estate and all the trusts, powers, discretion, immunities, privileges and
all other matters as was its predecessor, without the execution or filing of any instrument or any
z further act, deed, or conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that such successor trustee shall have capital and
surplus of at least $20 million.
44
10-32371.04
Section 1007. Resignation by Trustee. The Trustee and any successor trustee may at
any time resign from the trusts hereby created by giving written notice to the City and the
bondholders, and such resignation shall take effect upon the appointment of a successor trustee
by the bondholders or by the City. Such notice may be served personally or sent by registered
mail (to the City) or first class mail (to the bondholders).
Section 1008. Removal of Trustee. The Trustee may be removed at any time by an
instrument or concurrent instruments in writing delivered to the Trustee and to the City, and
signed by the holders of not less than 5 1 % in aggregate principal amount of Bonds Outstanding
hereunder.
Section 1009. Appointment of Successor Trustee. In case the Trustee hereunder shall
resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation, or
otherwise become incapable of acting hereunder, or in case it shall be taken under the control of
any public officer or officers, or of a receiver appointed by the court, a successor may be
appointed .by the holders of not less than 51% in aggregate principal amount of Bonds
Outstanding hereunder, by an instrument or concurrent instruments in writing signed by such
holders, or by their attorneys in fact, duly authorized; provided, nevertheless, that in case of such
vacancy the City by an instrument executed and signed by its Mayor and attested by its City
Clerk under its seal, shall appoint a temporary trustee to fill such vacancy until a successor
trustee shall be appointed by the bondholders in the manner above provided. Any such
temporary trustee appointed by the City shall immediately and without further act be superseded
by the trustee appointed by such bondholders. Every such temporary trustee and every such
successor trustee shall be a trust company or bank in good standing, having capital and surplus of
not less than $20 million.
Section 1010. Concerning Any Successor Trustee. Every successor or temporary
trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to
the City an instrument in writing accepting such appointment hereunder, and thereupon such
successor or temporary trustee, without any further act or conveyance, shall become fully vested
with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor;
but such predecessor shall, nevertheless, on the written request of the City or of its successor
trustee, execute and deliver an instrument transferring to such successor all the estate, properties,
rights, powers and trusts of such predecessor hereunder; and every predecessor trustee shall
deliver all securities, moneys and any other property held by it as trustee 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 successor the estates, rights, powers and duties
hereby vested or intended to be vested in the predecessor trustee, any and all such instruments in
writing shall, on request, be executed, acknowledged, and delivered by the City.
Section 1011. Reliance Upon Instruments. The resolutions, opinions, certificates and
other instruments provided for in this Indenture may be accepted and relied upon by the Trustee
as conclusive evidence of the facts and conclusions stated therein and shall be full warrant,
r� protection and authority to the Trustee for its actions taken hereunder.
J-
45
10-32371.O4
Section 1012. Appointment of Co -Trustee. The City and the Trustee shall have power
to appoint, and upon the request of the Trustee the City shall for such purpose join with the
Trustee in the execution of all instruments necessary or proper to appoint, another corporation or
one or more Persons approved by the Trustee, either to act as co -trustee or co -trustees jointly
with the Trustee of all or any of the property subject to the lien hereof, with such powers as may
be provided in the instrument of appointment and to vest in such corporation or Person or
Persons as such co -trustee any property, title, right or power deemed necessary or desirable. In
the event that the City shall not have joined in such appointment within fifteen (15) days after the
receipt by it of a request so to do, the Trustee alone shall have the power to make such
appointment. Should any deed, conveyance or instrument in writing from the City be required by
the co -trustee so appointed for more fully and certainly vesting in and confirming to such co -
trustee such properties, rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed, acknowledged and
delivered by the City. Every such co -trustee shall, to the extent permitted by law, be appointed
subject to the following provisions and conditions, namely:
(1) The Bonds shall be authenticated and delivered, and all powers, duties,
obligations and rights conferred upon the Trustee in respect of the custody of all money
and securities pledged or deposited hereunder, shall be exercised solely by the Trustee;
and
rbz; (2) The Trustee, at any time by an instrument in writing, may remove any
W:
such separate Trustee or co -trustee.
Every instrument, other than this Indenture, appointing any such co -trustee shall refer to
this Indenture and the conditions of this Article X expressed, and upon the acceptance in writing
by such co -trustee, the co -trustee shall be vested with the estate or property specified in such
instrument, jointly with the Trustee (except insofar as local law makes it necessary for any
separate trustee to act alone), subject to all the trusts, conditions and provisions of this Indenture.
Any such co -trustee may at any time, by an instrument in writing, constitute the Trustee as the
co -trustee's agent or attorney -in -fact with full power and authority, to the extent authorized by
law, to do all acts and things and exercise all discretion authorized or permitted by the co -trustee,
for and on behalf of the co -trustee and in the co -trustee's name. In case any co -trustee shall die,
become incapable of acting, resign or be removed, all the estate, properties, rights, powers,
trusts, duties and obligations of said co -trustee shall vest in and be exercised by the Trustee until
the appointment of a new trustee or a successor to such co -trustee.
Section 1013. Designation and Succession of Paying Agents. The Trustee and any
other banks or trust companies designated as Paying Agent or Paying Agents in any
supplemental indenture or in an instrument appointing a successor Trustee shall be the Paying
Agent or Paying Agents for the Bonds.
Any bank or trust company with which or into which any Paying Agent may be merged
or consolidated, or to which the assets and business of such Paying Agent may be sold, shall be
deemed the successor of such Paying Agent for the purposes of this Indenture. If the position of
Paying Agent shall become vacant for any reason, the City shall, within thirty (30) days
46
10-32371.04
` thereafter, appoint such bank or trust company as shall be specified by the City as such Paying
Agent to fill such vacancy; provided, however, that, if the City shall fail to appoint such Paying
Agent within said period, the Trustee shall make such appointment.
The Paying Agents shall enjoy the same protective provisions in the performance of its
duties hereunder as are specified in Section 1001 hereof with respect to the Trustee insofar as
such provisions may be applicable.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 1101. Supplemental Indentures Not Requiring Consent of Bondholders.
The City and the Trustee may, from time to time and at any time, without the consent of or
notice to the bondholders, enter into supplemental indentures as follows:
(a) to cure any formal defect, omission, inconsistency or ambiguity in this
Indenture;
(b)
to
grant to or
confer
or impose upon the Trustee
for the benefit of
the
bondholders
any
additional
rights,
remedies, powers, authority,
security, liabilities
or
duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with this Indenture as theretofore in effect, provided that no such
additional liabilities or duties shall be imposed upon the Trustee without its consent;
(c) to add to the covenants and agreements of, and limitations and restrictions
upon, the City in this Indenture other covenants, agreements, limitations and restrictions
to be observed by the City which are not contrary to or inconsistent with this Indenture as
theretofore in effect;
(d) to confirm, as further assurance, any pledge under, and the subjection to
any claim, lien or pledge created or to be created by, this Indenture, of the Trust Estate or
of any other moneys, securities or funds;
(e) to comply with the requirements of the Trust Indenture Act of 1939, as
from time to time amended; -
(0 to authorize the issuance and sale of one or more series of Additional
Bonds;
(g) to make such additions, deletions or modifications as may be necessary to
assure compliance with Section 148(f) of the Code relating to required rebate to the
United States or otherwise as may be necessary to assure exemption from federal income
—�� taxation of interest on the Bonds; or
47
10-32371.04
• (h) to modify, alter, amend or supplement this Indenture in any other respect
which is not materially adverse to the bondholders and which does not involve a change
described in clause (a), (b), (c), (d), (e) or (f) of Section 1102 hereof and which, in the
judgment of the Trustee, is not to the prejudice of the Trustee.
Section 1102. Supplemental Indentures Requiring Consent of Bondholders. Subject
to the terms and provisions contained in this Section, and not otherwise, the holders of not less
than 2/3 in aggregate principal amount of the Bonds then Outstanding shall have the right, from
time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to
and approve the execution by the City and the Trustee of such indenture or indentures
supplemental hereto as shall be deemed necessary and desirable by the City for the purpose of
modifying, altering, amending, adding to, or rescinding, in any particular, any of the terms or
provisions contained in this Indenture or in any supplemental indenture; provided, however, that
nothing herein contained shall permit or be construed as permitting (a) an extension of the
maturity (or mandatory redemption date) of the principal of or the interest on any Bond issued
hereunder, or (b) a reduction in the principal amount of or redemption premium or rate of interest
on any Bond issued hereunder, or (c) the creation of any lien on the Trust Estate or any part
thereof, except as hereinbefore expressly permitted, or (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 indenture, or (f) deprive the holder of any Bond
then Outstanding of the lien hereby created on the Trust Estate. Nothing herein contained,
however, shall be construed as making necessary the approval of bondholders of the execution of
any supplemental indenture as provided in Section 1101 of this Article XI.
If, at any time the City shall request the Trustee to enter into any supplemental indenture
for any of the purposes of this Section, the Trustee shall, at the expense of the City, cause notice
of the proposed execution of such supplemental indenture to be mailed by first class mail to each
registered owner of the Bonds. Such notice shall briefly set forth the nature of the proposed
supplemental indenture and shall state that copies thereof are on file at the principal office of the
Trustee for inspection by bondholders. The Trustee shall not, however, be subject to any liability
to any bondholder by reason of its failure to mail such notice, and any such failure shall not
affect the validity of such supplemental indenture when consented to and approved as provided
in this Section 1102. If the holders of not less than 2/3 in aggregate principal amount of the
Bonds Outstanding at the time of the execution of any such supplemental indenture shall have
consented to and approved the execution thereof as herein provided, no holder of any Bond shall
have any right to object to any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the City from executing the same or from taking any action pursuant to the
provisions thereof.
Section 1103. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture entered into pursuant to Section 1101 or 1102 hereof, this Indenture shall
be deemed to be modified and amended in accordance therewith.
as
1 o-J237 1.OJ
. ARTICLE XII
FINANCIAL GUARANTY INSURANCE POLICY
Section 1201. Consent of Ambac Assurance. (a) Any provision of this Indenture
expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any
manner which affects the rights of Ambac Assurance hereunder without the prior written consent
of Ambac Assurance.
(b) Unless otherwise provided in this Section 1201, Ambac Assurance's consent shall
be required in addition to bondholder consent, when required, for the following purposes:
(i) execution and delivery of any supplemental Indenture, (ii) removal of the Trustee or Paying
Agent and selection and appointment of any successor trustee or paying agent, and (iii) initiation
or approval of any action not described in (i) or (ii) above which requires bondholder consent.
(c) Any reorganization or liquidation plan with respect to the City must be acceptable
to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall
have the right to vote on behalf of all bondholders who hold Series 2002 Bonds absent a default
by Ambac Assurance under the Financial Guaranty Insurance Policy.
(d) Anything in this Indenture to the contrary notwithstanding, upon the occurrence
and continuance of an Event of Default, Ambac Assurance shall be entitled to control and direct
the enforcement of all rights and remedies granted to bondholders or the Trustee for the benefit
of the bondholders under this Indenture, including, without limitation, (i) the right to accelerate
the principal of the Series 2002 Bonds as described in Section 902 of this Indenture, and (ii) the
right to annul any declaration of acceleration, and Ambac Assurance shall also be entitled to
approve all waivers of Events of Default.
(e) Upon the occurrence of an Event of Default, the Trustee may, with the consent of
Ambac Assurance, and shall, at the direction of Ambac Assurance or at the written request of
bondholders of not less than 5 1 % in aggregate Outstanding principal amount of the Series 2002
Bonds with the consent of Ambac Assurance, by written notice to the City and Ambac
Assurance, declare the principal of the Series 2002 Bonds to be immediately due and payable,
whereupon that portion of the principal of the Series 2002 Bonds thereupon coming due and the
interest thereon accrued to the date of payment shall, without further action, become and be
immediately due and payable, anything in this Indenture or in the Series 2002 Bonds to the
contrary notwithstanding.
Section 1202. Notices/Information to be Given to Ambac Assurance. (a) While the
Financial Guaranty Insurance Policy is in effect, the Trustee (or the City to the extent the Trustee
is not in possession of such information) shall furnish to Ambac Assurance at its address
indicated in Section 1302 hereof (to the attention of the Surveillance Department)
(i) as soon as practicable after the filing thereof, a copy of any financial
statement relating to the City's Water and Sewer Fund and a copy of any audit and
annual report of the City;
49
10-32371.W
(ii) a copy of any notice to be given to the registered owners of the
Series 2002 Bonds, including, without limitation, notice of any redemption of or
defeasance of the Series 2002 Bonds, and any certificate rendered pursuant to this
Indenture relating to the security for the Series 2002 Bonds; and
(iii) such additional information as Ambac Assurance may reasonably request.
(b) Ambac Assurance shall be included as a party to be notified under the provisions
of the Continuing Disclosure Agreement with respect to the Series 2002 Bonds.
(c) The Trustee shall notify Ambac Assurance of any failure of the City to provide
relevant notices, certificates, etc.
(d) Notwithstanding any other provision of this Indenture, the Trustee shall
immediately notify Ambac Assurance if at any time there are insufficient moneys to make any
payments of principal and/or interest on the Bonds as required and immediately upon the
occurrence of any Event of Default hereunder.
(e) The City will permit Ambac Assurance to discuss the affairs, finances and
accounts of the City or any information Ambac Assurance may reasonably request regarding the
security for the Series 2002 Bonds with appropriate officers of the City. The Trustee and the
City will permit Ambac Assurance to have access to and to make copies of all books and records
relating to the Series 2002 Bonds at any reasonable time.
J
Section 1203. Payment Procedure. So long as the Financial Guaranty Insurance Policy
shall be in full force and effect, the City, the Trustee and any Paying Agent agree to comply with
the following provisions:
(a) At least one (1) day prior to all interest payment dates with respect to the Series
2002 Bonds, the Trustee or Paying Agent, if any, will determine whether there will be sufficient
moneys in the funds and accounts created hereunder to pay the principal of and interest on the
Series 2002 Bonds on such interest payment date. If the Trustee or Paying Agent, if any,
determines that there will be insufficient moneys in such funds and accounts, the Trustee or
Paying Agent, if any, shall so notify Ambac Assurance. Such notice shall specify the amount of
the anticipated deficiency, the Series 2002 Bonds to which such deficiency is applicable and
whether such Series 2002 Bonds will be deficient as to the payment of principal or interest, or
both. If the Trustee or Paying.Agent, if any, has not so notified Ambac Assurance at least one
(1) day prior to an interest payment date, Ambac Assurance will make payments of principal.
and/or interest due on the Series 2002 Bonds on or before the first (1st) day next following the
date on which Ambac Assurance shall have received notice of nonpayment from the Trustee or
Paying Agent, if any.
(b) The Trustee or Paying Agent, if any, shall, after giving notice to Ambac
Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac
Assurance's, direction, to The Bank of New York, in New York, New York, as insurance trustee
for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee"), the
50
10-32371.04
• registration books of the City maintained by the Trustee or Paying Agent, if any, and all records
relating to the funds and accounts maintained under this Indenture.
(c) The Trustee or Paying Agent, if any, shall provide Ambac Assurance and the
Insurance Trustee with a list of registered owners of Series 2002 Bonds entitled to receive
principal or interest payments from Ambac Assurance under the terms of the Financial Guaranty
Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or
drafts to the registered owners of the Series 2002 Bonds entitled to receive full or partial interest
payments from Ambac Assurance and (ii) to pay principal upon the Series 2002 Bonds
surrendered to the Insurance Trustee by the registered owners of the Series 2002 Bonds entitled
to receive full or partial principal payments from Ambac Assurance.
(d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to Ambac
Assurance pursuant to (a) above, notify registered owners of the Series 2002 Bonds entitled to
receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of
such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest
payments next coming due upon proof of bondholder entitlement to interest payments and
delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate
assignment of the registered owner's right to payment, (iii) that should they be entitled to receive
full payment of principal from Ambac Assurance, they must surrender their Series 2002 Bonds
(along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee
to permit ownership of such Series 2002 Bonds to be registered in the name of Ambac
Assurance) for payment to the Insurance Trustee, and not the Trustee or Paying Agent, if any,
and (iv) that should they be entitled to receive partial payment of principal from Ambac
Assurance, they must surrender their Series 2002 Bonds for payment thereon first to the Trustee
or Paying Agent, if any, who shall note on such Series 2002 Bonds the portion of the principal
paid by the Trustee or Paying Agent, if any, and then, along with an appropriate instrument of
assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will
then pay the unpaid portion of principal.
(e) In the event that the Trustee or Paying Agent, if any, has notice that any payment
of principal of or interest on a Series 2002 Bond which has become Due for Payment and which
is made to a bondholder by or on behalf of the Obligor has been deemed a preferential transfer
and theretofore recovered from its registered owner pursuant to the United States Bankruptcy
Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court
having competent jurisdiction, the Trustee or Paying Agent, if any, shall, at the time Ambac
Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any
registered owner's payment is so recovered, such registered owner will be entitled to payment
from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise
available, and the Trustee or Paying Agent, if any, shall furnish to Ambac Assurance its records
evidencing the payments of principal of and interest on the Series 2002 Bonds which have been
made by the Trustee or Paying Agent, if any, and subsequently recovered from registered owners
and the dates on which such payments were made.
51
10-32371.04
S;. (f) In addition to those rights granted Ambac Assurance under this Indenture, Ambac
Assurance shall, to the extent it makes payment of principal of or interest on Series 2002 Bonds,
become subrogated to the rights of the recipients of such payments in accordance with the terms
of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of
subrogation as to claims for past due interest, the Trustee or Paying Agent, if any, shall note
Ambac Assurance's rights as subrogee on the registration books of the City maintained by the
Trustee or Paying Agent if any, upon receipt from Ambac Assurance of proof of the payment of
interest thereon to the registered owners of the Series 2002 Bonds, and (ii) in the case of
subrogation, as to claims for past due principal, the Trustee or Paying Agent, if any, shall note
Ambac Assurance's rights as subrogee on the registration books of the City maintained by the
Trustee or Paying Agent, if any, upon surrender of the Series 2002 Bonds by the registered
owners thereof together with proof of the payment of principal thereof.
Section 1204. Trustee -Related Provisions. (a) The Trustee or Paying Agent, if any,
may be removed at any time, at the request of Ambac Assurance, for any breach of the Trust set
forth herein.
(b) Ambac Assurance shall receive prior written notice of any Trustee or Paying
Agent resignation.
(c) Every successor Trustee appointed pursuant to this Indenture shall be a trust
company or bank in good standing located in or incorporated under the laws of the State of
Arkansas, duly authorized to exercise trust powers and subject to examination by federal or state
authority, having a reported capital and surplus of not less than $75,000,000 and acceptable to
Ambac Assurance. Any successor Paying Agent, if applicable, shall not be appointed unless
Ambac Assurance approves such successor in writing.
(d) Notwithstanding any other provision of this Indenture, in determining whether the
rights of the bondholders will be adversely affected by any action taken pursuant to the terms and
provisions of this Indenture, the Trustee shall consider the effect on the bondholders as if there
were no Financial Guaranty Insurance Policy.
(e) Notwithstanding any other provision of this Indenture, no removal, resignation or
termination of the Trustee or Paying Agent shall take effect until a. successor, acceptable to
Ambac Assurance, shall be appointed.
Section 1205. Interested Parties. (a) To the extent that this Indenture confers upon or
gives or grants to Ambac Assurance any right, remedy or claim under or by reason of this
Indenture, Ambac Assurance is hereby explicitly recognized as being a third -party beneficiary
hereunder and may enforce any such right, remedy, or claim conferred, given or granted
hereunder.
(b) Nothing
in this Indenture expressed or implied is
intended or shall be construed to
confer upon, or to give
or grant to, any person or entity, other than the City, the Trustee,
Ambac
Assurance, the Paying
Agent, if any, and the registered owners
of the Bonds, any right,
remedy
or claim under or by reason of this Indenture or any covenant,
condition or stipulation
hereof,
52
10-32371.04
• : and all covenants, stipulations, promises and agreements in this Indenture contained by and on
behalf of the City shall be for the sole and exclusive benefit of the City, the Trustee, Ambac
Assurance, the Paying Agent, if any, and the registered owners of the Bonds.
ARTICLE XIII
MISCELLANEOUS
Section 1301. Consents, etc. of Bondholders. Any request, direction, objection or
other instrument required by this Indenture to be signed and executed by the bondholders may be
in any number of concurrent writings of similar tenor and may be signed or executed by such
bondholders in person or by agent appointed in writing. Proof of the execution of any such
request, direction, objection or other instrument or of the writing appointing any such agent and
of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the
purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any
action taken by it under such request or other instrument, namely:
(a) The fact and date of the execution by any person of any such writing may
be proved by the certificate of any officer in any jurisdiction who by law has power to
take acknowledgments within such jurisdiction that the person signing such writing
�. acknowledged before such officer the execution thereof, or by an affidavit of any witness
to such execution.
(b) The fact of ownership of Bonds and the amount or amounts, numbers, and
other identification of such Bonds, and the date of holding the same shall be proved by
the registration books of the City maintained by the Trustee, as Bond registrar.
Section 1302. Notices. Except as otherwise provided in this Indenture, all notices,
certificates or other communications shall be sufficiently given and shall be deemed given when
mailed by registered or certified mail, postage prepaid, to the City or the Trustee. Notices,
certificates or other communications shall be sent to the following addresses:
City: City of Fayetteville
City Administration Building
113 West Mountain
Fayetteville, Arkansas 72701
Attention: Mayor
Trustee: Bank of Oklahoma, N.A.
P. O. Box 2300
Tulsa, Oklahoma 74192
Attention: Cynthia Wilkinson
Ambac Assurance: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
53
10-32371.04
Either of the foregoing may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates or other communications shall be sent.
Section 1303. Limitation of Rights. With the exception of rights herein expressly
conferred, nothing expressed or mentioned in or to be implied from this Indenture, or the Bonds
issued hereunder, is intended or shall be construed to give to any person or company other than
the parties hereto, and the holders of the Bonds secured by this Indenture any legal or equitable
rights, remedy, or claim under or in respect to this Indenture or any covenants, conditions, and
provisions hereof being intended to be and being for the sole exclusive benefit of the parties
hereto and the holders of the Bonds hereby secured as herein provided.
Section 1304. Severability. If any provisions of this Indenture shall be held or deemed
to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any
provisions or any constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or paragraphs in this
Indenture contained shall not affect the remaining portions of this Indenture or any part thereof.
Section 1305. Applicable Provisions of Law. This Indenture shall be considered to
have been executed in the State of Arkansas and it is the intention of the parties that the
substantive law of the State of Arkansas govern as to all questions of interpretation, validity and
effect.
Section 1306. Counterparts. This Indenture may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same
instrument.
Section 1307. Successors and Assigns. All the covenants, stipulations, provisions,
agreements, rights, remedies and claims of the parties hereto in this Indenture contained shall
bind and inure to the benefit of their successors and assigns.
Section 1308. Captions. The captions or headings in this Indenture are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of
this Indenture.
Section 1309. Photocopies and Reproductions. A photocopy or other reproduction of
this Indenture may be filed as a financing statement pursuant to the Uniform Commercial Code,
although the signatures of the City and the Trustee in such reproduction are not original manual
signatures.
Section 1310. Bonds Owned by the City. In determining whether bondholders of the
requisite aggregate principal amount of the Bonds have concurred in any direction, consent or
waiver under this Indenture, Bonds which are owned by the City shall be disregarded and
54
10-32371.04
AWN
deemed not to be Outstanding for the purpose of any such determination, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any such direction,
consent or waiver, only Bonds which the Trustee knows are so owned shall be so disregarded.
Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Bonds and that the pledgee is not the City. In case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
10-32371.04
55
..:: IN WITNESS WHEREOF, the City has caused these presents to be signed in its name
and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City
Clerk, and, to evidence its acceptance of the trust hereby created, the Trustee has caused these
presents to be signed in its behalf by its duly authorized officers and its corporate seal to be
hereto affixed.
CITY OF FAYETTEVILLE
By: Z X'JZ1'L1
Mayor
ATTEST:
/ A
14
City Clerk
.IL[It
.r ,.
44
j Ir ' BANK OF OKLAHOMA, N.A.,
s�' ft ,. � J • ~ as Trustee .
By: lX J
ATTEST:
Title: VICE PRESIDENT and TRUST OFFICER
By:
Title:
(SEAL)
56
10-32371.04
EXHIBIT A TO TRUST INDENTURE
Form of Series 2002A Bond
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R02A-
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2002A
Interest Rate: %
Date of Bond: May 1, 2002
Registered Owner: CEDE & CO.
Principal Amount:
KNOW ALL MEN BY THESE PRESENTS:
Maturity Date: August 15, 20_
CUSIP:
r9nl
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
A-1
10-3237I.04
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
This bond, designated "City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bond, Series 2002A," is one of a series of bonds in the aggregate original
principal amount of $2,730,000 (the "Series 2002A Bonds"), issued for the purpose of refunding
the City's outstanding Water and Sewer System Revenue Bonds, Series 1994, establishing a debt
service reserve for the Series 2002A Bonds, and paying expenses of issuing the Series 2002A
Bonds. The Series 2002A Bonds are issued under and are secured and entitled to the protection
given by a Trust Indenture dated as of May 1, 2002 (the "Indenture"), duly executed and
delivered by the City to the Trustee. Simultaneously with the issuance of the Series 2002A
Bonds, the City has issued its Water and Sewer System Refunding Revenue Bonds, Series 2002E
in the aggregate original principal amount of $6,540,000 (the "Series 2002B Bonds").
The Series 2002A Bonds are not general obligations of the City, but are limited and
special obligations payable solely from and secured by a pledge of the net revenues (the "Net
Revenues") of the City's water and sewer system (the "System"), as specified in, and in
accordance with the provisions of, the Indenture. The Series 2002A Bonds are secured by a
pledge of the Net Revenues on a parity basis with the pledge of Net Revenues securing the Series
2002B Bonds. The pledge of Net Revenues securing the Series 2002A Bonds and Series 2002B
Bonds is junior and subordinate to the prior pledge of Net Revenues securing the payment of
debt service on the City's outstanding Water and Sewer System Refunding Revenue Bonds,
Series 1999 (the "Series 1999 Bonds").
The Indenture provides that the City may hereafter issue Additional Bonds from time to
time under certain terms and conditions contained in the Indenture and, if issued, such Additional
Bonds will rank on a parity of security with the Series 2002A Bonds and Series 2002B Bonds
and be equally and ratably secured by and entitled to the protection of the Indenture. Reference is
hereby made to the Indenture and to all indentures 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 Trustee and the registered owners of the Series 2002A Bonds, and the
terms upon which the Series 2002A Bonds are issued and secured.
The Series 2002A Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2001) §§14-164-401 et seq.,
§§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended,
the "Act"), and pursuant to Ordinance No. 4381 of the City adopted on March 19, 2002. The
Series 2002A Bonds do not constitute an indebtedness of the City within the meaning of any
constitutional or statutory limitation.
Provision has been made in the Indenture for
the creation or
maintenance
of a
Revenue
Fund, an Operation and Maintenance Fund, a Bond
Fund (and for
the payment
into
the Bond
Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and
interest on the Series 2002A Bonds when due), a Debt Service Reserve Fund and a Renewal and
' Replacement Fund. The City covenants in the Indenture to always maintain rates for System
A-2
10-3237 UM{
services which will produce Net Revenues (gross revenues of the System less all reasonable and
necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the
System) in each fiscal year at least equal to 125% of the average annual debt service on all
outstanding indebtedness of the City secured by System revenues, plus the amount, if any,
required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund
established with respect to outstanding indebtedness of the City secured by System revenues, and
plus the amount, if any, required to make deposits to the Renewal and Replacement Fund.
Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2002A
Bonds shall never constitute an obligation or charge against the general credit or taxing powers
of the City.
Financial Guaranty Insurance Policy No. (the "Policy") with respect to
payments due for principal of and interest on this Series 2002A Bond has been issued by Ambac
Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of
New York, New York, New York, as the Insurance Trustee under said Policy and will be held by
such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee and a copy thereof may be secured
from Ambac Assurance or the Insurance Trustee. All payments required to be made under the
Policy shall be made in accordance with the provisions thereof. The owner of this Series 2002A
Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set
forth in the Policy.
The holder of this Series 2002A Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take any action with respect
to any event of default under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the principal of all the
Series 1999 Bonds, the Series 2002A Bonds, the Series 2002B Bonds and Additional Bonds, if
any, issued under the Indenture and then outstanding may be declared and may become due and
payable before the stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture supplemental thereto,
may be made only to the extent and in the circumstances permitted by the Indenture.
The Series 2002A Bonds shall not be subject to redemption prior to maturity.
This Series 2002A Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon surrender hereof,
together with a written instrument of transfer duly executed by the registered owner or his duly
authorized attorney.
The Series 2002A Bonds are issuable as registered bonds without coupons in
denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon
payment of the charges provided in the Indenture, Series 2002A Bonds may be exchanged for a
like aggregate principal amount of Series 2002A Bonds of other authorized denominations.
.: No recourse shall be had for the payment of the principal of or, premium, if any, or
interest on any of the Series 2002A Bonds or for any claim based thereon or upon any obligation,
covenant or agreement contained in the Series 2002A Bonds or the Indenture against any past,
present or future alderman, officer or employee of the City, or any successor, as such, either
directly or through the City or any successor of the City, under any rule of law or equity, statute
or constitution or by the enforcement of any assessment or penalty or otherwise, and all such
liability of any such alderman, officer or employee as such is hereby expressly waived and
released as a condition of and consideration for the issuance of any of the Series 2002A Bonds.
This Series 2002A Bond is issued with the intent that the laws of the State of Arkansas
will govern its construction.
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 the Series
2002A Bonds do exist, have happened and have been performed in due time, form and manner as
required by law; that the indebtedness represented by the Series 2002A Bonds, together with all
obligations of the City, does not exceed any constitutional or statutory limitation; and that the
revenues pledged to the payment of the principal of and premium, if any, and interest on the
Series 2002A Bonds as the same become due and payable will be sufficient in amount for that
purpose.
This Series 2002A Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of Authentication
hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series
2002A Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their
manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of
the date hereof shown above.
CITY OF FAYETTEVILLE, ARKANSAS
By:
ATTEST:
By:
City Clerk
(SEAL)
Mayor
A-4
10-32371.04
• (Form of Trustee's Certificate)
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond is one of the Series 2002A Bonds of the issue described in and issued under
the provisions of the within mentioned Indenture.
Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original
of which is on file with the undersigned, delivered and dated the date of the original delivery of
and payment for the Series 2002A Bonds.
BANK OF OKLAHOMA, N.A.,
as Trustee
By:
Authorized Signature
A-5
10-32,371.04
. (Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, , hereby sells, assigns, and
transfers unto , the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints
as attorney to transfer the within Bond on the books kept for registration thereof with full power
of substitution in the premises.
DATE: , 20_.
Transferor
GUARANTEED BY:
NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or
other transfer agent.
A-6
10-32371.04
FW64MONmail tell 11Czi1,Y19091WOCil 03 a1
Form of Series 2002B Bond
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R0213-
Interest Rate:
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2002B
% Maturity Date: August 15, 20_
Date of Bond: May 1, 2002
Registered Owner: CEDE & CO.
Principal Amount:
KNOW ALL MEN BY THESE PRESENTS:
CUSIP:
Dollars
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
B-1
10-32371.04
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
This bond, designated "City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bond, Series 2002B," is one of a series of bonds in the aggregate original
principal amount of $6,540,000 (the "Series 2002B Bonds"), issued for the purpose of refunding
the City's outstanding Water and Sewer System Subordinate Revenue Bonds, Series 2000,
establishing a debt service reserve for the Series 2002B Bonds, and paying expenses of issuing
the Series 2002B Bonds. The Series 2002B Bonds are issued under and are secured and entitled
to the protection given by a Trust Indenture dated as of May 1, 2002 (the "Indenture"), duly
executed and delivered by the City to the Trustee. Simultaneously with the issuance of the
Series 2002B Bonds, the City has issued its Water and Sewer System Refunding Revenue Bonds,
Series 2002A in the aggregate original principal amount of $2,730,000 (the "Series 2002A
Bonds").
The Series 2002B Bonds are not general obligations of the City, but are limited and
special obligations payable solely from and secured by a pledge of the net revenues (the "Net
Revenues") of the City's water and sewer system (the "System"), as specified in, and -in
accordance with the provisions of, the Indenture. The Series 2002B Bonds are secured by a
pledge of the Net Revenues on a panty basis with the pledge of Net Revenues securing the Series
2002A Bonds. The pledge of Net Revenues securing the Series 2002A Bonds and Series 2002B
Bonds is junior and subordinate to the prior pledge of Net Revenues securing the payment of
debt service on the City's outstanding Water and Sewer System Refunding Revenue Bonds,
Series 1999 (the "Series 1999 Bonds").
The Indenture provides that the City may hereafter issue Additional Bonds from time to
time under certain terms and conditions contained in the Indenture and, if issued, such Additional
Bonds will rank on a panty of security with the Series 2002A Bonds and Series 2002B Bonds
and be equally and ratably secured by and entitled to the protection of the Indenture. Reference is
hereby made to the Indenture and to all indentures 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 Trustee and the registered owners of the Series 2002B Bonds, and the
terms upon which the Series 2002B Bonds are issued and secured.
The Series 2002B Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2001) §§14-164-401 et seq.,
§§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended,
the "Act"), and pursuant to Ordinance No. 4381 of the City adopted on March 19, 2002. The
Series 2002B Bonds do not constitute an indebtedness of the City within the meaning of any
constitutional or statutory limitation.
Provision has been made in the Indenture for the creation or maintenance of a Revenue
Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond
Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and
interest on the Series 2002B Bonds when due), a Debt Service Reserve Fund and a Renewal and
B-2
10-32371.04
Replacement Fund. The City covenants in the Indenture to always maintain rates for System
services which will produce Net Revenues (gross revenues of the System less all reasonable and
necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the
System) in each fiscal year at least equal to 125% of the average annual debt service on all
outstanding indebtedness of the City secured by System revenues, plus the amount, if any,
required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund
established with respect to outstanding indebtedness of the City secured by System revenues, and
plus the amount, if any, required to make deposits to the Renewal and Replacement Fund.
Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2002B
Bonds shall never constitute an obligation or charge against the general credit or taxing powers
of the City.
Financial Guaranty Insurance Policy No. (the "Policy") with respect to
payments due for principal of and interest on this Series 2002B Bond has been issued by Ambac
Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of
New York, New York, New York, as.the Insurance Trustee under said Policy and will be held by
such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee and a copy thereof may be secured
from Ambac Assurance or the Insurance Trustee. All payments required to be made under the
Policy shall be made in accordance with the provisions thereof. The owner of this Series 2002B
Bond acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set
forth in the Policy.
' The holder of this Series 2002B Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take any action with respect
to any event of default under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the principal of all the
Series 1999 Bonds, the Series 2002A Bonds, the Series 2002B Bonds and Additional Bonds, if
any, issued under the Indenture and then outstanding may be declared and may become due and
payable before the stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture supplemental thereto,
may be made only to the extent and in the circumstances permitted by the Indenture.
The Series 2002B Bonds are subject to redemption prior to maturity, at the option of the
City, on and after August 15, 2012, in whole at any time or in part in inverse order of maturity (and
selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any
source, at a redemption price equal to one hundred percent (100%) of the principal amount of the
Series 2002B Bonds being redeemed, plus accrued interest to the date of redemption
Notwithstanding the
foregoing,
so long
as DTC or its
nominee
is the sole registered
owner of the Series 2002B
Bonds, the
particular
Series 2002B
Bonds or
portions thereof to be
redeemed in part within a maturity shall be selected by lot by DTC in such manner as DTC shall
determine. In selecting Series 2002B Bonds for redemption prior to maturity, in the case any
outstanding Series 2002B Bond is in a denomination greater than $5,000, each $5,000 of face
B-3
10.32371.04
•. value of such Series 2002B Bond shall be treated as a separate Series 2002B Bond of the
denomination of $5,000.
In the event any of the Series 2002B Bonds or portions thereof (which shall be $5,000 or
any integral multiple thereof) are called for redemption, notice thereof shall be given by the
Trustee by first class mail to the registered owner of each such Series 2002B Bond addressed to
such registered owner at his registered address and placed in the mails not less than thirty (30)
nor more than sixty (60) days prior to the date fixed for redemption; provided, however, that
failure to give such notice by mailing, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any Series 2002B Bond with respect to which no such failure
or defect has occurred. Each notice shall identify the Series 2002B Bonds or portions thereof
being called, and the date on which they shall be presented for payment. After the date specified
in such call notice, the Series 2002B Bond or Series 2002B Bonds so called for redemption will
cease to bear interest provided funds sufficient for their redemption have been deposited with the
Trustee, and, except for the purpose of payment, shall no longer be protected by the Indenture
and shall not be deemed to be outstanding under the provisions of the Indenture.
This Series 2002B Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon surrender hereof,
together with a written instrument of transfer duly executed by the registered owner or his duly
authorized attorney.
The Series 2002B Bonds are issuable as registered bonds without coupons in
denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon
payment of the charges provided in the Indenture, Series 2002B Bonds may be exchanged for a
like aggregate principal amount of Series 2002B Bonds of other authorized denominations.
No recourse shall be had for the payment of the principal of or premium, if any, or
interest on any of the Series 2002B Bonds or for any claim based thereon or upon any obligation,
covenant or agreement contained in the Series 2002B Bonds or the Indenture against any past,
present or future alderman, officer or employee of the City, or any successor, as such, either
directly or through the City or any successor of the City, under any rule of law or equity, statute
or constitution or by the enforcement of any assessment or penalty or otherwise, and all such
liability of any such alderman, officer or employee as such is hereby expressly waived and
released as a condition of and consideration for the issuance of any of the Series 2002B Bonds.
This Series 2002B Bond is issued with the intent that the laws of the State of Arkansas
will govern its construction.
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 the Series
2002B Bonds do exist, have happened and have been performed in due time, form and manner as
required by law; that the indebtedness represented by the Series 2002B Bonds, together with all
obligations of the City, does not exceed any constitutional or statutory limitation; and that the
revenues pledged to the payment of the principal of and premium, if any, and interest on the
B-4
10.32371.04
Series 2002B Bonds as the same become due and payable will be sufficient in amount for that
purpose.
This Series 2002B Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of Authentication
hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series
2002B Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their
manual or facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of
the date hereof shown above.
CITY OF FAYETTEVILLE, ARKANSAS
By:
ATTEST:
By:
City Clerk
(SEAQ
Mayor
10-32371.04
(Form of Trustee's Certificate)
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond is one of the Series 2002B Bonds of the issue described in and issued under the
provisions of the within mentioned Indenture.
Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original
of which is on file with the undersigned, delivered and dated the date of the original delivery of
and payment for the Series 2002B Bonds.
BANK OF OKLAHOMA, N.A.,
as Trustee
By:
Authorized Signature
B-6
10-32371.04
. (Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, , hereby sells, assigns, and
transfers unto the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints
as attorney to transfer the within Bond on the books kept for registration thereof with full power
of substitution in the premises.
DATE: , 20
Transferor
GUARANTEED BY:
NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or
other transfer agent.
B-7
10-32371.04
f
•
•
f
3
0
9
P
5
171
11
EXECUTION COPY
•
0
CITY OF FAYETTEVILLE, ARKANSAS
to
BANK OF OKLAHOMA, N.A.
as Trustee
FIRST SUPPLEMENTAL TRUST INDENTURE
Dated as of May 1, 2004
This First Supplemental Trust Indenture supplements and amends a Trust Indenture dated as of
May 1, 2002, by and between the City of Fayetteville, Arkansas and Bank of Oklahoma, N.A., as
Trustee. The Trust Indenture, as supplemented and amended hereby, secures the City's
(i) $2,730,000 original principal amount of Water and Sewer System Refunding Revenue Bonds,
Series 2002A, (ii) $6,540,000 original principal amount of Water and Sewer System Refunding
Revenue Bonds, Series 2002B, and (iii) $6,090,000 original principal amount of Water and
Sewer System Refunding Revenue Bonds, Series 2004.
Prepared by:
Kutak Rock LLP
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
10-58927.3
• FIRST SUPPLEMENTAL TRUST INDENTURE
THIS FIRST SUPPLEMENTAL TRUST INDENTURE dated as of May 1, 2004, by
and between the CITY OF FAYETTEVILLE, ARKANSAS (the "City"), a city of the first
class organized under and existing by virtue of the laws of the State of Arkansas, and BANK OF
OKLAHOMA, N.A., as trustee (the "Trustee"), a national banking association organized under
and existing by virtue of the laws of the United States of America and having its principal
corporate trust office located in Tulsa, Oklahoma;
WITNESSETH:
WHEREAS, the City presently owns a public water and sewer utility system (which
system, together with all capital improvements thereto, is herein collectively called the
"System") serving the residents of the City and its environs; and
WHEREAS, the City is authorized and empowered under the provisions of the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & 2003 Supp.) Sections 14-164401 et
seq., Sections 14-234-201 et seq. and Sections 14-235-201 et seq. (collectively, and as from time
to time amended, the "Act"), to issue and sell its water and sewer revenue bonds and to expend
the proceeds thereof to finance the costs of acquisition, construction, equipping, improving,
maintaining, operating and repairing the System, and to refund any bonds issued under the Act or
• any bonds issued under other applicable legislation payable from and secured by a pledge of
revenues derived from the System; and
WHEREAS, pursuant to the provisions of Ordinance No. 4159 of the City, adopted and
approved on April 20, 1999, the City has previously issued its Water and Sewer System
Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), in the original principal
amount of $8,365,000, for the purpose of refunding certain outstanding bonds of the City
previously issued to finance and refinance the cost of improvements to the System; and
WHEREAS, the City and the Trustee have previously entered into a Trust Indenture
dated as of May 1, 2002 (the "Original Indenture"), pursuant to which the City's Water and
Sewer System Refunding Revenue Bonds, Series 2002A and Series 2002B (collectively, the
"Series 2002 Bonds"), were issued in the original principal amount of $9,270,000, for the
purpose of refunding certain outstanding bonds of the City previously issued to finance and
refinance the cost of improvements to the System; and
WHEREAS,
the
Series 2002 Bonds were issued
and secured
under the Original
Indenture on a junior
and
subordinate basis to the Series 1999
Bonds; and
WHEREAS, in order to secure sufficient funds to refund the Series 1999 Bonds, to fund
a debt service reserve, to pay the premium on a policy of municipal bond insurance and to pay
legal and other expenses incidental to the issuance of water and sewer system refunding revenue
bonds for such purposes, it has been determined appropriate and necessary that the City
. authorize the issuance of its $6,090,000 Water and Sewer System Refunding Revenue Bonds,
Series 2004 (the "Series 2004 Bonds"), pursuant to the provisions of the Constitution of the State
10-589273
. of Arkansas and the Act, such Series 2004 Bonds to be payable solely from and secured by a
pledge of the net revenues of the System on a parity with the pledge of System net revenues
securing the Series 2002 Bonds; and
WHEREAS, upon the issuance of the Series 2004 Bonds and the corresponding
refunding and defeasance of the Series 1999 Bonds, then the Series 2002 Bonds and the Series
2004 Bonds will be the only outstanding indebtedness of the City secured by System net
revenues; and
WHEREAS, the conditions for the issuance of Additional Bonds, as set forth in the
Original Indenture, have been satisfied; and
WHEREAS, the Series 2004 Bonds are to be
dated,
bear interest,
mature
and be subject
to redemption as hereinafter in this First Supplemental
Trust
Indenture set
forth in
detail; and
WHEREAS, the execution and delivery of this First Supplemental Trust Indenture and
the issuance of the Series 2004 Bonds have been in all respects duly and validly confirmed,
authorized and approved by Ordinance No. 4554 adopted and approved by the City Council of
the City on April 6, 2004; and
WHEREAS, all things necessary to make the Series 2004 Bonds, when authenticated by
the Trustee and issued as in this First Supplemental Trust Indenture provided, the valid, binding
and legal obligations of the City according to the import thereof, and to constitute the Indenture
(as defined below) a valid pledge of the Net Revenues (as defined in the Indenture) to the
payment of the principal of, premium, if any, and interest on the Series 2002 Bonds, the Series
2004 Bonds and all Additional Bonds (as defined below), if any, to be issued on a parity
therewith (the Series 2002 Bonds, the Series 2004 Bonds and such Additional Bonds are
hereinafter referred to as the "Bonds"), have been done and performed, and the creation,
execution and delivery of this First Supplemental Trust Indenture and the creation, execution,
issuance and delivery of the Series 2004 Bonds, subject to the terms hereof, have in all respects
been duly authorized; and
WHEREAS, in order to make proper provision for the security of the Series 2004 Bonds,
it is necessary that the Original Indenture be amended and supplemented as effected hereby;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS FIRST
SUPPLEMENTAL TRUST INDENTURE WITNESSETH:
Section 1.01. It is understood and agreed that the provisions of the Original Indenture
shall extend to and apply to the security and benefit of the Series 2004 Bonds and that the term
"Bonds" as used in the Original Indenture is hereby recognized to include and shall be deemed to
refer to (where applicable) the Series 2004 Bonds.
Section 1.02. Section 101 of the Original Indenture is hereby amended by adding thereto
the following definitions (and by striking any definitions which are supplanted by the definitions
. set forth below):
10-58927.3 2
. "Additional Bonds" mean Bonds in addition to the Series 2002 Bonds and the Series
2004 Bonds which are issued under the provisions of Section 213 of this Indenture.
"Authorizing Ordinance" means (i) Ordinance No. 4381, adopted by the City on
March 19, 2002, which authorized the issuance of the Series 2002 Bonds pursuant to this
Indenture, and (ii) Ordinance No. 4554, adopted by the City on April 6, 2004, which authorized
the issuance of the Series 2004 Bonds pursuant to this Indenture.
"Bonds" mean the Series 2002 Bonds, the Series 2004 Bonds and all Additional Bonds
issued by the City pursuant to this Indenture.
"1999 Escrow Agreement" means the Escrow Deposit Agreement dated May 20, 2004,
between the City and the 1999 Escrow Trustee, providing for the redemption of the Series 1999
Bonds.
"1999 Escrow Fund" means the fund established under the 1999 Escrow Agreement for
deposit of moneys and investment securities to be held for the redemption of the Series 1999
Bonds.
"1999 Escrow Trustee" means Bank of Oklahoma, N.A., in its capacity as escrow trustee
under the 1999 Escrow Agreement.
"2004
Financial Guaranty Insurance
Policy" means the
financial guaranty insurance
policy issued
by Ambac Assurance insuring
the payment when
due of the principal of and
interest on the
Series 2004 Bonds as provided therein.
"Indenture" means this Trust Indenture dated as of May 1, 2002, as amended and
supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004, each by and
between the City and the Trustee, pursuant to which the Bonds are issued, and any further
amendments and supplements thereto.
"Outstanding" means, when used with reference to the Bonds, as of any particular date,
the aggregate of all Bonds authenticated and delivered under this Indenture except:
(a) Bonds cancelled at or prior to such date or delivered to or acquired by the
Trustee at or prior to such date for cancellation;
(b) Bonds deemed to be paid in accordance with Article VIII of this
Indenture; and
(c) Bonds in lieu of or in exchange or substitution for which other Bonds shall
have been authenticated and delivered pursuant to this Indenture.
Notwithstanding the provisions of (a), (b) and (c), (i) Series 2002 Bonds, the principal of
and/or interest on which has been paid by Ambac Assurance pursuant to the Financial Guaranty
Insurance Policy and (ii) Series 2004 Bonds, the principal of and/or interest on which has been
• paid by Ambac Assurance pursuant to the 2004 Financial Guaranty Insurance Policy, shall be
deemed to remain Outstanding for all purposes.
10-58927.3 3
• "Series 2004 Bonds" means City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bonds, Series 2004, issued under and secured by this Indenture in the
aggregate principal amount of $6,090,000 for the purpose of refunding the Series 1999 Bonds.
Section 2.01. Article II of the Original Indenture is hereby amended by adding at the
end thereof the following sections:
"Section 218. Details of Series 2004 Bonds.
The Series 2004 Bonds (i) shall be designated "City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds, Series 2004," (ii) shall be in the
aggregate principal amount of $6,090,000, (iii) shall be dated as of May 1, 2004,
(iv) shall bear interest from such date at the rates hereinafter provided until paid, payable
semiannually on February 15 and August 15 of each year, commencing August 15, 2004,
(v) shall be issued in denominations of $5,000 each, or any integral multiple thereof,
(vi) shall be numbered from R04-1 upwards in order of issuance according to the records
of the Trustee, and (vii) shall mature, unless sooner redeemed in the manner in this
Indenture set forth, on August 15 in each of the years and in the amounts set forth in the
following table, which table also sets forth the interest rates for the Series 2004 Bonds:
Year
(August 15)
Principal Amount
Interest Rate
2004
$ 130,000
1.00%
• 2005
585,000
2.50
2006
595,000
2.50
2007
615,000
3.00
2008
6355000
3.00
2009
6553000
2.80
2010
670,000
3.05
2011
6905000
3.30
2012
1,515,000
4.00
"Section 219. Form of Series 2004 Bonds. The Series 2004 Bonds shall be
issued as registered Bonds without coupons. The Series 2004 Bonds and the Trustee's
certificate of authentication to be endorsed thereon shall be in substantially the form set
forth in Exhibit A to this First Supplemental Trust Indenture, with appropriate variations,
insertions and omissions as permitted or required by the Indenture."
"Section 220. Delivery of Series 2004 Bonds. Simultaneously with the delivery
of the Series 2004 Bonds, the Trustee shall apply the proceeds thereof as follows:
(a) The amount, if any, received as accrued interest on the Series 2004
Bonds, shall be deposited in the Series 2004 Account of the Bond Fund;
(b) An amount equal to $786,432.50, the Reserve Requirement with
• respect to the Series 2004 Bonds, shall be deposited in the Series 2004 Account of
the Debt Service Reserve Fund;
10-58927.3
• (c) An amount equal to $5,222,145.07 shall be transferred to the 1999
Escrow Trustee to be held in the 1999 Escrow Fund for redemption of the Series
1999 Bonds;
(d) An amount equal to $24,410.10 shall be paid to Ambac Assurance
in payment of the premium for the 2004 Financial Guaranty Insurance Policy;
(e) An amount equal to $50,640.10 shall be deposited in the Costs of
Issuance Fund and shall be utilized for payment of Costs of Issuance of the Series
2004 Bonds pursuant to the written direction of the City; and
(f) The balance of said proceeds in the amount of $103.18 shall be
deposited in the Series 2004 Account of the Bond Fund."
Section 3.01. Section 301 of the Original Indenture is hereby amended and
supplemented to read as follows:
"Section 301. Optional Redemption.
(a) The Series 2002A Bonds shall not be subject to redemption prior to
maturity.
(b) The Series 2002B Bonds are subject to redemption prior to maturity, at the
• option of the City, on and after August 15, 2012, in whole at any time or in part in inverse
order of maturity (and selected by the Trustee by lot within a maturity) on any interest
payment date, from funds from any source, at a redemption price of 100% of the
principal amount of the Series 2002B Bonds being redeemed, plus accrued interest to the
date of redemption.
(c) The Series 2004 Bonds are subject to redemption prior to maturity, at the
option of the City, on and after August 15, 2009, in whole at any time or in part in inverse
order of maturity (and selected by the Trustee by lot within a maturity) on any interest
payment date, from funds from any source, at a redemption price of 100% of the
principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the
date of redemption."
Section 4.01. Section 802 of the Original Indenture is hereby amended and restated to
read as follows:
"Section 802. Bonds Deemed Paid. Any Bond shall be deemed to be paid within
the meaning of this Article VIII when payment of the principal of and premium, if any,
and interest on such Bond (whether at maturity or upon redemption as provided in this
Indenture, or otherwise), either (i) shall have been made or caused to be made in
accordance with the terms thereof, or (ii) shall have been provided for by irrevocably
depositing with the Trustee, in trust and irrevocably set aside exclusively for such
payment, (1) moneys sufficient to make such payment or (2) Government Securities
• (provided that
such deposit
will
not affect
the
tax-exempt status of the interest on any of
the Bonds or
cause any of
the
Bonds to
be
classified as "arbitrage bonds" within the
10-58927.3 5
. meaning of Section 148(a) of the Code, as reflected in an opinion of Bond Counsel
delivered to the Trustee), maturing as to principal and interest in such amount and at such
times as will provide sufficient moneys to make such payment, and all necessary and
proper fees, compensation and expenses of the Trustee and any Paying Agent pertaining
to the Bonds with respect to which such deposit is made shall have been paid or the
payment thereof provided for to the satisfaction of the Trustee and any said Paying
Agent. Any Government Securities used for defeasance must provide for the timely
payment of principal and interest and cannot be callable or prepayable prior to maturity
or earlier redemption of the defeased Bonds (excluding Government Securities that do
not have a fixed par value and/or whose terms do not promise a fixed dollar amount at
maturity or call date).
Notwithstanding anything in this Indenture to the contrary, in the event that the
principal and/or interest due on the Series 2002 Bonds shall be paid by Ambac Assurance
pursuant to the Financial Guaranty Insurance Policy, the Series 2002 Bonds shall remain
Outstanding for all purposes, shall not be defeased or otherwise satisfied and shall not be
considered paid by the City, and the pledge and assignment of the Trust Estate and all
covenants, agreements and other obligations of the City to the registered owners shall
continue to exist and shall run to the benefit of Ambac Assurance, and Ambac Assurance
shall be subrogated to the rights of such registered owners.
Notwithstanding anything in this Indenture to the contrary, in the event that the
• principal and/or interest due on the Series 2004 Bonds shall be paid by Ambac Assurance
pursuant to the 2004 Financial Guaranty Insurance Policy, the Series 2004 Bonds shall
remain Outstanding for all purposes, shall not be defeased or otherwise satisfied and shall
not be considered paid by the City, and the pledge and assignment of the Trust Estate and
all covenants, agreements and other obligations of the City to the registered owners shall
continue to exist and shall run to the benefit of Ambac Assurance, and Ambac Assurance
shall be subrogated to the rights of such registered owners."
Section 5.01. Section 1201 of the Original Indenture is hereby amended and
supplemented to read as follows:
"Section 12.01. Consent of Ambac Assurance. (a) Any provision of this
Indenture expressly recognizing or granting rights in or to Ambac Assurance may not be
amended in any manner which affects the rights of Ambac Assurance hereunder without
the prior written consent of Ambac Assurance. Ambac Assurance reserves the right to
charge the City a fee for any consent or amendment to the Indenture while the Financial
Guaranty Insurance Policy or the 2004 Financial Guaranty Insurance Policy is
outstanding.
(b) Unless otherwise provided in this Section 1201, Ambac Assurance's
consent shall be required in addition to bondholder consent, when required, for the
following purposes: (i) execution and delivery of any supplemental Indenture,
(ii) removal of the Trustee or Paying Agent and selection and appointment of any
• successor trustee or paying agent, and (iii) initiation or approval of any action not
described in (i) or (ii) above which requires bondholder consent.
10-58927.3 6
• (c) Any reorganization or liquidation plan with respect to the City must be
acceptable to Ambac Assurance. In the event of any reorganization or liquidation,
Ambac Assurance shall have the right to vote on behalf of (i) all bondholders who hold
Series 2002 Bonds absent a default by Ambac Assurance under the Financial Guaranty
Insurance Policy and (ii) all bondholders who hold Series 2004 Bonds absent a default by
Ambac Assurance under the 2004 Financial Guaranty Insurance Policy.
(d) Anything in this Indenture to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default, Ambac Assurance shall be entitled to
control and direct the enforcement of all rights and remedies granted to bondholders or
the Trustee for the benefit of the bondholders under this Indenture, including, without
limitation, (i) the right to accelerate the principal of the Series 2002 Bonds and the Series
2004 Bonds as described in Section 902 of this Indenture, and (ii) the right to annul any
declaration of acceleration, and Ambac Assurance shall also be entitled to approve all
waivers of Events of Default.
(e) (i) Upon the occurrence of an Event of Default, the Trustee may, with the
consent of Ambac Assurance, and shall, at the direction of Ambac Assurance or at the
written request of bondholders of not less than 51% in aggregate Outstanding principal
amount of the Series 2002 Bonds with the consent of Ambac Assurance, by written
notice to the City and Ambac Assurance, declare the principal of the Series 2002 Bonds
to be immediately due and payable, whereupon that portion of the principal of the
• Series 2002 Bonds thereupon coming due and the interest thereon accrued to the date of
payment shall, without further action, become and be immediately due and payable,
anything in this Indenture or in the Series 2002 Bonds to the contrary notwithstanding;
and (ii) upon the occurrence of an Event of Default, the Trustee may, with the consent of
Ambac Assurance, and shall, at the direction of Ambac Assurance or at the written
request of bondholders of not less than 51% in aggregate Outstanding principal amount
of the Series 2004 Bonds with the consent of Ambac Assurance, by written notice to the
City and Ambac Assurance, declare the principal of the Series 2004 Bonds to be
immediately due and payable, whereupon that portion of the principal of the Series 2004
Bonds thereupon coming due and the interest thereon accrued to the date of payment
shall, without further action, become and be immediately due and payable, anything in
this Indenture or in the Series 2004 Bonds to the contrary notwithstanding."
Section 5.02. Section 1202 of the Original Indenture is hereby amended and
supplemented to read as follows:
"Section 1202. Notices/Information to be Given to Ambac Assurance. (a) While
the Financial Guaranty Insurance Policy or the 2004 Financial Guaranty Insurance Policy
is in effect, the Trustee (or the City to the extent the Trustee is not in possession of such
information) shall furnish to Ambac Assurance at its address indicated in Section 1302
hereof (to the attention of the Surveillance Department):
(i) as soon as practicable after the filing thereof, a copy of any
. financial statement relating to the City's Water and Sewer Fund and a copy of any
audit and annual report of the City;
10-58927.3 7
(ii) a copy of any notice to be given to the registered owners of the
Series 2002 Bonds or the Series 2004 Bonds, including, without limitation, notice
of any redemption of or defeasance of the Series 2002 Bonds or the Series 2004
Bonds, and any certificate rendered pursuant to this Indenture relating to the
security for the Series 2002 Bonds or the Series 2004 Bonds; and
(iii) such additional information as Ambac Assurance may reasonably
request.
(b) Ambac Assurance shall be included as a party to be notified under the
provisions of the Continuing Disclosure Agreement with respect to the Series 2002
Bonds and the Continuing Disclosure Agreement with respect to the Series 2004 Bonds.
(c) The Trustee shall notify Ambac Assurance of any failure of the City to
provide relevant notices, certificates, etc.
(d) Notwithstanding any other provision of this Indenture, the Trustee shall
immediately notify Ambac Assurance if at any time there are insufficient moneys to
make any payments of principal and/or interest on the Bonds as required and immediately
upon the occurrence of any Event of Default hereunder.
(e) The City will permit Ambac Assurance to discuss the affairs, finances and
accounts of the City or any information Ambac Assurance may reasonably request
regarding the security for the Series 2002 Bonds or the Series 2004 Bonds with
appropriate officers of the City. The Trustee and the City will permit Ambac Assurance
to have access to and to make copies of all books and records relating to the Series 2002
Bonds or the Series 2004 Bonds at any reasonable time.
(f) Ambac Assurance shall have the right to direct an accounting at the City's
expense, and the City's failure to comply with such direction within thirty (30) days after
receipt of written notice of the direction from Ambac Assurance shall be deemed a
default hereunder; provided, however, that if compliance cannot occur within such
period, then such period will be extended so long as compliance is begun within such
period and diligently pursued, but only if such extension would not materially adversely
affect the interests of any registered owner of the Bonds."
Section 5.03. Section 1203 of the Original Indenture is hereby renamed as follows
"Payment Procedure Under Financial Guaranty Insurance Policy".
Section 5.04. Section 1204 of the Original Indenture is hereby amended and
supplemented to read as follows:
"Section 1204. Trustee -Related Provisions. (a) The Trustee or Paying Agent,
if any, may be removed at any time, at the request of Ambac Assurance, for any breach of
the Trust set forth herein.
• (b) Ambac Assurance shall receive prior written notice of any Trustee or
Paying Agent resignation.
10-58927.3
• (c) Every successor Trustee appointed pursuant to this Indenture shall be a
trust company or bank in good standing located in or incorporated under the laws of the
State of Arkansas, duly authorized to exercise trust powers and subject to examination by
federal or state authority, having a reported capital and surplus of not less than
$75,000,000 and acceptable to Ambac Assurance. Any successor Paying Agent, if
applicable, shall not be appointed unless Ambac Assurance approves such successor in
writing.
(d) Notwithstanding any other provision of this Indenture, in determining
whether the rights of the bondholders will be adversely affected by any action taken
pursuant to the terms and provisions of this Indenture, the Trustee shall consider the
effect on the bondholders as if there were no Financial Guaranty Insurance Policy or
2004 Financial Guaranty Insurance Policy.
(e) Notwithstanding any other provision of this Indenture, no removal,
resignation or termination of the Trustee or Paying Agent shall take effect until a
successor, acceptable to Ambac Assurance, shall be appointed."
Section 5.05. Article XII of the Original Indenture is hereby amended and supplemented
by adding the following Section 1206 thereto:
"Section 1206. Payment Procedure Under 2004 Financial Guaranty Insurance
Policy. So long as the 2004 Financial Guaranty Insurance Policy shall be in full force
• and effect, the City, the Trustee and any Paying Agent agree to comply with the
following provisions:
(a) At least one (1) day prior to all interest payment dates with respect to the
Series 2004 Bonds, the Trustee or Paying Agent, if any, will determine whether there will
be sufficient moneys in the funds and accounts created hereunder to pay the principal of
and interest on the Series 2004 Bonds on such interest payment date. If the Trustee or
Paying Agent, if any, determines that there will be insufficient moneys in such funds and
accounts, the Trustee or Paying Agent, if any, shall so notify Ambac Assurance. Such
notice shall specify the amount of the anticipated deficiency, the Series 2004 Bonds to
which such deficiency is applicable and whether such Series 2004 Bonds will be deficient
as to the payment of principal or interest, or both. If the Trustee or Paying Agent, if any,
has not so notified Ambac Assurance at least one (1) day prior to an interest payment
date, Ambac Assurance will make payments of principal and/or interest due on the Series
2004 Bonds on or before the first (Ist) day next following the date on which Ambac
Assurance shall have received notice of nonpayment from the Trustee or Paying Agent, if
any.
(b) The Trustee or Paying Agent, if any, shall, after giving notice to Ambac
Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac
Assurance's direction, to The Bank of New York, in New York, New York, as insurance
trustee for Ambac Assurance or any successor insurance trustee (the "Insurance
Trustee"),
the
registration books
of the City maintained
by the Trustee or Paying Agent,
. if any, and
all
records relating to
the funds and accounts
maintained under
this Indenture.
10-58927.3 9
• (c) The Trustee or Paying Agent, if any, shall provide Ambac Assurance and
the Insurance Trustee with a list of registered owners of Series 2004 Bonds entitled to
receive principal or interest payments from Ambac Assurance under the terms of the
2004 Financial Guaranty Insurance Policy, and shall make arrangements with the
Insurance Trustee (i) to mail checks or drafts to the registered owners of the Series 2004
Bonds entitled to receive full or partial interest payments from Ambac Assurance and
(ii) to pay principal upon the Series 2004 Bonds surrendered to the Insurance Trustee by
the registered owners of the Series 2004 Bonds entitled to receive full or partial principal
payments from Ambac Assurance.
(d) The Trustee or Paying Agent, if any, shall, at the time it provides notice to
Ambac Assurance pursuant to (a) above, notify registered owners of the Series 2004
Bonds entitled to receive the payment of principal or interest thereon from Ambac
Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to
them all or a part of the interest payments next coming due upon proof of bondholder
entitlement to interest payments and delivery to the Insurance Trustee, in form
satisfactory to the Insurance Trustee, of an appropriate assignment of the registered
owner's right to payment, (iii) that should they be entitled to receive full payment of
principal from Ambac Assurance, they must surrender their Series 2004 Bonds (along
with an appropriate instrument of assignment in form satisfactory to the Insurance
Trustee to permit ownership of such Series 2004 Bonds to be registered in the name of
• Ambac Assurance) for payment to the Insurance Trustee, and not the Trustee or Paying
Agent, if any, and (iv) that should they be entitled to receive partial payment of principal
from Ambac Assurance, they must surrender their Series 2004 Bonds for payment
thereon first to the Trustee or Paying Agent, if any, who shall note on such Series 2004
Bonds the portion of the principal paid by the Trustee or Paying Agent, if any, and then,
along with an appropriate instrument of assignment in form satisfactory to the Insurance
Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal.
I
(e) In the event that the Trustee or Paying Agent, if any, has notice that any
payment of principal of or interest on a Series 2004 Bond which has become Due for
Payment and which is made to a bondholder by or on behalf of the Obligor has been
deemed a preferential transfer and theretofore recovered from its registered owner
pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance
with the final, nonappealable order of a court having competent jurisdiction, the Trustee
or Paying Agent, if any, shall, at the time Ambac Assurance is notified pursuant to (a)
above, notify all registered owners that in the event that any registered owner's payment
is so recovered, such registered owner will be entitled to payment from Ambac Assurance
to the extent of such recovery if sufficient funds are not otherwise available, and the
Trustee or Paying Agent, if any, shall furnish to Ambac Assurance its records evidencing
the payments of principal of and interest on the Series 2004 Bonds which have been
made by the Trustee or Paying Agent, if any, and subsequently recovered from registered
owners and the dates on which such payments were made.
10-58927.3 10
• (f) In addition to those rights granted Ambac Assurance under this Indenture,
Ambac Assurance shall, to the extent it makes payment of principal of or interest on
Series 2004 Bonds, become subrogated to the rights of the recipients of such payments in
accordance with the terms of the 2004 Financial Guaranty Insurance Policy, and to
evidence such subrogation (i) in the case of subrogation as to claims for past due interest,
the Trustee or Paying Agent, if any, shall note Ambac Assurance's rights as subrogee on
the registration books of the City maintained by the Trustee or Paying Agent if any, upon
receipt from Ambac Assurance of proof of the payment of interest thereon to the
registered owners of the Series 2004 Bonds, and (ii) in the case of subrogation, as to
claims for past due principal, the Trustee or Paying Agent, if any, shall note Ambac
Assurance's rights as subrogee on the registration books of the City maintained by the
Trustee or Paying Agent, if any, upon surrender of the Series 2004 Bonds by the
registered owners thereof together with proof of the payment of principal thereof."
Section 6.01. Severabilitv. (a) If any provisions of this First Supplemental Trust
Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as
applied in any particular case in any, jurisdiction or jurisdictions or in all jurisdictions or in all
cases because it conflicts with any provisions or any constitution or statute or rule of public
policy, or for any other reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or circumstance, or of
rendering any other provision or provisions herein contained invalid, inoperative or
unenforceable to any extent whatever.
• (b) The invalidity of any one or more phrases, sentences, clauses or paragraphs in this
First Supplemental Trust Indenture contained shall not affect the remaining portions of this First
Supplemental Trust Indenture or any part thereof.
C J
Section 6.02. Applicable Provisions of Law. This First Supplemental Trust Indenture
shall be considered to have been executed in the State of Arkansas and it is the intention of the
parties that the substantive law of the State of Arkansas govern as to all questions of
interpretation, validity and effect.
Section 6.03. Counterparts. This First Supplemental Trust Indenture may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.
Section 6.04. Ratification of Original Indenture. As supplemented and amended hereby,
the Original Indenture is hereby ratified and confirmed.
10-58927.3 11
• IN WITNESS WHEREOF, the City has caused these presents to be signed in its name
and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City
Clerk, and to evidence its acceptance of the trust hereby created, the Trustee has caused these
presents to be signed in its behalf by its duly authorized officers and its corporate seal to be
hereto affixed.'
ATTEST:
(SEAL)
CITY OF FAYETTEVILLE, ARKANSAS
By:
Mayor
k, G; 'STY 0a ', 0&BANK OF OKLAHOMA, N.A.,
GR• •, i
as Trustee
FAYETTEVILLE;
• 9�•9RkAWN%� 44 By:
��TON•GOJ.` Title:
ATTEST: '" � uia;100%
By: —
Title:
(SEAL)
[SIGNATURE PAGE TO FIRST SUPPLEMENTAL TRUST INDENTURE]
10-58927.3
• IN WITNESS WHEREOF, the City has caused these presents to be signed in its name
and behalf by its Mayor and its corporate seal to be hereunto affixed and attested by its City
Clerk, and to evidence its acceptance of the trust hereby created, the Trustee has caused these
presents to be signed in its behalf by its duly authorized officers and its corporate seal to be
hereto affixed.
•
•
ATTEST:
By:
City Clerk
(SEAL)
ATTEST:
By:_ CD
4itle: As sis ant Uic President & Trust Officer
(SEAL)
CITY OF FAYETTEVILLE, ARKANSAS
Mayor
BANK OF OKLAHOMA, N.A.,
as Trustee
i Z
By:
Title: Vice President & Trust Officer
[SIGNATURE PAGE TO FIRST SUPPLEMENTAL TRUST INDENTURE]
10-58927.3
11
0
•
EXHIBIT A TO FIRST SUPPLEMENTAL TRUST INDENTURE
Form of Series 2004 Bond
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: %
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
Principal Amount:
KNOW ALL MEN BY THESE PRESENTS:
Maturity Date: August 15, 20_
CUSIP: 312693
Dollars
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
10-58927.3 A-1
• shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
This bond, designated "City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bond, Series 2004," is one of a series of bonds in the aggregate original
principal amount of $6,090,000 (the "Series 2004 Bonds"), issued for the purpose of refunding
the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 1999,
establishing a debt service reserve for the Series 2004 Bonds, paying the premium on a policy of
municipal bond insurance, and paying expenses of issuing the Series 2004 Bonds. The Series
2004 Bonds are issued under and are secured and entitled to the protection given by a Trust
Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust
Indenture dated as May 1, 2004 (as amended and supplemented, the "Indenture"), each duly
executed and delivered by the City to the Trustee. The City has previously issued its Water and
Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal
amount of $9,270,000 (the "Series 2002 Bonds") under the provisions of the Indenture.
The Series 2004 Bonds are not general obligations of the City, but are limited and special
obligations payable solely from and secured by a pledge of the net revenues (the "Net
Revenues") of the City's water and sewer system (the "System"), as specified in, and in
accordance with the provisions of, the Indenture. The Series 2004 Bonds are secured by a pledge
of the Net Revenues on a panty basis with the pledge of Net Revenues securing the Series 2002
• Bonds.
The Indenture provides that the City may hereafter issue Additional Bonds from time to
time under certain terms and conditions contained in the Indenture and, if issued, such Additional
Bonds will rank on a panty of security with the Series 2002 Bonds and Series 2004 Bonds and be
equally and ratably secured by and entitled to the protection of the Indenture. Reference is
hereby made to the Indenture and to all indentures 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 Trustee and the registered owners of the Series 2004 Bonds, and the
terms upon which the Series 2004 Bonds are issued and secured.
The Series 2004 Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-164-401 et seq.,
§§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended,
the "Act"), and pursuant to Ordinance No. 4554 of the City adopted on April 6, 2004. The Series
2004 Bonds do not constitute an indebtedness of the City within the meaning of any
constitutional or statutory limitation.
Provision has been made in the Indenture for the creation or maintenance of a Revenue
Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond
Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and
interest on the Series 2004 Bonds when due), a Debt Service Reserve Fund and a Renewal and
• Replacement Fund. The City covenants in the Indenture to always maintain rates for System
services which will produce Net Revenues (gross revenues of the System less all reasonable and
10-58927.3 A-2
• necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the
System) in each fiscal year at least equal to 125% of the average annual debt service on all
outstanding indebtedness of the City secured by System revenues, plus the amount, if any,
required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund
established with respect to outstanding indebtedness of the City secured by System revenues, and
plus the amount, if any, required to make deposits to the Renewal and Replacement Fund.
Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2004
Bonds shall never constitute an obligation or charge against the general credit or taxing powers
of the City.
Financial Guaranty Insurance Policy No. 22458BE (the "Policy") with respect to
payments due for principal of and interest on this Bond has been issued by Ambac Assurance
Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of New York,
New York, New York, as the Insurance Trustee under said Policy and will be held by such
Insurance Trustee or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee and a copy thereof may be secured
from Ambac Assurance or the Insurance Trustee. All payments required to be made under the
Policy shall be made in accordance with the provisions thereof. The owner of this Bond
acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth
in the Policy.
The holder of this Series 2004 Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take any action with respect
to any event of default under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the principal of all the
Series 2002 Bonds, the Series 2004 Bonds and Additional Bonds, if any, issued under the
Indenture and then outstanding may be declared and may become due and payable before the
stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture supplemental thereto,
may be made only to the extent and in the circumstances permitted by the Indenture.
The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City,
on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and
selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any
source, at a redemption price equal to one hundred percent (100%) of the principal amount of the
Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption
This Series 2004 Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon surrender hereof,
together with a written instrument of transfer duly executed by the registered owner or his duly
authorized attorney.
The Series 2004 Bonds are issuable as registered bonds without coupons in
• denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon
I0-58927.3 A-3
•
payment of the charges provided in the Indenture, Series 2004 Bonds may be exchanged for a
like aggregate principal amount of Series 2004 Bonds of other authorized denominations.
No recourse shall be had for the payment of the principal of or premium, if any, or
interest on any of the Series 2004 Bonds or for any claim based thereon or upon any obligation,
covenant or agreement contained in the Series 2004 Bonds or the Indenture against any past,
present or future alderman, officer or employee of the City, or any successor, as such, either
directly or through the City or any successor of the City, under any rule of law or equity, statute
or constitution or by the enforcement of any assessment or penalty or otherwise, and all such
liability of any such alderman, officer or employee as such is hereby expressly waived and
released as a condition of and consideration for the issuance of any of the Series 2004 Bonds.
This Series 2004 Bond is issued with the intent that the laws of the State of Arkansas will
govern its construction.
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 the Series
2004 Bonds do exist, have happened and have been performed in due time, form and manner as
required by law; that the indebtedness represented by the Series 2004 Bonds, together with all
obligations of the City, does not exceed any constitutional or statutory limitation; and that the
revenues pledged to the payment of the principal of and premium, if any, and interest on the
Series 2004 Bonds as the same become due and payable will be sufficient in amount for that
purpose.
This Series 2004 Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of Authentication
hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2004
Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their manual or
facsimile signatures), and its corporate seal to be affixed or imprinted hereon, all as of the date
hereof shown above.
ntoIWI8
City Clerk
(SEAL)
CITY OF FAYETTEVILLE, ARKANSAS
By:
Mayor
10.59927.3
MA
0 (Form of Trustee's Certificate)
Is
L-J
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond is one of the Series 2004 Bonds of the issue described in and issued under the
provisions of the within mentioned Indenture.
Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original
of which is on file with the undersigned, delivered and dated the date of the original delivery of
and payment for the Series 2004 Bonds.
BANK OF OKLAHOMA, N.A.,
as Trustee
By:
Authorized Signature
10-58927.3 A-5
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, hereby sells, assigns, and
transfers unto , the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints
as attorney to transfer the within Bond on the books kept for registration thereof with full power
of substitution in the premises.
DATE: 120
Transferor
GUARANTEED BY:
•
NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or
other transfer agent.
•
10-58927.3 A-6
EXECUTION COPY
•
0
ESCROW DEPOSIT AGREEMENT
Dated May 20, 2004
Between
CITY OF FAYETTEVILLE, ARKANSAS
Issuer
m
BANK OF OKLAHOMA, N.A.
Escrow Trustee
Pertaining to the
Current Refunding of:
$693653000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 1999
Prepared by:
Kutak Rock LLP
425 West Capitol Avenue, Suite 1100
Little Rock, Arkansas 72201
10-58775.3
• ESCROW DEPOSIT AGREEMENT
THIS ESCROW DEPOSIT AGREEMENT (this "Agreement'), dated May 20, 2004,
by and between the City of Fayetteville, Arkansas (the "City"), a city of the first class organized
and existing by virtue of the laws of the State of Arkansas, and Bank of Oklahoma, N.A., as
escrow trustee (the "Escrow Trustee"), a banking corporation organized under and existing by
virtue of the laws of the United States of America and having its principal corporate trust office
in Tulsa, Oklahoma;
WITNESSETH:
WHEREAS, the City has heretofore issued its $8,365,000 Water and Sewer System
Refunding Revenue Bonds, Series 1999, dated May 1, 1999, of which $6,365,000 in aggregate
principal amount remain outstanding and are stated to mature on August 15, 2004 to 2012,
inclusive (the "Series 1999 Bonds"), as identified on the attached Schedule I; and
WHEREAS, pursuant to Ordinance No. 4554 adopted and approved by the City Council
of the City on April 6, 2004, and the Constitution and laws of the State of Arkansas, the City has
authorized the issuance of $6,090,000 aggregate principal amount of its Water and Sewer System
Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), a portion of the proceeds of
which are to be utilized, together with other available funds and investment earnings thereon, to
accomplish a current refunding of all of the Series 1999 Bonds in accordance with the
requirements of Section 25 of Ordinance No. 4159 of the City adopted and approved on April 20,
1999; and
WHEREAS, the City has made arrangements for the Escrow Trustee to purchase, with
(a) a portion of the proceeds derived from the sale of the Series 2004 Bonds, (b) amounts
released from the Bond Fund for the Series 1999 Bonds, and (c) amounts released from the Debt
Service Reserve Fund for the Series 1999 Bonds, the 1999 Government Obligations (hereinafter
defined), the principal of and interest on which, when due, together with an initial cash deposit,
will provide sufficient moneys to enable the Escrow Trustee:
(i) to deposit with itself as the trustee and the paying agent for the Series 1999
Bonds (the "1999 Paying Agent') sufficient moneys to pay, as the same shall become due
and payable, the principal of all of the Series 1999 Bonds at maturity and upon
redemption to and including August 15, 2004; and
(ii) to deposit with itself as the 1999 Paying Agent sufficient moneys to pay,
as the same shall become due and payable, the interest to accrue on all Series 1999 Bonds
to their respective dates of payment or redemption; and
WHEREAS, the schedule of principal and interest requirements for retiring the Series
1999 Bonds upon redemption prior to maturity is attached hereto as Schedule Il; and
WHEREAS, the City has entered into this Agreement with the Escrow Trustee prior to
the delivery of the Series 2004 Bonds in order to make adequate provision for the retirement and
10-58775.3
redemption of the Series 1999 Bonds and to make provision for the payment of the fees and
expenses of the Escrow Trustee;
NOW, THEREFORE, in consideration of the mutual covenants and benefits hereinafter
set forth and for other valuable consideration, the receipt of which is hereby acknowledged by
each party hereto, the Issuer and the Escrow Trustee agree as follows:
Section 1. There is hereby created and established with the Escrow Trustee a special,
segregated and irrevocable escrow account designated "City of Fayetteville, Arkansas - 1999
Refunding Escrow Fund" (the "1999 Escrow Fund") to be held in the custody of the Escrow
Trustee as a trust fund for the benefit of the registered owners of the Series 1999 Bonds, separate
and apart from other funds of the City and the Escrow Trustee. The Escrow Trustee hereby
accepts the Escrow Fund and acknowledges the receipt and irrevocable deposit to the credit of
the Escrow Fund of the sum of $6,485,180.45 in immediately available funds consisting of
(a) $5,222,145.07 of proceeds received by the City from the sale and delivery of the Series 2004
Bonds (the "2004 Bond Proceeds"), (b) $465,492.72 released from the Bond Fund for the Series
1999 Bonds (the "1999 Bond Fund Moneys"), and (c) $797,542.66 released from the Debt
Service Reserve Fund for the Series 1999 Bonds (the "1999 Reserve Fund Moneys").
Section 2. The Escrow Trustee represents and acknowledges that, concurrently with
the deposit of the amounts set forth in Section I above, it will use the 2004 Bond Proceeds, the
1999 Bond Fund Moneys and the 1999 Reserve Fund Moneys (i) to purchase on behalf of and for
• the account of the City from the United States Treasury a United States Treasury Certificate of
Indebtedness and Note —State and Local Government Series ("SLGS"), which is the noncallable
direct obligations of the United States of America in book -entry form in the aggregate principal
or par amount of $6,485,180.00, as further described in Schedule III hereto (the "1999
Government Obligations"), by payment of said principal or par amount to the U.S. Federal
Reserve Bank, and (ii) to make a cash deposit in the 1999 Escrow Fund in the amount of $0.45
(the "1999 Cash Deposit").
The Escrow Trustee will receive book -entry credits for the 1999 Government Obligations
and will credit the 1999 Government Obligations to the 1999 Escrow Fund. The 1999 Cash
Deposit will be made from 2004 Bond Proceeds and will be held uninvested as cash and
disbursed by the Escrow Trustee to pay a portion of the interest due on the Series 1999 Bonds.
Section 3. The City has determined that the interest on and the principal amounts
successively maturing on the 1999 Government Obligations in accordance with their terms and
the 1999 Cash Deposit are sufficient in the aggregate to assure that moneys will be available to
the Escrow Trustee in amounts sufficient, without further investment, to pay and redeem the
Series 1999 Bonds and to pay the interest thereon as described in the preamble to this Agreement
and in Schedule II hereto. If the City shall fail to deposit initially with the Escrow Trustee cash
and the 1999 Government Obligations the interest on and principal of which shall be sufficient,
together with such cash, to make such payments as they become due and payable, the City shall
timely deposit in the 1999 Escrow Fund such additional amounts as may be required to meet
• fully the amount so to become due and payable. Notice of any insufficiency shall be given by the
10-58775.3 2
• Escrow Trustee to the City as promptly as possible, but the Escrow Trustee shall in no manner be
responsible for any insufficiency of funds or the City's failure to make deposits.
Section 4. The Escrow Trustee shall, from the moneys and investments in the 1999
Escrow Fund, timely provide the 1999 Paying Agent with amounts sufficient to pay the principal
of and interest on each of the Series 1999 Bonds as the same become due and payable in
accordance with Schedule II hereto.
Section 5. The Escrow Trustee shall hold the 1999 Government Obligations and the
1999 Cash Deposit in the 1999 Escrow Fund at all times as a special and separate trust fund
irrevocably pledged for the benefit of the registered owners of the Series 1999 Bonds, wholly
segregated from other funds and securities on deposit with it, shall never commingle the 1999
Government Obligations or the 1999 Cash Deposit with other funds or securities owned or held
by it, and shall never at any time use, loan or borrow the same in any way other than as provided
in this Agreement.
Section 6. The Escrow Trustee shall from time to time collect and receive the interest
accruing and payable on the 1999 Government Obligations and the maturing principal amounts
of the 1999 Government Obligations as the same become due and immediately credit the same to
the 1999 Escrow Fund so that the interest on and principal of the 1999 Government Obligations,
as such become due, will be available, together with the 1999 Cash Deposit, to meet the payment
requirements of the Series 1999 Bonds, as shown on Schedule II hereto.
Section 7. As shown on Schedule IV hereto, the Escrow Trustee shall apply the
principal and interest received from the 1999 Government Obligations and the 1999 Cash
Deposit to the payment of the interest on and the maturing principal of the Series 1999 Bonds.
Principal and interest received on the 1999 Government Obligations and not needed at the time
to make the aforesaid payments on the Series 1999 Bonds shall remain in trust and be held in
cash uninvested. The 1999 Escrow Fund shall continue in effect to and including the date upon
which the Escrow Trustee makes the final deposit with itself as the 1999 Paying Agent in an
amount sufficient to pay the balance of the principal of and interest coming due on the Series
1999 Bonds, whereupon the Escrow Trustee shall transfer any remaining balance in the 1999
Escrow Fund, together with any remaining receipts in the Bond Fund and Debt Service Reserve
Fund for the Series 1999 Bonds, to the Bond Fund for the Series 2004 Bonds.
Section 8.
At the written request of the
City and upon compliance with the
conditions
hereinafter set forth,
the Escrow Trustee shall have the power to sell, transfer or
otherwise
dispose of or request
the redemption of the 1999
Government Obligations acquired
hereunder
and to substitute for the 1999 Government Obligations (a) other direct noncallable obligations of,
or direct noncallable and nonprepayable obligations the full and timely payment of principal of
and interest on which is unconditionally guaranteed by, the United States of America, and/or
(b) to the extent then authorized by law, evidences of direct ownership of future interest and
principal payments on either direct noncallable obligations of the United States of America or
direct non -callable and nonprepayable obligations, the full and timely payment of principal of
and interest on which is unconditionally guaranteed by the United States of America, which
obligations are held by a bank or trust company organized and existing under the laws of the
10-58775.3 3
• United States of America or any state thereof in the capacity of custodian in safekeeping on
behalf of the holders or owners of such securities or interests (collectively, the "1999 Substitute
Defeasance Obligations"). The City hereby covenants that it will not request the Escrow "Trustee
to exercise any of the powers described in the preceding sentence in any manner which, if
reasonably expected on the date of issuance hereof, would cause any of the Series 2004 Bonds or
any of the Series 1999 Bonds to be an "arbitrage bond" within the meaning of Section 148 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder in
effect on the date of such request and applicable to obligations issued on the issue date of the
Series 2004 Bonds. The Escrow Trustee shall purchase such 1999 Substitute Defeasance
Obligations with the proceeds derived from the sale, transfer, disposition or redemption of the
1999 Government Obligations together with any other funds available for such purpose. The
foregoing transactions may be effected only if. (i) an independent certified public accountant
shall certify that after such transactions the principal amount of and interest income on the 1999
Substitute Defeasance Obligations will, together with any remaining 1999 Government
Obligations and other moneys available for the purpose, be sufficient without further investment
to pay, as the same become due at maturity or earlier redemption, all principal of and interest on
the Series 1999 Bonds which have riot been paid previously; (ii) the amounts and dates of the
anticipated transfers from the 1999 Escrow Fund to the 1999 Paying Agent for the Series 1999
Bonds will not be diminished or postponed thereby; (iii) the 1999 Substitute Defeasance
Obligations will be of comparable credit standing to the 1999 Government Obligations originally
purchased; (iv) notification will be given to Standard & Poor's Ratings Services, a division of
• The McGraw-Hill Companies, Inc., and any other rating agency that the City selects, and (v) the
Escrow Trustee shall receive an unqualified opinion of attorneys nationally recognized on the
subject of municipal bonds to the effect that such disposition, substitution or purchase would not
cause any of the Series 2004 Bonds or any of the Series 1999 Bonds to be an "arbitrage bond"
within the meaning of Section 148 of the Code and the regulations thereunder in effect on the
date of such disposition, substitution or purchase and applicable to obligations issued on the issue
date of the Series 2004 Bonds.
Section 9. The Escrow Trustee shall not be liable or responsible for any loss resulting
from any investment made in the 1999 Government Obligations or any 1999 Substitute
Defeasance Obligations.
Section 10. In the event of the Escrow Trustee's failure to account for any funds or
securities received by it for the City's account under this Agreement, such funds and securities
shall be and remain the property of the 1999 Escrow Fund, and the City and the registered
owners of the Series 1999 Bonds shall be entitled to the preferred claim and shall have the first
lien upon such funds and securities enjoyed by a trust beneficiary. The funds and securities
received by the Escrow Trustee under this Agreement shall not be considered as a banking
deposit by the City, and the City shall have no right or title with respect thereto. The funds and
securities so received by the Escrow Trustee as escrowee and trustee under this Agreement shall
not be subject to checks or drafts drawn by the City or claims against the City by any creditor of
the City other than the holders or registered owners of the Series 1999 Bonds.
• Section 11. [Reserved].
10-58775.3 4
• Section 12. The City has specifically and irrevocably elected to redeem on August 15,
2004 all of the Series 1999 Bonds maturing on and after August 15, 2005. The Escrow Trustee is
hereby irrevocably authorized and directed, and hereby agrees, to give or cause to be given notice
of such redemption of the Series 1999 Bonds in substantially the form set forth in Appendix A to
this Agreement as provided below and to inform the City promptly and in writing of the giving of
such notice. Such notice of redemption shall be mailed by first class mail to all registered
owners of the Series 1999 Bonds at their addresses appearing on the registration books of the
City maintained by the 1999 Paying Agent, such notice to be placed in the mails not less than
30 days nor more than 60 days prior to the redemption date.
The Escrow Trustee is also hereby irrevocably authorized and directed, and hereby
agrees, to mail by first class mail, as soon as practicable, to all registered owners of the Series
1999 Bonds at their addresses appearing on such registration books a notice in substantially the
form set forth in Appendix B to this Agreement that the Series 1999 Bonds are deemed to have
been paid, and the Escrow Trustee will inform the City promptly and in writing of the giving of
such notice.
The cost of the giving of such notices shall be borne by the City.
Section 13. The Escrow Trustee shall have no responsibility to the City or any person
in connection herewith except as specifically provided herein and shall not be responsible for
anything done or omitted to be done by it except for its own negligence or default in the
. performance of any obligation imposed on it hereunder. The Escrow Trustee, except as herein
specifically provided for, is not a party to, nor is it bound by nor need it give consideration to the
terms or provisions of, any other agreement or undertaking between the City and any other
person, and the Escrow Trustee assents to and is to give consideration only to the terms and
provisions of this Agreement. Unless specifically provided herein, the Escrow Trustee has no
duty to determine or inquire into the happening or occurrence of any event or contingency or the
performance or failure of performance of the City with respect to arrangements or contracts with
others, the Escrow Trustee's sole duty hereunder being to safeguard the 1999 Escrow Fund, to
invest moneys therein and to dispose of and deliver the same in accordance with the provisions
of this Agreement. If, however, the Escrow Trustee is called upon by the terms of this
Agreement to determine the occurrence of any event or contingency, the Escrow Trustee shall be
obligated in making such determination to exercise reasonable care and diligence, and in event of
error in making such determination the Escrow Trustee shall be liable for its own misconduct or
its negligence. In determining the occurrence of any such event or contingency, the Escrow
Trustee may request from the City or any person such reasonable additional evidence as the
Escrow Trustee in its discretion may deem necessary to determine any fact relating to the
occurrence of such event or contingency and in this connection may inquire and consult with the
City, among others, at any time. The Escrow Trustee may consult with legal counsel, and the
opinion of such counsel shall be full and complete authority and protection to the Escrow Trustee
as to any action taken or omitted by it in good faith and in accordance with such opinion.
• Section 14. This Agreement is between the City and the Escrow Trustee only, and in
connection therewith the Escrow Trustee is authorized by the City to rely upon the
representations of the City with respect to the adequacy of the calculations made in connection
10-58775.3 5
• with this Agreement, and the Escrow Trustee shall not be liable to any person in any manner for
such reliance. The duty of the Escrow Trustee hereunder shall be only to the City and the
registered owners of the Series 1999 Bonds. Neither the City nor the Escrow Trustee shall assign
or attempt to assign or transfer its interest or obligations hereunder or any part hereof. Any such
assignment or attempted assignment shall be in direct conflict with this Agreement and without
effect.
Section 15. The Escrow Trustee may act
upon any written
notice, request, waiver,
consent, certificate, receipt,
authorization, power of
attorney or other
instrument or document
which the Escrow Trustee in
good faith believes to be
genuine and to be
what it purports to be.
Section 16. Any notice, authorization, request or demand required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given when mailed by
first class mail, postage prepaid, addressed as follows:
If to the City: City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, AR 72701
Attention: Finance and Internal Services Director
If to the Escrow Trustee: Bank of Oklahoma, N.A.
P.O. Box 2300
• Tulsa, OK 74192
Attention: Cynthia Wilkinson
Any of such addresses may be changed at any time upon written notice of such change
sent by first class mail, postage prepaid, to the other persons named in this Section 16 by the
person effecting the change.
Section 17. Whenever under the terms of this Agreement the performance date of any
act to be done hereunder shall fall on a day which is not a legal banking day and upon which the
Escrow Trustee is not open for business, the performance thereof on the next succeeding business
day of the Escrow Trustee shall be deemed to be in full compliance with this Agreement.
Whenever time is referred to in this Agreement, it shall be the time recognized by the Escrow
Trustee in the ordinary conduct of its normal business transactions.
Section 18. Time shall be of the essence in the performance of obligations from time
to time imposed upon the Escrow Trustee by this Agreement.
Section 19. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective personal representatives, successors and assigns.
Section 20. The Escrow Trustee has been paid $2,000.00 from the proceeds of the
Series 2004 Bonds as compensation for all of its fees as Escrow Trustee and 1999 Paying Agent
for the services rendered or to be rendered pursuant to this Agreement. The Escrow Trustee will
also bill the City for its expenses incurred in connection with serving as Escrow Trustee and
1999 Paying Agent; provided, however, that expenses of publication of the defeasance notice
10-58775.3 6
• attached as Appendix B shall first be paid from available moneys in the Cost of Issuance Fund
established with respect to the Series 2004 Bonds. In addition, to the extent permitted by law,
the City agrees to indemnify the Escrow Trustee and hold it harmless against any liability which
it may incur while acting in good faith and without negligence in its capacity as Escrow Trustee
under this Agreement, including, but not limited to, any court costs and reasonable attorneys'
fees. Such costs and fees and any other expenses related to such indemnification of the Escrow
Trustee shall be paid by the City, and in no event shall such costs and fees and any other
expenses related to such indemnification give rise to any claim against the 1999 Escrow Fund,
the moneys in which are solely for the benefit of the registered owners of the Series 1999 Bonds
until the payment thereof.
Section 21. The Escrow Trustee agrees to serve under this Agreement until all of the
Series 1999 Bonds have been redeemed and to accept as full compensation for its services
hereunder and its services as 1999 Paying Agent the amount paid pursuant to Section 22. The
provisions of this Section 21 shall be binding upon any successor to the Escrow Trustee.
Section 22. This Agreement shall terminate when the Series 1999 Bonds and the
interest thereon have been paid and discharged in accordance with the proceedings authorizing
the Series 1999 Bonds.
Series 23. If any one or more of the covenants or agreements provided in this
Agreement on the part of the City or the Escrow Trustee to be performed should be determined
• by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be
deemed and construed to be severable from the remaining covenants and agreements herein
contained and shall in no way affect the validity of the remaining provisions of this Agreement.
E
Jurisdiction for the resolution of any conflict arising from this Agreement shall lie with
the Washington County Circuit Court with venue in Fayetteville, Arkansas.
Section 24. This Agreement may be executed in several counterparts, all or any of
which shall be regarded for all purposes as one original and shall constitute and be but one and
the same instrument.
Section 25. This Agreement shall be governed by the laws of the State of Arkansas.
10-58775.3
• IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their duly authorized officers and their corporate seals to be hereunto affixed and
attested as of the date first above written.
CITY OF FAYETTEVILLE, ARKANSAS
ATTEST:
City" Clerk
o`��6Rw R BANK OF OKLAHOMA, N.A.
'c �FAYETTEVILLE; = By
• ATTEST:
Authorized Officer
Authorized Officer
10-58775.3
0
• IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their duly authorized officers and their corporate seals to be hereunto affixed and
attested as of the date first above written.
CITY OF FAYETTEVILLE, ARKANSAS
By
Mayor
ATTEST:
City Clerk
•
ATTEST:
E
Autho ized ffrcer
BANK OF OKLAHOMA, N.A.
/ 9
By • !
A thorized Officer
10-58775.3
E
FI
. SCHEDULEI
•
•
OUTSTANDING SERIES 1999 BONDS
Maturity
Date Principal
(August 15) Amounts
Interest
Rates
2004
$ 525,000
3.90%
2005
545,000
3.95
2006
5659000
4.00
2007
590,000
4.05
2008
615,000
4.15
2009
640,000
4.20
2010
665,000
4.25
2011
695,000
4.35
2012
1,525,000
4.45
10-58775.3 1-1
SCHEDULEII
REQUIREMENTS TO PAY AND REDEEM THE SERIES 1999 BONDS
Principal
Payment Date Interest Principal Due Redeemed Total Payment
August 15, 2004 $1332628.75 $525,000.00 $5,840,000.00 $6,498,628.75
10-58775.3 II -I
•
E
SCHEDULEIH
1999 GOVERNMENT OBLIGATIONS*
Maturity
Type Dates
SLGS-CI August 15, 2004
Principal Interest
Amounts Rates
$6,485,180.00 0.870%
* United States Treasury Obligations — State and Local Government Series
11513 EI1
0 SCHEDULEIV
L J
AVAILABILITY AND APPLICATION OF 1999 ESCROW FUND
Cash Balance at Receipts from 1999 Debt Service Requirement Cash Balance at
Period Endin¢ Berg of Period Government Obligations to Retire Series 1999 Bonds End of Period
5-20-04 $ — $ — $ — $0.45
8-15-04 0.45 6,498,628.30 6,498,628.75 0.00
10-58775.3 IV- I
• APPENDIX A
NOTICE OF REDEMPTION
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 1999
NOTICE IS HEREBY GIVEN by the Bank of Oklahoma, N.A., Tulsa, Oklahoma, the
trustee and paying agent (the "Trustee") for the Water and Sewer System Revenue Refunding
Bonds, Series 1999, of the City of Fayetteville, Arkansas (the "City"), dated May 1, 1999 (the
`Bonds"), that all of the outstanding Bonds maturing on August 15, 2005 and thereafter are
hereby called for redemption and prepayment on August 15, 2004. Each of the Bonds so called
for redemption and prepayment shall.be redeemed and prepaid at a redemption price of 100% of
the principal amount thereof plus accrued interest to the date of redemption. The Bonds so called
for redemption shall be payable upon presentation and surrender at the corporate trust offices of
the Trustee at Bank of Oklahoma, N.A., c/o Corporate Trust Services, 1525 W. W.T. Harris
Boulevard, 30, Charlotte, NC 28288-1153, and such Bonds shall cease to bear interest as of
August 15, 2004.
• Withholding of 30% of gross redemption proceeds of any payment made within the
United States may be required by the Economic Growth and Tax Relief Reconciliation Act of
2001, unless the paying agent has the correct taxpayer identification number (social security or
taxpayer identification number) or exemption certificate or equivalent when presenting your
securities for payment.
Dated this day of 2004.
BANK OF OKLAHOMA, N.A., as Trustee
By: _
Title:
Instructions: Mail by first class mail, postage prepaid, to the registered owner of each Series 1999 Bond to be
. redeemed, addressed to the owners' registered addresses, and placed in the mails between June 16, 2004 and July 16,
2004.
10-58775.3 A-1
• APPENDIX B
NOTICE OF DEFEASANCE
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 1999
NOTICE IS HEREBY GIVEN by the Bank of Oklahoma, N.A., Tulsa, Oklahoma, the
trustee and paying agent (the "Trustee") for the Water and Sewer System Refunding Revenue
Bonds, Series 1999, of the City of Fayetteville, Arkansas (the "City"), dated May 1, 1999 (the
`Bonds"), that all of the outstanding Bonds maturing on August 15, 2005 and thereafter will be
called for redemption and prepayment on August 15, 2004. Each of the Bonds so called for
redemption and prepayment shall be redeemed and prepaid at a redemption price of 100% of the
principal amount thereof plus accrued interest to the date of redemption. The Bonds so called for
redemption shall be payable upon presentation and surrender at the corporate trust offices of the
Trustee at Bank of Oklahoma, N.A., c/o Corporate Trust Services, 1525 W. W.T. Harris
Boulevard, 3C3, Charlotte, NC 28288-1153, and such Bonds shall cease to bear interest as of
August 15, 2004.
Pursuant to Ordinance No. 4159, adopted by the City Council of the City on April 20,
1999 and providing for the issuance of the Bonds (the "1999 Bond Ordinance"), there have been
deposited, with the Trustee, United States Treasury Certificates of Indebtedness and Notes —
State and Local Government Series ("SLGS"), the principal of and the interest on which when
due will provide moneys which, together with other moneys which have also been deposited with
the Trustee, shall be sufficient to pay when due the principal of and interest due and to become
due on the Bonds on or prior to August 15, 2004, as required by Section 9 of the 1999 Bond
Ordinance, and the Bonds are deemed to have been paid in accordance with Section 25 of the
1999 Bond Ordinance.
Dated this day of 52004.
BANK OF OKLAHOMA, N.A., as Trustee
By
Title:
Instructions: Mail by first class mail, postage prepaid, to the registered owner of each Series 1999 Bond to be
redeemed, addressed to the owners' registered addresses, and placed in the mails within thirty (30) days after the
date of delivery of this Escrow Agreement.
10-58775.3 B-1
13
EXECUTION COPY
•
TAX REGULATORY AGREEMENT
between
CITY OF FAYETTEVILLE, ARKANSAS
and
BANK OF OKLAHOMA, N.A.,
as Trustee
Dated as of May 1, 2004
• Relating to:
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Prepared by:
Kutak Rock LLP
425 West Capitol Avenue
Suite 1100
Little Rock, Arkansas 72201
10-58776.3
• TAX REGULATORY AGREEMENT
THIS TAX REGULATORY AGREEMENT (this "Tax Regulatory Agreement) is made
and dated as of May 1, 2004, by and between the CITY OF FAYETTEVILLE, ARKANSAS, a
city of the first class and political subdivision of the State of Arkansas (the "Issuer"), and BANK
OF OKLAHOMA, N.A., a national banking association organized and existing under the laws of
the United States of America, not in its individual capacity but solely in its capacity as the trustee
(the "Trustee") named under that certain Trust Indenture dated as of May 1, 2002, as amended
and supplemented by that First Supplemental Trust Indenture dated as of May 1, 2004, each by
and between the Issuer and the Trustee (as amended and supplemented, the "Indenture").
WITNESSETH:
WHEREAS, pursuant to the Constitution and laws of the State of Arkansas, including
particularly Arkansas Code Annotated §§ 14-234-201 et seq., Arkansas Code Annotated
§§ 14-235-201 et seq., and Arkansas Code Annotated §§ 14-164-401 et seq. (collectively, the
"Authorizing Legislation"), the Issuer has authorized the issuance of $6,090,000 principal
amount of its Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series
2004 Bonds"), pursuant to the Indenture and Ordinance No. 4554, adopted and approved on
April 6, 2004 (the "Authorizing Ordinance"), for the purposes of providing a portion of the funds
. needed for (i) the current refunding of the Issuer's $6,365,000 outstanding principal amount of
Water and Sewer System Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"),
(ii) funding a debt service reserve, (iii) paying the premium for a policy of municipal bond
insurance, and (iv) paying the costs of issuance of the Series 2004 Bonds; and
•
WHEREAS, the Series 1999 Bonds were originally issued by the Issuer for the purpose
of refinancing the acquisition, construction and equipping of certain water and sewer system
facilities (the "Facilities"); and
WHEREAS, the Issuer has determined that the issuance, sale and delivery of the Series
2004 Bonds is necessary in order to refund the Series 1999 Bonds and thereby refinance the costs
of the Facilities; and
WHEREAS, this Tax Regulatory Agreement has been entered into by the Issuer and the
Trustee to provide for compliance with the provisions of the Internal Revenue Code of 1986, as
amended, and the Regulations promulgated thereunder;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Issuer and the Trustee hereby agree as follows:
10.58776.3
ARTICLE I
DEFINITIONS
Section LL Definitions. The following words and phrases shall have the following
meanings. Any capitalized word or term used herein but not defined herein shall have the same
meaning given in the Indenture.
"Adjusted Fair Market Value" of an investment means the Fair Market Value plus the
sum of all adjustments, if any, made to the issue price of such investment under Section 1272 of
the Code, since the date the investment became a Nonpurpose Obligation.
"Arbitrage Rebate Consultant" means an accounting firm or a firm of attorneys or
another person or firm with knowledge of or experience in advising bond trustees with respect to
the provisions of Section 148(f) of the Code.
"Bond Counsel" means
Kutak Rock LLP or an attorney or firm of attorneys
recognized
as having
expertise in matters
relating to the issuance of tax-exempt obligations
reasonably
acceptable
to the Trustee.
"Bond Year" means the one-year period beginning on the day after expiration of the
preceding bond year. The first Bond Year begins on the date of issue of the Series 2004 Bonds
and ends May 1, 2005.
• "Code" means the Internal Revenue Code of 1986, as amended, and the Regulations
thereunder.
"Computation Period" means each period from the date of issue through the date on
which a determination of the Rebate Amount is made.
"Costs of Issuance" means all costs incurred in connection with the borrowing.
Examples of costs of issuance include (but are not limited to):
(a) underwriters' spread (whether realized directly or derived through purchase
of the Series 2004 Bonds at a discount below the price at which a substantial number of
Series 2004 Bonds are sold to the public);
(b) counsel fees (including bond counsel, underwriter's counsel, issuer's
counsel, trustee counsel and any other specialized counsel fees incurred in connection with
the borrowing);
(c) financial advisor fees (including the Issuer's financial advisor) incurred in
connection with the borrowing;
(d) rating agency fees;
(e) trustee and escrow agent fees incurred in connection with the borrowing;
• (f) paying agent and certifying and authenticating agent fees related to
issuance of the Series 2004 Bonds;
10-58776.3 2
• (g) accountant fees related to issuance of the Series 2004 Bonds;
(h) printing costs (for the Series 2004 Bonds and of preliminary and final
offering materials); and
(i) costs incurred in connection with the required public approval process
(e.g., publication costs for public notices generally and costs of any public hearing or voter
referendum);
"Facilities" means the facilities originally financed or refinanced with proceeds of the
Series 1999 Bonds.
"Fair Market Value" of an investment means the fair market value, including accrued
interest, of such investment at the time it becomes a Nonpurpose Obligation.
"Gross Proceeds" means:
(a) Sale proceeds (as defined in Section 1.148-1(b) of the Regulations);
(b) Investment proceeds (as defined in Section 1.148-1(b) of the Regulations);
(c) Transferred proceeds (as defined in Section 1.148-9 of the Regulations);
(d) Any amounts held as a sinking fund for the Series 2004 Bonds;
(e) Any amounts held in a pledged fund or reserve fund for the Series 2004
Bonds; and
• (f) Any other replacement proceeds (as defined in Section 1.148-1(c) of the
Regulations).
"Net Sale Proceeds" means sale proceeds, less the portion of those sales proceeds
invested in a reasonably required reserve or replacement fund under Section 148(d) of the Code.
"Nonpurpose Obligation" means any investment property, as defined in Section 148(b)
of the Code, in which Gross Proceeds are invested and which is not acquired to carry out the
governmental purpose of the issue.
"Rebate Amount" means, with respect to the Series 2004 Bonds, the amount computed as
described in Section 4.13 hereof.
"Regulation" or "Regulations" means the temporary, proposed or final Income Tax
Regulations promulgated by the Department of the Treasury and applicable to the Series 2004
Bonds.
"Series 1999 Bonds" means the Issuer's $8,365,000 Water and Sewer System Refunding
Revenue Bonds, Series 1999.
"Series 2004 Bonds" means the Issuer's $6,090,000 Water and Sewer System Refunding
Revenue Bonds, Series 2004.
• "State " means the State of Arkansas.
10-58776.3 3
. "Tax Regulatory Agreement" means this Tax Regulatory Agreement.
"Trustee" means Bank of Oklahoma, N.A., a national banking association organized and
existing under the laws of the United States of America, or any successor trustee under the
Indenture.
"Underwriter" means Stephens Inc.
"Yield" means, with respect to the Series 2004 Bonds, yield computed under
Section 1.148-4 of the Regulations, and with respect to an investment, yield computed under
Section 1.148-5 of the Regulations.
Section LZ Reliance on Issuer Information. Bond Counsel and the Trustee shall be
permitted to rely upon the contents of this Tax Regulatory Agreement and any certification,
document or instructions provided pursuant to this Tax Regulatory Agreement and shall not be
responsible or liable in any way for the accuracy of their contents or the failure of the Issuer to
deliver any required information.
ARTICLE II
REPRESENTATIONS AND COVENANTS BY THE ISSUER
Section 2.1. Organization and Authority. The Issuer hereby represents that it (1) is a
political subdivision duly organized and existing under the laws of the State of Arkansas, and
(2) has lawful power and authority to issue the Series 2004 Bonds for the purposes set forth in
the Indenture, to enter into, execute and deliver the Indenture and this Tax Regulatory
Agreement, and to carry out its obligations under such documents, and (3) by all necessary
action has been duly authorized to execute and deliver the Indenture and this Tax Regulatory
Agreement, acting by and through its duly authorized officials.
Section 2.2. Use of Bond Proceeds; Ownership of the Facilities; Use of Prior Bond
Proceeds. The Issuer hereby represents and warrants for the benefit of the Bond Counsel, the
Trustee and holders of the Series 2004 Bonds that the proceeds of the Series 2004 Bonds will be
used to refund the Series 1999 Bonds (except those limited proceeds which are used to fund a
debt service reserve, to pay the bond insurance premium, and to pay Costs of Issuance) and that
all of the Facilities will continue to be owned and operated by the Issuer. The Issuer further
represents and warrants that its representations and warranties with respect to the Series 1999
Bonds and the Series 2004 Bonds, the use of the proceeds thereof, and the Facilities contained in
that certain Tax Regulatory Agreement dated May 1, 1999 and in that certain Tax Compliance
Agreement dated as of May 27, 1999, remain true and correct as of the date hereof.
Section 2.3. Change in Use or Ownership of Facilities. The Issuer represents that it
intends to own and operate the Facilities at all times during the term of the Series 2004 Bonds.
The Issuer does not know of any reason why the Facilities will not be so used in the absence of
(i) supervening circumstances not now anticipated by it, (ii) adverse circumstances beyond its
control, or (iii) obsolescence of such insubstantial parts or portions thereof as may occur as a
result of normal wear and tear. The Issuer covenants that it will not change the use, ownership or
nature of any portion of the Facilities so long as any of the Series 2004 Bonds are outstanding
10-58776.3 4
unless, in the written opinion of Bond Counsel, such change will not result in the inclusion of
interest on the Series 2004 Bonds in the gross income of the recipient thereof for purposes of
federal income taxation, except that the Issuer may, without an opinion, sell or otherwise dispose
of minor parts or portions of the Facilities as may be necessary or desirable due to normal wear,
tear or obsolescence.
Section 2.4. Bonds in Registered Form. The Series 2004 Bonds will be issued in
registered form as required by Section 149(a) of the Code.
Section 2.5. Information Reporting. The Issuer covenants to file IRS Form 8038-G
(Information Return for Tax -Exempt Governmental Obligations) with the Internal Revenue
Service in connection with the issuance of the Series 2004 Bonds, as required by § 149(e) of the
Code.
Section 2.6. No Federal Guarantee. The Issuer represents and covenants that it has
not taken and will not take, or permit to be taken, any action that will cause the Series 2004
Bonds to be "federally guaranteed" within the meaning of § 149(b) of the Code.
Section 2.7. Series 2004 Bonds Not Hedge Bonds. The Issuer represents that it
reasonably expects to expend at least 85 percent of the "spendable proceeds" of the Series 2004
Bonds within three years of the date hereof and not more than 50 percent of the proceeds of the
Series 2004 Bonds will be invested in Nonpurpose Obligations having substantially guaranteed
yields for four years or more.
• Series 2.8. No Replacement. No portion of the amounts received from the sale of the
Series 2004 Bonds will be used as a substitute for other funds which were otherwise to be used
as a source of financing for the refunding of the Series 1999 Bonds, and which will be used to
acquire, directly or indirectly, investment obligations producing a Yield in excess of the Yield on
the Series 2004 Bonds.
Section 2.9. No Abusive Arbitrage Device. The Issuer represents that the Series 2004
Bonds are not and will not be part of a transaction or series of transactions that has the effect of
(1) enabling the Issuer to exploit the difference between tax-exempt and taxable interest rates to
gain a material financial advantage, and (2) overburdening the tax-exempt bond market.
Section 2.10. Single Issue. The Issuer represents that the Series 2004 Bonds constitute
a single "issue" under § 1.150-1(c) of the Regulations. No other obligations of the Issuer (1) are
being sold within fifteen (15) days of the sale of the Series 2004 Bonds, (2) are being sold
pursuant to the same plan of financing as the Series 2004 Bonds, and (3) are expected to be paid
from substantially the same source of funds (disregarding guaranties from third parties, such as
bond insurance) as the Series 2004 Bonds.
Section 2.11. Representations as to Limits on the Use of Proceeds. The amount of
Series 2004 Bond proceeds to be deposited to the Debt Service Reserve Fund shall not exceed
the lesser of (i) 10 percent of the initial stated principal amount of the Series 2004 Bonds, (ii) the
maximum annual debt service on the Series 2004 Bonds, or (iii) 125 percent of the average
annual debt service on the Series 2004 Bonds.
10-58776.3 5
Section 2.12. Reliance on Representations of Issuer; Survival. The Issuer understands
and acknowledges that Bond Counsel is relying on the various representations, warranties and
covenants of the Issuer contained in this Tax Regulatory Agreement for purposes of delivering
its approving opinion. All representations and certifications of the Issuer contained in this Tax
Regulatory Agreement will survive the execution and delivery of this Tax Regulatory Agreement
and the issuance, sale and delivery of the Series 2004 Bonds, as representations of facts existing
as of the date of the execution and delivery of this Tax Regulatory Agreement. The covenants
and warranties of the Issuer contained in this Article II will remain in full force and effect
notwithstanding the defeasance of the Series 2004 Bonds and the discharge of the Indenture,
until the final maturity date of all Series 2004 Bonds Outstanding and payment of such Series
2004 Bonds.
ARTICLE III
COVENANTS OF THE TRUSTEE
Section 3.1. Covenants of the Trustee. The Trustee covenants to the Issuer that it will
comply with all applicable provisions of this Tax Regulatory Agreement and any written letter or
opinion of Bond Counsel which sets forth any action necessary by the Trustee to preserve
interest on the Series 2004 Bonds from the gross income of the recipients thereof for federal
income tax purposes. Such covenant will remain in full force and effect notwithstanding the
defeasance of the Series 2004 Bonds and the discharge of the Indenture, until the final maturity
• date of all Series 2004 Bonds Outstanding and payment of such Series 2004 Bonds. The Trustee
shall keep records of the expenditure of Gross Proceeds of the Series 2004 Bonds for the term of
this Tax Regulatory Agreement. Such records, if any, as are maintained by the Trustee may, at
the option of the Trustee, be maintained by electronic filing or record keeping systems.
ARTICLE IV
ARBITRAGE AND REBATE
Section 4.1. Purpose. The purpose of this Article IV is to certify, pursuant to
§ 1.148-2(b) of the Regulations, the reasonable expectations of the Issuer as to the sources, uses
and investment of Series 2004 Bond proceeds and other moneys in order to support the Issuer's
conclusion that the Series 2004 Bonds will not be deemed to be "arbitrage bonds" within the
meaning of § 148 of the Code. The person executing this Tax Regulatory Agreement on behalf
of the Issuer is an officer of the Issuer responsible for issuing and delivering the Series 2004
Bonds. The Issuer has not been notified of any listing or proposed listing of the Issuer by the
Internal Revenue Service as an issuer that may not certify its bonds.
Section 4.2. Reasonable Expectations. The facts, estimates, expectations and
representations of the Issuer set forth in this Article IV are based upon the Issuer's understanding
of various documents and certificates executed in connection with the issuance of the Series
2004 Bonds, including (1) the Indenture, (2) the Escrow Agreement, (3) this Tax Regulatory
• Agreement, and (4) a certificate of the Underwriter. To the Issuer's knowledge, the facts,
estimates and expectations set forth in this Tax Regulatory Agreement are reasonable. The
10-58776.3 6
Issuer has no
knowledge that
would cause it to believe that
the representations,
warranties and
• certifications
described herein
are unreasonable or inaccurate
or may not be relied
upon.
Section 4.3. Authority and Purpose for Series 2004 Bonds. The Issuer is issuing and
delivering the Series 2004 Bonds simultaneously with the execution of this Tax Regulatory
Agreement, pursuant to the Authorizing Legislation, the Indenture and the Authorizing
Ordinance. The Series 2004 Bonds are being issued for the purposes of providing a portion of
the funds needed for (i) the current refunding of the Series 1999 Bonds, (ii) funding a debt
service reserve, (iii) paying the premium for a policy of municipal bond insurance, and
(iv) paying Costs of Issuance of the Series 2004 Bonds. The proceeds of the Series 2004 Bonds
to be used to defease and refund the Series 1999 Bonds, together with other available moneys
and investment earnings on such moneys and proceeds, do not exceed the amount necessary to
provide for such refunding and defeasance.
Section 4.4.
Funds and Accounts. (a) The
following funds
and
accounts have been
established with the
Trustee pursuant to the Indenture in connection with
the
Series 2004 Bonds:
Bond Fund;
Debt Service Reserve Fund;
Costs of Issuance Fund; and
Rebate Fund.
(b) The following fund has been established with the Escrow Trustee pursuant to the
Escrow Agreement in connection with the defeasance of the Series 1999 Bonds:
1999 Escrow Fund.
Section 4.5. Source and Disbursement of Series 2004 Bond Proceeds. The Series
2004 Bonds will be sold to the public at a purchase price equal to $6,160,772.21 (representing
the $6,090,000.00 par amount of the Series 2004 Bonds plus a net reoffering premium of
$60,720.95 and plus $10,051.26 of accrued interest thereon). The Underwriter will retain an
underwriting discount of $66,990.00. Accordingly, the net amount of proceeds of the Series
2004 Bonds to be received by the Issuer shall be $6,093,782.21, which amount shall be deposited
and expended as follows:
(a) $10,051.26, equal to the accrued interest on the Series 2004 Bonds, will be
deposited in the Bond Fund and used to pay interest on the Series 2004 Bonds due
August 15, 2004;
(b) $5,222,145.07 shall be transferred to the Escrow Trustee for deposit in the
1999 Escrow Fund, and shall be used, together with $1,263,035.38 of legally available
moneys of the Issuer also deposited in the 1999 Escrow Fund (which legally available
moneys are comprised of $465,492.72 representing the debt service fund for the Series
• 1999 Bonds and $797,542.66 representing the bond fund for the Series 1999 Bonds), to
10-58776.3 7
• pay maturing principal and interest on the Series 1999 Bonds and to redeem the Series
1999 Bonds on August 15, 2004;
(c) $786,432.50 of the proceeds will be deposited in the Debt Service Reserve
Fund and held as a reasonably required reserve fund for the Series 2004 Bonds;
(d) $24,410.10 shall be paid to Ambac Assurance Corporation for the
premium on a financial guaranty insurance policy;
(e) $50,640.10 of the proceeds will be deposited into the Cost of Issuance
Fund and used to pay Costs of Issuance of the Series 2004 Bonds; and
(f) the remaining $103.18 of proceeds will be deposited in the Bond Fund and
used to pay interest on the Bonds due on August 15, 2004.
Section 4.6. Costs of Issuance Fund. The Indenture creates the Costs of Issuance
Fund which will be initially funded with $50,640.10 of Series 2004 Bond proceeds. Moneys in
the Cost of Issuance Fund will be used to pay Costs of Issuance associated with the Series 2004
Bonds. Proceeds of the Series 2004 Bonds deposited in the Costs of Issuance Fund shall be
spent within a one-year period beginning on the date of issuance of the Series 2004 Bonds and
may be invested until expended in Nonpurpose Obligations that bear a Yield that is materially
higher than the Yield on the Series 2004 Bonds. The earnings on such investments will be
subject to the rebate requirements described in Section 4.13 of this Tax Regulatory Agreement
. unless the Issuer qualifies under one of the rebate exemptions described in the Code and the
Regulations.
Section 4.7. Bond Fund The Indenture creates the Bond Fund. Moneys will be
transferred to the Bond Fund as described in the Indenture to provide for the payment of
principal of and interest on the Series 2004 Bonds as due. Moneys deposited in the Bond Fund
will be spent within a 13-month period beginning on the date of deposit, and any amount
received from investment of moneys held in the Bond Fund will be spent within a one-year
period beginning on the date of receipt. The Bond Fund will be completely depleted at least
once a year. Accordingly, the Bond Fund constitutes a "bona fide debt service fund" for the
Series 2004 Bonds. Amounts in the Bond Fund may be invested until expended in Nonpurpose
Obligations that bear a Yield that is materially higher than the Yield on the Series 2004 Bonds.
The earnings on such investments will be subject to the rebate requirements described in Section
4.13 of this Tax Regulatory Agreement for any year in which the sum of such investment
earnings equals or exceeds $100,000 unless the Issuer qualifies under one of the other rebate
exemptions described in the Code and the Regulations.
Section 4.8. Debt Service Reserve Fund The Indenture creates the Debt Service
Reserve Fund into which $786,432.50 of Series 2004 Bond proceeds will be deposited. Moneys
in the Debt Service Reserve Fund will be expended solely to pay principal of and interest on the
Series 2004 Bonds when the same become due, when and if there is a deficiency in the Bond
Fund available to make such payments. The Debt Service Reserve Fund will be maintained in an
amount equal to 50% of the
maximum annual debt service on the Series
2004 Bonds. The
Issuer
• is of the opinion, based on
representations of the Underwriter, that the
amount deposited
in the
10-58776.3 8
. Debt Service Reserve Fund is reasonably required for the purposes for which such fund is
established. Accordingly, the Debt Service Reserve Fund is a "reasonably required reserve
fund" for the Series 2004 Bonds within the meaning of the Code and the Regulations. Amounts
in the Debt Service Reserve Fund may be invested until expended in Nonpurpose Obligations
that bear a Yield that is materially higher than the Yield on the Series 2004 Bonds. The earnings
on such investments will be subject to the rebate requirements described in Section 4.13 of this
Tax Regulatory Agreement unless the Issuer qualifies under one of the rebate exemptions
described in the Code and the Regulations.
CI
Section 4.9. 1999 Escrow Fund Proceeds of the Series 2004 Bonds and other
available moneys deposited to the 1999 Escrow Fund will be invested in accordance with the
terms of the Escrow Agreement at a Yield not to exceed the Yield on the Series 2004 Bonds.
Section 4.10. Yield on the Series 2004 Bonds. (a) The Underwriter has certified (i) that
the initial offering price of Series 2004 Bonds, as set forth in Section 4.5 of this Tax Regulatory
Agreement, represents the maximum initial offering price at which a substantial amount of each
maturity of the Series 2004 Bonds were offered for sale and sold to the public (exclusive of bond
houses, brokers or similar persons acting in the capacity of underwriters or wholesalers) through
a bona fide offering, (ii) that such initial offering price was established by a bona fide bid
without regard to any amounts which would increase the Yield on any maturity of the Series
2004 Bonds above its market yield and (iii) that the description of interest rates and Yields
contained in the final Official Statement with respect to the Series 2004 Bonds constitutes a true
and correct summary thereof.
(b) The Yield on the Series 2004 Bonds has been calculated by the Underwriter to be
not less than 3.1393674%. The calculation of Yield has been made on the basis of semiannual
compounding using a 360-day year and upon the assumption that payments are made on the last
day of each semiannual interest payment period. For purposes of computing Yield on
Nonpurpose Obligations, the purchase price of any such obligation is equal to the Fair Market
Value as of the date of a binding contract to acquire such obligation.
Section 4.11. Arbitrage Representations. Pursuant to the issuance of the Series 2004
Bonds, the Issuer hereby represents, certifies and warrants as follows:
(a) Other than the aforementioned funds and accounts created under the
Indenture, there has not been created or established and the Issuer does not expect that
there will be created or established, any sinking fund, pledged fund or similar fund,
including, without limitation, any arrangement under which money, securities or
obligations are pledged directly or indirectly to secure the Series 2004 Bonds or any
contract securing the Series 2004 Bonds or any arrangement providing for compensating
balances to be maintained by the Issuer with any holder of the Series 2004 Bonds.
(b) All funds established pursuant to the Indenture will be invested pursuant
to the Indenture and this Tax Regulatory Agreement. All funds established pursuant to
the Escrow Agreement will be invested pursuant to the Escrow Agreement.
10-58776.3 9
(c) The Issuer will instruct the Trustee with respect to investment of the
various funds held under the Indenture.
(i) The Issuer will not instruct the Trustee to invest in any
Nonpurpose Obligation unless at Fair Market Value. The Fair Market Value of a
Nonpurpose Obligation shall be the price at which a willing buyer would purchase
the investment from a willing seller in a bona fide, arm's-length transaction
determined as of the date on which the contract to buy or sell the investment is
entered into.
(ii) If a Nonpurpose Obligation is acquired or sold or disposed of in an
arm's length transaction without regard to any amount paid to reduce the Yield on
the Nonpurpose Obligation, or any reduction in sale or disposition price to reduce
the Rebate Amount, the Fair Market Value of the Nonpurpose Obligation shall be
the amount paid for, or the amount realized upon the sale or disposition of, the
Nonpurpose Obligation.
(iii) If a United States Treasury obligation is acquired directly from or
sold or disposed of directly to the United States Treasury, such acquisition or sale
or disposition shall be treated as establishing a market for the obligation and as
establishing the Fair Market Value of the obligation.
(iv) The purchase or sale of a certificate of deposit issued by a
. commercial bank will be at Fair Market Value if the Yield at which it is
purchased is not less than (i) the Yield of comparable United States Treasury
Obligations and (ii) the highest Yield posted by such provider on comparable
deposits to the public.
(v) The Trustee, on behalf of the Issuer, may not purchase or sell
Nonpurpose Obligations pursuant to any investment contract or repurchase
agreement unless (i) it receives at least three bids from persons other than those
with an interest in the Series 2004 Bonds, (ii) a certification is provided by the
person whose bid is accepted stating the administrative costs that are reasonably
expected to be paid to third parties in connection with the investment contract,
(iii) a certification is provided by the person whose bid is accepted stating that the
Yield of the investment contract is not less than the Yield of comparable
investment contracts to other persons who do not utilize proceeds of tax-exempt
bonds to purchase such contracts, (iv) the Yield on the investment contract is at
least equal to the Yield offered under the highest bid received from a
noninterested party, (v) the bidding for the investment contract takes into account
as a significant factor the expected drawdown schedule of the Series 2004 Bond
proceeds, and (vi) any collateral security requirements of the investment contract
are reasonable.
Section 4.12. Arbitrage Compliance. The Issuer acknowledges that the continued
exclusion of interest on the Series 2004 Bonds from gross income of the recipients for purposes
of federal income taxation depends, in part, upon compliance with the arbitrage limitations
10-58776.3
10
• imposed by Section 148 of the Code, including the rebate requirement described in Sections
4.13, 4.14 and 4.15 below. The Issuer hereby agrees and covenants that it shall not permit at any
time or times any of the proceeds of the Series 2004 Bonds or other funds of the Issuer to be
used, directly or indirectly, to acquire any asset or obligation, the acquisition of which would
cause the Series 2004 Bonds to be "arbitrage bonds" for purposes of Section 148 of the Code.
The Issuer further agrees and covenants that it shall do and perform all acts and things necessary
in order to ensure that the requirements of Section 148 of the Code are met. To that end, the
Issuer hereby agrees to take the actions described in Sections 4.13 through 4.15 below with
respect to the investment of Gross Proceeds on deposit in the funds and accounts established
under the Indenture and the Escrow Agreement and to direct the Trustee and Escrow Trustee to
make the required transfers and dispositions described in Sections 4.13, 4.14 and 4.15, below.
Section 4.13. Rebate Fund; Calculation of Rebate Amount. Section 148(f) of the Code
requires the payment to the United States of the excess of the amount earned on the investment
of Gross Proceeds in Nonpurpose Obligations over the amount that would have been earned on
such investments had the amount so invested been invested at a rate equal to the Yield on the
Series 2004 Bonds, together with any income attributable to such excess. The Cost of Issuance
Fund, the Bond Fund, the Debt Service Reserve Fund, the 1999 Escrow Fund and the Rebate
Fund (defined below) are subject to this rebate requirement.
In accordance with the requirements set out in the Code, the Rebate Fund (the "Rebate
Fund") has been created in the Indenture with respect to the Series 2004 Bonds to be held by the
. Trustee and used as provided in this Section 4.13. The Rebate Fund shall be held and disbursed
in accordance with the following:
(a) All money at any time deposited in the Rebate Fund shall be held by the
Trustee in trust, except as may otherwise be directed in writing by the Issuer, for payment
to the federal government of the United States of America. All amounts deposited into or
on deposit in the Rebate Fund shall be governed by this Tax Regulatory Agreement. The
Trustee shall be deemed conclusively to have complied with this Tax Regulatory
Agreement if it follows the directions of the Issuer or an Arbitrage Rebate Consultant
engaged by the Issuer, and shall have no liability or responsibility to enforce compliance
by the Issuer with the terms of this Tax Regulatory Agreement.
(b) (i) Any funds remaining in the Rebate Fund after redemption and
payment of all the Series 2004 Bonds and the final payment to the United States
of America described in Section 4.14 below, or provision made therefor including
accrued interest and payment of any applicable fees and expenses to the Trustee
and any Arbitrage Rebate Consultant and satisfaction of the payment of the
Rebate Amount in accordance with directions from the Issuer, shall be withdrawn
by the Trustee upon written instructions from the Issuer and remitted to the Issuer.
(ii) Notwithstanding anything to the contrary in this Tax Regulatory
Agreement, any amount received from the investments of amounts held in the
Rebate Fund which represents an amount earned shall be credited to and retained in
• the Rebate Fund upon the receipt thereof.
10-58776.3
11
• (iii) In the event that on the first day of any Bond Year the amount on
deposit in the Rebate Fund exceeds the aggregate Rebate Amount as certified by an
Arbitrage Rebate Consultant engaged by or on behalf of the Issuer, the Trustee, upon
written instructions from the Issuer, shall withdraw the excess from the Rebate Fund,
pay any amounts then due and payable under the Indenture and pay any remaining
excess to the Issuer.
(iv) For purposes of crediting amounts to the Rebate Fund or
withdrawing amounts from the Rebate Fund, Nonpurpose Obligations shall be
valued in the manner provided in this Tax Regulatory Agreement.
(c) On or before 30 days following the end of the fifth Bond Year, upon the
Issuer's written direction, an amount shall be deposited to the Rebate Fund by the Trustee
from deposits made by the Issuer, if and to the extent required, so that the balance of the
Rebate Fund shall equal the aggregate Rebate Amount required as of the end of such fifth
Bond Year.
(d) In order to meet the Issuer's obligations in complying with the rebate
requirement of Section 148(f) of the Code, the Trustee and the Issuer agree and covenant
to take the following actions:
(i) For each investment of amounts held with respect to the Series
2004 Bonds (other than investments in obligations described in Section 103(a) of
• the Code, including amounts so treated) in the (I) Costs of Issuance Fund,
(II) Bond Fund, (III) Debt Service Reserve Fund, (IV) 1999 Escrow Fund, and
(V) Rebate Fund, the Trustee shall record the purchase date of such investment,
its purchase price, the accrued interest due on its purchase date, its face amount,
its coupon rate, the frequency of its interest payment, and if disposed of, its
disposition price, accrued interest due on its disposition date and its disposition
date. If so engaged by the Issuer, an Arbitrage Rebate Consultant shall calculate
the Fair Market Value for such investments and the Yield thereon. The Yield for
an investment shall be calculated by using as its purchase price its Fair Market
Value on the purchase date of such investment or on the date on which it becomes
a Nonpurpose Obligation, whichever is later.
(ii) Any Arbitrage Rebate Consultant shall determine the amount of
earnings received on all investments described in paragraph (i) above, other than
investments in obligations described in Section 103(a) of the Code (including
amounts so treated) which are not defined by the Code as "investment property"
or amounts in the Bond Fund if the earnings on the Bond Fund do not exceed
$100,000 for any Bond Year, during the Computation Periods ending with the
following determination dates: (I) the last day of the first Bond Year and each
succeeding last day of each Bond Year; (II) the maturity date of the Series 2004
Bonds; (III) if all outstanding Series 2004 Bonds are redeemed prior to the
maturity date of the Series 2004 Bonds, the date on which all Series 2004 Bonds
• are redeemed; and (IV) with respect to the 1999 Escrow Fund, the date of
expenditure of all Series 2004 Bond proceeds therein on redemption of the Series
1999 Bonds. In addition, where Nonpurpose Obligations are retained by the
10-58776.3 12
• Trustee after retirement of the Series 2004 Bonds, any unrealized gains or losses
as of the date of retirement of the Series 2004 Bonds must be taken into account
in calculating the earnings on such Nonpurpose Obligations with each such
obligation treated as sold for its Fair Market Value. In calculating the earnings
described above, earnings received in a Bond Year shall include amounts which
would be treated as income under Section 1272 of the Code regarding the accrual
of original issue discount. In addition, earnings received in any Bond Year within
the Computation Period shall include the gain or loss on the sale of any
investment determined by subtracting the Adjusted Fair Market Value of the
investment from the disposition price of the investment. For purposes of assisting
the Issuer or an Arbitrage Rebate Consultant engaged by or on behalf of the Issuer
in making such determinations, the Trustee shall provide to the Issuer or
Arbitrage Rebate Consultant all information requested by the Issuer or Arbitrage
Rebate Consultant in the possession of the Trustee.
(iii) For each Computation Period specified in paragraph (ii) above, the
Issuer or an Arbitrage Rebate Consultant engaged by the Issuer shall determine
the amount of earnings on all investments held in the Rebate Fund during the
Computation Period. In calculating the earnings, earnings within the
Computation Period shall include amounts which would be treated as income
under Section 1272 of the Code regarding the accrual of original issue discount.
In addition, earnings in any Bond Year within the Computation Period shall
include the gain or loss on the sale of any investment determined by subtracting
the Adjusted Fair Market Value of the investment from the disposition price of
the investment.
(iv) For each Computation Period specified in paragraph (ii) above, the
Issuer or an Arbitrage Rebate Consultant engaged by the Issuer shall calculate the
Rebate Amount by any appropriate method described in the Code and Regulations
applicable or which become applicable to the Series 2004 Bonds.
(v) For each Computation Period specified in paragraph (ii) above and
within 30 days of the end of each such Computation Period, the Issuer or an
Arbitrage Rebate Consultant engaged by the Issuer shall calculate the Rebate
Amount and notify the Issuer (if the calculation is made by an Arbitrage Rebate
Consultant) and the Trustee in writing of the Rebate Amount. If the Rebate
Amount (less amounts previously rebated to the United States) exceeds the
amount on deposit in the Rebate Fund, the Issuer shall immediately pay such
amount to the Trustee for deposit into the Rebate Fund. If the Issuer does not pay
such amount within 20 days of notice of the Rebate Amount to the Trustee, the
Trustee shall withdraw and transfer such amount, first, from amounts on deposit
in the funds and accounts under the Indenture (and the Trustee, without direction
from the Issuer, and without making demand on, but with notice to, the Issuer,
shall immediately withdraw such amount from such funds and accounts) and, if
• such amounts are insufficient, second, from any other source.
10-58776.3 13
• Section 4.14. Payment to United States. (a) Within 45 days after the end of the fifth
Bond Year and after every fifth Bond Year thereafter, the Issuer shall direct the Trustee to pay to
the United States, not later than 45 days after the end of the fifth Bond Year, and not later than
five years after each preceding payment was due or would have been due if a Rebate Amount
existed at that time, an amount equal to not less than the excess of (i) 90% of the sum of the
balance, if any, in the Rebate Fund at such time plus all previous payments made to the United
States, over (ii) all previous payments made to the United States. The Issuer shall direct the
Trustee and the Trustee, in accordance with such directions, shall pay to the United States, not
later than 60 days after the last outstanding Series 2004 Bonds are paid or redeemed, 100% of the
Rebate Amount as of the end of the final Computation Period less all previous payments made to
the United States.
(b) Each payment of Rebate Amount shall be mailed by the Trustee to the Internal
Revenue Service Center, Ogden, Utah 84201. Each payment shall be accompanied by a copy of
the Form 8038-T and the statement summarizing the determination of the Rebate Amount.
(c) If during any Computation Period, the aggregate amount earned on Nonpurpose
Obligations in which the Gross Proceeds of the Series 2004 Bonds are invested is less than the
amount that would have been earned if the obligations had been invested at a rate equal to the
Yield on the Series 2004 Bonds, such deficit may at the request of the Issuer be withdrawn from
the Rebate Fund and paid to the Issuer. The Issuer may direct that any overpayment of rebate
may be recovered from any Rebate Amount previously paid to the United States under any
procedure that may, after the date of this Tax Regulatory Agreement, be permitted by the Code
or the Regulations.
(d) The Issuer shall provide to the Trustee all information and calculations necessary
for the Trustee to fulfill its obligations under this Section 4.14.
Section 4.15. Recordkeeping. In connection with the rebate requirement, the Trustee
and the Issuer shall maintain the following records:
(a) The Trustee and the Issuer shall record all amounts paid to the
United States pursuant to Section 4.14.
(b) The Trustee and the Issuer shall retain records of any rebate calculations
until six years after the retirement of the last obligation of the issue.
Section 4..16. Payment to Arbitrage Rebate Consultant. The Issuer shall pay the fees
and expenses of any Arbitrage Rebate Consultant. If at any time when the Issuer has retained
and is required to pay an Arbitrage Rebate Consultant and the Issuer does not make sufficient
payment, the Trustee, 20 days after receiving from the Arbitrage Rebate Consultant a demand for
such payment, shall withdraw from the funds and accounts established under the Indenture
(except for the Rebate Fund) such amount as may be needed to pay the fees and expenses of the
Arbitrage Rebate Consultant.
10-58776.3 14
0 ARTICLE V
TERM OF TAX REGULATORY AGREEMENT
Section 5.1. Term. Including all representations, warranties and covenants herein, this
Tax Regulatory Agreement shall be effective from the date of issuance of the Series 2004 Bonds
through the date that is six years after the last Series 2004 Bond is redeemed, paid or deemed
paid pursuant to the Indenture.
ARTICLE VI
AMENDMENTS
Section 6.1. Amendments. Notwithstanding any other provision hereof, any provision
of this Tax Regulatory Agreement may be deleted or modified at any time at the option of the
Issuer if the Issuer has provided to the Trustee an opinion of Bond Counsel, in form and
substance satisfactory to the Trustee, that such deletion or modification will not adversely affect
the exclusion of interest on the Series 2004 Bonds from the gross income of the recipients for
purposes of federal income taxation.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
• Section 7.1. Events of Default. The failure of either party to this Tax Regulatory
Agreement to perform any of its required duties under any provision hereof shall constitute an
Event of Default under this Tax Regulatory Agreement.
Section 7.2. Remedies for an Event of Default. Upon an occurrence of an Event of
Default under Section 7.1 hereof, the Issuer or the Trustee may, in their discretion, proceed to
protect and enforce their rights and the rights of the holders of the Series 2004 Bonds by
pursuing any available remedy, including a suit at law or in equity.
ARTICLE VIII
PROTECTION OF TRUSTEE
Section 8,1, Protection of Trustee. (a) It is hereby recognized and agreed that the
Trustee is entering into this Tax Regulatory Agreement in its respective capacity as Trustee
under the Indenture, and the Trustee shall, with respect to this Tax Regulatory Agreement, be
entitled to all of the same rights, protections and immunities hereunder as are afforded to the
Trustee under the Indenture.
(b) The parties hereto acknowledge that the Trustee has no liabilities with respect to
compliance with the Code except to take administrative actions as directed by the Issuer pursuant
• to this Tax Regulatory Agreement.
10-58776.3 15
. (c) The Issuer hereby agrees to indemnify and hold the Trustee harmless for, from
and against any and all claims, losses, damages, judgments, costs and expenses incurred by the
Trustee relating to this Tax Regulatory Agreement except for claims caused by the negligence,
breach of trust or willful misconduct of the Trustee.
•
•
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
I 0-58776.3
16
• IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Tax Regulatory
Agreement to be executed in their respective names and by their proper officers thereunto duly
authorized, all as of the day and year first written above.
•
•
CITY OF FAYETTEVILLE, ARKANSAS
BANK OF OKLAHOMA, N.A., as Trustee
By:_
Title:
10-58776.3 17
•
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Tax Regulatory
Agreement to be executed in their respective names and by their proper officers thereunto duly
authorized, all as of the day and year first written above.
CITY OF FAYETTEVILLE, ARKANSAS
By:
Mayor
BANK OF OKLAHOQMAA,, N.A., as Trustee
By: LL
Title: Vice President & Trust Officer
10-58776.3
17
COPS`
Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-1
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 1.00%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$1303000
Maturity Date: August 15, 2004
• Principal Amount: ONE HUNDRED THIRTY THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
CUSIP: 312693 FW 9
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
UL54601
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-2
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 2.50%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$585,000
Maturity Date: August 15, 2005
CUSIP: 312693 FX 7
Principal Amount: FIVE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
10-62194.1
COPY
. Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-3 $595,000
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 2.50%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
Maturity Date: August 15, 2006
CUSIP: 312693 FY 5
Principal Amount: FIVE HUNDRED NINETY-FIVE THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
IOfi2184.1
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-4
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 3.00%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$6157000
Maturity Date: August 15, 2007
• Principal Amount: SIX HUNDRED FIFTEEN THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
CUSIP: 312693 FZ 2
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
I Ofi2184.1
COPY
. Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-5 $635,000
•
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 3.00%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
Maturity Date: August 15, 2008
CUSIP: 312693 GA 6
Principal Amount: SIX HUNDRED THIRTY-FIVE THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
10-62194.1
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-6
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 2.80%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$6553000
Maturity Date: August 15, 2009
CUSIP: 312693 GB 4
Principal Amount: SIX HUNDRED FIFTY-FIVE THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
IOb2184.1
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-7
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 3.05%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$6702000
Maturity Date: August 15, 2010
Principal Amount: SIX HUNDRED SEVENTY THOUSAND DOLLARS
• KNOW ALL MEN BY THESE PRESENTS:
•
CUSIP: 312693 GC 2
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
fULY41-M]
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-8 $6903000
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 3.30%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
Maturity Date: August 15, 2011
• Principal Amount: SIX HUNDRED NINETY THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
CUSIP: 312693 GD 0
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
1062184.1
COPY
• Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation ("DTC'), to the City or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by the authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of
DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is
wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
No. R04-9
UNITED STATES OF AMERICA
STATE OF ARKANSAS
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM
REFUNDING REVENUE BOND, SERIES 2004
Interest Rate: 4.00%
Date of Bond: May 1, 2004
Registered Owner: CEDE & CO.
$155155000
Maturity Date: August 15, 2012
CUSIP: 312693 GE S
• Principal Amount: ONE MILLION FIVE HUNDRED FIFTEEN THOUSAND DOLLARS
KNOW ALL MEN BY THESE PRESENTS:
That the City of Fayetteville, Arkansas, a municipality and political subdivision
organized and existing by virtue of the laws of the State of Arkansas (the "City"), for value
received, promises to pay to the Registered Owner shown above, or registered assigns, on the
Maturity Date shown above, but solely from the source and in the manner hereinafter set forth,
the Principal Amount shown above, and in like manner to pay interest on said amount from the
date hereof until payment of such Principal Amount has been made or duly provided for, at the
Interest Rate per annum shown above, such interest to be payable semiannually on February 15
and August 15 of each year, commencing on the February 15 or August 15 next succeeding the
date of this bond shown above, except as the provisions hereinafter set forth with respect to
redemption of this bond prior to maturity may become applicable hereto. The principal of and
premium, if any, on this bond are payable in lawful money of the United States of America upon
the presentation and surrender hereof at the principal corporate trust office of Bank of Oklahoma,
N.A., Tulsa, Oklahoma, or its successor or successors, as trustee (the "Trustee"). So long as
Cede & Co. or another nominee of DTC is the registered owner of this bond, payment of interest
hereon shall be made by wire transfer of immediately available funds by the Trustee to the
Registered Owner as of the first day of the calendar month in which such interest payment date
shall fall (the "Record Date"). At any time thereafter, payment of interest hereon shall be made
by check or draft of the Trustee to the Registered Owner as of the applicable Record Date, at the
owner's address as it appears on the bond registration books of the City kept by the Trustee.
10-62184.I
COPY
• This bond, designated "City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bond, Series 2004," is one of a series of bonds in the aggregate original
principal amount of $6,090,000 (the "Series 2004 Bonds"), issued for the purpose of refunding
the City's outstanding Water and Sewer System Refunding Revenue Bonds, Series 1999,
establishing a debt service reserve for the Series 2004 Bonds, paying the premium on a policy of
municipal bond insurance, and paying expenses of issuing the Series 2004 Bonds. The Series
2004 Bonds are issued under and are secured and entitled to the protection given by a Trust
Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust
Indenture dated as May 1, 2004 (as amended and supplemented, the "Indenture"), each duly
executed and delivered by the City to the Trustee. The City has previously issued its Water and
Sewer System Refunding Revenue Bonds, Series 2002, in the aggregate original principal
amount of $9,270,000 (the "Series 2002 Bonds") under the provisions of the Indenture.
The
Series 2004 Bonds are
not general obligations of the City, but are limited
and special
obligations
payable
solely from
and secured by a pledge of the net revenues
(the "Net
Revenues")
of the
City's water
and sewer system (the "System"), as specified
in, and in
accordance
with the
provisions of,
the Indenture. The Series 2004 Bonds are secured
by a pledge
of the Net Revenues
on a parity basis with the pledge of Net Revenues securing the
Series 2002
Bonds.
The Indenture provides that the City may hereafter issue Additional Bonds from time to
time under certain terms and conditions contained in the Indenture and, if issued, such Additional
Bonds will rank on a parity of security with the Series 2002 Bonds and Series 2004 Bonds and be
equally and ratably secured by and entitled to the protection of the Indenture. Reference is
hereby made to the Indenture and to all indentures 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 Trustee and the registered owners of the Series 2004 Bonds, and the
terms upon which the Series 2004 Bonds are issued and secured.
The Series 2004 Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the State of Arkansas, including particularly Amendment 65 to the
Constitution and Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-164-401 et seq.,
§§14-234-201 et seq. and §§14-235-201 et seq. (collectively, and as from time to time amended,
the "Act"), and pursuant to Ordinance No. 4554 of the City adopted on April 6, 2004. The Series
2004 Bonds do not constitute an indebtedness of the City within the meaning of any
constitutional or statutory limitation.
Provision has been made in the Indenture for the creation or maintenance of a Revenue
Fund, an Operation and Maintenance Fund, a Bond Fund (and for the payment into the Bond
Fund of sufficient amounts of Net Revenues to pay the principal of and premium, if any, and
interest on the Series 2004 Bonds when due), a Debt Service Reserve Fund and a Renewal and
Replacement Fund. The City covenants in the Indenture to always maintain rates for System
services which will produce Net Revenues (gross revenues of the System less all reasonable and
necessary costs and expenses incurred in the operation, maintenance, repair and insuring of the
System) in each fiscal year at least equal to 125% of the average annual debt service on all
outstanding indebtedness of the City secured by System revenues, plus the amount, if any,
required to be deposited into the Debt Service Reserve Fund and any debt service reserve fund
10-62184.1 2
COPY
• established with respect to outstanding indebtedness of the City secured by System revenues, and
plus the amount, if any, required to make deposits to the Renewal and Replacement Fund.
Reference is hereby made to the Indenture for the details of the rate covenant. The Series 2004
Bonds shall never constitute an obligation or charge against the general credit or taxing powers
of the City.
Financial Guaranty Insurance Policy No. 22458BE (the "Policy") with respect to
payments due for principal of and interest on this Bond has been issued by Ambac Assurance
Corporation ("Ambac Assurance"). The Policy has been delivered to The Bank of New York,
New York, New York, as the Insurance Trustee under said Policy and will be held by such
Insurance Trustee or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee and a copy thereof may be secured
from Ambac Assurance or the Insurance Trustee. All payments required to be made under the
Policy shall be made in accordance with the provisions thereof. The owner of this Bond
acknowledges and consents to the subrogation rights of Ambac Assurance as more fully set forth
in the Policy.
The holder of this Series 2004 Bond shall have no right to enforce the provisions of the
Indenture or to institute action to enforce the covenants therein, or to take any action with respect
to any event of default under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the principal of all the
Series 2002 Bonds, the Series 2004 Bonds and Additional Bonds, if any, issued under the
Indenture and then outstanding may be declared and may become due and payable before the
stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture supplemental thereto,
may be made only to the extent and in the circumstances permitted by the Indenture.
The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City,
on and after August 15, 2009, in whole at any time or in part in inverse order of maturity (and
selected by the Trustee by lot within a maturity) on any interest payment date, from funds from any
source, at a redemption price equal to one hundred percent (1001/6) of the principal amount of the
Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption
This Series 2004 Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon surrender hereof,
together with a written instrument of transfer duly executed by the registered owner or his duly
authorized attorney.
The Series 2004 Bonds are issuable as registered bonds without coupons in
denominations of $5,000 and any integral multiple thereof. Subject to the limitations and upon
payment of the charges provided in the Indenture, Series 2004 Bonds may be exchanged for a
like aggregate principal amount of Series 2004 Bonds of other authorized denominations.
. No
recourse shall be had
for the payment
of the principal of
or
premium,
if any, or
interest on
any of the Series 2004
Bonds or for any
claim based thereon
or
upon any
obligation,
10-62184.1 3
0
•
covenant or agreement contained in the Series 2004 Bonds or the Indenture against any past,
present or future alderman, officer or employee of the City, or any successor, as such, either
directly or through the City or any successor of the City, under any rule of law or equity, statute
or constitution or by the enforcement of any assessment or penalty or otherwise, and all such
liability of any such alderman, officer or employee as such is hereby expressly. waived and
released as a condition of and consideration for the issuance of any of the Series 2004 Bonds.
This Series 2004 Bond is issued with the intent that the laws of the State of Arkansas will
govern its construction.
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 the Series
2004 Bonds do exist, have happened and have been performed in due time, form and manner as
required by law; that the indebtedness represented by the Series 2004 Bonds, together with all
obligations of the City, does not exceed any constitutional or statutory limitation; and that the
revenues ,pledged to the payment of the principal of and premium, if any, and interest on the
Series.2004 Bonds as the same become due and payable will be sufficient in amount for that
purpose.
This Series 2004 Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of Authentication
hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, the City of Fayetteville, Arkansas has caused this Series 2004
Bond to be executed by its Mayor and City Clerk, thereunto duly authorized (by their manual or
facsimile signatures), and its corporate seal to be affixed or imprinted hereon,.all as of the date
hereof shown above.
ATTEST:
By: Mn�
City Clerk
(SEAL)
CITY OF FAYETTEVILLE, ARKANSAS
a
:U•
OFAY�EVILLE�
rnryarrn
•
•
LOC10Fy
(Form of Trustee's Certificate)
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond is one of the Series 2004 Bonds of the issue described in and issued under the
provisions of the within mentioned Indenture.
Attached hereto is the complete text of the opinion of Kutak Rock LLP, a signed original
of which is on file with the undersigned, delivered and dated the date of the original delivery of
and payment for the Series 2004 Bonds.
BANK OF OKLAHOMA, N.A.
as Trustee
By.
Aulhorized Signature
10-62184.1
•
•
•
COPY
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, , hereby sells, assigns, and
transfers unto , the within Bond and all rights thereunder, and
hereby irrevocably constitutes and appoints
as attorney to transfer the within Bond on the books kept for registration thereof with full power
of substitution in the premises.
DATE: , 20_.
Transferor
GUARANTEED BY:
NOTICE: Signature(s) must be guaranteed by an institution satisfactory to the Trustee or
other transfer agent.
10-62184.1 6
•
14
15
410
OFFICIAL STATEMENT
NEW ISSUE
BOOK -ENTRY ONLY
'RATINGS: S&P:."AAA"(Underlying:"A")
(AMBAC ImareJ)
40 In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain
representations and continuing compliance with certain covenants, interest on the Series 2004 Bonds is excluded from gross income for federal income tax
purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Under existing law, Bond Counsel is of the opinion that the
Series 2004 Bonds and the interest thereon are exempt from all state, county and municipal taxes in the State of Arkansas. See the caption "TAX AM TIERS"
herein.
$6,090,000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
SERIES 2004
Dated: May 1, 2004 Due: August 15, as shown below
The Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), are being issued by the City of Fayetteville,
Arkansas (the "City") for the purpose of refunding certain outstanding indebtedness of the City, funding a debt service reserve, paying the premium for a
financial guaranty insurance policy, and paying certain expenses in connexion with the issuance of the Series 2004 Bonds. See the captions
"ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein.
The Series 2004 Bonds are issuable only as fully registered bonds and, when issued, will be registered in the time of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), New York, New York, to which principal, premium, if any, and interest payments on the Series 2004 Bonds will be
made so long as Cede & Co. is the registered owner of the Series 2004 Bonds. Individual purchases of the Series 2004 Bonds will be made only in book -entry
form, in denominations of $5,000 or integral multiples thereof. Individual purchasers ("Beneficial Owners") of Series 2004 Bonds will not receive physical
delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM' herein.
The Series 2004 Bonds shall bear interest from their dated date, payable on February 15 and August 15 of each year, commencing August 15, 2004. All
such interest payments shall be payable to the persons in whose name such Series 2004 Bonds are registered on the bond registration books maintained by the
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), as of the first day of the calendar month in which the applicable interest payment date
falls. Principal of and premium, if any, on the Series 2004 Bonds shall be payable at the principal corporate trust office of the Trustee. So long as DTC or its
nominee is the registered owner of the Series 2004 Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the
disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein.
Pursuant to a Trust Indenture dated as of May I, 2002, as amended and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004,
each by and between the City and the Trustee, the principal of, premium, if any, and interest on the Series 2004 Bonds are secured by a pledge of the Net
Revenues (as defined herein) of the water and sewer system (the "System") of the City. The pledge of Net Revenues securing the Series 2004 Bonds shall be
•on a parity with the existing pledge of Net Revenues securing $8,145,000 outstanding principal amount of the City's Water and Sewer System Refunding
Revenue Bonds, Series 2002. The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i)
125% of the average annual debt service on all indebtedness of the City to which System revenues are pledged, (t) the amount, if any, needed to fund debt
service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, emit (iii) the amount, if any, needed to make
required deposits to the Renewal and Replacement Fund (as defined herein). See the caption "SECURITY FOR THE BONDS" herein. The Series 2004
Bonds are subject to optional redemption prior to maturity as more fully described herein under the caption `T fE SERIFS 2004 BONDS - Redemption"
Payment of the principal of and interest on the Series 2004 Bonds when due will be insured by a financial guaranty insurance policy to be issued by
Ambac Assurance Corporation simultaneously with the delivery of the Series 2004 Bonds.
r
. 3 fb C.
The Series 2004 Bonds are special obligations of the City secured by and payable solely from the Net Revenues or the System. The Series 2004
Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt limitation or restriction. The issuance
of the Series 2004 Bonds shall not directly, indirectly or contingently obligate the City to levy or pledge any fazes whatsoever or to make any
appropriation for the payment of the Series 2004 Bonds, except as described herein with respect to Net Revenues of the System.
MATURITY SCHEDULE
Maturity
Principal
Interest
'Maturity
Principal
Interest
(August 15
Amount
Rate
Price
(August 151
Amount
Rate
Price
2004
$130,000
1.000%
100.000"/
2009
$ 655,000
2.8000/0
99.611%
2005
585,000
2.500%
101.366%
2010
670,000
3.050%
99.434%
2006
595,000
2.500%
101.371 %
2011
690,000
3.3000/a
99.359%
2007
615,000
3.000%
102.578%
2012
1,515,000
4.000%
101.888%
2008
635,000
3.000%
101.713%
(Plus acemed interest)
The Series 2004 Bonds are offered when, as and if issued by the City and are subject to the final approving opinion of Kutak Rock LLP, Little Rock,
Arkansas, Bond Counsel. Certain matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. It is expected that the Series 2004
Bonds will be available for delivery in New York, New York, on or about May 20, 2004.
Stephens Inc.
• The date of this Official Statement is April 23, 2004.
Sec the caption "RATINGS" herein.
(•
CITY OF FAYETTEVILLE, ARKANSAS
Issuer
City Council
Dan Coody, Mayor
Kyle Cook
Bob Davis
Lioneld Jordan
Shirley Lucas
Don Marr
Robert Reynolds
Robert Rhoades
Brenda Thiel
Hugh Earnest, Chief Administrative Officer
Stephen Davis, Finance & Internal Services Director
Greg Boettcher, Water & Wastewater Director
Sondra Smith, City Clerk
Kit Williams, City Attorney
BANK OF OKLAHOMA, N.A.
Tulsa, Oklahoma
Trustee and Paying Agent
KUTAK ROCK LLP
Little Rock, Arkansas
Bond Counsel
STEPHENS INC.
Fayetteville, Arkansas
Underwriter
(This page intentionally left blank.)
A
•
No dealer, broker, salesman or other person has been authorized by the City or by Stephens Inc. (the
"Underwriter") to give any information or to make any representations, other than those contained herein; and, if
given or made, such other information or representations must not be relied upon as having been authorized by
either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to
buy, nor shall there be any sale of any Series 2004 Bonds in anyjurisdiction in which such offer is not authorized, or
in which the person making such offer, solicitation or sale is not qualified to do so, or to any person to whom it is
unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein are
subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the
System since the date hereof.
THE SERIES 2004 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, NOR HAS THE TRUST INDENTURE BEEN QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS FROM SUCH
REGISTRATION AND QUALIFICATION CONTAINED IN SUCH LAWS.
CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM THE CITY, THE
DEPOSITORY TRUST COMPANY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE.
THE UNDERWRITER 14AS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN
ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE
FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF 'THIS
TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTY THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2004 BONDS
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
- --- ---. �_.... _ 1.,..-b6.................. ................................... _.........................
TheCity........................................................................................................................
TheSystem.............................................................
Definitions of Certain Terms ..................................
Summary of the Indenture ......................................
Summary of the Continuing Disclosure Agreement
Underwriting...........................................................
TaxMatters.............................................................
Ratings....................................................................
Legal Matters ..........................................................
Financial Statements ...............................................
Miscellaneous
..................................................................................................................
Accuracy and Completeness of Official Statement.........................................................
APPENDIX A - Audited General Purpose Financial Statements of the City for the
Page
2
4
5
6
8
9
9
10
10
13
22
25
30
32
33
33
34
..................................... 35
..................................... 35
..................................... 35
yearended December 31, 2002............................................................................................................................... A-1
APPENDIX B - Unaudited Financial Statements of the City's Water and Sewer Fund for the
yearended December 31, 2003................................................................................................................ B-I
APPENDIX C - Form of Bond Counsel Opinion............................................................... .................................. C-1
APPENDIX D - Specimen of Financial Guaranty Insurance Policy.................................................................... D-1
[THIS PAGE LEFT BLANK INTENTIONALLY]
•
•
OFFICIAL STATEMENT
$6,09%000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
SERIES 2004
INTRODUCTORY STATEMENT
The following introductory statement is subject in all respects to the more complete information set forth in
this Official Statement. All descriptions and summaries of documents hereinafter set forth are qualified in their
entirety by reference to each such document. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms under the caption "DEFINITIONS OF CERTAIN TERMS" herein.
This Official Statement, including the cover page and the Appendices hereto, is furnished in connection
with the offering of Water and Sewer System Refunding Revenue Bonds, Series 2004 in the principal amount of
$6,090,000 (the "Series 2004 Bonds"), by the City of Fayetteville, Arkansas (the "City").
The City is a city of the first class organized and existing under the laws of the State of Arkansas (the
"State"). The City is authorized under Amendment 65 to the Constitution of the State ("Amendment 65") and
Arkansas Code Annotated (1998 Repl. & 2003 Supp.) §§14-164-401 et seq., §§14-234-201 et seq., and
§§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell revenue bonds
for the purpose of financing and refinancing the cost of improvements and betterments to its water and sewer system
(the "System").
The Series 2004 Bonds are to be issued by the City pursuant to Amendment 65, the Act and Ordinance
No. 4554, adopted and approved on April 6, 2004 (the "Authorizing Ordinance"), for the purpose of (i) refunding
the City's $6,365,000 outstanding principal amount Water and Sewer System Refunding Revenue Bonds, Series
1999 (the "Series 1999 Bonds"), (ii) establishing a debt service reserve for the Series 2004 Bonds, (iii) paying the
premium for a financial guaranty insurance policy, and (iv) paying the costs of issuing the Series 2004 Bonds. See
the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein.
The Series 2004 Bonds are special obligations of the City, payable solely from and secured by a pledge of
the Net Revenues (as defined herein) of the System on a parity basis to the existing pledge of Net Revenues securing
the payment of debt service on $8,145,000 outstanding principal amount of the City's Water and Sewer System
Refunding Revenue Bonds, Series 2002 (the "Series 2002 Bonds"). The City has covenanted to fix and maintain
rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt
service on all indebtedness of the City to which System revenues are pledged, (ii) the amount needed to fund debt
service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and
(iii) the amount needed to make required deposits to the Renewal and Replacement Fund (as defined herein). The
regularly scheduled payment of principal of and interest on the Series 2004 Bonds when due is guaranteed under a
financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") issued concurrently with the
delivery of the Series 2004 Bonds by Ambac Assurance Corporation, a Wisconsin -domiciled stock insurance
company ("Ambac Assurance"). See the captions "SECURITY FOR THE BONDS," "BOND INSURANCE" and
"SUMMARY OF THE INDENTURE" herein.
The faith and credit of the City are not pledged to the payment of the Series 2004 Bonds, and the
Series 2004 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or
statutory debt limitation or restriction. The issuance of the Series 2004 Bonds shall not directly, indirectly or
contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the
payment of the Series 2004 Bonds, except as described herein with respect to Net Revenues.
Additional bonds may be issued on a parity of security with the Series 2002 Bonds and the Series 2004
Bonds under certain circumstances set forth in the Indenture (hereinafter defined). See the caption "THE SERIES
2004 BONDS - Additional Bonds" herein. The Series 2002 Bonds, the Series 2004 Bonds and any Additional
Bonds are herein collectively referred to as the "Bonds."
Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the
Series 2004 Bonds, by and between the City and the Trustee (the "Continuing Disclosure Agreement"), the City has
undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data •
concerning the System and of the occurrence of certain material events. See the caption "SUMMARY OF THE
CONTINUING DISCLOSURE AGREEMENT" herein.
This Official Statement contains brief descriptions or summaries of, among other matters, the City, the
System, the Series 2004 Bonds, the Continuing Disclosure Agreement, and the Trust Indenture dated as of May 1,
2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004 (as
supplemented and amended, the "Indenture"), by and between the City and Bank of Oklahoma, N.A., Tulsa,
Oklahoma, as trustee (the "Trustee"), pursuant to which the Bonds are issued and secured. Such descriptions and
information do not purport to be comprehensive or definitive. All references herein to the Indenture and the
Continuing Disclosure Agreement are qualified in their entirety by reference to each such document, and all
references to the Series 2004 Bonds are qualified in their entirety by reference to the definitive form thereof and the
information with respect thereto included in the Indenture. Copies of the Continuing Disclosure Agreement, the
Indenture, and the form of Series 2004 Bond included therein, are available from the City by writing to the attention
of the City Clerk, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas
72701 and, during the initial offering period only, from the Underwriter, Stephens Inc., 3425 North Futrall,
Suite 201, Fayetteville, Arkansas 72703. Certain financial and operating data have been provided by the City from
the audited records of the System and certain demographic information has been obtained from other sources which
are believed to be reliable.
THE SERIES 2004 BONDS
Description. The Series 2004 Bonds will be initially dated as of May 1, 2004, and will bear interest
payable semiannually on February 15 and August 15 of each year, commencing August 15, 2004, at the rates set
forth on the cover page hereof. The Series 2004 Bonds will mature on August 15 in the years and in the principal
amounts set forth on the cover page hereof.
The Series 2004 Bonds are issuable only in the form of fully registered bonds and, when issued, will be
registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York,
New York, to which principal, premium, if any, and interest payments on the Series 2004 Bonds will be made so
long as Cede & Co. is the registered owner of the Series 2004 Bonds. Individual purchases of the Series 2004
Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual
purchasers ("Beneficial Owners") of Series 2004 Bonds will not receive physical delivery of bond certificates. See
the caption "BOOK -ENTRY ONLY SYSTEM" herein.
All interest payments on the Series 2004 Bonds shall be payable to the persons in whose name such Series
2004 Bonds are registered on the bond registration books maintained by the Trustee, as of the first day of the -
calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series
2004 Bonds shall be payable at the principal corporate trust office of the Trustee. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Series 2004 Bonds to the extent of the sum or sums so
paid. So long as DTC or its nominee is the registered owner of the Series 2004 Bonds, disbursement of such
payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial
Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein.
Redemption. The Series 2004 Bonds are subject to redemption prior to maturity as follows:
The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after
August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot
within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the
principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption.
Partial Redemption of a Series 2004 Bond. In selecting Series 2004 Bonds for redemption prior to
maturity, in the case any outstanding Series 2004 Bond is in a denomination greater than $5,000, each $5,000 of face
value of such Series 2004 Bond shall be treated as a separate Series 2004 Bond in the denomination of $5,000;
provided, however, that so long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, the
particular Series 2004 Bonds or portions thereof to be redeemed within a maturity shall be selected by lot in such
manner as DTC shall determine.
Notice of Redemption. Notice of the call for any redemption, identifying the Series 2004 Bonds or portions
thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by
first class mail (or, so long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, by any
io
other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2004 Bond
addressed to such registered owner at his registered address and placed in the trails not less than thirty (30) nor more
than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by
mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Series 2004
Bond with respect to which no such failure or defect has occurred.
Any notice mailed as provided above shall be conclusively presumed to have been duly given, whether or
not the registered owner receives the notice.
Additional Bonds. The City may issue from time to time one or more series of Additional Bonds for the
purpose of (i) financing Costs of Construction in connection with the acquisition, construction and equipping of
Project facilities, (ii) refunding the Series 2002 Bonds, the Series 2004 Bonds or any series of Additional Bonds or
Subordinate Obligations, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured
equally and ratably with the Series 2002 Bonds, the Series 2004 Bonds and any other series of Additional Bonds
theretofore issued and then Outstanding, except insofar as any terms or conditions of redemption or purchase
established under the Indenture may afford additional benefit or security for the Bonds of any particular series.
Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the items required for the
issuance of Bonds by the Indenture, plus a statement by a Qualified Accountant reciting the opinion, based upon
necessary investigation, that the Net Revenues of the System for the Fiscal Year immediately preceding the Fiscal
Year in which such Additional Bonds are to be issued were not less than (i) 130% of the average Annual Debt
Service on all then outstanding Bonds and Subordinate Obligations, plus the Additional Bonds then proposed to be
issued, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt
service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required
deposits to the Renewal and Replacement Fund.
If any changes have been made, and are in effect on the date of issuance of the Additional Bonds, in any
rates and charges imposed by the City for System services which were not in effect during the entire preceding
Fiscal Year, the Qualified Accountant may, if such changes resulted in increases in such rates and charges, and shall,
if such changes resulted in reductions in such rates and charges, adjust the Net Revenues for the preceding Fiscal
Year to reflect any changes in such Net Revenues which would have occurred if the changed rates and charges had
been in effect during the entire preceding Fiscal Year.
Notwithstanding any of the foregoing, no Additional Bonds shall be issued unless there is no default
existing at the time of issuance under the Indenture.
Subordinate Obligations. Nothing in the Indenture shall prevent the City from authorizing and issuing
bonds, notes, bond anticipation notes, warrants, certificates or other obligations or evidences of indebtedness, the
payment of the principal of and premium, if any, and interest on which shall be made from Revenues or Net
Revenues or from a special fund to be established and maintained from Revenues or Net Revenues, provided
payments from Revenues or Net Revenues or from Revenues or Net Revenues in such special fund; and the lien and
charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien, pledge and charge
created in the Indenture for the security and payment of the Bonds and other payments under the Indenture,
including, without limitation, the following payments out of Revenues specified by the Indenture: (i) payments of
Operation and Maintenance Expenses; (ii) payments into the Bond Fund; (iii) payments into the Debt Service
Reserve Fund; and (iv) payments into the Renewal and Replacement Fund.
Transfer or Exchange. The Bonds may be transferred on the books of registration kept by the Trustee by
the registered owner in person or by the owner's duly authorized attorney, upon surrender thereof, together with a
written instrument of transfer duly executed by the registered owner or the owner's duly authorized attorney. Upon
surrender for transfer of any Bond at the principal corporate office of the Trustee, the City shall execute and the
Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same
series and in the same aggregate principal amount and of any authorized denomination or denominations.
Transfers of registration or exchanges of Bonds shall be without charge to the holders of such Bonds, but
any taxes or other governmental charges required to be paid with respect to the same shall be paid by the holder of
theiBond requesting such transfer or exchange as a condition precedent to the exercise of such privilege.
The Trustee shall not be required to transfer or exchange any Bond during the period from and including a
Record Date to the next succeeding interest payment date of such Bond nor to transfer or exchange any Bond after
the mailing of notice calling such Bond for redemption has been made, and prior to such redemption.
So long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, transfers of beneficial
interests in the Series 2004 Bonds shall be in accordance with the rules and procedures of DTC and its direct and
indirect participants. See the caption "BOOK -ENTRY ONLY SYSTEM" herein.
SECURITY FOR THE BONDS
General. The Bonds are special obligations of the City secured by and payable solely from the Net
Revenues derived from operation of the System. The Bonds do not constitute an indebtedness of the City within the
meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Bonds shall not directly,
indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for
the payment of the Bonds, except as described herein with respect to the Net Revenues of the System.
Rate Covenant. The rates charged for services of the System heretofore fixed by ordinances of the City and
the conditions, rights and obligations pertaining thereto, as set forth in said ordinances, are ratified, confirmed and
continued by the Authorizing Ordinance.
In the Indenture, the City covenants that the rates for System services will never be reduced while any of
the Bonds are Outstanding unless there is obtained from a Qualified Accountant a certificate to the effect that Net
Revenues, with the reduced rates, in the current Fiscal Year will be at least equal to (i) 125% of the average Annual
Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to
the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and
(iii) the amount,, if any, needed to make required deposits to the Renewal and Replacement Fund. The City further
covenants that the rates for System services shall, if and when necessary, from time to time, be increased in such
manner as will produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all Bonds and
Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund
and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to
make required deposits to the Renewal and Replacement Fund.
The Indenture defines "Net Revenues" as Revenues less Operation and Maintenance Expenses. Revenues
include 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. Operation and
Maintenance Expenses include all ordinary and necessary expenses of operation, repair, maintenance and insuring of
the System under generally accepted accounting principles. Such term includes the cost of purchased water and
payments to all taxing authorities, but does not include debt service and depreciation expense.
Debt Service Reserve. From the proceeds of sale of each series of Bonds issued pursuant to the Indenture,
there shall be deposited into the Debt Service Reserve Fund an amount which, together with the amounts then on
deposit therein, will be equal to 50% of the aggregate maximum Annual Debt Service on all Outstanding Bonds in
any Fiscal Year thereafter (the "Reserve Requirement").
If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be
reimbursed to the Reserve Requirement through monthly payments, beginning not later than the fifth business day
preceding the fifteenth day of the month immediately following the month in which the Debt Service Reserve Fund
was reduced below the Reserve Requirement, and continuing not later than the fifth business day preceding the
fifteenth day of each month thereafter until such reimbursement shall have been accomplished, from any funds in
the Revenue Fund (after making the required deposits into the Operation and Maintenance Fund and into the Bond
Fund as provided in the Indenture), in an amount equal to 1/12 of the Reserve Requirement deficiency. If a surplus
shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be
deposited into the Bond Fund. -
The moneys on deposit in the Debt Service Reserve Fund (i) shall be used to the extent necessary to
prevent a default in the payment of Annual Debt Service on the Bonds and Trustee's and any Paying Agent's fees
and (ii) may be used, together with other available funds, to provide for the payment at maturity or to redeem prior
to maturity all, but not less than all, of the Outstanding Bonds.
Bond Insurance. As described below under the caption "BOND INSURANCE," the payment of principal
of and interest on the Series 2004 Bonds as due is guaranteed under a financial guaranty insurance policy (the
"Financial Guaranty Insurance Policy") issued concurrently with the issuance of the Series 2004 Bonds by Ambac
Assurance Corporation, a Wisconsin -domiciled stock insurance company ("Ambac Assurance").
BONDINSURANCE
Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial
Guaranty Insurance Policy") relating to the Series 2004 Bonds effective as of the date of issuance of the Series 2004
Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The'Bank of New
York, in New York, New York or any successor thereto (the "Insurance Trustee") that portion of the principal of and
interest on the Series 2004 Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by
the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such
payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment
or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment
from the Trustee. The insurance will extend for the term of the Series 2004 Bonds and, once issued, cannot be canceled
by Ambac Assurance.
The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory
sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the
Series 2004 Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all
outstanding Series 2004 Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding
Series 2004 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund
redemption dates. In the event of any acceleration of the principal of the Series 2004 Bonds, the insured payments will
be made at such times and in such amounts as would have been made had there not been an acceleration.
In the event the Trustee has notice that any payment of principal of or interest on a Series 2004 Bond which has
become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential
transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled
to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available.
The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in the
Policy. Specifically, the Financial Guaranty Insurance Policy does not cover:
I. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund
redemption) or as a result of any other advancement of maturity.
2. payment of any redemption, prepayment or acceleration premium.
3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying
Agent, if any.
If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires
surrender of Series 2004 Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to
permit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance to the extent of the
payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty
Insurance Policy requires proof of Holder entitlement to interest payments and an appropriate assignment of the Holder's
right to payment to Ambac Assurance.
Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Series 2004 Bond,
appurtenant coupon, if any, or right to payment of principal or interest on such Series 2004 Bond and will be fully
subrogated to the surrendering Holder's rights to payment.
Ambac Assurance Corporation
Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin -domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do
business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the
U.S. Virgin Islands, with admitted assets of approximately $7,278,000,000 (audited) and statutory capital of
$4,490;000,000 (audited) as of December 31, 2003. Statutory capital consists of Ambac Assurance's policyholders'
surplus and statutory contingency reserve. Standard & Poor's Credit Markets Services, a Division of The McGraw-
Hill Companies, Moody's Investors Service and Fitch Ratings have each assigned a triple-A financial strength rating
to Ambac Assurance.
Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an
obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such
obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions
substantially identical to those contained in its Financial Guaranty insurance policy shall be treated for federal income
tax purposes in the same manner as if such payments were made by the Obligor of the Series 2004 Bonds.
Ambac Assurance makes no representation regarding the Series 2004 Bonds or the advisability of investing in
the Series 2004 Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official
Statement other than the information supplied by Ambac Assurance and presented under the heading "BOND
INSURANCE"
Available Information
The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the
"SEC"). These reports, proxy statements can be read and copied at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC maintains an internet site at htto://www.sec.eov that contains reports, proxy and information statements
and other information regarding companies that file electronically with the SEC, including the Company. These reports,
proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the
"NYSE") at 20 Broad Street, New York, New York 10005.
Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards
are available from Ambac Assurance. The address of Ambac Assurance's administrative offices and its telephone
number are One State Street Plaza, 19th Floor, New York, New York 10004 and (2I2) 668-0340.
Incorporation of Certain Documents by Reference
The following documents filed by the Company with the SEC (File No. 1-I0777) are incorporated by reference
in this Official Statement:
(1) The Company's Annual Report on Forth 10-K for the fiscal year ended December 31, 2003 and filed
on March 15, 2003; and
(2) The Company's current report on Form 8-K dated April 21, 2004 and filed on April 22, 2004.
All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after
the date of this Official Statement will be available for inspection in the same manner as described above in
"Available Information."
BOOK -ENTRY ONLY SYSTEM
The Series 2004 Bonds will be issued only as one fully registered Series 2004 Bond for each maturity, in
the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as
registered owner of all the Series 2004 Bonds. The fully registered Series 2004 Bonds will be retained and
immobilized in the custody of DTC.
DTC (or any successor securities depository) or its nominee for all purposes under the Indenture will be
considered by the City and the Trustee to be the owner or holder of the Series 2004 Bonds.
Owners of any book entry interests in the Series 2004 Bonds (the "book entry interest owners") described
below, will not receive or have the right to receive physical delivery of the Series 2004 Bonds, and will not be
considered by the City and the Trustee to be, and will not have any rights as, owners or holders of the Series 2004
Bonds under the bond proceedings and the Indenture except to the extent, if any, expressly provided thereunder.
CERTAIN INFORMATION REGARDING DTC AND DIRECT PARTICIPANTS IS SET FORTH
BELOW. THIS INFORMATION HAS BEEN PROVIDED BY DTC. THE CITY, THE UNDERWRITER AND
BOND COUNSEL ASSUME NO RESPONSIBILITY FOR THE ACCURACY OF SUCH STATEMENTS.
DTC, the world's largest depository, is a limited -purpose trust company organized under the New York •
Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code,
and a
"clearing agency" registered pursuant to the provisions
of Section 17A of the
Securities
Exchange
Act of
1934.
DTC holds and provides asset servicing for over two
million issues of U.S.
and non-U.S.
equity
issues,
corporate and municipal debt issues and money market instruments from over 85 countries that DTC's participants
• ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants
of sales and other securities transactions in deposited securities, through electronic computerized book -entry
transfers and pledges among Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants
of DTC and by Members of the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and
EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available
to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The DTC Rules applicable to its Direct and Indirect Participants are on file with
the Securities and Exchange Commission. More information about DTC can be found at www.dtc.com.
Purchases of Series 2004 Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Series 2004 Bonds on DTC's records. The ownership interest of each actual
purchaser of each Series 2004 Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Series 2004 Bonds are to be accomplished by
entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in Series 2004 Bonds, except in the event
that use of the Book -Entry System for the Series 2004 Bonds is discontinued.
To facilitate subsequent transfers, all Series 2004 Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. or such other name as, may be requested by an
authorized representative of DTC. The deposit of Series 2004 Bonds with DTC and their registration in the name of
Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Series 2004 Bonds, DTC's records reflect only the identity of the Direct Participants
to whose accounts such Series 2004 Bonds are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to
time. Redemption notices shall be sent to DTC. If less than all of the Series 2004 Bonds within a maturity are to be
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither DTC nor Cede
& Co. (nor such other DTC nominee) will consent or vote with respect to
the Series
2004 Bonds unless authorized
by a Direct Participant in,
accordance with DTC's Procedures. Under
its usual
procedures, DTC mails an Omnibus
Proxy to the City as
soon as possible after the Record Date. The
Omnibus
Proxy will assign Cede & Co.'s
consenting or voting rights
to those Direct Participants to whose accounts
the Series
2004 Bonds are credited on the
Record Date (identified in a
listing attached to the Omnibus Proxy).
Payment of debt service and redemption proceeds with respect to the Series 2004 Bonds will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is
to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the
City or the Trustee on payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and debt service to
Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
BENEFICIAL OWNERS SHOULD CONSULT WITH THE DIRECT PARTICIPANTS OR INDIRECT
PARTICIPANTS FROM WHOM THEY PURCHASE A BOOK ENTRY INTEREST TO OBTAIN
INFORMATION CONCERNING THE SYSTEM MAINTAINED BY SUCH DIRECT PARTICIPANTS OR
INDIRECT PARTICIPANTS TO RECORD SUCH INTERESTS, TO MAKE PAYMENTS, TO FORWARD
NOTICES OF REDEMPTION AND OF OTHER INFORMATION.
THE CITY AND THE TRUSTEE HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS
OF THE RECORDS OR NOTICES RELATING TO, OR PAYMENTS MADE ON ACCOUNT OF, BOOK
ENTRY INTEREST OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY
RECORDS RELATING TO THAT OWNERSHIP.
The Trustee and the City, so long as a book entry method of recording and transferring interest in the Series
2004 Bonds is used, will send any notice of redemption or of any Indenture amendment or supplement or other
notices to Bondholders under the Indenmre only to DTC (or any successor securities depository) or its nominee.
Any failure of DTC to advise any Direct Participants, or of any Direct Participants or Indirect Participants to notify
any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of
the Series 2004 Bonds called for redemption, the Indenture amendment or supplement, or any other action premised
on notice given under the Indenture.
The City and the Trustee cannot and do not give any assurances that DTC, Direct Participants, Indirect
Participants or others will distribute payments of debt service on the Series 2004 Bonds made to DTC or its nominee
as the registered owner of the Series 2004 Bonds, or any redemption or other notices, to the Beneficial Owners, or
that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official
Statement.
DTC may discontinue providing its services as securities depository with respect to the Series 2004 Bonds
at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, bond certificates are required to be printed and delivered.
In addition, the City may decide to discontinue use of the system of book -entry transfers through DTC (or a
successor securities depository). In that event, bond certificates will be printed and delivered.
SOURCES AND USES OF FUNDS
The proceeds of the Series 2004 Bonds and other available funds are expected to be used as follows:
Sources of Funds
Series 2004 Bond Proceeds* $61150,721
Available Moneys in Series 1999 Bond
Fund and Debt Service Reserve Fund 1,263,035
Total Sources: $7 413.7 6
Uses of Funds
Deposit to Series 1999 Bond Escrow Fund $674859180
Debt Service Reserve Fund Deposit 786,433
Costs of Issuance, Underwriter's Discount
and Bond Insurance Premium 1379400
Contingency 4,743
Total Uses: $22413,75
* Including a $60,721 net reoffering premium.
THE REFUNDING PROGRAM
The proceeds of the Series 2004
Bonds will be used to accomplish a current refunding of
$6,365,000
outstanding principal amount of the
City's Water and Sewer System Refunding Revenue Bonds, Series
1999, dated
as of May 1, 1999 (the "Series 1999
Bonds").
The Series 1999 Bonds were issued to refund bonds previously issued
by the City to refinance various
capital
improvements to the water storage, transmission and
distribution
components of the System.
Upon the delivery of the Series 2004 Bonds, a portion of the proceeds thereof will be deposited with the
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an irrevocable Escrow
'Deposit Agreement (the "Escrow Agreement"), between the City and the Escrow Trustee. The proceeds derived
from the Series 2004 Bonds will be held by the Escrow Trustee under the Escrow Agreement in trust for the holders
of the Series 1999 Bonds, and will be sufficient to pay the principal, premium, and interest due on the Series 1999
Bonds when redeemed on August 15, 2004. Amounts held by the Escrow Trustee will be irrevocably pledged for
the benefit of the holders of the Series 1999 Bonds. After such deposit, the Series 1999 Bonds will no longer be
deemed to be outstanding and will be secured solely by the amounts held by the Escrow Trustee. See the caption
"ESTIMATED SOURCES AND USES OF FUNDS" herein.
DEBT SERVICE REQUIREMENTS
As of the date of closing, the Series 2002 Bonds and the Series 2004 Bonds constitute the only debt
obligations secured by Revenues of the System. The following table details amounts required to pay scheduled
principal and interest on the Series 2002 Bonds and the Series 2004 Bonds during each year:
Series 2002 Series 2002 Series 2004 Series 2004 Total Debt
Year Principal Interest Principal Interest Service
2004 $ 4453000 $ 3537405 $ 130,000 $ 55,017 $ 9837422
2005 460,000 340,055 585,000 1892145 11574,200
2006 475,000 324,645 595,000 174$20 11569,165
2007 495,000 307,545 615,000 159,645 11577,190
2008 515,000 288,240 635,000 141,195 17579,435
2009 5353000 267,382 6553000 1227145 115799527
2010 555,000 245,180 6703000 103,805 1,573,985
2011 580,000 221,315 690,000 83,370 1,574,685
2012 605,000 195,505 15515,000 60,600 213765105
2013 635,000 167,978 - - 802,978
2014 6%000 1385450 - - 7989450
2015 695,000 1079100 - - 8023100
2616 7257000 73,392 - - 7983392
2017 765,000 37,867 802,867
Totals: aaV 442 $18392.501
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ESTIMATED DEBT SERVICE COVERAGE
The following table shows estimated maximum and average annual debt service coverage with respect to
the outstanding Series 2002 Bonds and Series 2004 Bonds utilizing historical Net Revenues of the System.
Historical Gross Revenues of the System
Historical Operating Expenses
Net Revenues Available for Debt Service(i)
Maximum Annual Debt Service Requirement on
Series 2002 Bonds and Series 2004 Bonds(z)
Average Annual Debt Service Requirement on
Series 2002 Bonds and Series 2004 Bondst�1(3)
Maximum Annual Debt Service Coverage
Average Annual Debt Service Coverage
2002 2003
Audited (Unaudited)
$211308,134 $213554,753
15.078.396 16.943.064
N_51 0
$23376,105 $2,3767105
$1,675,537 $1,675,537
2.62X L24-X
3.72X 2=
(1) Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance
and repair of the System in accordance with generally accepted accounting principles applicable to municipal water
systems (excluding depreciation, interest and amortization expenses).
(2) See the caption "DEBT SERVICE REQUIREMENTS" herein.
(3) For the years 2005 — 2012 while both the Series 2002 Bonds and the Series 2004 Bonds will be outstanding.
THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON
THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE
FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE
THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE
SUCH HISTORICAL RESULTS.
THE CITY
Genera/. The City is a city of the first class organized and existing under the laws of the State of Arkansas.
The City is.the seat of government of Washington County (the "County") and is the fourth largest city in the State.
The City is located in the Metropolitan Statistical Area of Fayetteville/Springdale/Rogers (the "MSA"), which
includes all of Washington and Benton Counties in the northwest comer of the State and is approximately 185 miles
northwest of Little Rock, Arkansas, 125 miles east of Tulsa, Oklahoma, and 210 miles south of Kansas City,
Missouri.
The City is served by U.S. Interstate 540, U.S. Highways 62 and 71, and State Highways 16, 45, 112, 156,
180 and 265. The Burlington Northern Railroad has several lines running through the City, and a general aviation
airport with a 6,006-foot runway is available for limited commuter travel. The Northwest Arkansas Regional
Airport is located approximately 40 minutes from downtown Fayetteville and provides daily flights to numerous
venues.
Government. The City currently operates under the Mayor -Council form of government pursuant to which
a mayor, city attorney, city clerk and eight aldermen are elected, two from each of the City's four wards. The
mayor, city attorney and city clerk are full-time positions elected to four year terms. Aldermen also serve four year
terms.
•
•
•
Rl:
•
io
41
The City's elected officials and the dates on which their respective terms expire are as follows:
Name
Office
Term Expires
Dan Coody
Mayor
12/31/04
Kit Williams
City Attorney
12/31/06
Sondra Smith
City Clerk
12/31/04
Kyle Cook
Alderman
12/31/06
Bob Davis
Alderman
12/31/04
Lioneld Jordan
Alderman
12/31/04
Shirley Lucas
Alderman
12/31/06
Don Marr
Alderman
12/31/04
Robert Reynolds
Alderman
12/31/06
Robert Rhoades
Alderman
12/31/06
Brenda Thiel
Alderman
12/31/04
Population. The following is a table of population changes for the City, the MSA and the State of
Arkansas, according to the United States Census Bureau:
City of
State of
Year
Fayetteville
MSA
Arkansas
1960
20,274
92,069
11786,272
1970
307729
127,846
15923,322
1980
36,608
178,609
25286,435
1990
425099
21%908
21350,624
2000
582047
311,121
22673,400
Economic Data.
Per capita
personal income figures
for the MSA and
the State of Arkansas are as follows:
State of
Year
MSA
Arkansas
1992
$18,260
$167425
1993
18,765
16,995
1994
197590
17,750
1995
20,193
183546
1996
2%870
199442
1997
213586
2%228
1998
22,893
21,256
1999
24,213
223223
2000
23,316
21,995
2001
24,585
223750
2002
n/a
n/a
Source: Bureau of Economic Analysis.
Retail sales figures for the MSA and the State are as follows:
MSA
State of
MSA as % of
Year
Arkansas
State of Arkansas
1993
$19880,105,000
S16,997,721,000
11.06%
1994
23217,2291000
191090,516,000
11.61
1995
2148634257000
20,99829233000
11.84
1996
21692,5545000
22,053,022,000
12.21
1997
27845,9%000
22,87212363000
12.44
1998
3,018,8961000
23,944,6471000
12.61
1999'
n/a
n/a
n/a
2000
3,526,791,000
28,488,033,000
12.38
2001
3,8063422,000
2976522693,000
12.84
2002
39841,326,000
29,2693775,000
13.12
2003
3,968,812,000
29,920,716,000
1126
. Methodology changed to calendar year basis. No reliable information is available for 1999.
Source: Sales and Marketing Management Survey of Buyer Power.
The following table shows the total assessed value of non -utility real and personal property within the City
for the years indicated:
•
Year Real Property Personal Property Total
1994 $2453093,513 $ 8613221277 $331,415,790
1995 340,593,452 101,2743620 44128689072
1996 359,3691202 1137157,365 472,526,567
1997 3821798,143 120,064,627 5027862,770
1998 4011001,338 1271575,096 5283576,434
1999 413,6487415 1371404,499 551,0521914
2000 432,9511171 1459147,891 5785099,062
2001 486,8537822 15537947579 6421648,401
2002 5411004,690 158,6883783 6992693,473
2003tt1 5651846,525 167,638,657 733,4851182
to Not certified.
Source: Washington County Tax Assessor's Office. The assessed value represents 20% of the appraised value of
property.
Building permits issued by the Cityt'I are shown below for the years indicated:
1999 2000 2001 2002 2003t2t
Residential Building 451 361 339 328 735
Commercial Building 59 27 38 35 31
Permits
Value of All Building •
Permits $100,744,816 $121,887,263 $85,262,302 $100,809,486 $179,007,987
(l) Does not include building activity of the University of Arkansas, school permits and additionstalterations to existing structures.
(2) Increase largely due to the permitting of a number of multifamily developments as well wan acceleration of permit requests in advance of
the imposition of impact fees by the City.
Source: City of Fayetteville.
Unemployment figures for the MSA and the State of Arkansas, according to the U.S. Bureau of Labor
Statistics, are as follows:
Year
MSA
State of Arkansas
1994
2.4%
5.3%
1995
2.4
4.9
1996
2.9
5.4
1997
3.0
5.3
1998
3.2
5.5
1999
2.4
4.5
2000
2.1
4.4
2001
1.7
5.1
2002
2.4
5.4
2003
3.0
6.2
2004*
3.0
5.2
* January 2004 only; preliminary
Employment and Industry. The principal campus of the University of Arkansas is located in the City and
had total enrollment for the Spring semester of 2004 of approximately 15,527. For the 2003-04 fiscal year ending
June 30, 2004, the University has an operating budget in excess of $206 million, which does not include the
agricultural experimentation station or other associated operations. On the Fayetteville campus, the University
12
employs approximately 2,867 faculty, administrative, secretarial, clerical and maintenance personnel in both full-
time and part-time positions, making the University the largest employer in the City.
Other major employers in the City, their products or services and approximate number of employees are set
forth below:
Employer Product or Service Employee Range
Pinnacle Foods, International Frozen Dinners 11000-21499
Superior Industries Cast Aluminum Wheels 11000-21499
Washington Regional Medical Center Medical 1,000-2,499
Northwest Arkansas Mall Retail (all stores) 1,000-2,499
Tyson Foods Food Products 800-1,599
Fayetteville School District Education 500-999
City of Fayetteville Government 500-999
Arkansas Western Gas Co. Utilities 300499
Ayrshire Electronics Manufacturing 300499
McClinton Anchor Company Limestone and Hot Mix 300499
Veteran's Admin. Medical Center Medical 30OA99
Wal-Mart Supercenter Retail 300-499
Washington County Government Government 300-499
Source: Fayetteville Chamber of Commerce.
THE SYSTEM
Water Supply. The water supply for the City is provided by the Beaver Water District of Benton and
Washington Counties, Arkansas ,he "District"', which is the source of supply for an approximate population of
200,000 people in northwest Arkansas. The District was organized as a public water distribution district by order of
the Benton County Circuit Court on July 17, 1959 for the purpose of obtaining water storage rights in Beaver
Reservoir from the U.S. Corps of Engineers, and supplying treated water to municipalities within Benton and
Washington Counties. Through the joint efforts of the cities of Bentonville, Fayetteville, Rogers and Springdale,
Arkansas (the "Participating Cities"), the District entered into a contract with the U.S. Corps of Engineers providing
for the supply to the District of up to 120 million gallons of water per day ("mgd").
The Beaver Reservoir has a capacity of 1,952,000 acre feet. The District currently has a firm pumping
capacity of 27.6 mgd to the City. The District's facilities are located on a 300 acre site owned by the District
approximately 2 1/2 miles east of Lowell, Arkansas, near its intake structure on Beaver Reservoir. The District's
water treatment plant has a present nominal design capacity of 80 mgd with a current peak demand of 67.8 mgd.
The District's 1996 master plan indicated that an expansion of capacity will be undertaken when peak demand
exceeds 70 mgd. This expansion has begun and is presently intended to provide a nominal design capacity of 140
mgd upon completion.
Water Supply Contracts with Beaver Water District. In 1967, the District and the Participating Cities
entered into a Memorandum of Understanding and Contract for Construction, Maintenance, Operation and
Expansion of Beaver Water Supply Facilities (the "Memorandum of Understanding"). Pursuant to the
Memorandum of Understanding, the District agreed to construct, operate, maintain and expand a drinking water
treatment plant as required to meet the then present and future needs of the Participating Cities. The Participating
Cities agreed to build and maintain their ownwater supply lines from the point of the water discharge at the
District's drinking water treatment plant to their respective distribution systems. The Participating Cities are also
permitted to serve, through their distribution systems, other smaller cities and other approved water distribution
agencies within Benton and Washington counties.
The Memorandum of Understanding provides that the Participating Cities will make payments to the
District for drinking water used by each Participating City based on the total cost to the District of the water
delivered, including, but not limited to, amortization of the District's indebtedness, operation and maintenance of the
District's facilities and the cost of the expansion of the District's facilities.
The District issued water revenue bonds in 1990 and 1991 to finance a 40 mgd expansion to the then
existing water treatment facility. The 1990 and 1991 water bonds were defeased with 1994 water revenue bonds
13
dated as of June 1, 1994. This District also issued water revenue bonds in 2003 to finance the construction of two
raw water intakes with microtunneled piping connections to Beaver Lake, construction of a 60 inch raw water •
pipeline, improvements to and expansion of the Croxton I Water Treatment Plant, solids handling improvements for
the Croxton I Water Treatment Plant and the Steele Water Treatment Plant, improvements to the Steele Water
Treatment Plant, and property acquisition.
The Participating Cities' obligations to make payments under the Memorandum of Understanding are
evidenced, as to each Participating City, by water rate ordinances duly enacted in accordance with State law. While
each Participating City has agreed, in principle, to make payments to the District sufficient to pay its proportionate
share of the District's cost of providing water, the Participating Cities' sources of payment are limited to revenues
from their respective water systems pursuant to these water rate ordinances. The revenues derived from these water
rate ordinances are not pledged by the Participating Cities to the repayment of the District's bonds and are subject to
the debt requirements on any outstanding bonds of the Participating Cities secured by water revenues. Payments
made to the District by the Participating Cities are considered by the Participating Cities to be operating expenses.
The 1994 and 2003 water revenue bonds are currently the only outstanding bonded indebtedness of the
District. As of December 31, 2003, the 1994 water revenue bonds were outstanding in the principal amount of
$14,720,000, and had a scheduled final maturity in 2009. As of December 31, 2003, the 2003 water revenue bonds
were outstanding in the principal amount of $57,390,000, and had a scheduled final maturity in 2018.
The costs of the water storage rights are treated as a cost of water produced, and therefore the Participating
Cities pay based on water consumption. The City treats these costs as Operation and Maintenance Expenses of the
System and they are to be paid from Revenues deposited to the Operation and Maintenance Fund prior to the
payment of debt service on the Series 2002 Bonds or the Series 2004 Bonds.
The District's total water sales for the previous two fiscal years ended September 30 are represented in the
following table:
City 2002 2003
Fayetteville $4,9532866 $51040,203
5,056,008 57025,519
Springdale 21587,085
Rogers 23776,922
2 361,911
2.383.880
Bentonville $15,0143718
TOTALS: $15.170.676
Source: Audited Financial Statements of the District dated September 30, 2002 and 2003.
Each Participating City is billed monthly based on metered water consumption and effective rates at that
time for drinking water purchased. On the basis of the District's annual audit, a cost for providing service to the
Participating Cities is determined. Based on the District's annual operating costs, a charge or credit is [hen applied
to each City for under- or over -payment for the drinking water used in that year. Net refunds for overpayments by
the Participating Cities for the two fiscal years ended September 30, 2002 and 2003 were $2,291,053 and
$1,403,320, respectively. The City received a refund of $426,277 for the fiscal year ended September 30, 2003.
The rates charged by the District to the Participating Cities since 1967 for the cost of water delivered are as
follows:
Effective Date Rate Per Million Gal.
1967
$180.00
9-1-77
270.00
9-1-82
320.00
I1-1-85
370.00
12-1-86
410.00
Effective Date Rate Per Million Gal.
2-1-89 610.00
2-1-90 810.00
2-1-91 13010.00
11-1-03 1,160.00
Customers. At December 31, 2003, the City had approximately 30,658 active water customers and 26,427
active sewer customers. Water customers are billed solely on the basis of water usage and meter and line size. See
the caption "THE SYSTEM —Rate Structure" below. The following table classifies active sewer customers for the •
years indicated:
14
2003
2002
2001
2000
1999
Residential
221061
20,926
20,095
19,533
18,685
Commercial/Industrial
21387
2,377
21482
2,433
21347
Outside City Limits
1 979
1 931
1 857
1792
1695
Totals:
Z
��4
Source: City of Fayetteville
The System's 10 largest water customers, based upon water revenues
produced during 2003, are as follows:
Percentage of 2003
Customer
Total Revenues
Water Revenues
University of Arkansas
$545,996.62
5.10%
Campbell Soup (Pinnacle Foods)
349,956.21
3.27%
Superior Industries
301,466.49
2.82%
Tyson Foods, Inc.
248,115.69
2.32%
City of West Fork
2195462.90
2.05 /o
City of Fayetteville
149,501.65
1.40%
City of Elkins Water District
1133276.47
1.06%
Mt. Olive Water Association
955954.59
0.90%
Veterans Administration
66,613.35
0.62%
Washington Regional Medical Center
48,268.63
0.45%
Source: City of Fayetteville.
Historical Statistics. The following
table shows
historical water usage statistics for the water distribution
component of the System:
Average Daily
Use
Maximum Days' Use
Year
in Million
Gallons
in Million Gallons
1992
10.20
MG
17.84 MG
1993
10.70
MG
17.95 MG
1994
10.62
MG
18.94 MG
1995
12.45
MG
21.50 MG
1996
12.55
MG
21.50 MG
1997
12.33
MG
20.53 MG
1998
13.26
MG
23.80 MG
1999
13.30
MG
23.56 MG
2000
13.20
MG
23.77 MG
2001
13.16
MG
20.39 MG
2002
13.72
MG
23.63 MG
2003
13.39
MG
26.24 MG
Source: City of Fayetteville.
y
15
L------------
The following table shows historical sewer treatment statistics for the wastewater treatment component of
the System:
Average Daily Flow
Year in Million Gallons
1992 10.40 MG
1993 11.90 MG
1994 11.35 MG
1995 11.73 MG
1996 11.69 MG
1997 11.01 MG
1998 11.22 MG
1999 11.22 MG
2000 11.79 MG
2001 12.50 MG
2002 11.95 MG
2003 10.95 MG
Source: City of Fayetteville.
Present System. As described above under this caption in the subcaptions "- Water Supply" and "- Water
Supply Contracts With Beaver Water District," the City purchases treated water from the Beaver Water District. The
City distributes such treated water to its residents as well as to the residents of certain surrounding cities and
communities as described below. The City presently owns and operates a single wastewater treatment plant serving
residents of the City and surrounding areas.
The water distribution component of the System is made up of approximately 595 miles of water main,
2,350 fire hydrants and approximately 29 million gallons of storage capacity held in 14 water storage tanks. The
water distribution component of the System provides service to the City, to the Cities of Farmington and Greenland,
to parts of the City of Johnson, and to other rural areas surrounding the City. Wholesale service is provided to the
Cities of Elkins and West Fork, to the Mount Olive Rural Water System and to the Rural Development Authority of
Washington County, Arkansas.
The City currently has no written agreements with respect to the provision of its water services to, and the
operation of the water systems of, the Cities of Farmington, Greenland and Johnson. Continuing water sales and the
operation of these systems is based on terms and provisions of expired contracts and mutual understandings between
the City and each of the Cities of Farmington, Greenland and Johnson. The City has a current contract in place with
respect to wholesale service to the Mount Olive Rural Water System and is currently in the process of renegotiating
wholesale contracts with the City of West Fork and with the Rural Development Authority of Washington County,
Arkansas. There is no written agreement currently in force with respect to the sale of water to the City of Elkins,
and continuing sales are based on the terms and provisions of an expired contract and mutual understandings
between the City and the City of Elkins.
The sewage collection component of the System consists of approximately 480 miles of sewer main and
11,300 manholes. The type of pipe in the sewage collection system is principally vitrified clay pipe with varying
amounts of ABS composite pipe, plastic pipe and cast iron pipe. The age -of the sewage collection system varies
from new to 87 years. The City has implemented an ongoing sewer rehabilitation program with over $16 million
spent in related capital improvements during the last decade.
Sewer collection and treatment services are provided to residents of the City, to the Cities of Farmington
and Greenland, and to small parts of the City of Johnson. Some rural residents in the City's growth area also receive
sewer collection and treatment service. Wholesale service is provided to the City of Elkins.
Total revenues collected for water and sewer services to nonresidents of the City represented approximately
15% of total revenues of the System during 2003. Revenues collected for water services to nonresidents represented
approximately 21% of the total revenues of the System during 2003. The City of Farmington was the largest
nonresident water customer accounting for less than 3.5% of total revenues of the System during 2003. Revenues
collected for sewer services to nonresidents of the City represented approximately 7.9% of total revenues of the
System ton was
he
approximately during 2003.
totalhevenues of he City of e System during t2003 largest
added together, the water and sewerrng for
service
16
revenues derived from the City of Farmington accounted for approximately 4.3% of total revenues of the System
during 2003.
- - The City's existing wastewater treatment plant ("W WTP") went into operation in 1987 and is currently
permitted at 12.4 mdg. Treatment stages consist of the plant headworks (bar screens, vacutators and influent lift
station), primary sedimentation, aeration basins, secondary sedimentation basins, biological and chemical nutrient
removal, and U.V. disinfection. The sludge treatment plan employs dewatering of secondary sludge with ultimate
disposal of the residuals in a sanitary landfill. Average daily flow treated was 10.95 mgd in 2003. Peak flow in
2003 was approximately 23.4 mgd. The W WTP is operated on a contract basis by Operations Management
International, the 2003 operations having no permit violations. The existing W WTP was planned to meet the 2005
needs of the City.
A comprehensive study of the System was completed in February of 1997 and updated in 2002. This
comprehensive improvement program addressed sewer lines, pumping stations and treatment works, including the
construction of a new 10 mdg wastewater treatment facility west of the City. Final design of the project is underway
and the 300 acre west plant site has been acquired by the City. Project construction is scheduled to commence in the
third quarter of 2004, final completion being anticipated in the third quarter of 2006. The improvements are
predicted to meet 20-year needs by providing a net treatment works capacity of 21.2 mgd plus correct wet water
overflow problems.
Projected Capita/ Expenditures. The City anticipates the cost of contemplated expansions and capital
improvements to the System over the next five years, including the construction of the wastewater treatment plant,
to be as set forth in the following table. Said expansions and improvements are expected to be financed from a
combination of System revenues and the receipts from a dedicated 3/4% City sales and use tax (the "Sales Tax")
approved by the voters of the City at an election held November 6, 2001. Collection of the Sales Tax commenced
on April 1, 2002. Pursuant to the election, Sales Tax revenues are dedicated to the payment of debt service on
obligations to be issued to finance wastewater treatment and sewerage improvements. The precise breakdown of
funding sources for the new wastewater treatment plant has yet to be finalized; however, it is likely that the costs
thereof will be financed by a combination of sources, including, but not limited to, System revenues and proceeds
from debt issuances secured by System revenues and/or Sales Tax revenues.
2004'
2005
2006
2007
2008
Miscellaneous Water
System Improvements
$ 8,4885436
$ 6985000
$ 572,000
$ 5792000
$ 7123000
Miscellaneous Sewer
System Improvements
639465365
125007000
115005000
1,5002000
135002000
Wastewater Treatment
Plant Expansion
122,022,491
180,000
180,000
180,000
180,000
TOTALS:
$137
$2.378.000
22
2 5 0
2 0
From the City's 2004 annual
budget.
Source: Water and Wastewater Director, City of Fayetteville, Arkansas.
Rate Structure. Effective January 11, 2004, the following tables set forth the City's current water rate
structure:
WATER RATES
Monthly Treated Water Rates
Usage Rate (in gallons) Inside City
First 10,000 $2.81
Next 290,000 2.42
Next 4,700,000 1.76
Over 5,000,000 1.60
17
Outside Citv
$3.52
3.03
2.20
1.98
Monthly
Meter Service Charge
Meter Size (inches)
Inside City
Outside City
518
$ 3.88
$ 4.92 •
3/4
4.14
5.26
1
5.39
6.84
Iyx
9.40
11.94
2
13.69
17.39
3
31.90
40.51
4
52.80
67.05
6
105.60
134.11
8
158.40
201.16
Monthly Standby Fire Protection Service Charge
Line Size (inches) Inside/Outside City
2 $ 6.60
3 19.80
4 39.60
6 110.00
8 231.00
10 396.00
Monthly Wholesale Treated Water Rates (Outside City Limits)
Usage Rate Per 1,000 Gallons $ 2.01
Reduced Demand 1.81
Meter Charge 55.55
Effective February 9, 2004, the following tables set forth the City's current sewer rate structure:
SEWER RATES •
Monthly Quantity Charge
User Type Usage Rate Per 1 000 Gallons
Effective 2-9-04 Effective 12-31-04 Effective 12-31-05
Residential
$2.61
$2.84
$3.10
Commercial/Industrial
2.04
2.22
2.42
Outside City Limits
6.03
6.57
7.16
622
City of Elkins
524
5.71
Monthly
Service Charge
Meter Size (inches)
Effective 2-9-04
Inside City
Effective 12-31-04
Effective 12-31-05
5/8
$ 8.72
$ 9.50
$ 10.36
x/4
10.08
10.99
11.98
1
11.34
12.36
13.47
1'/x
15.85
17.27
21.99
2
21.10
23.00
31.44
3
46.31
50.77
73.01
4
77.51
84.49
120.26
6
149.26
163.64
238.37
P.
23226
253.16
356.48
•
IE
Monthly
Service Charge
Meter Size (inches)
Outside City
Effective 2-9-04
Effective 12-31-04
Effective 12-31-05
5/8
$ 8.72
$ 9.50
$ 10.35
%
11.87
12.94
14.10
1
16.28
17.75
19.35
1 V2
28.90
31.50
34.33
2
41.51
45.25
49.32
3
97.02
105.75
115.27
4
160.09
174.50
190.21
6
317.78
346.38
377.56
9
475.47
518.26
564.90
Extra Strength Surcharge
For all commercial and industrial customers whose wastewater discharge is greater than 300 mg/I of BODS
and/or TSS, an extra strength surcharge is levied as follows:
Effective 2-9-04
Effective 12-31-04
Effective 12-31-05
Extra Strength BOD5
$0.2246/lb
$0.2449/lb
$0.2669/lb
Extra Strength TSS
$0.1123/lb
SO.1224/lb
$0.1334/lb
Rate Comparison. The following is a comparison of the monthly water and sewer charges for the City of
Fayetteville with the charges of other area municipalities, based upon combined water and sewer charges for the
average residential unit with 6,000 gallons of water consumption per month:
City Cost Per Month
Fayetteville $45.12
Bentonville 51.70
Fort Smith 37.76
Rogers 40.78
Springdale 36.02
Source: City water and sewer departments as of March 1, 2004.
Billing Procedures, Delinquency and Uncollectible Accounts. The City Code of Ordinances provides that
bills for water and sewer services are rendered in the net amount due. Water bills are due and payable on or before
the twentieth day following the billing date stated on the water bill. Currently, water bills not paid on or before the
due date are considered delinquent and an additional charge of 10% of the total current bill is assessed against the
account.
In the event that bills due the City for water service are not paid on or before the twentieth day following
the billing date stated on the water bill, notice by mail is sent to each customer concerned advising him that such bill
is due and payable immediately. Should any delinquent bill remain unpaid, the appropriate ordinance provides that
service will be discontinued on the twenty-eighth day following the billing date stated on the water bill, and the
customer's deposit will be forfeited in an amount sufficient to cover the gross amount of his due bill. The forfeiture
of the deposit will take place if the customer has not paid the delinquent bill plus all applicable service charges
within seven days after disconnection. If the forfeited deposit is not sufficient to cover the delinquent bill plus all
applicable service charges and the bill is delinquent by more than 90 days, the matter is turned over to a collection
agency. Over the last five years, the City's bad debt expense experience has been as follows:
19
Fiscal Year Ending
December 31
1999
2000
2001
2002
2003t'I
Unaudited.
Water and Sewer
Operating Revenues
$19,356,739
19,462,422
1%397,672
19,946,464
20,364,602
Bad Debt
Bad Debt Expense
Percentage
$ 68,275
.35%
61,391
.31
121,921
.63
61,615
31
87,800
.43
Financial Information. Set forth in Appendix A to this Official Statement are the audited general purpose
financial statements of the City for the year ended December 31, 2002, which financial statements have been audited
by BKD, LLP, independent certified public accountants, as stated in their report also appearing in Appendix A. The
notes set forth in Appendix A are an integral part of such financial statements, and the statements and notes should
be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of
the City's Water and Sewer Fund for the year ended December 31, 2003.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
•
•
r1
L_I
20
Following is a summary of revenues, expenses and changes in fund equity of the City's Water and Sewer
Fund for the five years ended December 31, 2003. Information for the summary for the years ended December 31,
1999, 2000 and 2001 was derived from the financial statements of the City audited by Arthur Andersen LLP,
independent certified public accountants. Information for the summary for the year ended December 31, 2002 was
derived from the financial statements of the City audited by BKD, LLP, independent certified public accountants.
The audits were performed for the purpose of rendering an opinion on the general purpose financial statements of
the City taken as a whole, and not for the purpose of rendering an opinion on the fair presentation of the City's
Water and Sewer Fund. The following table should be read in conjunction with the audited financial statements and
related notes in Appendix A. Information for the summary for the year ended December 31, 2003 was derived from
the unaudited financial statements of the City's Water and Sewer Fund attached as Appendix B.
City of Fayetteville, Arkansas Water and Sewer Fund
Statement of Revenues, Expenses and Changes in Fund Equity
For the Years Ended December 31,
t999 2000 2001 2002 2003u)
Operating revenues:
Water services $ 10,117,253 $ 10,874,563 $ 10,755,892 $ 11,016,685 $ 10,7002460
Sewer services 8,639,486 8,587,859 8,641,780 81929,779 9,052,355
Other - - - - 611 787
Total operating revenues 19356,739 l9 462 422 19,397,672 19,946,464 20.364.602 -
Operating expenses:
Operations and administration 2,430,483 2,410,107 2,544,236 2,485,972 2,866,394
Water supply 3,528,175 3,748,951 3,816,720 4,319,415 4,616,576
Water transmission and distribution 1,180,593 1,057,616 1,037,574 1,190,411 1,253,010
Sewer collection 1,131,662 1,137,836 1,042,260 1,185,122 1,255,818
Wastewater treatment 3,970,703 '3,919,332 4,138,194 4,234,671 41866,555
Customer service 1513 294 1.414.992 L552 456 1,662 805 2,084,711
Total operating expenses
before depreciation 13,754 910 13 688,834 14 13 L440 M078.396 16 943,064
Operating income before depreciation 5,601,829 5,773,588 5,266,232 4,868,068 3,421,538
Depreciation 3432.070 3568,916 3798,815 3,881,891 4.004383
Operating income (loss) 2,169,759 2.204.672 1,467 417 996,177 _ (583,445)
Nonoperating income (expense)
Intergovernmental 550,000 915,000 239,112 268,700 -
interest expenses and fees (670,521) (651,383) (900,628) (592,878) (421,563)
Interest income 729,392 791,237 1,093,183 858,731 962,583
Net increase in fair value of
investments (decrease) (23, 579) 82,003 6,033 218,637 (248,614)
Other 197,442 111,836 216 377 234,239 227,568
Total nonoperating income (expense) 782,734 1,248,693 654,077 987,429 512,974
Income before operating transfers 2,952,493 3,453,365 2,121,494 1,973,606 (63,471)
Capital Contributions - - 3,455,445 3,195,752 3,495,312
Operating transfers in - - - - 1,149,040
Operating transfers out - - - - (244,411)
Net income (loss) 2,952,493 3,453,365 5,576,939 5,169,358
Add back depreciation on assets acquired
with contributed capital 2.163.774 2,596,745 2,267,592 2.298.632
Increase in retained earnings 5,116,267 6.050.110 7,844.531 7,467,990
Retained earnings, beginning of year 52,714,552 57,721,928 63,772,038 71,616,570
Cumulative effect of change in
accounting principle (108891) - - -
Retained earnings, beginning of year, as
Restated 52.605 661 57,721,929 63,772,039 71,616,570
Retained earnings, end of year 57 721,928 63772.038 71 616 569 79 094,560
Contributed capital, beginning of year 45,180,987 46,356,387 47,294,676 46,931,575
Capital contributions 3,474,102 3,535,034 1,904,491 538,746
Cumulative effect of change in
accounting principle (134,928) - - -
Depreciation on assets acquired with
contributed capital (2 163.774) (2 596 745) (2,267,592 (2.298.632)
Contributed capital, end of year 46,356,387 47.294.676 46 931 575 45,191.689
Total fund equity, end of year $104 078 3 1 S124aZ6.242
Change in net assets 4,336,470
Total net assets, beginning of year 124,276,249
Total net assets, end of year $128 612] 19
t Unaudited. Changes in financial statement presentation are a result of the application of the requirements of GASB 34.
21
DEFINITIONS OF CERTAIN TERMS
The following are definitions of certain terms used in this Official Statement:
"Act" — Arkansas Code Annotated (1998 Repl. and Supp. 2003) §§ 14-164-401 et seq., §§ 14-234-201 et
seq. and §§ 14-235-201 et seq., as from time to time amended.
"Additional Bonds" — Bonds in addition to the Series 2002 Bonds and the Series 2004 Bonds which are
issued under the provisions of the Indenture.
"Ambac Assurance" — Ambac Assurance Corporation, a Wisconsin -domiciled stock insurance company,
the issuer of the Financial Guaranty Insurance Policy.
"Annual Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations,
as the case may be, the Debt Service for any particular Fiscal Year required pursuant to the provisions of the
Indenture to be paid or set aside during such Fiscal Year, less the amount of such payment which is provided from
the proceeds of the sale of Bonds or Subordinate Obligations or from sources other than Net Revenues.
"Authorizing Ordinance" — Ordinance No. 4554 of the City, adopted and approved on April 6, 2004,
authorizing the issuance of the Series 2004 Bonds pursuant to the Indenture.
"Bond Counsel" — Any firm of nationally recognized municipal bond counsel selected by the City and
acceptable to the Trustee.
"Bond Fund" — The fund by that name created and established in the Indenture.
"Bonds" — The Series 2002 Bonds, the Series 2004 Bonds and all Additional Bonds issued by the City
pursuant to the Indenture.
"City" — The City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the
State of Arkansas.
"Code" — The Internal Revenue Code of 1986, as from time to time amended, and applicable regulations
issued or proposed thereunder.
"Cost of Issuance Fund" — The fund by that name created and established in the Indenture.
"Debt Service" — With respect to all or.any particular amount of Bonds or Subordinate Obligations, as the
case may be, the total as of any particular date of computation and for any particular period of the scheduled amount
of interest and amortization of principal payable on such Bonds or Subordinate Obligations, excluding amounts
scheduled during such period which relate to principal which has been retired before the beginning of such period.
"Debt Service Reserve Fund" — The fund by that name created and established in the Indenture.
"Depository" — A national or state banking corporation or association (which may also include the Trustee
and any Paying Agent) which holds membership in the Federal Deposit Insurance Corporation.
"Escrow Agreement" — The Escrow Deposit Agreement dated May 20, 2004, between the City and the
Escrow Trustee, providing for the redemption of the Series 1999 Bonds.
"Escrow Trustee" — The Bank of Oklahoma, N.A., in its capacity as escrow trustee under the Escrow
Agreement.
"Event of Default" — Any event of default specified in the Indenture. See the caption "SUMMARY OF
THE INDENTURE — Events of Default" herein.
"Financial Guaranty Insurance Policy" — The financial guaranty insurance policy issued by Ambac
Assurance insuring the payment when due of the principal of and interest on the Series 2004 Bonds as provided
therein.
"Fiscal Year" — The 12-month period used, at any time, by the City for accounting purposes with respect to
the System, which may be the calendar year. Currently, the fiscal year of the City ends on December 31 of each
year.
"Government Securities" — (i) bonds, notes, certificates of indebtedness, treasury bills or other securities
constituting direct obligations of, or obligations on which the full and timely payment of principal and interest is
or hel
fully and unconditionally guaranteed by, the United States of America (including any such securi[and'su ev deuces
in book -entry form on the books of the Department of Treasury of the United States of America), ( )
22
of direct ownership or proportionate or individual interest in future interest or principal payments on specified direct
obligations of, or obligations on which the full and timely payment of principal and interest is fully and
unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company
organized and existing under the laws of the United States of America or any state thereof in the capacity of
custodian in form and substance satisfactory to the Trustee.
"Holder" or "bondholder" or "owner of the Bonds" — The registered owner of any Bond.
"Indenture" — The Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First
Supplemental Trust Indenture dated as of May 1, 2004, each by and between the City and the Trustee, pursuant to
which the Bonds are issued, and any further amendments and supplements thereto.
"Investment Securities" — If and to the extent the same are at the time legal for investment of funds held
under the Indenture:
(1) Government Securities;
(2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed
by the full faith and credit of the United States of America:
— Senior debt obligations issued by the Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC).
— Obligations of the Resolution Funding Corporation (REFCORP).
— Senior debt obligations of the Federal Home Loan Bank System.
— Senior debt obligations of other Government Sponsored Agencies approved by
Ambac Assurance;
(3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic
commercial banks which have a rating on their short tens certificates of deposit on the date of
purchase of "PA" by Moody's and "A -I" or "A-1+" by S&P and maturing no more than 360
calendar days after the date of purchase. (Ratings on holding companies are not considered as the
rating of the bank.);
(4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P;
(5) Pre -refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of
the United States of America or of any agency, instrumentality or local governmental unit of any such
state which are not callable at the option of the obligor prior to maturity or as to which irrevocable
instructions have been given by the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the
highest rating category of Moody's or S&P or any successors thereto; or
(B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an
escrow consisting only of cash or obligations described in paragraph (2) above, which
escrow may be applied only to the payment of such principal of and interest and redemption
premium, if any, on such Obligations or other obligations on the maturity date or dates
thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as
appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized
independent certified public accountant, to pay principal of and interest and redemption
premium, if any, on the bonds or other obligations described in this paragraph on the
maturity date or dates specified in the irrevocable instructions referred to above, as
appropriate;
(6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of at least
"AVA" or higher by both Moody's and S&P.
(7) Investment agreements approved in writing by Ambac Assurance (supported by appropriate opinions
of counsel); and
23
(g) Other forms of investments (including repurchase agreements) approved in writing by Ambac
Assurance. •
i
"Moody's" — Moody's Investors Service and any successor thereto.
"Net Revenues" — Revenues less Operation and Maintenance Expenses.
"Operation and Maintenance Expenses" — For any period, all ordinary and necessary expenses of operation,
repair, maintenance and insuring of the System under generally accepted
or transfers counting foprinciples,
the c (a) the Bond
pt that there
shall not be included (i) any.allowance for depreciation, (ii) anydeposits
Fund or to any fund or account created for the payment of debt service on any Subordinate Obligations, (b) the Debt
fund or account created
oection with any Suordinate
Service Reserve Fund or any debt service reserve ents withcrersnecI to obl gations not payable
Obligations, or (c) the Renewal and Replacement Fund, or (iii) any paym P
in whole or in part under any circumstances from Revenues. Operating Expenses shall specifically include
obligations of the City to the Beaver Water District of Benton and Washington Counties, Arkansas.
"Operation and Maintenance Fund" — The fund by that name described in the Indenture.
"Outstanding" — When used with reference to the Bonds, as of any particular date, the aggregate of all
Bonds authenticated and delivered under the Indenture except:
(a) Bonds cancelled at or prior to such date or delivered to or acquired by the Trustee at or
prior to such date for cancellation;
(b) Bonds deemed to be paid in accordance with Article V III of the Indenture; and
(c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been
authenticated and delivered pursuant to the Indenture.
Notwithstanding the provisions of (a), (b) and (c), Series 2004 Bonds, the principal of and/or interest on which has
been paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy, shall be deemed to remain
Outstanding for all purposes.
"Paying Agent" — Any bank or trust company named by the City as the place at which the principal of and
premium, if any, and interest on the Bonds are payable.
"Permitted Encumbrances" — (i) Any mortgage lien for the security of the Bonds; (ii) liens for taxes,
assessments and other governmental charges not then delinquent
r which can be paid warehousemen's, and penalty;a(iii) unstand
inchoate mechanics' and materialmen's liens; (iv) P
ry course business; and (v) any easements, restrictions, mineral,
others similar liens, if any, arising in the ordina
oil, gas and mining rights and reservations, zoning laws andd defects in title or other encumbrances to which System
facilities may be subject because of their acquisition, construction and installation as part of the System.
"Person" — Any natural person, firm, association, corporation, limited liability company, partnership, joint
stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political
subdivision thereof or other public body.
"Qualified Accountant" — An independent certified public accountant or firm of independent certified
public accountants not in the regular employ of the City.
"Rebate Fund" — The fund by that name created and established in the Indenture.
"Record Date" — With respect to any interest payment date of the Bonds, the first day of the calendar month
in which such interest payment date falls.
"Renewal and Replacement Fund — The fund by that name confirmed and described the Indenture.
"Reserve Requirement" — At any particular time, an amount equal to 50% of the aggregate maximum
Annual Debt Service in any Fiscal Year thereafter with respect to Outstanding Bonds of all series.
"Revenues" — 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. Revenues
but shall not be limited to, revenues from water sales, sewer service charges, fire
shall specifically include, •
protection charges and interest income on Revenue Fund balances. Notwithstanding the foregoing, Revenues shall
not include acreage, connection, front -footage, tap -on, assessment and similar fees, charges, contributions or grants
24
derived by the City in connection with the provision of or payment for capital improvements constituting a part of
the System.
"Revenue Fund" —The fund by that name confirmed and described in the Indenture.
"S&P" — Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and any
successor thereto.
"Series 1999 Bonds" — City of Fayetteville, Arkansas Water and Sewer'System Refunding Revenue
Bonds, Series 1999, issued in the original aggregate principal amount of $8,365,000.
"Series 2002 Bonds" — Collectively, the Series 2002A Bonds and the Series 2002B Bonds.
"Series 2002A Bonds" — One of the initial series of Bonds issued under and secured by the Indenture in the
aggregate principal amount of $2,7301000.
"Series 2002B Bonds" — One of the initial series of Bonds issued under and secured by the Indenture in the
aggregate principal amount of $6,540,000.
"Series 2004 Bonds" — An additional series of Bonds being issued under and secured by the Indenture in
the aggregate principal amount of $6,090,000.
"Subordinate Obligations" — Debt obligations of the City secured by a pledge of Net Revenues that is
subordinate to the lien thereon securing the payment of the Bonds, as permitted by the provisions of the Indenture.
"System" — The City's combined water and sewer utility system.
"Trustee" — The banking corporation or
association designated as Trustee
in the
Indenture, and its
successor or successors as such Trustee. The original
Trustee is Bank of Oklahoma, N.A.,
Tulsa,
Oklahoma.
"Trust Estate" — The property described in the granting clauses of the Indenture.
SUMMARY OF THE INDENTURE
The following statements are brief summaries of certain provisions of the Indenture. The statements do not
purport to be complete, and reference is made to the Indenture, copies of which are available for examination at the
offices of the City Clerk of the City, for a full statement thereof.
Funds and Disposition of Revenues. Net Revenues are pledged by the Indenture to the payment of the
principal of and premium, if any, and interest on the Bonds, subject to various provisions permitting application for
other purposes. The following funds are referenced with respect to the Bonds:
Fund Held By
Revenue Fund City
Operation and Maintenance Fund City
Bond Fund Trustee
Debt Service Reserve Fund Trustee
Renewal and Replacement Fund City
Cost of Issuance Fund Trustee
Rebate Fund Trustee
Application of Revenues. The application of Revenues is as follows:
(a) Revenue Fund. All Revenues shall, as and when received, be deposited into the Revenue Fund.
All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and Maintenance
Expenses of the System, the payment of Annual Debt Service on the Bonds and any Subordinate Obligations, the
maintenance of the Debt Service Reserve and the debt service reserves for any Subordinate Obligations, and the
providing of the Renewal and Replacement Fund in the order, at the times and in the amounts set forth as follows:
(b) Operation and Maintenance Fund. Prior to making the required payments into the Bond Fund and
Debt Service Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate Obligations, and
into the Renewal and Replacement Fund, there shall be paid from the Revenue Fund into the Operation and
25
Maintenance Fund, not later than the fifth business day preceding the fifteenth day in each month while any of the
Bonds shall be Outstanding, an amount sufficient to cause amounts on deposit therein to equal projected Operation
and Maintenance Expenses for the next two succeeding months (as shown in the budget of proposed Operation and (•
Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall be made only for those
purposes. Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses
may be computed and set up on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and
Maintenance Fund each month.
If in any month for any reason there shall be a failure to transfer and pay the required amount into the
Operation and Maintenance Fund, the amount of any deficiency shall be added to the amount otherwise required to
be transferred and paid into the Operation and Maintenance Fund in the next succeeding month.
(c) Bond Fund. Immediately following the making of required deposits into the Operation and
Maintenance Fund, there shall be paid from the Revenue Fund into the Bond Fund, on the fifth business day
preceding the fifteenth day of each month until all Outstanding Bonds with interest thereon have been paid in full, or
provision made for such payment, a sum equal to (i) 1/6 of the installment of interest coming due on the Bonds
(whether at maturity, upon mandatory redemption, or otherwise) during the then next six (6) months, and (ii) 1/12 of
the installment of principal coming due on the Bonds (whether at maturity, upon mandatory redemption, or
otherwise) during the then next twelve (12) months (provided, however, that the first payments required under the
Indenture with respect to a series of Bonds shall be prorated from the date of issuance of such series of Bonds and
subsequent payment obligations shall be reduced to the extent of investment earnings and other moneys credited to
the Bond Fund from sources other than monthly payments). All moneys in the Bond Fund shall be used solely for
the purpose of paying Annual Debt Service on the Bonds or for any redemption of the Bonds, except as specifically
provided in the Indenture. The Trustee shall withdraw from the Bond Fund, on the date of any principal or interest
payment, an amount equal to the amount of such payment for the sole purpose of paying the same.
If Revenues are insufficient to make the required payment into the Bond Fund, the amount of any such
deficiency in the payment made shall be added to the amount otherwise required to be paid into the Bond Fund not
later than the fifth business day preceding the fifteenth day of the next succeeding month.
When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall be and remain sufficient •
to pay in full the principal of and premium, if any, and interest on all Bonds then Outstanding, there shall be no
obligation to make further payments into the Bond Fund.
(d) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service
Reserve" herein.
(e) Renewal and Replacement Fund. After making the required deposits into the Operation and
Maintenance Fund, into the Bond Fund and Debt Service Reserve Fund, and into the bond funds and debt service
reserve funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund into the
Renewal and Replacement Fund not later than the fifth business day preceding the fifteenth day of each month white
any of the Bonds are Outstanding, an amount sufficient to cause the amount on deposit therein to equal $300,000 or
such greater amount as the City may determine from time to time is appropriate, provided that the amount to be
deposited in any month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in
the Renewal and Replacement Fund shall be used solely for the purpose of paying the cost of necessary repairs or
replacements 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.
(f) Surplus. Any surplus in the Revenue Fund after making all disbursements and providing for all
funds described above may be used, at the option of the City for any lawful purpose.
Investment of Funds. At the direction of the City or absent such direction, the Trustee shall invest moneys
in funds or accounts held by the Trustee in Investment Securities with maturity or redemption dates consistent with
the times at which said moneys will be required for the purposes provided in this Indenture; provided, however, the
stated maturity dates of Investment Securities of Debt Service Reserve Fund moneys shall not exceed five years
from the date of investment therein. Moneys in separate funds or accounts
may be commingled
Fund and Renewal
for the purpose of
investment. The City may invest moneys held in the Revenue Fund, Operation
and Replacement Fund in any investment obligations permitted by Arkansas law.
Obligations purchased as an investment of moneys in any fund or account created by the Indenture shall be
deemed at all times to be a part of such fund or account, and any income or toss due to an investment thereof shall
be charged to the respective fund or account for which the investment was made except as otherwise provided in the
Indenture.
Wd
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 Securities credited to such fund or account at the price at which such Investment Securities 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 Securities minus the amortization of any premium or plus the amortization of any
discount thereon and (ii) the market value of such Investment Securities, provided that Investment Securities
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.
Valuation of Funds and Accounts. In determining the value of any fund or account held by the Trustee
under the Indenture, the Trustee shall credit Investment Securities at the fair market value thereof, as determined by
the Trustee based on accepted industry standards and from accepted industry providers. No less frequently than
annually, and in any event within thirty (30) days prior to the end of each Fiscal Year, the Trustee shall determine
the value of each fund and account held under the Indenture and shall report such determination to the City.
The Trustee shall sell or present for redemption any Investment Securities as necessary in order to provide
money for the purpose of making any payment required under the Indenture, and the Trustee shall not be liable for
any loss resulting from any such sale.
Responsibility of Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection
with any investment of moneys made by it at the direction of the City.
Operation and Maintenance of System; Disposition of System Assets. The City covenants that it will
continuously operate the System in a diligent fashion in accordance with prudent utility practice and as a
revenue -producing undertaking in compliance with all applicable laws and regulations and all the covenants and
obligations under the Indenture.
The City further covenants that it will maintain the System in sound condition and repair, that it will not
sell or otherwise dispose of any property necessary to the proper operation of the System or to the maintenance of
Revenues, and that it will not enter into any lease or agreement which will impair or impede the operation of the
System or adversely affect the rights of the bondholders.
Insurance. 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 of Arkansas to assume the risk thereof, all properties of the System, other than water storage tanks, mains
and lines for the transmission, distribution or collection of water or wastewater, against loss or damage from fire,
lightning, tornado, winds, strike, malicious datnage or 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 Bond 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 Section 506 of the Indenture.
Damage or Destruction; Condemnation. The City covenants and agrees that in the event of damage to or
destruction of the System, or if all or any part of the System shall be taken under the exercise of eminent domain, it
will immediately notify the Trustee.
All insurance money paid or net amounts awarded shall be paid to the City, and the City shall proceed to
restore, repair, replace or rebuild System facilities as nearly as possible to the condition they were in immediately
prior to such damage or condemnation, to the extent that the same may be feasible, subject to such alterations as the
City may elect to make. If the insurance money or net amounts awarded shall be insufficient to pay all costs of the
restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the restoration and pay the
cost thereof. Any balance of the insurance or condemnation proceeds remaining over and above the cost of the
restoration shall be deposited into the Revenue Fund.
The City's obligations to make all payments set forth in the Indenture and to perform all other covenants
and agreements on its part to be performed shall not be affected by any such damage or destruction or
condemnation.
Notwithstanding the foregoing provisions, the City shall not be required to repair, restore, replace or
rebuild System facilities, or any part thereof, if the City shall elect to redeem prior to maturity on the next possible
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redemption date all of the Bonds then Outstanding, together with accrued interest to the redemption date, and to pay
all charges, fees and expenses necessarily incurred and required to be incurred in connection with such redemption, •
and all other amounts then owing by the City. In that event, the proceeds of all insurance or condemnation awards
shall be placed in and become part of the Bond Fund. If there be any deficiency in the moneys on deposit in the
Bond Fund after the deposit of all such proceeds, the City shall immediately deposit therein the amount of the
deficiency.
Accounting; Reports. The City covenants that it will keep the funds and accounts of the System separate
from all other funds and accounts of the City, and that it will keep accurate records of all items of cost and of all
expenditures relating to the System, and of the collection and application of Revenues, in accordance with generally
accepted accounting principles. Such records and accounts shall be open to inspection by the Trustee under
reasonable circumstances.
The City further covenants that at the end of each Fiscal Year it will cause an audit to be made of the books
and accounts for that Fiscal Year pertaining to the System by a Qualified Accountant. Copies of each such audit
shall be filed with the Trustee and furnished to the holders of outstanding Bonds making written request therefor.
Annual Budget. The City shall prepare an annual budget for System operations for each Fiscal Year. A
copy of each budget shall be filed with the Trustee and a copy shall be maintained in the office of the Finance and
Internal Services Director of the City.
Defeasance. Any Bond shall be deemed to be paid within the meaning of the Indenture when payment of
the principal of and premium, if any, and interest on such Bond (whether at maturity or upon redemption as provided
in the Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms
thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust and irrevocably set
aside exclusively for such payment, (1) moneys sufficient to make such payment or (2) Government Securities
(provided that such deposit will not affect the tax-exempt status of the interest on any of the Bonds or cause any of
the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a) of the Code, as reflected in an
opinion of Bond Counsel delivered to the Trustee), maturing as to principal and interest in such amounts and at such
times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and
expenses of the Trustee and any Paying Agent pertaining to the Bonds with respect to which such deposit is made
shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any said Paying
Agent.
Events of Default. Each of the following events shall constitute and is referred to in the Indenture as an
"Event of Default":
(a) Default in the due and punctual payment of any interest on any Bond;
(b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond,
whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon the maturity thereof by
declaration;
(c) Default in the payment of any, other amount required to be paid under the Indenture or the
performance or observance of any other of the covenants, agreements or conditions contained in the Indenture, or in
the Bonds issued under the Indenture, and continuance thereof for a period of sixty (60) days after written notice
specifying such failure and requesting that it be remedied, shall have been given to the City by the Trustee, which
may give such notice in its discretion and shall give such notice at the written request of holders of not less than
fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding, unless the Trustee, or the
Trustee and holders of an aggregate principal amount of Bonds not less than the aggregate principal amount of
Bonds the holders of which requested such notice, as the case may be, shall agree in writing to an extension of such
period prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the
applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective
action is instituted by the City within such period and is being diligently pursued; and
(d) The filing of a petition in bankruptcy by or against the City under the United States Bankruptcy
Code or the commencement of a proceeding by or against the City under any other law concerning insolvency,
reorganization or bankruptcy.
The term "default" as used in clauses (a), (b) and (c) above shall mean default by the City in the
performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture,
or in the Bonds Outstanding thereunder, exclusive of any period of grace required to constitute a default an "Event
of Default" as described above.
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Acceleration. Upon the occurrence of an Event of Default, the Trustee may, and upon the written request
of the holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall, by notice in writing
delivered to the City, declare the principal of all Bonds then Outstanding, together with any premium and the
interest accrued thereon, immediately due and payable, and such principal and interest shall thereupon become and
be immediately due and payable.
Other Remedies; Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may, as
an alternative, pursue any available remedy by suit at law or in equity, including, without limitation, mandamus to
enforce the payment of the principal of and premium, if any, and interest on the Bonds then Outstanding.
If an Event of Default shall have occurred, and if it shall have been requested so to do by the holders of
51% in aggregate principal amount of Bonds Outstanding and if it shall have been indemnified as provided in the
Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by
the Indenture as the Trustee, being advised by counsel, shall deem most expedient in the interests of the
bondholders.
No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the bondholders)
is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default or Event of Default shall
impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or
acquiescence therein; and every such right and power may be exercised from time to time and as often as may be
deemed expedient.
No waiver of any default or Event of Default under the Indenture, whether by the Trustee or by the
bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or
remedies consequent thereon.
Rights and Remedies of Bondholders. No holder of any Bond shall have any right to institute any suit,
action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof
or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the
Trustee has been notified as provided in the Indenture, or of which by the Indenture it is deemed to have notice, nor
unless such default shall have become an Event of Default and the holders of not less than 51% in aggregate
principal amount of Bonds Outstanding shall have made written request to the Trustee and shall have offered it
reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit, or
proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture
nor unless the Trustee shall thereafter fail or refuse to exercise the powers granted, or to institute such action, suit, or
proceeding in its own name; and such notification, request and offer of indemnity are declared in every such case at
the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to
any action or cause of action for the enforcement of the Indenture or for the appointment of a receiver or for any
other remedy thereunder; it being understood and intended that no one or more holders of the Bonds shall have any
right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by action of the holder or
holders or to enforce any right under the Indenture except in the manner therein provided, and that all proceedings at
law or in equity shall be instituted, held and maintained in the manner therein provided for the equal benefit of the
holders of all Bonds Outstanding thereunder. Nothing in the Indenture contained shall, however, affect or impair the
right of any bondholders to enforce the payment of the principal of and premium, if any, and interest on any Bonds
at and after the maturity thereof, or the obligation of the City to pay the principal of and premium, if any, and
interest on each of the Bonds issued under the Indenture to the respective holders thereof at the time and place in
said Bonds expressed.
Supplemental Indentures Not Requiring Consent of Bondholders. The City and the Trustee may, from time
to time and at any time, without the consent of or notice to the bondholders, enter into supplemental indentures as
follows:
(a) to cure any formal defect, omission, inconsistency or ambiguity in the Indenture;
(b) to grant to or confer or impose upon the Trustee for the benefit of the bondholders any additional
rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or
imposed and which are not contrary to or inconsistent with the Indenture as theretofore in effect, provided that no
such additional liabilities or duties shall be imposed upon the Trustee without its consent;
c
(c) to add to the covenants and agreements of, and limitations and restrictions upon, the City in the
Indenture other covenants, agreements, limitations and restrictions to be observed by the City which are not contrary
to or inconsistent with the Indenture as theretofore in effect; �•
(d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge
created or to be created by, the Indenture, of the Trust Estate or of any other moneys, securities or funds;
(e) to comply with the requirements of the Trust Indenture Act of 1939, as from time to time
amended;
(I) to authorize the issuance and sale of one or more series of Additional Bonds;
(g) to make such additions, deletions or modifications as may be necessary to assure compliance with
Section 148(f) of the Code relating to required rebate to the United States or otherwise as may be necessary to assure
exemption from federal income taxation of interest on the Bonds; or
(h) to modify, alter, amend or supplement the Indenture in any other respect which is not mat rially
adverse to the bondholders and which does not involve a change described in clause (a), (b), (c), (d), O (�elow
and which, in the judgment of the Trustee, is not to the prejudice of the Trustee.
Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained
in this paragraph, and not otherwise, the holders of not less than 2/3 in aggregate principal amount of the Bonds then
Outstanding shall have the right, from time to time, 'anything contained in the Indenture to the contrary
notwithstanding, to consent to and approve the execution by the City and the Trustee of such indenture or indentures
supplemental to the Indenture as shall be deemed necessary and desirable by the City for the purpose of modifying,
altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the
Indenture or in any supplemental indenture; provided, however, that nothing contained in the Indenture shall permit
or be construed as permitting (a) an extension of the maturity (or mandatory redemption date) of the principal of or
the interest on any Bond issued thereunder, or (b) a reduction in the principal amount of or redemption premium or
rate of interest on any Bond issued thereunder, or (c) the creation of any lien on the Trust Estate or any part thereof,
except as expressly permitted in the Indenture, or (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 indenture, or (t) deprive the holder of any Bond then Outstanding of the lien created on the Trust
Estate.
If, at any time the City shall request the Trustee to enter into any supplemental indenture for any of the
purposes described above, the Trustee shall, at the expense of the City, cause notice of the proposed execution of
such supplemental indenture to be mailed by first class mail to each registered owner of the Bonds. Such notice
shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file
at the principal office of the Trustee for inspection by bondholders. The Trustee shall not, however, be subject to
any liability to any bondholder by reason of its failure to mail such notice, and any such failure shall not affect the
validity of such supplemental indenture when consented to and approved as provided above. If the holders of not
less than 2/3 in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such
supplemental indenture shall have consented to and approved the execution thereof, no holder of any Bond shall
have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the City from
executing the same or from taking any action pursuant to the provisions thereof.
SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT
The City has entered into an undertaking in the form of the Continuing Disclosure Agreement as required
by the Indenture for the benefit of the Beneficial Owners of the Series 2004 Bonds to cause certain financial
information to be sent to certain information repositories annually and to cause notice to be sent to such information
repositories of certain specified events, pursuant to the requirements of Section (b)(5)(i) of Rule 15c2-12 of the
Securities Exchange Act of 1934, as amended (the "Rule"). The City has not failed to comply with any previous
undertaking pursuant to the Rule.
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The Continuing Disclosure Agreement contains the following covenants and provisions:
(a) The City shall, not later than August I of each year, commencing August 1, 2004, provide to each
Repository and the Trustee its Annual Financial Information consistent with the requirements of subsection (d)
below.
(b) If, on the date specified in subsection (a) above for providing the Annual Financial Information to
Repositories, the Trustee has not received a copy of the Annual Financial Information, the Trustee shall contact the
Disclosure Representative to determine if the City is in compliance with subsection (a).
(c) If the Trustee is unable to verify that the Annual Financial Information has been provided to the
Repositories by the date required within subsection (a), the Trustee shall file a notice to such effect with the
Repositories and the MSRB.
(d) The City's Annual Financial Information shall contain or incorporate by reference the following:
(i) The following general categories of financial data and operating data with respect to the
City's water and sewer system (the "System") for the prior fiscal year:
(A) Changes in wholesale water rates charged by the Beaver Water District;
(B) Changes in the City's water and sewer rate structure;
(C) Annual System operating revenues, bad debt expense and bad debt expense
percentage;
(D) Costs for projected System capital improvements for the current fiscal year;
(E) Usage percentages of all water users consuming more than 5% of the System's
water output;
(F) Average daily water use and maximum day's water use; and
(G) Average daily sewage flow.
(ii) The City's audited financial statements for the prior fiscal year, prepared in accordance
with accounting principles generally accepted in the United States ("GAAP") as such principles are
modified by the governmental accounting standards promulgated by the Government Accounting Standards
Board ("GASB") and by mandated principles of the State of Arkansas, if any, as in effect from time to
time, which financial statements have been audited by such auditor as shall then be required or permitted
by the laws of the State of Arkansas. If the City's audited financial statements are not available by the time
its Annual Financial Information is required to be filed pursuant to subsection (a) above, the Annual
Financial Information shall contain the unaudited financial statements of the City in a format similar to its
audited financial statements contained in the Official Statement for the Series 2004 Bonds, and the audited
financial statements shall be filed in the same manner as the Annual Financial Information when they
become available.
(e) The City has agreed to instruct the Trustee to deliver to each National Repository, or the MSRB
and the Arkansas State Repository, notice of the occurrence of any of the following Specified Events, if deemed
material:
(i) Principal and interest payment delinquencies;
(i i) Non-payment related defaults;
(iii) Unscheduled draws on any debt service reserve reflecting financial difficulties;
(iv) Unscheduled draws on any credit enhancement reflecting financial difficulties;
(v) Substitution of any credit or liquidity providers, or their failure to perform;
(vi) Adverse tax opinions or events affecting the tax-exempt status of the Series 2004 Bonds;
(vii) Modifications to rights of Bondowners;
(viii) Bond calls;
(ix) Defeasances;
(x) Release, substitution or sale of property securing payment of the Series 2004 Bonds; or
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(xi) Rating changes.
(I) The City has agreed that the foregoing undertakings shall be for the benefit of the Beneficial
Owners of the Series 2004 Bonds, and shall be enforceable by any Beneficial Owner of the Series 2004 Bonds in an •
action for specific performance against the City.
(g) The continuing obligation of the City to provide Annual Financial Information and notice of the
occurrence of Specified Events, if material, will terminate if the City is no longer an "obligated party' within the
meaning of the Rule or upon the maturity, defeasance, prior redemption or payment in full of the Series 2004 Bonds.
The City and the Trustee may amend the Continuing Disclosure Agreement, and any provision of the Continuing
Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel,
reasonably acceptable to each of the City and the Trustee, to the effect that such amendment or waiver would not, in
and of itself, cause the undertakings under the Continuing Disclosure Agreement to violate the Rule, taking into
account any subsequent change in or official interpretation of the Rule.
(h) The following terms used under this caption shall have the meanings set forth below:
"Annual Financial Information" means the annual financial information to be provided by the City of the
type described in the Continuing Disclosure Agreement.
"Arkansas State Repository'" means any public or private repository or entity as may be designated by the
State of Arkansas as a state repository for purposes of the Rule and recognized as such by the SEC. As of the date
of the Continuing Disclosure Agreement, there is no Arkansas State Repository.
"Beneficial Owner" means any person which has the power, directly or indirectly, to vote or consent with
respect to, or to dispose of ownership of, any Series 2004 Bonds, including persons holding Series 2004 Bonds
through nominees or depositories.
"Disclosure Representative" means the City's Finance and Internal Services Director or his or her designee,
or such other officer or employee as the City shall designate in writing to the Trustee from time to time.
"MSRB" means the Municipal Securities Rulemaking Board.
"National Repository" means any nationally recognized municipal securities information repository for �•
purposes of the Rule.
"Participating Underwriter" means Stephens Inc.
"Repository" means each National Repository and the Arkansas State Repository.
"Specified Events" means each of the events with respect to the Series 2004 Bonds listed in subsection (e)
above.
(i) A failure by the City to comply with the provisions of the Continuing Disclosure Agreement will
not constitute an Event of Default under the Indenture, and the sole remedy in such an event shall be an action to
compel specific performance. Nevertheless, such a.failure to comply must be reported in accordance with the Rule
and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or
sale of the Series 2004 Bonds in the secondary market. Consequently, such a failure may adversely affect the
transferability and liquidity of the Series 2004 Bonds.
UNDERWRITING
Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the
"Underwriter"), the Series 2004 Bonds are being purchased at a purchase price of $6,083,730.95 (representing the
stated principal amount of the Series 2004 Bonds plus a net reoffering premium of $60,720.95 and less an
underwriting discount of $66,990.00) plus accrued interest from May 1, 2004 to the date of delivery of the Series
2004 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2004 Bonds
if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2004 Bonds is subject to
various conditions contained in the bond purchase agreement, including the absence of pending or threatened
litigation questioning the validity of the Series 2004 Bonds or any proceedings in connection with the issuance
thereof, and the absence of material adverse changes in the financial condition of the System.
The Underwriter intends to offer the Series 2004 Bonds to the public initially at the offering prices as set
forth on the cover page of this Official Statement, which offering prices (or bond yields establishing such offering
prices) may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join
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with dealers and other underwriters in offering the Series 2004 Bonds to the public, and may offer the Series 2004
Bonds to such dealers and other underwriters at a price below the public offering price.
The City has agreed to indemnify the Underwriter against certain civil liabilities in connection with the
offering and sale of the Series 2004 Bonds, including certain liabilities under federal securities laws.
TAX MATTERS
Federal Income Taxes. In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations,
rulings and judicial decisions, interest on the Series 2004 Bonds is excluded from gross income for federal income
tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion
described in the preceding sentence assumes the accuracy of certain representations and compliance by the City with
covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series
2004 Bonds. Failure to comply with certain of such requirements may cause interest on the Series 2004 Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2004
Bonds. The City has covenanted to comply with such requirements.
Notwithstanding Bond Counsel's opinion that interest on the Series 2004 Bonds is not a specific preference
item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings
of certain corporations, and such corporations are required to include in the calculation of alternative minimum
taxable income 75% of the excess of such corporation's adjusted current earnings over its alternative minimum
taxable income (determined without regard to such adjustment and prior to reduction for certain net operating
losses).
Tax Treatment of Original Issue Discount. The difference between the initial public offering price, as set
forth on the cover page hereof, of Series 2004 Bonds maturing August 15, 200% 2010 and 2011 (the "OID Bonds"),
and their principal payable at maturity constitutes original issue discount treated as interest which is excluded from
gross income for federal income tax purposes subject to the caveats and provisions described above.
In the case of an owner of an OID Bond, the amount of original issue discount which is treated as having
accrued with respect to such OID Bond is added to the cost basis of the owner in determining, for federal income tax
purposes, gain or loss upon disposition of such OID Bond (including its sale, redemption or payment at maturity).
Amounts received upon disposition of such OID Bond which are attributable to accrued original issue discount will
be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by reference to the
yield to maturity of each individual OID Bond bearing original issue discount, on days which are determined by
reference to the maturity of such OID Bond. The amount treated as original issue discount on such OLD Bond for a
particular semiannual accrual period is equal to (i) the product of (a) the yield to maturity for such OID Bond
(determined by compounding at the close of each accrual period) and (b) the amount which would have been the tax
basis of such OLD Bond at the beginning of the particular accrual period if held by the original purchaser, (ii) less
the amount of any payments on such OLD Bond during the accrual period. The tax basis is determined by adding to
the initial public offering price on such OID Bond the sum of the amounts which would have been treated as original
issue discount for such purposes during all prior periods. If such OID Bond is sold between semiannual
compounding dates, original issue discount which would have accrued for that semiannual compounding period for
federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.
Owners of OID Bonds should consult their own tax advisors with respect to the determination for federal
income tax purposes of original issue discount accrued with respect to OID Bonds as of any date, with respect to the
accrual of original issue discount for such OID Bonds purchased in the secondary markets and with respect to the
state and local tax consequences of owning OID Bonds.
Tax Treatment of Original Issue Premium. The Series 2004 Bonds maturing August 15, 2005, 2006, 2007,
2008 and 2012 (the "Premium Bonds"), will be reoffered at a price in excess of the principal amount thereof. Under
the Code, the difference between the principal amount of a Premium Bond and the cost basis of such Premium Bond
to an owner thereof is "bond premium." Under the Code, bond premium is amortized over the term of a Premium
Bond (i.e., the maturity date of a Premium Bond or its earlier call date) for federal income tax purposes. An owner
of a Premium Bond is required to decrease his or her basis in such Premium Bond by the amount of the amortizable
bond premium attributable to each taxable year (or portion thereof) he or she owns such Premium Bond. The
amount of the amortizable bond premium attributable to each taxable year is determined on an actuarial basis at a
constant interest rate determined with respect to the yield on a Premium Bond compounded on each interest payment
date. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes.
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Owners of Premium Bonds (including purchasers of Premium Bonds in the secondary market) should
consult their own tax advisors with respect to the precise determination for federal income tax purposes of the
treatment of bond premium upon sale, redemption or other disposition of Premium Bonds and with respect to the ;.
state and local consequences of owning and disposing of Premium Bonds.
Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to
the Series 2004 Bonds.
The accrual or receipt of interest on the Series 2004 Bonds may otherwise affect the federal income tax
liability of the owners of the Series 2004 Bonds. The extent of these other tax consequences will depend upon such
owner's particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion
regarding any such consequences. Purchasers of the Series 2004 Bonds, particularly purchasers that are
corporations (including S corporations and foreign corporations operating branches in the United States), property or
casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of Social Security or
Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may
be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult
their tax advisors as to the tax consequences of purchasing or owning the Series 2004 Bonds.
Changes in Federal Tax Law. From time to time, there are legislative proposals in the Congress that, if
enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the
Series 2004 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether
if enacted it would apply to bonds issued prior to enactment. Purchasers of the Series 2004 Bonds should consult
their tax advisors regarding any pending or proposed tax legislation. The opinions expressed by Bond Counsel are
based upon existing legislation as of the date of issuance and delivery of the Series 2004 Bonds, and Bond Counsel
has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation.
State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2004 Bonds
is exempt from all state, county and municipal taxes in the State of Arkansas.
RATINGS r.
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P" ), has given
the Series 2004 Bonds the rating of "AAA" based on the delivery of the Financial Guaranty Insurance Policy by
Ambac Assurance and has assigned an underlying rating of "A" to the Series 2004 Bonds. Such ratings reflect only
the view of S&P at the time such ratings were given. An explanation of the significance of the ratings may be
obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that the
ratings will not be revised downward or withdrawn entirely by S&P if in its judgment circumstances so warrant.
Any downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Series
2004 Bonds.
Neither the City nor the Underwriter have undertaken any responsibility subsequent to the issuance of the
Series 2004 Bonds to assure the maintenance of the ratings or to oppose any revision or withdrawal of the ratings.
No application.has been made to any rating agency other than S&P for a rating on the Series 2004 Bonds.
LEGAL MATTERS
Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2004 Bonds are
subject to the unqualified approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel, a copy of
whose approving opinion will be delivered with the Series 2004 Bonds. Certain legal matters will be passed upon
for the City by its counsel, Kit Williams, Esq., City Attorney.
Litigation. There is no litigation pending seeking to restrain or enjoin the issuance or delivery of the Series
2004 Bonds or questioning or affecting the legality of the Series 2004 Bonds or the proceedings and authority under
which the Series 2004 Bonds are to be issued, or questioning the right of the City to issue the Series 2004 Bonds.
Except as set forth in the following paragraph, there is no action, suit or proceeding known to be pending or
threatened, restraining or enjoining the City in any way which could have a material adverse effect on the City or the
System's financial affairs.
The City is presently a defendant or co-defendant in an action where the amount of damages sought
exceeds $50,000. In this case, the City has prevailed at the trial court level. This case is currently on appeal and is
being actively defended by counsel for the City. As of the date of this Official Statement, the City believes the
34
41
likelihood of an unfavorable outcome is remote. Further, the City does not know of any fact or set of facts from
which the liability might arise which individually or collectively would materially affect Net Revenues or the
financial position of the System.
FINANCIAL STATEMENTS
The general purpose financial statements of the City at December 31, 2002 and for the year then ended,
included herein as Appendix A, have been audited by BKD, LLP, independent certified public accountants, as set
forth in their report dated April2, 2003, which report is also included in Appendix A. The notes set forth in
Appendix A are an integral part of the financial statements, and the statements and notes should be read in their
entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the City's
Water and Sewer Fund for the year ended December 31, 2003. Additional financial information concerning the City
may be obtained from the City's Finance and Internal Services Director, City of Fayetteville, City Administration
Building, It 3 West Mountain, Fayetteville, Arkansas 72701.
MISCELLANEOUS
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not
so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of
the estimates will be realized. This Official Statement is not to be construed as a contract or agreement between the
City and the purchasers or owners of any of the Series 2004 Bonds.
ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT
The information contained in this Official Statement has been taken from sources considered to be reliable,
but is not guaranteed. To the best of the knowledge of the City, this Official Statement does not include any untrue
statement of a material fact, nor does it omit the statement of any material fact required to be stated herein, or
necessary to make the statements herein, in light of the circumstances under which they were made, not misleading.
35
The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville,
Arkansas.
I
CITY OF FAYETTEVILLE, ARKANSAS
/ ` W��
Mayor
r�
i
972
APPENDIX A
AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS
OF THE CITY FOR THE YEAR ENDED DECEMBER 31, 2002
A-1
[THIS PAGE LEFT BLANK INTENTIONALLY] �•
A-2
L
UYI. K MIR Meer, 9/k 26aC
6 SMENn Mens.9im )t0 P.e*P1xxk
and 4".!•laia Fu rro <52rSG2 601S'F115U Fax 951a7Si7ie
Independent Accountants' Report on Financial_ Statements
and Supplementary Information
The Honorable Mayor and City Council
City of Fayetteville, Arkansas
Fa}cnwilic, Arkansas
axe teak, n
GA.a Qvoi
?m aim, An )I61t-acg
=0491M Farat66 ida
bAdM11
We have audited the accompanying general purpose financial statements of the City of Fayetteville,
Arkin as as of and for the year ended December 31, 2002, as fisted in the table of contents. These
general purpose financial statements are the responsibility of the City's management. Our responsibility
is to ccpress an opinion on these general purpose financial statements based on our audit.
We conducted nor audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Cover aacnt Auditing Srandeirdr,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
micstacment. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion -
In our opinion, the general purpose financial statements referred to above present thirty, in all material
respects, the financial position of the City of Fayettevil le, Arkansas as of December 31, 2002, and the
results of its operations and the cash flows of its proprietary fund types for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
to accordance with Governntmi Auditing Srandardr, we have also issued our report dated April 2, 2003.
on our consideration ofthe City's internal control over financial reporting and our tests of its coarpliancc
with certain provisions of Taws, regulations, contracts and grants. That report is an integral part of an
audit performed in accordance with Goverment Auditioli Sreaularatr and should be read in conjunction
wild this report its wasiderhig die results of our audit.
S4111d5 s The accompanying supplrnfrntary information as listed in the table of contents is presented for purposes
Ira ofadditional analysis and is not a required part of the general purpose financial statements. Such
Sas= 'information has berm subjected to die procedures applied in the audit of the general purpose founncial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the gcncrai purpose
financial statements taken as a whole.
A-3
The llonomblo Mayor end City Council
City of Fayetteville, Arkansas
Page 2
The accompanying infonogtion in the introductory and statistical sections as listed in the (able of contents
is presented for purposes of additional analysis and is not.. a required part of the general purpose financial
statement. Such information has not been subjected to the procedums applied in the audit of the gmwd
purpose financial statements and, accordioglyS we express no opinion on it.
April 2. 2003
9&P) r `G
i•
•
A-4
i
y
pane Left Blank Intentionatty
A-5
City of Fayegov%fe. Atkarroas
Cetnhnred Balance Sher
A9 Fund Types, ACOWJM Getups, W4 D(watefy Presentee Cmnpanent Links
DowmWr 31. 2002
OmmmemlFund Tim"
6 =20 s
134o05 $
s 3.039
903,072
4,313.M
_
e1,111,733
534,494
21.161
1,374,501
40MO
25,280
2=15
2770M
67,190
123.203
55,332
55
1,100,402
414,200
1,670.704
1,04
103.755
4.731
137,S17
5,801,027
3,103
709,=9
r�
6 12,611.611 S 4.974.63e S 0.753.3% s 04,597.099
•
M.
t
Trial
Total
f9doc4ry
(msaaraneum
(rnegptandtan
Praadamry Fund Tlpes Fund Tyaes
Ataaum Groups
.only)
adA
Genar✓V Ganersl
tesmml hoar and
Filed Lofloi m
P1i1LLy CanponoW
Reporft
Enterydu Saylw Agency
Assets now
Ggvemiemt Lbft
Er10v
S 394.2ae
S I.M S
367,622 $ S
S 1293,10r S
78SA42
>) Z069949
2T.884AM
4.029376
20,a33,503
127".512
1,93&746
129,605.260
3,581.944
es
4.T66
SA38257
0.409
5,443,258
103,446
23316
157,049
060,452
102us
696.555
83.902
aa,e19
t2,930
696,040
505,040
65=7
65,357
262,751
t8.ea5
8.356A89
IMAM
57 AO
123A71
69e233
696,231
55,812
W.305
374.M
37030
Z"51273
6,826300
6,e26,300
e,65e
16A59
46,959
20,336
7",565
780,565
6,215
8215
8216
141,269,702
S,563,403
53,656,795
20OA91=
361,012
201.072R72
110,000
11CAN
185,961
185,961
16a,9ai
0.756.359
e.756.359
6,756,359
20A46.811
20,&SA11
20 9/8$f 1
i 177.248.688
S, 9.647.261 3
20,894.057 S 53.858,795 9 Z7.707,1r0
5 ar6.ae6.17e.. $.
11224407
S 361,Ste,%3
A-7
Cky of F%vuealle, Alkanaaa
C4mWned Baku= Shoal. oonitrvad DpreSenped CargengLLUnbs
AR Fmd TyFaa Am Groups. and 'Caeiefy
DeoamSn 3t, 2W2
Fund eguRyand a6rer oedn¢
imvsfrnanth Rertmul6sad
uwu
Calbbubtl CepSai '
Ratakied earnings:
Pa Wn dfdmvoogaborAs
Uare od
FLId balmlrn:
RaCmd far:
Adlc Smodwfbnds
Debi mrAm
DROP member
Ra6rammd baneLs
Drug ankro m A
wapAd wpancgt a
Unrr,.msed:
Dosigl atad.
Capewbopraramaraa
Qndesmnaled
Tool eafd aquty and
ww=d'ds
ToW RablPW3. fund equRy
and onwrmdU
Ttw Sco0awnyty Mbt a w integral part of
the germ" &wndal statm wds.
5 410.062 L 261im L L 2.060,032
fA46.252 199.306
32,= 16 m 138,0t6
01.212
iMT.767 69.996 471,710
110,iNp
8.756.359
2,I09
10&7f& 2,664
01,932,431
4.4T5.728 4255428
8'.604.481 4A25.101 6,768.M 61.992.437
L 12,511.611 S 4A74A36 S' 6.7 , W $ 61,SWAR9
UH
ip
i
Tabs.
TOW
Fldudbt
(menlmeodu
(mammandum
ProcrietmyFund Typ" Fund TMs
Amm" Gmups
poM
only)
Gmem Gwww
fil"a l TAW ow
Rmd 1On94wm
P7In" GOfnpanent
Ftaporft
Entwpdu Smioe A�
As4B/5 Debt
GOVftylnlent thins
Fatty
$ 1.844,020 S 110.351 S MA93 S
739,609 124A64
260,389 147.423
i,409Al2
as" 14,076
59,672
326,154
1.355.000
110AW
21,410A00
t748.3751
28,781.920 243,415 1.077,791
55.571.219 167545
;838,796
9/.954,754 9.436,30/
404AW
797,431
18,614.5&S
S S 5S57.710 $
1S4A57 S 5,112467
2,709,231
2,T09331
595,040
605440
65.j67 68,267
81212
81212
1y4B9
89 tAAi2
2S00.007.OBT
2,304A67
59A72
69 n
320,154
32B,154
1,355.OW
1,355,000
110,000
1to,=
27,707,170 27,707.170
27,707,170
21,410A00
21,410,000
_ (748.375)
(748.375)
2L707.170 62.941513 220,014 63.161A57
53,858.795 53,858,796
7OA31 53XQA26
S5.838,764
65.935.704
2,638,735
2AW,795
101,341.m
101=1455
T10,000
110A00
6,756.359
6,758,359
494,450
404ABM
MA31
797,431
18,914.586
18,01086
67,100
67,109
1114329
111,329
61.932,437 01,032,437
12.731.154 2,63i,732 15A62AW
150,461,T88 9A03,B48 10.918,868 53,858,706 315454693 2,902.363 318,367,020
j-177246,688 6 0A47.2B1 S M804951 S MAM.799 5 27.707.170 j 376,398,1T6 S 3,122,407 S 381.S16,583
A-9
City of Fayatfa*0 Arkansas
G Mbioed Seeman) of Reverwea, ExpendWrea,
and Changes in Fund Baleoggs .
AD laor ormbntal Fund Types and U'eaerely Presented Cempanant Units
For M Year Ended Decen&er 31, 2002
Total reventca
cuwunnil
Felled
Fire
Urboundiviclopaldrat
General serAm
Ong law "braernard
Library
Debt UMM
Paying aawt fears
Capital
Total eVandatums
•.
•..
pera
Opera"
l :i
sond Proceeds
Bond lzavad Coal
TOW vow wndv
sauces (teas)
Ex (da8dwcy) of reeanuee over (w4er)
• expenditures and o(ner
fk=chg salrtrss 0aeal
Fond balance. begLmkV of Year
Fund balarwe. end of year
The axsrmpanyng roles are an adegrel pert of
Ore general purpose financial staemeras.
Sped61
Dw
Capilat
ooneral
Pc enrle
SerAw
Fmocts
s 11,991,670
s 1,489,011
6 6.185M
6 16.744.182
64ZWD
1,T75,444
4,672,519
S54,641
1.184.515
512.627
496,030
1.253AS2
316,342
176,957
40,943
1.665,700
81,256
39,S62
393,M
886.7$4
7.150
1.385.147
18.312,330
6.898.334
6234,044
21.241.885
2338.690
1AM,573
7,T56,946
4.979.38E
480,356
3,5M,o68
U12AW
1,943,308
1.395,577
1T2,605
M114
433.68T
1,374,012
,zs94,16a
21252,37E
6.932.683
1.374.012
t2;094.188
f2kU0.0331
l34.329)
A660M
8,54TA9T
3,018,875
48,575
1.595.370
. (388,864)
(61,101)
(42k551
62.939
(893,210)
(184239)
25,388.106
(244947)
1,936,801
(12.526)
1.658.309
20.746,065
(1,003,232)
(46b%)
6,518,941
29.293,562
8.887.7M
4371.956
23%418
3=81875
$ 8.694.491 $
4,326,101
S 8,756;354 5
61.932.437
I•
•
A-10
Total
Total
(=f andm
(m and=
onM
on"
Rimw
Component Report6y
Goy menl
Unit Dolly
6 30,410,564 6 1A69,611 6 37,89&675
842,908
842,0M
7=,604
626,964
7,629,668
2.195,372
347,169
_2,642,544
1253,452
1.253.482
2,20T,942
64.766
2,272708
494,503
17.250
511,763
_.2279.659
60,440
2.340,099
;
2.338,690 2,338.690
1.48fi,5T3 1,4M.5"
T.M.948 7,358.90
4,979.M2 4.970.382
4P08;424 4.008.424
5115M176 .5,156,176
1,39U77 1.395,577
172j608 172,606
855.114 855.114
433.56T 433,567
1.568,594 1,555 5%4
1,120,113 1,128,113
1,374.012 1.374.012
12,694,188 12694,188
42253.235 _ 2A3.707 44946.942
1111433,767 (88,107) tn,345,ito
4.6e2820
4.662,W0
(4,602020)
(4.M2,620)
1,642,447 1,642,447
(889,520) (666v,sx11)
62939
62,939
(877.449)
(877.449)
29,786,106
25,368,106
(244.9471_
(244,947)
24,328.649 772.927 25,101,576
34,782,416 684,820 35.447.236
40.947.972 2.145,9t2 49,094,884
6 81,710,368 $ 2.831,732 5 84,542,120
A-1 I
Carom FayascVNYa, Alsnnsaa
Coa411nad Satemtl4 of Rev4n04a, 60snd4t#es
and Chanpas In F1md Balances - Eculo aad Actual (GAAP Beals)
G4nmat, Spadal Re a. Oabt SarAce, and Capital PJscm Fords
For the Yaw F�ded pecanber 31. 2W2
le
S 113433W S 11,991$70 $ 148.170 S 1324$81
821,000
842,BW
21PS
1,74707
1,775,444
Z7,747
5,170,324
1,197,SW
1,184,615
(12=
400435
1,171,OM
1.253.452
82.452
-.
422,W0
316342
(105AW)
205,450
012%
61356
7876m
888.764
99A01
7,9fA-
179W350 18312339 321AM 7.113.750
219534"
2.339.690
SUMS
1.688,644
1,486.673
202971
7,W5,139
7,a58946
206,193
418Wd57
4.879302
7395
665AD1
480356
185.235
3370,838
3.427.W7
3,212.989
214M
23951134
1.599040
1,895$77
20071
Ss5.oa9
1,442,t59
133969
•
22.786125 21,252.372 1$34.353 9398,777
(4.795.3751 (2,940.0331 12856,342 163
3.015,310 3.018;675 3,50 53.00
(410,0891 (309,864) 21,225 (61,102)
()08,120) 1693:2101
1.0993101 1938.Bo1 24.790 (8,102)
(2W9 271J. f1,W3,23Z) 1,881.132 (2.191,1291
9,897.723 9,697723 4371.966
$ 6,a000449_ $ 8.694.491 3 1.BBU32 S 2/80
T"a zC mpa"*9 notes ara an in"m part of VIA 9amem puwm rmmal 3ta1Mft*,
A-12
L
ti
Special Rcwe
Debt SeMce
_
Caudal pmects
Vafiema
vmaoca
Varl x
Fa bb
Fe ble
F1lvatde
ACWW
(tJn(mwablel
13t1dc41 ACktal_
Lravorabwi
B,dnat
Adu�
1lF.davvebw)
1 1.486.Ott 3
154.330 S
6.270A00 S 6,195,70(
S (a4.M)
$ 15264.870
f 16,T44,182
$ 1.479312
4,677-519
(5V2,605)
4051,505
554,841
(1,511&067)
512.527
112.492
300.000
4%330
190,330
176.957
(29.493)
82,561 4&943
(13,615)
1263,535
1A05,7(73
402,054
U50
39=
393,585
393,S80
7.763
498
5,/67 B33
1.305.447
(3,764.706)
3.520,068
342,768
/,943.908
1ASIV8215
.
172.606
382,474
855,114
587A45
433.687
1
1,417A81 1,374,012 43.00
' 72A25.675 12A9ON 59,331.490
6.932,683
2,364,114
1,417,061 1,374,012 41A49 72,025,676 12,694jes 59.331.490
134.329) 2,140"0 4,915M 4.88002 _.(54,86S) (47,967,811) 61547,497 56 515.308
48.575 (4,425) 115371721 1,595.370
(61.tOf) 1 (2A89)
75.000 62,939
s7,wa
2,489 (4,44I=)
(4,212A55) 228,677
(12MI)
(115,=)
(16445) 23L593
25.38&t00
25,36&106
_ (244,947)
(24047)
112.520) _. (4A24) 1.610252 1,65&308 48,057 20285.795 20.740,065 460.270
(49,855)
2144274 6,626,752
6.518.A41
15,011)
(27AMM)
nIM582
50.975,578
4,371.9%
239,418
239,418
32.6WTS
32AM875
3 4,325.101 S
2.144,274 S &766.170
f 8,75&359
S (8,en) S
4,M.M
S 61.932,137
$ SB.975S78
A-13
City of Fayetteville, Arkansas
CoMbinCrl Statement of Revenues, Expermes, and Changes in Fund Equity
A0 Proprietary FmA Typas
For the Year Ended December 31. 2002
Operating revers ,
Aldine fees
itsrris and lasses
Solid waste fees
Water services
Sewer Services
Shop charges
Claw
Tool operating revenues
"ratino expenses,
Operations and administration
Landside; operations
Find based operations
water supply
water transmission and distribution
Sewer Q011lecum
wastewater innatarnent
Customer SWAMS
Solid waste SOMMS
Total operatng expenses before
depreciation
Depredation
Opemting loss
Nonoperating income (expense):
Intergovernmental
State tourist texas
Interest expense and paying
agent fees
Interest Income
Net increase N the fair Value of 0rvesLneals
Other
Total nonoperating income
Captfal Conufttions
Income (loss) before operating transfers
S 500.221 S
41ZB14
5,475,126
11.01805
8,92%779
3,ST7,740
18,980
28,353A05 3,571,740
Z,544,194 Z,390,967
381,972
427,934
507,545
4,319,415
1,f90,411
1,165,i22
4234,671
1 ASZ,805
5,756,680
22212.749 2890,967
4.140,656
1.180,773
5.501,997
1,5284876
(1,361,341)
(346,1031
2,717,255
280,789
S sao221
412,614
51475,126
11,016.685
8,929,779
3,571,740
18.980
29.925,146
4,935,161
381,972
427,934
507,545
4,319,415
1,190,411
1,165,122
4,234,671
1.682,805
51768,680
24,603.716
5.321,429'
7.030.873
(1.709A44)
21717255
280,769
955,507)
1{119,827)
180.407
11(300234
274,792
34.766
309.558
320,753
20y942
349,695
3,765,909
236,115
4,002,024
3,195,762
3.195.752
5,6=20
(411,988)
5,486.332
0
•
•
A-14
y
City of Fayetteville, Arkansas -
Combined Statement of Revenues, Expenses, and Changes In Fund Equity, Nntinued
All PII1pEetary Fund Types
For Are Year Ended December 31, 2002
Operating bansrers:
Operating transfers from component units
Operating transfers to component units
Net Income (lass)
Add back depreciation on assets acquired
with ountrinded capital
Increase (decrease) in retained earnings
Retained earnings, beginning of year
Retained earnings, end of year
Caltnbuted capital, beginning of year
CWal contributions
Oeprcoiatlon on assets acquired
with contributed capital
Contributed capital, and of year
Total fund equity, end of year
Proprietary Funds
Total
Internal
(memorandum
Eateexise SA�ta
aa�IV1
806,581
806,581
(764,9981
UK99(i)
54641,903 (111,966)
5,529,915
3,143277 13,114 3,158,391
8,785,180 (98,874) $Sti6,306
88, SM9
9.535,175
95 543,544
94,793549
9,436,301
104229,850
681255,750
160,659
56AW,409
558,746
55(�746
13,1432M
(13,114)
(3,156,391)
55,671219
167,645
56,838,764
S 150,464.768
S 9,603.846
$ 450,068,814
The accompanying notes are an integral part of the general purpose financial statements.
A-15
i•
Net cash used for apRW and tdaWd 8n WKhVaQ+eee
Wish Sovrafrom hvwdn9 ac6YTias:
Pwchasa of Inveaanenl sactglt;m net
Pmoseds Gam sale of hv4.smanl sewrtres, net
Gdrr Oa and &VIdends an 5w4ybnenfe
Pwdg of nmbS 14d inveshwnte dlks, net
proceeds G0m safeef resatcled wmiamem 4e011898s, w
Net Cash provided by investing ac6vlos
Net deacaw in ash
Casty beghdng Of ywr
Cash end of
Toad
bdee ad (mevrtarardum
Eheetofise Sere M only)
8 (1,36t,341) $ (348,103) b (1.709.444)
5,501,997
1154578
7.830,873
187,671
434
188.005
66,705
.1.681
58.305
G".420_
639.420
81633
26,4/r
(MOM287
N.288)
22,152
(483.9w)
(10M
(414 185)
69,748
10.555
100.333
1OZ995.
102.996
(649,555)
(50,555)
335.9t5
-.- &IM
339.533
292,141
292,141
280.789
250.789
886.581
- SM681
(764,998)
U64,9961
614,513
614,513
2,425.114
2,425,114
9.158.760
9.150.760
WAS)
197,435)
04.790OM
(14.190.000)
(3,974,029)
(2.055.504) (6,029,533)
(7,148,506}
(1.18)
67256
(8.426,096) (t958.248) (10414.344)
(165278)
(185279)
1.833.158
GA833
2265,989
1,141242
189,767
1,330,419
(108)
008)
S78,186
678166
3,187,208
822.000
40013.M
463M
1000
484,668
8 3942ee S
1.IX38
$ 395288
Nanash hvesfFq, CROW. and 9nancNg 8Nv8ks
Water and Sewer Fund received conftuBcm 0f flMd assets 01 S3.r541498
10
GAG'.
L
City of Fayetevilie. Arkansas
Combined Statement of Changes in Plan Net Assets
All Trust Funds
For the Year Ended Decmnber 31, 2002
Fiduciary
Funds
pension
Trust
Additions=
Member contributions
S 65,272
City conbi6ulions
1789652
Investment earnings
ii.153,495j
Netrnaeasein the fair value of Investments
1311123
stale insurance taxes
264r960
Other
IIJ23..
Tbtal additions
82.034
C0nt1act021 SO 41M
45,231
Berard payments
2,274,b39
Total deductions
2,319.769
Decrease in net assets
(2.237,135)
Net asaeta, tialinnirg of year
22,054AOi
Not assets, and of year -
$ 10 616A66
The accompanying notes are an intso part of the general purpose financial statements.
A-17
(le
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A, REPORTING ENTITY
The City of Fayetteville, Arkansas (the "City") Is a municipality governed by an elected
mayorand an eight -member council. As required by accounting principles.generefly
accepted in the United States ("GAAP"), these financial statements present the City
(the primarygovemment) and its eomponentunits. The component units are included
in the City's reporting entity because of the significance of their operational or financial
relationships wnh the City based upon the criteria of Govemmental Accounting
Standards Board ("GASB") Statement 14,'The Financial Reporting Entity." Generally,
GASB Statement 14 requires entities upon which the City Is able to Impose Its will, or
that are fiscally dependent upon the City. to be included as part of the Citys financial
reporting entity. Additionally, those entities that the nature and significance of their
relationship with the City is such that exclusion from the Citys financial reporting entity
would render the Citys financial statements Incomplete or misleading, should also be
included as part of the City's reporting entity.
Those entities that meet the above established criteria for inclusion, as well as meet
either of the following criteria (1) provide services entirety or almost entirety forthe City
or (2) whose board is substantively the same as the City's board, are required to be
Included as part of the primary gavemment's financial statements through "blended" (• presentation. Those entities that meet the above established criteria for inclusion, but
do not either (1) provide servicesentirety or almost entirely for the City or (2) have the
same or substantially the same board as the City are required to be presented
"discretely" or in a separate colu mn as part of the City's reporting entity, but not part of
the primary government.
Those commissions and boards which have been included within the City`s financial
statements along with the criteria used in making this determination are as follows:
Discretely Presented Component Units
Advertising and Promotion Commission - The Commission Is governed by seven
members appointed by the City Council. The Mayor and one City Alderman serve as
two of the seven members of the Commission. The City levies and collects taxes to
fund the Commission. The Commission's purpose is to promote and develop tourism
for the City of Fayetteville. The Commission is discretely presented as a separate
column in the City's general purpose financial statements. The Advertising and
Promotion Commission does not prepare separate audited financial statements.
•
A-18
•
L
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
avetteville Library Board - The City appoints all five board members and controls a
major portion of the budget. The library serves the residents of the City and
Washington County. The Library is discretely presented as a separate column in the
Cbty's general purpose financial statements. The Library does not issue separate
audited financial statements.
B. FUND ACCOUNTING
The accounting and reporting policies of the City conform to GAAP applicable :to local
governmental units. GASB is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. Additionally, the City has
elected to apply only FinancialA000unting Standards Board ("FASB") pronouncements
Issued prior to November 30, 1989 that do not conflict with or contradict a GASB
pronouncement to Us proprietary fund activities. A description of the more significant
accounting and financial reporting policies and practices of the City follows.
The accounts of the City are organized on the basis of funds and account groups, each
of which is considered a separate accounting entity. The operations of each fund are
accounted for by providing a separate set of self -balancing accounts which comprise
its assets, .liabilities, fund balance/retalned earnings, revenues, and
expendituresrexpenses. Funds are classified into three categories: governmental,
proprietary, and fiduciary. Each category, in turn, is divided into separate "fund types."
Account groups are used to establish accounting control and accountability for the
City's general fixed assets and general tong -term debt. The various funds and account
groups are grouped in the accompanying combined financial statements as follows:
Governmental Fund Types:
General Fund - The general fund is the principal operating fund of the City. it is
used to account for all financial resources except those required to be accounted
for in other funds.
Special Revenue Funds - Special revenue funds are used to account for the
proceeds of specific revenue sources which are designated to finance particular
functions or activities of the City.
Debt Service Fund - The debt service fund Is used to account for the accumulation
of resources for, and the paymentof, general long-term debt prindpal, interest and
related costs, other than debt service payments made by proprietary funds.
A-19
(0
City of Fayetteville, Arkansas
Notes to the General Purpose Flnancial:Statements
December 31 , 2002
other than thaw financed
by proprietary fund types -
Proprietary Fund Types:
Enterprise Funds - Enterprise funds are used to
financed and operated in a manner similar to, pi
the intent of the governing body is that the cost
the general public on a continuing basis be finar
user charges; or (b) where the governing
determination of revenues earned, expense,
appropriate for Capital maintenance, publi
accountability, or other purposes.
internal Service Fund - The internal service fund is used to account for the financing
of goods or services provided by one department to other departments of the Cityv
on a cost reimbursement basis -
Fiduciary Fund Types:
TrustFundsand Agency Funds -Trust funds -and agency funds are used toamount
for assets held by the City in a trustee capacity or as an agent for individuals,
private organizations, other governments, and/or other funds. Trust funds are
accounted for in essentially the same manner as proprietary funds since capital
maintenance is critical. Agency funds are custodial in nature and do not Involve
measurement of results of operations.
Account Groups:
General Fixed Assets - This account group is used to maintain control over the
Ckys Axed assets, other than infrastructure and those fixed assets reported in the
proprietary funds.
General Long -Term Debt - This account group is established to account for all
general obligation debt of the City, other than debt related to proprietary funds.
Additionally, long-term liabilities expected to be financed from governments] funds
are accounted for In the general long-term debt account group.
The two account groups are not funds. They are concerned only with the
measurement of financial position. They are not involved with measurement of
results of operations.
A-20
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Other:
Use of estimates
The preparation of financial statements In conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affectthe reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Total Column on Combined Financial Statements - The total columns on. the
accompanying combined financial statements are captioned "memorandum ontr to
indicate thetthey are premed only to facilitate financial analysis. Data in these
columns are not Intended to present financial position, results of operations, or cash
flows in conformity with GAAP. Neither is such data similar to a consolidation as
interfund eliminations have not been made in the aggregation of this data.
C. BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund Is determined by its
measurement focus. All governmental funds are accounted for using a current
;financial resources measurement focus. With this measurement focus, only current
assets and current liabilities generally are included on the balance sheet. Operating
statements of these funds present increases (€.e., revenues and other financing
sources) and decreases (i.e., expenditures and other financing uses) In net current
assets.
All proprietary funds and pension trust funds are accounted for on a flow of economic
resources measurement focus. With this measurement focus, all assets and all
liabilities associated with the operation of these funds are included on the balance
sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and
retained earnings components. Proprietary fund operating statements present
increases (i.a., revenues) and decreases (i.e., expenses) in total net assets.
The modified accrual basis of accounting is used by all governmental fund types and
agency funds. Under the modified accrual basis of accounting, revenues are
recognized when susceptible to accrual (.e., when they become both measurable and
available). Measurable means the amount of the transaction can be determined and
available means collectible within the current period or soon enough thereafter to be
used to pay liabilities of the current period. Expendltures are recorded when the
related fund liability is incurred. Principal and interest on general long-term debt are
recorded when due.
A-21
to
City of rayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Those revenues susceptible to accrual are interest revenue, Property taxes, and grant
revenues. Sales tastes collected and held by the State at year-end on behalf of the City
wealso recognized as revenue. Fines, permits, and parking meter revenues are not
susceptible 10 accrual because generally they are not measurable until received In
cash. Grants and similar items are recognized as revenue as soon as an eligibility
requirements have been met.
The accrual basis of accounting is utilized by proprietary fund types. Under this
method, revenues are recorded when earned and expenses are recorded at the time
related fund liabilities are incurred.
D. BUDGETS AND BUDGETARY ACCOUNTING
The City is required by State statute to prepare and submit an annual budget to the
City Council, fir to February 1 of each year, the original budget is legally enacted
through passage of a City resolution, Budgets are prepared for the General Fund,
special revenue funds, debt service funds, and capital projects funds. These budgets
are prepared on the modified accrual basis for revenues and expenditures. In addition,
encumbrance accounting is employed. Under this system, purchase orders, contracts,
and other oommitments forthe expenditures of funds are recorded as encumbrances in
order to reserve a portion of the applicable appropriation. At the end of the year,
encumbrances for which goods andior services have not been received are canceled. •
Encumbrances and unencumbered appropriations lapse at the end of the year.
Encumbrances which lapsed at December31 t 2002, and were reinstated as of January
1, 2003, for the General Fund, special revenue funds, and capital projects funds.
totaled $149,139, $447,330, and $23,861,234, respectively.
Appropriations forbudgeted funds cannot exceed the estimated revenues and existing
fund balances and a is unlawful for the City to create or authorize creation of a deficl
fund balance or retained earnings in any fund. Budgetary control is maintained at the
program (operating urtl within a division, e.g., administration, maintenance,
construction,etc. within the Street Division) level. The Administrative Services Director
is authorized to amend the budget in amounts up to $15,000. The Mayor is authorized
to appropriate addifronat amounts up to $200000.
Adjustments which exceed the Mayor's authority must be approved by the City Council.
Budgeted amounts as presented in the accompanying combined financial statements
are as originally adopted, and amended throughout the year, at the budgetary level of
control.
For 2002, the original budgeted expenditures and transfers out of 322,027,349 were
increased to $23,902,934 for the General Fund; increased from $201,950 to $592,642
A-22
City of Fayetteville, Arkansas
Notes to the General Purpose financial Statements
December 31, 2002
for the off Street Parking Fund; increased from $647.000 to $1,465,699 for the
Community Development Fund; increased from $1,607,860 to $2,995,134 for the Paft
Development Fund, increased from $13,334,000 to $29,940,991 for the Sales Tax
Construction Fund and jacreased from $20,417;000 to $21,348,809 for the library
Construction Fund. In all other funds, amendments were not significant in rotation to
the original appropriations:
E. ASSETS, LIABILITIES, AND FUND EQUITY
Fixed Assets and Depreciation -Purchases of fixed assets by governmental fund types
are recorded as expenditures at the time of their purchase. Such assets, excluding
infrastructure assets, are then capitalized in the general fixed assets account group.
General fixed assets are not depreciated and are recorded at historical costs, Donated
assets are recorded at their estimated fair market value on the date donated.
Infrastructure assets, such as bridges, streets, curbs, gutters, drainage systems,
lighting systems, sidewalks, and other elements of the public domain, are not reporters
in the balance sheet,
Fixed assets for proprietary funds are stated at cost or, for contributed items, at
estimated fair market value at the date of contribution. The costs of normal
maintenance and repairs that do not add to the value of the asset or materially extend
asset lives are not capitalized. Improvements are capitalized and depreciated overate
remaining useful lives of the fixed assets. Depredation of all exhaustible fixed assets
used by proprietary funds is charged as an expense against their operations.
Depredation has been provided using the straight-line method over the following
estimated useful lives:
Years
Bui-Wings - 10-50
Improvements other NWtA an bngs 10-60
Machinery, equipment, and vehldes 3.10
Receivables - Customer Accounts - Based on historical collection experience,
unoxxilectible receivables are not signtficant. Accordingly, no allowance has been made
for doubtful accounts at December 31, 2002. Accounts that are determined to be
uncollectibie are charged off to expense when such determination is made. .
Investments -Certificates of deposit and money market Investments that maturewithin
one year of the date of acquisition are recorded at amortized cost. All other
investments are recorded at fair value with the resulting unrealized gains and losses
recognized in the current period.
A-23
i•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, '2002
Due froWto other governments - Due from other governments consists primarily of
December taxes, state tumback, cost sharing, and grant reimbursement requests
receivable at year-end. Due to other governments consists prime* of grant
sub`edpient expense reimbursements, cost sharing, and fourth quarter parking
revenue distributions.
Inventories - Inventories in the governmental funds are stated at cost. Inventories in
the proprietary funds are stated at the lower of cost or market. Inventory cost is
determined by the average cost method. The cost is recorded as an expense upon
consumption.
Prepaid Expenditures/Expenses - Payments made to vendors for services that wig
benefit periods beyond December 31, 2002, are recorded as prepaid expenditures in
governmental funds and prepaid expenses in proprietary funds. Prepaid expenditures
are accounted for on the consumption basis in governmental funds.
Property Taxes - The City Wes property taxes applicable to the following year during
the month of October. Property taxes assessed during the previous year are due and
payable after February 1. Taxes are delinquent after the first week in October.
Property taxes attach as a lien on property as of February 1. Delinquent property texes
as of December 31, 2002, were not significarrt.
The assessed value of taxable property upon which property taxes are levied is i•
determined by the County Assessor. The Assessor estimates full market value of the
property and applies a statutory rate of 20% to arrive at an assessed value.
Washington County is the collecting agent forthe levy and remits the conections to the
City, net of a collection fee. Each unit of government receives its proportionate share of
tax receipts from the County Assessor, based on its individual mill levy, in the month
following the collection.
The amount of property taxes the City may levy for general government operations is
subject to a statutory limitation of5mills established bythe State ofArkansas. Thetax
levy Imitation may not be increased except by amendment to the State Constitution.
The City has levied A mills each for the Policemen's and Firemen's Pension Funds.
AdyanCe5-tp Other Funds - Noncurcgnt portions of long-term lnterfund loans receivable
are reported as advances and are offset by a fund balance reserve account which
indicates that they do not constitute expendable available financial resources:
therefore, they are not available for appropriation.
Bond Issuance Costs - in governmental fund types, bond Issuance costs are recorded
as expenditures in the current period. Issuance costs for proprietary funds are deferred
•
A-24
f
• City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
and amortized over the term of the fronds- The unamortized amount of these deferred
charges is dassifiad as "Unamortiedbond issuance casts" In the accompanying
combined financial statements.
Interfund.Transactions - Quasi-extemal transactions are accounted for as revenues,
expenditures, or expenses. Transactions that constitute reimbursements to a fund for
expenditures(expenses initially made from it that are properly applicable to another
fund, are recorded as expenditureslexpenses in the reimbursing fund and as reduction
of expenditures/expenses in the fund that is reimbursed.
Operating transfers recorded in the combined financial statements are as fellows:
Goverrmrental
Discretely Pre5eated
Funds
PropdeWy
Funds Componed Onds
Total
Operating transfers in
$
4,662,820
S
- S -
S 40662=
Operating lransfam out
$
(4,962,820)
$
- $
S(4,882AW)
Operadng fmnshrs from
pdmary govemmem
$
$
- $ 1,642.447
$1,642A47
OpmfiM transfers to
pdnvy gov ment
$
-
S
- S (889,520)
$ (869,520)
Operating transfers hem
conywnont um(s
$
62,939
S
808.561 $ -
S 869,520
Operating trarwom to
component umts
$
(877,449)
S
(764,998) s -
$(1,842.447)
Rebatable Arbitrage
- Rebatable arbitrage is treated as an expense when due.
t
Compensated Absences - Vacation leave is granted to all full-time employees. The
annual amount of vacation time accrued varies from 10 to 30 days depending upon
years of service. The maximum smountof vacation time that may be accumulated by
general employees and uniformed police officers is 52 days. The maximum amount
that may be accumulated by uniformed firefighters is 60 days. Accumulated vacation
leave vests and the City is obligated to make payment even N the employee terminates.
The liability for unused and unpaid vacation leave attributable to the Citys
governmental funds is recorded in the respective funds and charged as an expenditure,
as earned. The City believes these liabilfties should be funded as incurred and are
appropriated in the current year. The amount attributable to the proprietary fund& is
A-25
city of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Side time accumulates and vests for all City employees. A police officers sick time
accumulates up to a Maximum of90days. Afirefxghterssick lime accumulates uptoa
maximum of four and one-half months. For all other employees, accumulated sick
fime, up to a maximum of 60 days, is paid upon termination. Vested or accumulated
sick leave that is expected to be liquidated with expendable available financial
resources is reported as an expenditure and a fund liability of the governmental fund
that will pay It. Amounts of vested or accumulated sick leave that are not expected to
be liquidated with expendable available financial resources are reported In the general
bng4erm debt account group. No expenditure is reported for these amounts. Vested
or accumulated sick leave of proprietary funds Is recorded as an expense and liability
of those funds as the benefits ague to employees. As of December 31, 2002,
$21282,t70 has been recorded for accrued sick leave in the general long-term debt
account group, and $274,927 and $407,195 have been reported as "Accnted
expenditures/expenses" in the governmental and proprietary funds, respectively.
Fund Ecuify - Contributed capital in proprietary funds represent amounts that have
been received as capital grants or contributions from developers, customers, or other
funds prior to the implementation of GASB 33, The City records depreciation expense
taken on contributed assets as an add back to retained earnings and a reduction of
oontdbutedcapitai. Reserves represent those portions of fund equity not appropriable
for expenditure or legally segregated for a specific future use. Designated fund
balances represent tentative plans for future use of financial resources.
A-26
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
F. STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the City considers cash to be currency on
hand and demand deposits with banks. The City does not include cash equivalents In
the statement of cash Flows.
2. CASH AND INVESTMENTS
The City's cash and investments consist of deposits with financial institutions, certificates
of deposit, U.S. Govemment and agency securities, corporate bonds, corporate stocks,
and money market funds. The City's investment policies are governed by State Statutes.
Permissible Investments Include direct obligations of the U.S- Government and agencies,
collateralized certificates of deposit, prerpfunded municipal bonds, corporate bonds,
collateralized repury iiase agreements, Treasury money markets, local government trusts,
and savings accounts. Pension fund assets held in bust may be invested in corporate
equity and debt securities. Certificates of deposit, money market investments, and U.S.
Government and agency obligations that mature within one year of the date of acquisition
are recorded at amortized cost. All other invesbments are recorded at fair value.
Collateral, of at least102%, is required for all amounts of demand deposits and certificates
of deposit that are not covered by federal deposit insurance. Deposits are carried at cost
The bank balances and investments are categorized below to give an indication of the
level of custodial credit risk assumed by the City at year-end.
DEPOSITS PRIMARY GOVERNMENT
Category Bank Carrying
Deposits 1 2 3 Barance Amount
Cash and certificates '
of deposits $ F74 R21 _ c LZM5.321 S 1,523.107
Risk Categories:
(1) Insured or codaterai@ed with saunses held by s,e Cityw by its agent in the City's nam.
(2) CoRateragzed with segaiges hdd by pre pledging financial lnatituuods trust deparbmnlor agentin Ute Cily's name.
(3) Uncoltaterafzed
A-27
City of Fayetteville,
Arkansas
Notes to the General Purpose
Financial Statements
December 310
2002
INVESTMENTS PRIMARY GOVERNMENT
Category,
Can*g
Fair
Investments
1 2 ..
. 3 Amount
Value
U.S. Government and
agency obligations
$106,320,290 $ -
108,320,29e
$ $ St139,785
$188,327,854
8,139,764
Corporate stock
8,139.765
4.130.738
4-130,736
Corpoate bands
4.130.73
(11) 1 mrod orr
(1) insured d and n red, a seswf0es held by the Cityby or im agent in the Chys name.
(2) Uninstxed andunregistered,wlfh sewddes he(dby the oaunterpartys W sldepartmentoragenlin BneCBys name.
(3) Uninsured and unregistered, with sacuddes held by the wuntemany in the CW6 nanta or held by the
countelpar" bust departrnowt a agent but not in the CWs name.
A reconciliation of cash and Investments as shown on the Combined Balance Sheet for the
primary government follows:
Carrying Amount as shown above: Balance Sheet
Deposits $ 1.523.107 Cash $ 11283,107
dnvestments t36.152.812 Investments 127,566,512
Restricted imastmants a 9§ 3W
Total ,$,],,76759 o Total s137575atc
DEPOSITS COMPONENT UNITS
Componen: UAft Category Bank Carrying
V>., ,
Cash and c'
of depaelts
Risk Categories:
(1) Insured or collateralized with securities pledging e City or by its agent in the CttY$ nana-
(2) Collateralized with securities held thefinancial insutution'strust department a aWnttnthe We name.
(3) Unoollalereiaed.
r• C
Y•
•
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
INVESTMENTS COMPONENT UNITS
Category Carrying Fair
ynvestmerits i 2 3 Amount Value
U.S. Government and
agency obligations $1,527.536 $ - $ - $ 1.527,536 $ 1.5274667
Corporate Bonds 41,165 - 41,165 41,165
51.586.70 -_ $ 1,5%,701 $ 1,%8.632
Investment Agreements 172,379 179,379
Total investments S 1 741M 1: t.747211
Pock Categories:
(1) Insured or registered, or securitles hmd by the City or its agent in the Gtys name.
(2) Uninsured and unregistered,v9th securities hold by the counterpWsbust departnentwagentin theCetys name.
(3) Uninsured and unregistered, wilt securities held by the cormldrparty In tea We name or held by the
conterpartys trust department or agent, but net in Are City's name.
A reconciliation of cash and investments as shown on the Combined Balance Sheet for the
component units follows:
Carrying Amount as shown above: Balance Sheet:
peas g 983,610 Cash $ 785,942
Investments 1741.080 Investments 1,938,748
2 724,690 .$_2.724_6a`n
GASS Statement 3, 'Deposits with Financial Institutions. Investments (including
Repurchase Agreements), and Reverse Repurchase Agreements; requires the
assignment of Fisk categories to investments, except those investments not evidenced by
securities. Accordingly, the City's, the Library's and the Advertising and Promotion
Commission investment agreements have not been assigned a risk category. The
investment agreements are money market mutual funds in which the City, the Library and
the Advertising and Promotion Commission have partial ownership in a pool of
investments. The pooled investments are in government securities except. for the
Policemen's and Firemeds Pension Funds Investments, which are a combination of
governmental and commercial securtfies
A-29
City of payetta+Aile, Arkansas
Notes to the General Purpose Financial Statements
December31j2002
3, INTERFUND RECEIVABLES AND PAYABLES
Interfund receivables and payab[es result from transactions between various funds within
the City. The balances by fund at December 31, 2002 are:
Fund
pilli loffrom otbor funds:
General fund:
special revenue funds:
Street
OH street parking
Community development
Drug law enfotnement
Parks development
capes pryects fund:
Sales tax Constructlon
Wastewater tmpravemard
Enterprise funds:
Airport
Solid waste
Water and sewer
Internal service fund:
Slop
Trust funds:
Policemen's pension and relief
Wnicipat judge retirement
Agency funds:
$ 277,Q06
36,337
561
2,618
17,674
123,293
10,el 1
70.360
2,731
39,819
10,569
1,542
primarygoverment
General fund 65,332
Spedal revenue fund 55
C"nponoot units
Advertising & promotion fund
Told
T
$ 3$939
4,894
%sag
1,161
1,331
194
136,020
96
12,323
247,970
3,223
144
s 595:o40
•
A-30
y
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A reconciliation of advances to/from other funds as shown on the Combined Balance
Sheet follows:
Advances talfrom other funds:
General fund
Agency funds:
3 110,000 $
Returned check 40,000
paym0 70,000
Tote( S 110.0m s 110.01%1
A reconciliation of interfund receivables and payables as shown on the Combined Balance
Sheet follows:
Due from other funds
Advances to other funds
Due from component units
Due to other funds
Advances from other fins
Due to Primary government
R.ocaivaWas PayaWes
S 695,040 $ -
110,000
65,387
4. FIXED ASSETS
A summary of changes In general fixed assets for the primary government and the
discretely presented component units for the year ended December 31, 2002 follows:
aalanoo Balarm
January 1, December 31,
2002 Additions Reductfons 2002
By fllalor class:
Primary 9overtunent
Land S 9.735.929 s 788,199 S (382,695) S 10,139,433
Buildings 23.786.870 4.698,816 (2,996.858) 25.488.826
Impmvcmcnts other
than buildings 7,613,689 1.007.791 (263.065) 6}58.395
FtrrnVW99WFWvtee 80,084 63,103 (24,915) 116272
Macfw,ary, equ4rent.
and veWdes 9.816.957 1,689 012 (1.752 1021 9.753.867
TOW primary government ;iLQa 590 . S6244921 dj r5.4t0.6551
Diwowly presented components.
Ubrary 5 70.631 S - $ $ 70,631
Advertising and promol3on 237,142 73m
Total componoM units S 307 T73 a 73 z . o s j 3g1.01z
A-31
City of FaYetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Balar�e
Balance
, mmy 1,
-
DocernlW 31,
2002
Addillom
Delaealle
2002
BY soun:as of ImresenorItc
pdnwy govunanerd:
$ -
_
$
f 1t,B33,070
General obligation Mons
f11,MPO
13,667A75
6,768=
(171,520)
20,264A18
Sales tax reverM
8,918'M
M217
i188,12o
9,535,152
speoiol revenue
21175,914
1e,270
(34,80)
2.1W,416
Federal grants
8.103.232
458,255
(5,0174343)
3,512,144
General fund nmonues
ContIbu8drls
6235,879
218.116
6453.9e5
SWSR 7n5
Total pdmsN 9ovemmenl
Su=sp4.
ru•9 1
�eR'Fi5°f41T"^
r
960,752w
ul.
8*004,147
,1
439,626
�1'
1
Urban: bIroelopInent
.,
.I
'R27.000.044
2,023,030
• 1
n
A summary • propd&tary fund types fixed assets balances
at December 31,2002 follows:
LIM
AkW
. ..T 141
343MMU
all
L• _
10MAN 37.M.GatMOMM
A-32
r
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Outstanding commitments at December 31, 2002 under authorized contracts for capital
projects of govemmental funds are presented in the folloudng table:
Ysojocts funded primarily
by sales tax MMMM
Steel & bridge m7wMeRtS
Willer and sew
Improvements
Facilitles improvements
information todmology
Projects funded by
federal grants:
Projects funded by
property tax:
Projects funded by
HMR tax revenues:
Fodlitle3
Park improvements
Street Improvements
Facilities improvements
Park improvements
Total
A-33
S 2236,250
760,607
1.280AS2
619,240
2,711,988
4.537,004
512,243
1.042,733
322,674
116,024
776,695
22A98
14.941.618
$ 5,037,728
228,494
210,441
676ZW
138,485
15,671,590
lot,097
369,18o
290,324
5-22.729.STT
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Construction in progress in the proprietary fund types Is comprised of the fonowing as of
December 31.2002:
E pendiWres incurred
to
Remaining
December31.2002.
Commitments
Projects funded primarily
.
by foderat grants:
g 2,688.040
S 1,674,534
Airport Improvements
Projects funded by
solid waste revs w:
Solid Waste improvements
�B5
19,203
Projects funded by
various sources:
Wastewater Treatment plant
3,568.020
48,911
Projeft funded by.
water sewer revenue:
470 0g2
1.942,606
Operations Center
Total
S 8428.017
,685.314
In managements opinion, the funding sources identified above are adequate to meet all
estimated future commitments.
5. LEASING ACTIVITIES
The Continuing Education Center CCEC") Fund leases building space and the Off -Street
Parking Fund leases parking facllitles to outside parties under long -tens operating lease
agreements. The off -Street Parking Fund capital lease assets are recorded in the General
Fixed Assets Account Group: therefore, no depreciation is recorded.
The CEC Fund budding lease expires November 1, 2t) C The two Off -Street Parking
Fund lease agreements expire September 30, 2004 and July 14, 2005.
•
A-34
L
y
City of Fayetteville, Arkansas
Notes to the General Purpose.Financial Statements
December31, 2002
The Cltys Investment in property leased to others under operating leases at December3l,
2002 consists of:
CEO
S 3,791.621
264,691
4,1156.312
Less -Accumulated
depreciation
Off Street ParkIM
S 615,445
404.135
1,019,580
Minimum future rental revenues to be received under noncancelableoperating leases as
of December 31, 2002 are:
2003
2004
2005
Tatal mintnrlan f ilure
rental revenues
6. LONG-TERM DEBT
CEC Off Stnaet Parking Total
Y
. ire
GENERAL OBLIGATION BONDS - Issuance of general obligation bonds by the City
Is governed by Arkansas Statutes. The Statutes require voter approval for issuance of
general obligation tw nds. General obligation bonds pledge the full faith and credit of
the government. The City currently has no authorized but unissued general obligation
bonds.
SALES AND USE TAX CAPITAL IMPROVEMENT BONDS — Issuance of sales and
use tax capital Improvement bonds is governed by Arkansas Statutes. The Statutes
require voter approval forthe Issuance of -the bonds. The bonds are special obligations
of the City secured by and payable solely from receipts of the sales and use tax The
City currently has no authorized but unissued sales and use tax capital Improvement
bonds.
A-35
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
The total general long-term debt payable as of December 31, 2002, and a summary of
debt aathidy for the year then ended is as follows:
Balance I Balance
January 1, December 31,
2002 Additions Reductions. 2002
Descriotion
Sales and use tax caPltal
improvement bonds: .
Refunding bonds 1997 $ 1,370,000
Series 2002 -
Vested compensated
absences (sick leave) 2A03.355
Total general long-term debt S 3 773 355
$ $ 345,000 $ 1,025,000
25,000,000 6000000 241400,0OO
r
u, r r r0 IL220Sr7,17
--r
Principal and interest payments of capital improvement bonds for subsequent fiscal
years are as follows:
Amount
Principal
Interest
Fiscal Years
2003
8 6,215,000
$' 7989725
2004
6.740,000
589,995
2005
5,565,000
339,945
2006
424000
1539680
2007
21700,000
43,200
Total
0
f•
•
A-36
L
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A summary of capital improvement bonds outstanding as of December 31, 2002 is as follows:
Bond Isere Due Dates Interest Rates
Amount
Sales tax capital hWrmments 1997 2003-2005 4b5%4.65%
$11=000
Sales and use tax capital
improvements 2002 2003-2007 2.OD%-4.00%
S24,4001000
The Sales Tax Capital Improvement Refunding Bonds, Series 1997, were issued to
refund the Sales Tax Capital Improvement Bonds, Series 1986 which were issued to
acquire, construct, and equip an arts center in a joint venture with the University of
Arkansas. The bonds are secured by a pledge of and first lien on a portion of the City's
share of receipts from a 1 % sales and use tax levied by Washington County. ,
The Sales and Use Tax Capital Improvement Bonds, Series 2002, in the amount of
$25,000,000, were issued In June 2002 for the purpose of financing a portion of the
costs of certain improvements to the Cilys wastewater treatment plants and sewerage
and related facilities. The bonds are secured by and payable solelyfrom receipts from
a three-quarters of one percent citywide sales and use tax
The City is subject to a statutory limitation by the State of Arkansas for bonded
indebtedness payable principally from property taxes net of debt service fund cash and
' Investments available to pay these bonds. At December 31, 2002, the statutory debt
limit and legal debt margin for the City were $137,202.633 and $136,416,446,
respectively. The City currently has no debt outstanding which is payable from
property tax.
A-37
f!.
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
REVENUE BONDS - Revenue bonds outstanding consist of debt issued by enterprise
funds of the City. A summary of debt activity for these revenue bonds as of December 31.
2002 Is as follows:
t,0251000 $
i 325,000 5 700,000
3215,000
3,215,000
7.3wO o o -
485,000 608650000
10,0001000
10,000,000
9,270,000
M4000 895801000
001 W 75,000_1.
. , 27= u;i. i;�,� 22,765 1.11
S
1,365 000
Less current maturttes
Revenue bands payable,
net of current maturities S �1.4tO.ODO
Principal and interest payments of the revenue bonds for subsequent fiscal years are
as follows:
Amount
Prt deal_
Interest
Fiscal years:
2003
S 1,355,000
$ 979,79tt
2004
1,415,000
930,065
2005
1,4801000
874,025
2006
1,530,000
818,324
2007
1,595,000
759,026
Thereafter 15,390,0 .-
FA1I]E:S!r.
•
A-38
y
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A summary of revenue bonds outstanding as of December 31, 2002 is as follows:
Outslandin0
Bend Issue
Due Dates
Interest Rates
Amount
Hotel and restaurant
1995
2003-2004
520%-5.25%
$ 700,000
Hotel and restaurant
1998
2003-2015
3.85%4.80%
6,620.000
Water and saw&
1999
2003.2012
3.76% 4.45°%
GAG5,000
Water and sewer
2002A
2003.2008
2.35%-4.05%
2,645,000
Water and sewer
20020
2003.2017
2.35%-4.95%
5,935,000
.S2226 00➢
The revenue bonds are not general obligations of the City or payable from proceeds of
an ad valorem tax, but are payable from the net revenues of the respective enterprise
funds.
The Hotefand Restaurant Gross Receipts Tax Refunding Bonds, series 1995 are
secured by a lien on pledged revenues consisting of collections from a 1% gross
receipts tax on hotels, motels, and restaurants: revenues derived from leasing the CEC
to the University of Arkansas; and funds received from the State undertoudst meeting
and entertainment facilities assistance laws.
The Hotel and Restaurant Gross Receipts Tax Bonds, series 1998 are secured by a
lien on pledged revenues consisting of collections from a 1 % gross receipts tax on
hotels, motels, and restaurants; revenues derived from leasing the CEC to the
University of Arkansas; revenues derived from the operation of the Town Center, and
funds received from the State under tourist meeting and entertainment facilities
assistance laws. The bonds were issued to provide funds to construct and equip the
Town Center, a multi -purpose civic center, and related parking facilities. The bonds are
issued on a parity of security with the Hotel and Restaurant Gross Receipts Tax
Refunding Bonds, series 1995.
The Water and Sewer System Refunding Revenue Bonds, series 1999, are secured
by a lien on the net revenues of the Citys water and sewer system. The bonds are
seamed by a statutory mortgage lien upon the water transmission and distribution
system. The bond ordinance requires that the City maintain gross revenues of the
water and sewer system of at least 110% of the amount required each fiscal yearto (1)
pay operating expenses of the system, (2) pay principal and interest requirements and
trustee fees on series 1999 and parity bonds, and (3) make any deposits needed to
maintain the debt service funds and the renewal and replacement fund at the required
levels. Prior to issuing parity indebtedness, the ordinance requires that the net
A-39
r�
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
revenues of the system for the preceding two years be at least 120% at the maximum
principal and interest requirenlertn all bonds
nd any parity indebtedness then
outstanding and the proposed parity
' Water and Sewer System Refunding Revenue Bonds, series 2002Aand 2002B, in the
amount of $9270,000 were issued in May 2002. The bonds are secured by a pledge
of the net revenues of the Clys water and sewer system. The bond ordinance
requires that the City maintain net revenues of the water and sewer system of at least
an amount equal to (1)125% of the average annual debt service on ad indebtedness,
(2) fund debt service reserve deficiencies on al series 1999 bonds and subordinate
obligations, and (3) fund required deposits to the renewal and replacement fund. The
pledge of revenues is junior and subordinate to the pledge of revenues securing the
1999 bonds, The Series 2002 Bonds were issued for the purpose of refunding the
City's $3215,000 Outstanding principal amount of the Water and Sewer System
Bonds,Revenue ra and refunding the CiVs $10,000,000 outstanding
principal amount of the Waterand Sewer System Subordinate Revenue, Series 2000.
The 1994 series was an advanced refunding and the trustaccount assets and liabilities
are riot included in the accompanying combined financial staternmts. At December3l,
2002, the 1994 bonds outstanding of $2.825,00 are considered defeased. The
economic gain on refunding the 1994 bonds was $10,940. The Series 2000 bond issue f
was a current refunding and the economic toss calculated on the refunding was
$1.142,980. The Series 200 bonds were short-term variable rate bonds with the total
pdncipal of $10,000.OW due in the year 2006. The refundings were issued to take
advantage Of lower interest rates, to restructure existing bond covenants and to
mitigate any interest risk on the variable interest rate of the Series 2000 bond issue.
C. CONDUIT DEBT OBLIGATIONS
From time to time, the City has issued revenue bonds to finance residential housing,
health care and related facilities to persons of low or moderate income or for the
elderly. The bonds are secured by the property financed and are payable solely from
payments received on the underlying mortgage loans. Neither the City, the State nor
any political subdivision thereof is obligated in any manner for the repayment of the
bonds.
Fayetteville Arkansas Public Facilities Board Single Family Mortgage Revenue
Refunding Bonds issued in 1993 in the amount of $7,750,000 and Fayetteville
amount of $23nsas f 770,000 Issued ic Facifibes In 202 were outstanding Variable Rate ras ofng eDecember Bondsvenue 3 2002.
•
A-40
r
i
L
City of Fayetteville, Arkansas .
Notes to the General Purpose Financial Statements
December 31, 2002
7, RETIREMENT PLANS
Each eligible employee is included in one of five defined benefit retirement plans, a
defined contribution plan and/or a deferred compensation plan which the City of
Fayetteville sponsors or has adopted. These are the Policemen's Pension and Relief
Fund, the Firemen's Pension and Relief Fund, the Municipal Judge Retirement Plan,
the Arkansas Local Police Retirement System, the Arkansas Local. Fire Retirement
System, the General Employee Retirement Savings Plan, and the General Employee
Non -Qualified Deferred Compensation Plan (the 'Deferred Compensation Plan').
Three of the plans are included in the City's reporting entity. The Policemen's and
Firemen's Pension and Relief Funds are funded and administered through the
Fayetteville Policemen's Relief Association and the Fayetteville Firemen's Relief
Association. The Municipal Judge Retirement Plan is administered by the City. The
other defined benefit plans and the General Employee Retirement Savings Plan and
Deferred Compensation Plan are not administered by the City and are not included as
a part of the Ctty's reporting entity. The Arkansas Local Police and Fire Retirement
Systems are administered by the State of Arkansas Police and Fire Pension Board.
The General Employee Retirement Savings Plan and the Deferred Compensation Plan
assets are held in custody by a bank trustee.
Six -year historical trend Information for each of the Cityrs single employer defined
benefit plans and for each of the City's agent muttiple-employer defined benefit plans is
included as required supplemental information after the notes to the general purpose
financial statements. A summary of significant data for each of the retirement plans
follows.
A. GENERAL EMPLOYEE RETIREMENT SAVINGS PLAN
Plan Description — The General Employee Retirement Plan is a defined contribution
plan qualified under section 401(a) of the InternalRevenue Code. Baneoklahoma
Trust administers the plan for the City. The initial eligibility for participation in this plan
Is the first day of the month following the employee's one-year anniversary of
employment. Participation in the plan is voluntary and available to all regular full-time
general employees of the City who are at least 20 years of age and who worked at
least 1,000 hours in the first 12 months of employment. The plan requires participating
employees to contribute at least 3% of their base wages to the Retirement Savings
Plan or the Deferred Compensation Plan. The City contribution to the Retirement
Savings Plan is 12% of base wages of contributors to either the Retirement Savings
Plan or the Deferred Compensation Plan. There is 1004E immediate vesting in
amounts contributed by the City.
A-41
City & Fayettevi[le, Arkansas
Notes to the Cre»eralPurpose Financial Statements
December 31.2002
EmployeeFor the year ended December 31 a 2002, the Cftft total payroll for all employees
grnountedto$211875t8gilo Total WOW payroliforthe General r=mployea Retirement
savings Plan amounted to $9.463 ..898. Contributions to the
Savings Plan were as follows:
Employer 9pployea
jcxwJp
,
B. MUNICIPAL JUDGE RETIREMENT PLAN
Plan Description - The City contnbutea a portion of court fees to the Municipal Judge
Retirement Plan. The plan was established by the City in accordance with Arkansas
Statutes and is included inthe CWs primaiyfinancial reporting entity. Anyjudge of the
municipal court who has served at least 20 Years in office, irrespective of age, shah be
eligible to receive retirement benefits. if a judge who is eligible to receive retirementfiLa
benefits resigns, retires from office, or Is succeeded in office by anotherjudge.
r the remainder er of
equal to one half the salary payable at termination will be payable
the judge's natural fife.
Major assumptions used by the actuary in determining the trend information are 7%
interest, 4.5°% salary sceie and mortality based on the 83 GAM table.
Three Year Trend Information for fhe Municipal Judge Retirement Fund t0110ws.
Annual Pension
Yearended
Cost(APG)
12131100
$ 9,477
12/31/01
$ 13,079
12/31/02
$ 171870
Percentage of
Net Pension
APG Gontributed
Obligation
191.63°%
$ (122,(514)
141.49%
$(1284041)
103.56%
$ (128,677)
f0
A-42
L
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Listed below is the City's annual pension cost and the net pension obligation for 2002.
Actuarially required contribution $ 0
Interest on net pension obligation (81963)
Adjustment to actuarially required
contribution 26,833
Annual pension cost 17,870
Actual contribution made 18,506
Decrease in net pension obligation (636)
Net pension obligation beginning of year (128,041)
Net pension obligation end of yearS(128,6771
Any deficiencies for retirement obligations shell be met by payment from the Gito
General Fund.
The current municipal judge has been employed by the City for twelve years;
consequently, there are no vested obligations under the plan.
G. POLICEMEN'S AND FIREMEN'S PENSION AND RELIEF FUNDS
Plan Description - The Policemen's Pension and Relief Fund and the Firemen's
Pension and Relief Fund are singleemployer defined benefit pension plans for the
police and fire, personnel employed by the City prior to January 1, 1983. These plans
do not prepare separate financial statements. Both plans became closed, by State
law, to new employees affaof January 1,1983.
For the year ended December 31, 2002, the City's total payroll for all employees
amounted to $21,875,807, including police and fire personnel. Total police and fire
personnel payroll amounted to $4,171,700 and $3,684,540, respectively, Total police
and fire covered payroll amounted to $352,372 and $568,837, respectively. Covered
payroll refers to eligible compensation paid by the City to active employees covered by
the Policemen's and Firemen's Pension and Relief funds.
The State of Arkansas Fire and Police Pension Review Board is responsible for the
coordination. of the actuarial valuations performed on the Policemen's and Firemen's
Pension and Relief Funds. Actuarial evaluations are performed biennially. Actuarial
assumptions used in evaluating the fund Include entry age cost method, book value for
valuing assets, level percent dosed amortization method, an amortization period of 6
years for active participants and 5 years for retirees, 6% investment rate of return,
4.2%to 8% salary increases, and 4% Inflation rate.
AA3
LJ
City of Fayetteville; Arkansas
Notes to the General Purpose Financial Statements
December3l,2002
As of December 31, 2001, the most recent Information available from the Pension
Review Board, employee membership data related to the plans was as follows:
Poke Fire
F etnigs and benetk'taries currently
remWM benenis
0
AdW plan parficlPants:
Fully vested
4 12
Nonvested
2 1
F
Minimum benefits are determined by State statute. Annual voluntary retirement'
benefits for police and fire equal 90°% of the membees highest year's pay. Members
g oiler
are eliglNe for these.benefiits after 20 years of service. Employees retirin
January 1,1987, are entitled to additional compensation of $2A0 annually for each year
worked in excess of 20 years, up to a maximum additional annual compensation of
$1,200. Benefits for participants overage 59are increased by1.25°%offinal salaryfor
each year worked In excess of 25 years up to a maximum benefit of 100% of final
salary.
The plans require employees to contribute 6 % of their eligible gross salary. These
contributions are refundable, without Interest, upon termination of employment priorto
becoming eligible for retirement or death benefits. The Policemen's Pension and Relief
Fund and Firemen's Pension and Relief Fund balances have been reserved for
member contributions in the amount of $249,565 and $155,286 respectively. The
reserves represent life -to -date contributions from participants currently employed and
contributing.
The Citys contribution to the Policemen's and Firemen's Pension and Relief Funds is
partially funded by a .8 mill property tax bevy and a portion of a statewide 2112% tax on
Insurance premiums of out -or -state insurance companies. On behalf payments from
the state insurance tax of $177,082 for the Policemen's Fund and $87,878 for the
Firemen's Fund were received by the City from the Arkansas local Police and Fire
Res agency. The sRe
f Fund also
receivan oilocaon�0ofll fnes end forfeffuresodlectedbythe City for
violations of ordinances or state laws.
Contributions to the Policemen's and Fremen's Pension and Relief Plans based on
covered payroll, for the year ended December 31, 202, 0respectively.ere$92The portion hiich
of
$237,378 and $55,272 were by the City and employees
the City's contribution to the plans based on covered payroll is determined by State
MAMA
•
L
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
statute and equals or exceeds the employees' oontribution. Contributions made by the
City represent 12% of covered payroll while contributions made by the police officers
and firefighters were 6% of covered payroll. Contributions from property taxes were
$261,384 to each fund.
The Firemen's Pension and Relief Fund elected to participate in the Deferred
Retirement Option Program (DROP) effective January 1,1996. Individual accounts are
maintained for members who elect to partlelpate. The member's DROP account
Includes the monthly amount of his retirement as If he had retired as of the date he
elected to, participate In DROP, Interest earnings, and one-half of the employer's
contribution to the Firemen's Pension and Relief Plan made on behalf of that
employee. The Firemen's Pension and Relief Fund balance has been reserved in the
amount of $797,431 for the amounts payable to participants in DROP.
Three Year Trend Information for Policemen's Pension and Relief Fund
Annual Pension
Percentage of
Net Pension
Year ended
Cost (APC)
APC Contributed
Obligation
MUM
$ 950,096
65.15%
$(2,9301678)
12/31/01
$ 924,436
6024%
$(2,563,150)
. 12/31/02
$ 1,399,872
.
41.58%
$(107461359)
Three Year Trend Information for Firemen's Pension and
Relief Fund
Year Endod
Annual Pension
Percentage of
Net Pension
Cost (APC)
APC Contributed
Obligation
12131/00
$ 266,262
190.30%
$(2,073,953)
12/31/01
$ 285,463
140.55%
$(291891696)
12/31/02
$ I,542,481
27.07%
$(1,064,737)
A-45
City of Fayetteville,' Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Listed below is the Citys annual pension cost and the net pension obligation for 2002.
Actuarially required contribution
Interest on net pension obligation
Adjustment to actuarially required
contribution
Annual pension cost
Actual contribution made
Increase in not pension obligation
Net pension obligation beginning of year
Net pension obligation and of year
Police Fire
$1,092,437 $ 10279,840
(153,789) (131,382)
461.224 394,023
1,399,872 1,542,481
582,081 417,522
817,791 101244959
(2.563,150) (2,189.8981
$ (1.745.359) $ 115C 37)
Summar • or Significant Accounting Policies and Plan Asset Matters -The Policemen`s
and Firemen's Pension and Relief Funds financial statements are prepared on the
accrual basis of accounfing. Both employer and employee contributions are
recognized as revenue In the period In which employees Provided services.
Certificates of deposit and money market investments, that mature within one year
from the date of acquisition, are carried at cost All otherinvestments are carried atfair
value on the balance sheetwith the resulting unrearized gains and losses recognized in
the cu rrem period, There are no bans to or leases with related parties to the pension
plans. Administrative costs are funded by investment earnings In the funds.
D. ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM
Plan Dgscrip#ion -.City police and fire personnel employed after December 31,1982,
are covered by the Arkansas Local Police and Fire Retirement System. A financial
report for the plan may be obtained from the Arkansas Locat Police and Fire
Retirement System, PO Drawer 34164, Little Rock, Arkansas, 72203. Participation is
a condition of emptoymenL This plan, which Is an agent multiple-ampfoyer public
employee retirement system, is a defined benefit plan providing death, disability, and
retirement benefits for its members. Normal retirement age under this plan Is age 55
with 20 years of credited service or age 60 with less than 20 years of credited service.
A member may retire at any age with 28 years or more of credited service.
For the year ended December 31, 2002, the Citys total payroll for all employees
amounted to $21,875,897 including police and fire personnel. Total police and fire
personnel payroll amounted to $4,171.700 and $3,684,540, respectively. Total police
and fire covered payroll amounted to $3,673,749 and $2,602,111, respectively.
Covered payroll refers to all recurring compensation paid by the City to active
employees covered by the Arkansas Local Police and Fire Retirement System. The
State of Arkansas is responsible for the coordination of the actuarial valuations
A-46
l�
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
performed on the Arkansas Local Police and Fire Retirement System. Actuarial
assumptions used were entry age cost method, level percent amortization method, 30
year amortization period for active participants, live year smoothed market valuation
method, 8% investment rate of retum, 461to 4.1 % salary Increases, 3% post -retirement
annual Increases, and 4% rate of inflation. As of December 31, 2001, the most recent
information available from the State, City of Fayetteville employee membership data
related to the plans was as follows:
Police
Fire'
Retirees and beneficiaries currar y
-
receiving benefits
g
g
Active plan panicoants:
Futiyvested
48
40
Flonvested
443
21.
16i- 7-"I LT.kTii 'fn? C�:iij1
Employees terminating from the plan before normal retirement age, with 5, but less
than 20 years of credited service, may receive future benefits provided the employee
does not withdraw his/her accumulated contributions and lives to his/her annuity
starting date.
The plan requires employees to contribute 6% of their eligible gross salary. Employer
contributions are established by the Arkansas Local Police and Fire Retirement
System, and are determined based on level -rate principles. City contribution rates for
the police plan were set at6% through September, at which time they were increased
to 10.06%. The increase was implemented after the adoption of a new benefit plan.
The required city contributions for the fire plan were 6%.
A-47
City of Fayetteville, Arkansas
Notes to the General Rurpose Financial Statements
December 31, 2062
Total contributions to the pension plans for..the year ended December 31; 2002, were
$838A74 of which $449,022 was contributed by the City and $388,552 was contributed
by employees. The City's contribution was actuarially determined as described above
and was based on an actuarial valuation as of December 31, 2001, Payments from a
state Insurance tax of $248,055 for Policemen and $112,472 for Firemen were
received by the City for the Arkansas Local Police and Fire Retirement System_
Three YearTrond Information for Arkansas Laval Police and Fire Retirement System.
Annual Pension Percentage of Net Pension
Year ended Cost (APC) APC Contributed Obligation
Police
12/31/99 $ 250,736 t00% $0
12/31/00 $ 32%517 100% $0
12/31101 $ 344,714 100% $0
Annual Pension
Percentage of
Net Pension
Year ended
Gost (APC)
APC Contributed
Obligation (�
Fire
12/31/99
$ 107,069
140%
$0
12/31/00
$ 2%345
100%
$0
12/31/01
$ 277,238
1000/0
$0
8. ENTERPRISE FUNDS SEGMENT INFORMATION
The City maintains five enterprise funds which provide water and sewer services,
solid waste collection and disposal, airport facilities, continuing education facilities,
and convention facilities.
•
WE
c
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
These funds were setup to operate primarily from proceeds of user charges. Segment
information for the year ended December 31, 2002 is as follows:
Tan
gold
w9W and
A6part
CEC
Cen1m
Wash
sever
TOW
UMMUM love
L 509Ati $
122.004 L
$
5A75.126 L
19,9 mm $
26.20A05
Depmda114e
1,021,674
04AM
3671760
135A65
3A81,891
5.501.997
Owmtna 9tmme Volt)
(1A29214)
(25,654)
(372.901)
(419.519)
956,177
(1,M1,341)
Opma" "nsfere ti (out) net
22,61/
19A42
41AM
Tax rnvenuw
-
260,708
-
-
-
280.786
Inle,9ow[te wWl revenues
2,425,1 t4
23,441
285,700
2,71T265
Noe 9taomo Voss)
1.114,375
229,696
(646209)
(225215)
5.169.360
U41A03
C,ema apaal w,mayaynv
-
-
-
-
3,754.490
3.754,496
property. Went am egdpoerrt:
Addlaons
Z032JM
-
-
81.0a
6,634.637
7,725A27
DOOMS
14,326
107,21f
4t11,112
622A49
Naww in Up"
2;56%126
(555)
3.325.701
22=512
28,531.676
ToW aswts
16.502,748
2AM,222
eM8,000
6.578,691
142,168,047
177,248A88
BonM and ofnarfonµhm
11auli9w
360A00
6,540AW
14,5%000
21,410AW
Tool equty
L15.950•t00 3
1.a73,950 $
2.711,743 $
5,622,T26 $
174276.249 3
150,464,765
9. COMMITMENTS AND CONTINGENCIES
Litigation
The City is a defendant in a lawsuit challenging the constitutionality of a city ordinance to
regulate operation of a racetrack facility that sits astride the city limits. The circuit judge
upheld the constitutionality of 0)e ordinance and the plaintiff has appealed the case and
filed a civil suit alleging inverse condemnation and is seeking $500,000 In damages. The
City feels there is a low probability of silbstantial damages being assessed against the City.
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31; 2002
The City, two City police offoem and others are defendants in a lawsuit alleging
defamation, false light, invasion of privacy, conversion, and violation of 42 U.S.C. 1983.
The City's insurance company, National Casualty Company, is defending the case and the
City's exposure is limited to the insurance deductible of $50,000, The City believes the
case does not have merit and the City will prevail.
The City is involved in other pending lawsuits In the normal course of operations.
Management does not belleve that the outcome of these claims will have a material
adverse effect on the Cftys fin8rinial condition.
Contingencies
Necessary improvements to the wastewater collection and treatment system have been
identified by the City. In 1999, the City took preliminary steps to implement these
Improvements by purchasing land suitable for the site of a second treatment plant and by
submitting a permit application. The total cost for the project is estimated at $121 million.
In an election held November 8, 2001, the voters of the City of Fayetteville approved a
3/4% sates and use tax dedicated to the payment of debt service on obligations issued to
finance these Improvements. The State of Arkansas has committed $100,000,000 for a
loan to the City to finance the project The City issued new bonds of $25,000,000 in 2002
to finance the remainder of the costs.
10.CONTINGENT LIABILITIES
In the normal course of operations, the City receives grant funds from various federal and
state agencies. The grant programs are subiect to audit by the granting authority, the
purpose of which is to ensure compliance with conditions precedent to the granting of
funds. The City believes that any liability for reimbursement which may arise as a result of
audits of grant funds would not be material.
The City is party to other proceedings which normally occur in governmental operations. In
the opinion of management and legal counsel, the proceedings are not likely to have a
material, adverse Impact on the affected funds of the City.
114RISK MANAGEMENT
The Citys comprehensive risk management program is administered with the assistance of
a professional risk management broker. The City is exposed to the risk of various losses
such as theft of, damage to, and destruction of assets; errors and omissions; and personal
injury, natural disasters and employee health and accident benefits. The City limits losses
and manages risk through the pureliase of insurance policies with several different carriers.
A-50
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
These funds were set.up to operate primarily from proceeds of user charges. Segment
information for the year ended December 31, 2002 is as follows:
,
Tan
send
W3wwd
Airport
CEC
candler
waste
sewer
TOW
Operating teverues
S 809A71 S
122.004 9
- S
SA75,126 S
18,04BAU $
26.30A05
Deproda6un
1,021.574
94.W
367,760
135.965
3181,891
5.501,987
Opersthg rncome(ima)
(1.529.214)
(25,884)
(372,901)
(419,519)
98&1T7
(1,361,341)
opomlug bansfars In not
22,841
19A42
41b83
Tar reven"
-
2a0,789
-
-
-
280.7a9
h,5p®T'arRetellal revenues
2,426.1u
-
23.441
268,700
2,71'1=
Not Income Oesa)
1,114378
229,506
(645.29n
(22621s)
5.169.358
Sb41,903
Coma dm a d o9r W1 W"
-
-
-
-
3.764.49E
3.754.490
Properly, plant and exape1er2
AddXws
2.032.Ba8
-
-
a1.0m
5,634,637
7.728.52T
Deletions
14„M
-
107,211
401.112
52ZA49
Net vrwkkV opm
$550,126
-
(555)
3.325;791
22b25.512
2B430.975
ToW assets
16.50274E
2,578222
9A18,0W
6,576,691
142,168,947
177.246.666
Bonds and Merbnp-0Mn
9abd4jos
360,000
6.54g000
14.810.000
21,410M
Tow ewry
$15.9d0.100 S
1A73.950 6
2.711743 S
5.622.726 S
124276,249 S
150,464.768
9. COMMITMENTS AND CONTINGENCIES
Litigation
The City is a defendant in a lawsuit challenging the constitutionality of a city ordinance to
regulate operation of a racetrack facility that sits astride the city limits. The circuit judge
upheld the constitutionality of the ordinance and the plaintiff has appealed the case and
riled a civil suit alleging inverse condemnation and is seeking $500,000 in damages. The
City feels there is a low probability of substantial damages being assessed againstthe City.
&TMIJ
i*
City of Fayetteville, Arkansas.
Notes to the. GeneratPurposo Financial Statements
December 31; 2002
The City, two City poUoa offloom and Others are defendants is a lawsuit alleging
defamation, false light, invasion of privacy, conversion, and violation of 42 U.S.C. 1983.
The City's insurance company, National Casualty Company, is defending the case and the
City's exposure is limited to the insurance deductible of $50,000, The City believes the
case does not have merit and the City will prevail.
The City is involved in other pending lawsuits in the normal course of operations.
Management does not believe that the outcome of these claims will have a material
adverse effect on the Citys financial condition.
Contingencies
Necessary improvements to the wastewater collection and treatment system have been
identified by the City. In 1999, the City took preliminary steps to implement these
Improvements by purchasing land suitable for the site of a second treatment plant and by
submitting a permit application. The total cost for the project is estimated at $121 million.
In an election held November 8, 2001, the voters of the City of Fayetteville approved a
314% sales and use tax dedicated to the payment of debt service on obligations issued to
finance these Improvements. The State of Arkansas has committed $100,000,000 for a
loan to the City to finance the project. The City issued new bonds of $25,000,000 in 2002 •
to finance the remainder of the costs.
10.CONTINGENT LIABILITIES
In the normal course of operations, the City receives grant funds from various federal and
state agencies. The grant programs are subject to audit by the granting authority, the
purpose of which is to ensure compliance with conditions precedent to the granting of
funds. The City believes that any liability for reimbursement which may arise as a result of
audits of grant funds would not be material.
The City Is party to other proceedings which normally occur in governmental operations. In
the opinion of management and legal counsel, the proceedings are not likely to have a
material, adverse impact on the effected funds of the City.
11,RiSK MANAGEMENT
The Citys comprehensive risk management program Is administered with the assistance of
a professional risk management broker. The City is exposed to the risk of various losses
such as theft of, damage to, and destruction of assets; wrors and omissions; and personal
injury, natural disasters and employee health and accident benefits. The City limits losses
and manages risk through the purchase of insurance policies with several different carriers.
•
►:Wv;
r
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
In addition, the City instituted various safety programs to reduce losses. The budgeting
process includes provisions for accumulating funds to cover deductibles and any minor
items which would not be covered by commercially purchased policies. There have been
no significant reductions in insurance coverage from coverage in the priaryear, and there
were no settlements that exceeded Insurance coverage in the past three Fiscal years.
12.NEW APPLICABLE GASB STANDARDS
In 1999, GASB Statement34 "Basic Financial Statements -and Management's Discussion
and Analysis -for State and Local Govemments' was issued. This Statement establishes
standards for preparing government -wide financial statements and fund4evel financial
statements and becomes effective for the City of Fayetteville in 2003. The City has not
adopted this statement nor determined the effects of adoption. Management intends to
delaythe retroactive reporting of all majorgeneral fixed assets until after Initial adoption as
permitted under GASB 34.
GASB has issued Statement No. 37, Basic Financial Statements - and Managements
Discussion and Analysis -for State and Local Governments: Omnibus - an Amendment of
GASB Statements No.21 and No. 34". The amendments to Statement 21 are necessary
because of the changes to the fiduciary fund structure requifed by Statement 34. The
amendments either clarify cenaln provisions that, in retrospect, may not be sufficiently
clear for consistent application or modify other provisions that the GASB Board believes
may have unintended consequences in some circumstances. This statement will become
effective for the City in the year 2003. The City has not adopted this statement nor
determined the effects of adoption.
GASB has issued Statement No. 38, 'Certain Financial Statement Note Disclosures,"
which modifies, establishes, and rescinds certain financial statement disclosure
requirements. This Statement will become effective for the City in the year2003. The City
has not adopted this statement nor determined the effects of adoption.
GASB has issued Statement No. 39, "Determining Whether Certain Organizations Are
Component Units" The Statement provides additional guidance to determine whether
certain organizations forwhich the City is not financially accountable should be reported as
component units. This statement will become effective for the City in the year 2004. The
City has not adopted this statement nor determined the effects of adoption.
A-51
0
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
13.SUBSEQUENT EVENT
in April 2003, 8t6 City b6ganthe process of refunding the Hotel and Restaurant Gross
Receipts Tax Bonds, Series 1998, The bonds will be secured by a lien on pledged
revenues from the collections of the 1% gross receipts tax on hotels, motels, and
restaurants levied for advertising and promotion. The pledge of revenues is to be
subordinate to the pledge of revenues supporting the Series 1995 Hotel and Restaurant
Gross Receipts Tax Refunding Bonds. The City is refunding the 1998 bonds to take
advantage of lower interest rates. .
I
A-52
APPENDIX B
• UNAUDITED FINANCIAL STATEMENTS OF THE CITY'S
WATER AND SEWER FUND FOR THE YEAR ENDED
DECEMBER 31, 2003
f•
L31
10
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i�
B-2
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 2003
UNAUDITED
ASSETS
Cash
Investments
Accounts Receivable
Due From Other Funds
Inventories
Prepaid Expenses
Restricted Assets
Investments
Accrued Interest
Fixed Assets
Property, Plant, and Equipment
Accumulated Depreciation
Unamortized Bond Issue Cost
TOTAL ASSETS
LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable
Accrued Expenses
Customer Deposits
Due to Other Funds
Payable from Restricted Assets
Revenue Bonds - Current Portion
Accrued Interest
Deferred Interest
Bonds Payable - Less Current Portion
Unamortized Bond Discount
TOTAL LIABILITIES
NET ASSETS
Invested in Capital Assets, Net of Related Debt
Restricted for Debt Service
Unrestricted
TOTAL NET ASSETS
$ 7113160
21,498,687
236117925
54,416
547,588
40,032
1,737,062
I3033
191 X8,754
(71,7653823)
13I,634
$ 146,796A68
1,763,410
612,748
11444,990
2233269
9703000
232,748
(460,247)
13,540,000
(1433169)
18,183,749
104,952,931
5333541
23,126,245
$ 1281612,719
B-3
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER FUND
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
UNAUDITED
OPERATING REVENUES
Water Services $ 10,700,460
Sewer Services 91052,355
Other 611,787
TOTAL OPERATING REVENUES 20,364,602
OPERATING EXPENSES
Water Supply 416167576
Operations and Administration 2,8661394
Water Transmission and Distribution 11253,010
Sewer Collection 11255,818
Waste Water Treatment 41866,555
Customer Services 21084,711
Depreciation 4,004,983
TOTAL OPERATING EXPENSES 20,948,047
OPERATING INCOME (LOSS) (583,445)
NONOPERATING INCOME (EXPENSE
Interest Income 9627583
Interest Expense (421,563)
Net Decrease in Fair Value of Investments (248,614)
Other 227,568
TOTAL NONOPERATING INCOME 51%974
INCOME BEFORE CONTRIBUTIONS AND TRANSFERS (63,471)
Capital Contributions 31495,312
Transfers In I,149,040
Transfers Out (244,911)
CHANGE IN NET ASSETS 4,3361470
TOTAL NET ASSETS, BEGINNING OF YEAR
TOTAL NET ASSETS, END OF YEAR
124,276,249
$ 128,612,719
1•
•
•
m
` APPENDIX C
•
Proposed Form of Bond Counsel Opinion
Kutak Rock LLP, Bond Counsel, will render an opinion with respect to the Series 2004 Bonds, dated the
date of issuance and delivery thereof, in substantially the following form:
May 12004
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephens Inc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
$620905000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville,
Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $6,090,000 Water and Sewer System
Refunding Revenue Bonds, Series 2004 (the "Bonds").
The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of
Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-
164-401 et seq., §§14-234-201 et seq. and §§ 14-235-201 et seq. (collectively, and as from time to time amended, the
"Authorizing Legislation"), pursuant to Ordinance No. 4554 of the City, duly adopted and approved on April 6,
2004 (the "Bond Ordinance" ), and pursuant to a Trust Indenture dated as of May 1, 2002, as amended and
supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended and supplemented, the
"Indenture"), by and between the City and Bank of Oklahoma, N.A., as trustee (the "Trustee"). Reference is hereby
made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to
the conditions for the issuance of parity debt by the City, the nature and extent of the security for the Bonds, the
rights, duties and obligations of the City, the Trustee and the holders of the Bonds, and the terms upon which the
Bonds are issued and secured.
Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of
which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the
power of the City to adopt the Bond Ordinance and enter into and perform its obligations under the Indenture, the
valid adoption of the Bond Ordinance and the due authorization, execution and delivery of the Indenture by the City,
and with respect to the Indenture being enforceable upon the City.
We
have examined
the law and such
certified proceedings and other
papers
as we have deemed necessary
to render this
opinion. As to
questions of fact
material to our opinion, we have
relied
upon the representations of the
C-1
City contained in the Bond Ordinance and the Indenture and in the certified proceedings and other certifications of
public officials furnished to us, without undertaking to verify the same by independent investigation. •
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly created and validly existing as a municipal corporation of the State of Arkansas.
Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and the
Authorizing Legislation, the City is empowered to adopt the Bond Ordinance, to execute and deliver the Indenture,
to perform the agreements on its part contained therein, and to issue the Bonds.
2. The Bond Ordinance has been duly adopted by the City and constitutes a valid and binding
obligation of the City enforceable upon the City in accordance with its terms.
3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and
binding obligation of the City enforceable upon the City in accordance with its terms.
4. The Bonds have been validly authorized, executed, issued and delivered by the City and represent
valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be
payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as
defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing
the City's Water and Sewer System Refunding Revenue Bonds, Series 2002, and any Additional Bonds (as defined
in the Indenture) issued hereafter.
5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the
Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues.
6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a
specific preference item for purposes of the federal alternative minimum tax. The opinion described in the
preceding sentence assumes the accuracy of certain representations and compliance by the City with covenants
designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended, that must be met subsequent
to the issuance of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City
has covenanted to comply with such requirements.
The interest on the Bonds is exempt from all state, county and municipal taxes in the State of
Arkansas.
8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and
the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with
the offer and sale of the Bonds.
It is to be understood that the rights of the registered owners of the Bonds and the enforceability of the
Bonds, the Bond Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally
applicable and that their enforcement may also be subject to the exercise ofjudicial discretion in appropriate cases.
Very truly yours,
C-2
APPENDIX D
•
Specimen of Financial Guaranty Insurance Policy
D-I
0
[THIS PAGE LEFT BLANK INTENTIONALLY]
•
D-2
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9 .5
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+�',2lSwa>d QEiCtt ei %nr�Ean4�"f�RFct`
D-3
(This page intentionally left blank.)
•
L
16
OFFICIAL STATEMENT
i
NEW ISSUE "RATINGS: S&P; "AAA" (Underlying: "A")
• BOOK -ENTRY ONLY (AMBAC Insured)
In the opinion'of Kwak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain
repreaeniatiow and continuing compliance with certain covenants, interest on the Series 2004 Bonds is excluded from gross income for federal income tar
purposesland is not a specific preference item for purposes of the federal alternative minimum tar. Under existing law, Bond Counsel is of the opinion that the
Series 1004 Bonds and the interest thereon are exempt from all state, county and municipal lazes in the State of Arkansas. Seethe caption "TAX MATTERS"
herein. 1
Dated:1 May 1,
$6,090,000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
SERIES 2004
Due: August 15, as sbown below
The Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), are being issued by the City of Fayetteville,
Arkansas (the "City') for the purpose of refunding certain outstanding indebtedness of the City, funding a debt service reserve, paying the premium for a
fmanciall guaranty ,insurance policy, and paying certain expenses in connection with the issuance of the 'Series 2004 Bonds. See the captions
"ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein.
The Series 2004 Bonds are issuable only as fully registered bonds and, when issued, will be registered in the time of Cede & Co., as nominee of The
Depository Trust Company ("DTC'), New York, New York, to which principal, premium, if any, and interest payments on the Series 2004 Bonds will be
made so long as Cede & Co. is the registered owner of the Series 2004 Bonds. Individual purchases of the Series 2004 Bonds will be made only in book -entry
form, in tlenominations of $5,000 or integral multiples thereof Individual purchasers ("Beneficial Owners") of Series 2004 Bonds will not receive physical
delivery of bond certificates. See the caption "BOOK -ENTRY ONLY SYSTEM' herein.
The Series 2004 Bonds shall bear interest from their dated date, payable on February 15 and August 15 of each year, commencing August 15, 2004. All
such interest payments shall be payable to the persons in whoseti me such Series 2004 Bonds are registered on the bond registration books maintained by the
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as trustee (the "Trustee"), as of the first day of the calendar month in which the applicable interest payment date
falls. Principal of and premium, if any, on the Series 2004 Bonds shall be payable at the principal corporate trust office of the Trustee. So long as DTC or its
nomineeis the registered owner of the Series 2004 Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the
disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants; as more fully described herein.
Pursuant to a Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental ,Trust Indenture dated as of May I, 2004,
each by and between the City and the Trustee, the principal of, premium, if any, and interest on the Series 2004 Bonds are secured by a pledge of the Net
Revenues (as defined herein) of the water and sewer system (the "System") of the City. The pledge of Net Revenues securing the Series 2004 Bonds shall be
• on a parity with the existing pledge of Net Revenues securing $8,145,000 outstanding principal amount of the City's Water and Sewer System Refunding
Revenue Bonds, Series 2002. The City has covenanted to fix and maintain rates for System services which shall produce Net Revenues at least equal to (i)
125%`of tithe average annual debt service on all indebtedness of the City to which System revenues are pledged, (ii) the amount, if any, needed to fund debt
service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and (iii) the warrant, if any, needed to make
required deposits to',the Renewal and Replacement Fund (as defined herein). See the caption "SECURITY FOR THE BONDS" herein. The Series 2004
Bonds are subject to optional redemption prior to maturity as more fully described herein under the caption "THE SERIES 2004 BONDS - Redemption."
Payment of the principal of and interest on the Series 2004 Bonds when due will be insured by a financial guaranty insurance policy to be issued by
Ambac Assurance Corporation simultaneously with the delivery of the Series 2004 Bonds.
i k
The Series 2004 Bonds are special obligations of the City secured by and payable solely from the Net Revenues of the System. The Series 2004
Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or statutory debt,limitation or restriction. The issuance
of the Series 2004jBonds shall not directly, indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any
appropriation for the payment of the Series 2004 Bonds, except as described herein with respect to Net Revenues of the System.
MATURITY SCHEDULE
Maturity Principal Interest Maturity Principal Interest
(August 15) Amount Rate Price (August 15) Amount Rate Price
2004 $130,000 1.000% 100.000% 2009 $ 655,000 2.800% 97611%
2005 585,000 2.500% 101.366% 2010 670,000 3.050% 99,434%
2606 595,000 2.500% 101.371% 2011 690,000 3.300"/ 99.359%
2007 615,000 3.000% 102.578% 2012 1,515,000 .. 4.000% 101.888%
2608 635,000 3.000% 101.713% .
(Plus accrued interest)
The Series 2004 Bonds are offered when, as and if issued by the City and are subject to the final approving opinion of Kursk Rock LLP, Little Rock,
Arkansas; Bond Counsel. Certain matters will be passed upon for the City by its counsel, Kit Williams, Esq., City Attorney. It is expected that the Series 2004
Bonds will be available for delivery in New York, New York, on or about May 20, 2004.
'I
See the caption) "RATINGS" herein.
Stephens Inc.
The date of this Official Statement is April 23, 2004.
WN
171
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•
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CITY OF FAYETTEVILLE, ARKANSAS
Issuer
City Council
Dan Coody, Mayor
Kyle Cook
Bob Davis
Lioneld Jordan
Shirley Lucas
Don Marr
Robert Reynolds
Robert Rhoades
Brenda Thiel
Hugh Earnest, Chief Administrative Officer
Stephen Davis, Finance & Internal Services Director
Greg Boettcher, Water & Wastewater Director
Sondra Smith, City Clerk
Kit Williams, City Attorney
BANK OF OKLAHOMA, N.A.
Tulsa, Oklahoma
Trustee and Paying Agent
KUTAK ROCK LLP
Little Rock, Arkansas
Bond Counsel
STEPHENSINC.
Fayetteville, Arkansas
Underwriter
(This page intentionally left blank.)
•
•
•
CI
No dealer, broker, salesman or other person has been authorized by the City or by Stephens Inc. (the
"Underwriter") to give any information or to make any representations, other than those contained herein; and, if
given or made, such other information or representations must not be relied upon as having been authorized by
either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to
buy, nor shall there be any sale of any Series 2004 Bonds in any jurisdiction in which such offer is not authorized, or
in which the person making such offer, solicitation or sale is not qualified to do so, or to any person to whom it is
unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein are
subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the
System since the date hereof.
THE SERIES 2004 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
19333 AS AMENDED, NOR HAS THE TRUST INDENTURE BEEN QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS FROM SUCH
REGISTRATION AND QUALIFICATION CONTAINED IN SUCH LAWS.
CERTAIN INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM THE CITY, THE
DEPOSITORY TRUST COMPANY AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE.
THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN
ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE
FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS
TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTY THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2004 BONDS
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
[OEM
IntroductoryStatement.........................................................................................................................................
stem
TheSeries 2004 Bonds..................................................................................
.................................................... 2
Securityfor the Bonds.........................................................................................................................................
4
BondInsurance.....................................................................................................................................................
5
Book -Entry Only System......................................................................................................................................
6
Sourcesand Uses of Funds...................................................................................................................................
8
TheRefunding Program........................................................................................................................................
9
DebtService Requirements..................................................................................................................................
9
EstimatedDebt Service Coverage........................................................................................................................
10
TheCity................................................................................................................................................................
10
TheS ....................................................................................................
13
y.......................................................
Definitionsof Certain Terms................................................................................................................................ 22
Summaryof the Indenture.................................................................................................................................... 25
Summary of the Continuing Disclosure Agreement............................................................................................. 30
Underwriting......................................................................................................................................................... 32
TaxMatters........................................................................................................................................................... 33
Ratings.................................................................................................................................................................. 33
LegalMatters........................................................................................................................................................ 34
FinancialStatements............................................................................................................................................. 35
Miscellaneous....................................................................................................................................................... 35
Accuracy and Completeness of Official Statement.............................................................................................. 35
APPENDIX A - Audited General Purpose Financial Statements of the City for the
yearended December 31, 2002............................................................................................................................... A-1
APPENDIX B - Unaudited Financial Statements of the City's Water and Sewer Fund for the
yearended December 31, 2003................................................................................................................ B-1
APPENDIX C - Form of Bond Counsel Opinion................................................................................................. C-1
APPENDIX D - Specimen of Financial Guaranty Insurance Policy.................................................................... D-I
[THIS PAGE LEFT BLANK INTENTIONALLY]
I
OFFICIAL STATEMENT
$6,0907000
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER SYSTEM REFUNDING REVENUE BONDS
SERIES 2004
INTRODUCTORY STATEMENT
The following introductory statement is subject in all respects to the more complete information set forth in
this Official Statement. All descriptions and summaries of documents hereinafter set forth are qualified in their
entirety by reference to each such document. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms under the caption "DEFINITIONS OF CERTAIN TERMS" herein.
This Official Statement, including the cover page and the Appendices hereto, is furnished in connection
with the offering of Water and Sewer System Refunding Revenue Bonds, Series 2004 in the principal amount of
$6,090,000 (the "Series 2004 Bonds"), by the City of Fayetteville, Arkansas (the "City").
The City is a city of the first class organized and existing under the laws of the State of Arkansas (the
"State"). The City is authorized under Amendment 65 to the Constitution of the State ("Amendment 65") and
Arkansas Code Annotated (1998 Repl. & 2003 Supp.) §§14-164-401 et seq., §§14-234-201 et seq., and
§§14-235-201 et seq. (collectively, and as from time to time amended, the "Act"), to issue and sell revenue bonds
for the purpose of financing and refinancing the cost of improvements and betterments to its water and sewer system
(the "System").
The Series 2004 Bonds are to be issued by the City pursuant to Amendment 65, the Act and Ordinance
No. 4554, adopted and approved on April 6, 2004 (the "Authorizing Ordinance"), for the purpose of (i) refunding
the City's $6,365,000 outstanding principal amount Water and Sewer System Refunding Revenue Bonds, Series
• 1999 (the "Series 1999 Bonds"), (ii) establishing a debt service reserve for the Series 2004 Bonds, (iii) paying the
premium for a financial guaranty insurance policy, and (iv) paying the costs of issuing the Series 2004 Bonds. See
the captions "ESTIMATED SOURCES AND USES OF FUNDS" and "THE REFUNDING PROGRAM" herein.
The Series 2004 Bonds are special obligations of the City, payable solely from and secured by a pledge of
the Net Revenues (as defined herein) of the System on a parity basis to the existing pledge of Net Revenues securing
the payment of debt service on $8,145,000 outstanding principal amount of the City's Water and Sewer System
Refunding Revenue Bonds, Series 2002 (the "Series 2002 Bonds"). The City has covenanted to fix and maintain
rates for System services which shall produce Net Revenues at least equal to (i) 125% of the average annual debt
service on all indebtedness of the City to which System revenues are pledged, (ii) the amount needed to fund debt
service reserve deficiencies with respect to all indebtedness of the City to which System revenues are pledged, and
(iii) the amount needed to make required deposits to the Renewal and Replacement Fund (as defined herein). The
regularly scheduled payment of principal of and interest on the Series 2004 Bonds when due is guaranteed under a
financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") issued concurrently with the
delivery of the Series 2004 Bonds by Ambac Assurance Corporation, a Wisconsin -domiciled stock insurance
company ("Ambac Assurance"). See the captions "SECURITY FOR THE BONDS," "BOND INSURANCE" and
"SUMMARY OF THE INDENTURE" herein.
The faith and credit of the City are not pledged to the payment of the Series 2004 Bonds, and the
Series 2004 Bonds do not constitute an indebtedness of the City within the meaning of any constitutional or
statutory debt limitation or restriction. The issuance of the Series 2004 Bonds shall not directly, indirectly or
contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for the
payment of the Series 2004 Bonds, except as described herein with respect to Net Revenues.
Additional bonds may be issued on a parity of security with the Series 2002 Bonds and the Series 2004
Bonds under certain circumstances set forth in the Indenture (hereinafter defined). See the caption "THE SERIES
2004 BONDS - Additional Bonds" herein. The Series 2002 Bonds, the Series 2004 Bonds and any Additional
Bonds are herein collectively referred to as the "Bonds."
•
Pursuant to the provisions of a Continuing Disclosure Agreement dated as of the date of delivery of the
Series 2004 Bonds, by and between the City and the Trustee (the "Continuing Disclosure Agreement"), the City has
undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data
concerning the System and of the occurrence of certain material events. See the caption "SUMMARY OF THE
CONTINUING DISCLOSURE AGREEMENT" herein.
This Official Statement contains brief descriptions or summaries of, among other matters, the City, the
System, the Series 2004 Bonds, the Continuing Disclosure Agreement, and the Trust Indenture dated as of May 1,
2002, as supplemented and amended by a First Supplemental Trust Indenture dated as of May 1, 2004 (as
supplemented and amended, the "Indenture"), by and between the City and Bank of Oklahoma, N.A., Tulsa,
Oklahoma, as trustee (the "Trustee"), pursuant to which the Bonds are issued and secured. Such descriptions and
information do not purport to be comprehensive or definitive. All references herein to the Indenture and the
Continuing Disclosure Agreement are qualified in their entirety by reference to each such document, and all
references to the Series 2004 Bonds are qualified in their entirety by reference to the definitive form thereof and the
information with respect thereto included in the Indenture. Copies of the Continuing Disclosure Agreement, the
Indenture, and the form of Series 2004 Bond included therein, are available from the City by writing to the attention
of the City Clerk, City of Fayetteville, City Administration Building, 113 West Mountain, Fayetteville, Arkansas
72701 and, during the initial offering period only, from the Underwriter, Stephens Inc., 3425 North Futrall,
Suite 201, Fayetteville, Arkansas 72703. Certain financial and operating data have been provided by the City from
the audited records of the System and certain demographic information has been obtained from other sources which
are believed to be reliable.
THE SERIES 2004 BONDS
Description. The Series 2004 Bonds will be initially dated as of May 1, 2004, and will bear interest
payable semiannually on February 15 and August 15 of each year, commencing August 15, 2004, at the rates set
forth on the cover page hereof. The Series 2004 Bonds will mature on August 15 in the years and in the principal
amounts set forth on the cover page hereof.
The Series 2004 Bonds are issuable only in the form of fully registered bonds and, when issued, will be •
registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York,
New York, to which principal, premium, if any, and interest payments on the Series 2004 Bonds will be made so
long as Cede & Co. is the registered owner of the Series 2004 Bonds. Individual purchases of the Series 2004
Bonds will be made only in book -entry form, in denominations of $5,000 or integral multiples thereof. Individual
purchasers ("Beneficial Owners") of Series 2004 Bonds will not receive physical delivery of bond certificates. See
the caption "BOOK -ENTRY ONLY SYSTEM" herein.
All interest payments on the Series 2004 Bonds shall be payable to the persons in whose name such Series
2004 Bonds are registered on the bond registration books maintained by the Trustee, as of the first day of the
calendar month in which the applicable interest payment date falls. Principal of and premium, if any, on the Series
2004 Bonds shall be payable at the principal corporate trust office of the Trustee. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Series 2004 Bonds to the extent of the sum or sums so
paid. So long as DTC or its nominee is the registered owner of the Series 2004 Bonds, disbursement of such
payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial
Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein.
Redemption. The Series 2004 Bonds are subject to redemption prior to maturity as follows:
The Series 2004 Bonds are subject to redemption prior to maturity, at the option of the City, on and after
August 15, 2009, in whole at any time or in part in inverse order of maturity (and selected by the Trustee by lot
within a maturity) on any interest payment date, from funds from any source, at a redemption price of 100% of the
principal amount of the Series 2004 Bonds being redeemed, plus accrued interest to the date of redemption.
Partial Redemption of a Series 2004 Bond. In selecting Series 2004 Bonds for redemption prior to
maturity, in the case any outstanding Series 2004 Bond is in a denomination greater than $5,000, each $5,000 of face
value of such Series 2004 Bond shall be treated as a separate Series 2004 Bond in the denomination of $5,000;
provided, however, that so long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, the
particular Series 2004 Bonds or portions thereof to be redeemed within a maturity shall be selected by lot in such •
manner as DTC shall determine.
Notice of Redemption. Notice of the call for any redemption, identifying the Series 2004 Bonds or portions
thereof being called and the date on which they shall be presented for payment, shall be mailed by the Trustee by
• first class mail (or, so long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, by any
other means acceptable to DTC, including facsimile) to the registered owner of each such Series 2004 Bond
addressed to such registered owner at his registered address and placed in the mails not less than thirty (30) nor more
than sixty (60) days prior to the date fixed for redemption; provided, however, that failure to give such notice by
mailing, or any defect therein, shall not affect the validity of any proceeding for the redemption of any Series 2004
Bond with respect to which no such failure or defect has occurred.
Any notice mailed as provided above shall be conclusively presumed to have been duly given, whether or
not the registered owner receives the notice.
Additional Bonds. The City may issue from time to time one or more series of Additional Bonds for the
purpose of (i) financing Costs of Construction in connection with the acquisition, construction and equipping of
Project facilities, (ii) refunding the Series 2002 Bonds, the Series 2004 Bonds or any series of Additional Bonds or
Subordinate Obligations, in whole or in part, or (iii) any combination thereof. Additional Bonds shall be secured
equally and ratably with the Series 2002 Bonds, the Series 2004 Bonds and any other series of Additional Bonds
theretofore issued and then Outstanding, except insofar as any terms or conditions of redemption or purchase
established under the Indenture may afford additional benefit or security for the Bonds of any particular series.
Before any Additional Bonds are authenticated, there shall be delivered to the Trustee the items required for the
issuance of Bonds by the Indenture, plus a statement by a Qualified Accountant reciting the opinion, based upon
necessary investigation, that the Net Revenues of the System for the Fiscal Year immediately preceding the Fiscal
Year in which such Additional Bonds are to be issued were not less than (i) 130% of the average Annual Debt
Service on all then outstanding Bonds and Subordinate Obligations, plus the Additional Bonds then proposed to be
issued, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund and any debt
service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to make required
deposits to the Renewal and Replacement Fund.
If any changes have been made, and are in effect on the date of issuance of the Additional Bonds, in any
rates and charges imposed by the City for System services which were not in effect during the entire preceding
• Fiscal Year, the Qualified Accountant may, if such changes resulted in increases in such rates and charges, and shall,
if such changes resulted in reductions in such rates and charges, adjust the Net Revenues for the preceding Fiscal
Year to reflect any changes in such Net Revenues which would have occurred if the changed rates and charges had
been in effect during the entire preceding Fiscal Year.
Notwithstanding any of the foregoing, no Additional Bonds shall be issued unless there is no default
existing at the time of issuance under the Indenture.
Subordinate Obligations. Nothing in the Indenture shall prevent the City from authorizing and issuing
bonds, notes, bond anticipation notes, warrants, certificates or other obligations or evidences of indebtedness, the
payment of the principal of and premium, if any, and interest on which shall be made from Revenues or Net
Revenues or from a special fund to be established and maintained from Revenues or Net Revenues, provided
payments from Revenues or Net Revenues or from Revenues or Net Revenues in such special fund, and the lien and
charge on such Revenues or Net Revenues, shall be made junior and subordinate to the lien, pledge and charge
created in the Indenture for the security and payment of the Bonds and other payments under the Indenture,
including, without limitation, the following payments out of Revenues specified by the Indenture: (i) payments of
Operation and Maintenance Expenses; (ii) payments into the Bond Fund; (iii) payments into the Debt Service
Reserve Fund; and (iv) payments into the Renewal and Replacement Fund.
Transfer or Exchange. The Bonds may be transferred on the books of registration kept by the Trustee by
the registered owner in person or by the owner's duly authorized attorney, upon surrender thereof, together with a
written instrument of transfer duly executed by the registered owner or the owner's duly authorized attorney. Upon
surrender for transfer of any Bond at the principal corporate office of the Trustee, the City shall execute and the
Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same
series and in the same aggregate principal amount and of any authorized denomination or denominations.
Transfers of registration or exchanges of Bonds shall be without charge to the holders of such Bonds, but
any taxes or other governmental charges required to be paid with respect to the same shall be paid by the holder of
the Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege.
The Trustee shall not be required to transfer or exchange any Bond during the period from and including a
Record Date to the next succeeding interest payment date of such Bond nor to transfer or exchange any Bond after •
the mailing of notice calling such Bond for redemption has been made, and prior to such redemption.
So long as DTC or its nominee is the sole registered owner of the Series 2004 Bonds, transfers of beneficial
interests in the Series 2004 Bonds shall be in accordance with the rules and procedures of DTC and its direct and
indirect participants. See the caption "BOOK -ENTRY ONLY SYSTEM" herein.
SECURITY FOR THE BONDS
General. The Bonds are special obligations of the City secured by and payable solely from the Net
Revenues derived from operation of the System. The Bonds do not constitute an indebtedness of the City within the
meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Bonds shall not directly,
indirectly or contingently obligate the City to levy or pledge any taxes whatsoever or to make any appropriation for
the payment of the Bonds, except as described herein with respect to the Net Revenues of the System.
Rate Covenant. The rates charged for services of the System heretofore fixed by ordinances of the City and
the conditions, rights and obligations pertaining thereto, as set forth in said ordinances, are ratified, confirmed and
continued by the Authorizing Ordinance.
In the Indenture, the City covenants that the rates for System services will never be reduced while any of
the Bonds are Outstanding unless there is obtained from a Qualified Accountant a certificate to the effect that Net
Revenues, with the reduced rates, in the current Fiscal Year will be at least equal to (i) 125% of the average Annual
Debt Service on all Bonds and Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to
the Debt Service Reserve Fund and any debt service reserve funds with respect to Subordinate Obligations, and
(iii) the amount, if any, needed to make required deposits to the Renewal and Replacement Fund. The City further
covenants that the rates for System services shall, if and when necessary, from time to time, be increased in such
manner as will produce Net Revenues at least equal to (i) 125% of the current Annual Debt Service on all Bonds and
Subordinate Obligations, (ii) the amount, if any, needed to make required deposits to the Debt Service Reserve Fund
and any debt service reserve funds with respect to Subordinate Obligations, and (iii) the amount, if any, needed to is
required deposits to the Renewal and Replacement Fund.
The Indenture defines "Net Revenues" as Revenues less Operation and Maintenance Expenses. Revenues
include 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. Operation and
Maintenance Expenses include all ordinary and necessary expenses of operation, repair, maintenance and insuring of
the System under generally accepted accounting principles. Such term includes the cost of purchased water and
payments to all taxing authorities, but does not include debt service and depreciation expense.
Debt Service Reserve. From the proceeds of sale of each series of Bonds issued pursuant to the Indenture,
there shall be deposited into the Debt Service Reserve Fund an amount which, together with the amounts then on
deposit therein, will be equal to 50% of the aggregate maximum Annual Debt Service on all Outstanding Bonds in
any Fiscal Year thereafter (the "Reserve Requirement").
If the amount in the Debt Service Reserve Fund is ever reduced below the Reserve Requirement, it shall be
reimbursed to the Reserve Requirement through monthly payments, beginning not later than the fifth business day
preceding the fifteenth day of the month immediately following the month in which the Debt Service Reserve Fund
was reduced below the Reserve Requirement, and continuing not later than the fifth business day preceding the
fifteenth day of each month thereafter until such reimbursement shall have been accomplished, from any funds in
the Revenue Fund (after making the required deposits into the Operation and Maintenance Fund and into the Bond
Fund as provided in the Indenture), in an amount equal to 1/12 of the Reserve Requirement deficiency. If a surplus
shall exist in the Debt Service Reserve Fund over and above the Reserve Requirement, such surplus shall be
deposited into the Bond Fund.
The moneys on deposit in the Debt Service Reserve Fund (i) shall be used to the extent necessary to
prevent a default in the payment of Annual Debt Service on the Bonds and Trustee's and any Paying Agent's fees
and (ii) may be used, together with other available funds, to provide for the payment at maturity or to redeem prior
to maturity all, but not less than all, of the Outstanding Bonds. •
III
Bond Insurance. As described below under the caption "BOND INSURANCE," the payment of principal
of and interest on the Series 2004 Bonds as due is guaranteed under a financial guaranty insurance policy (the
• "Financial Guaranty Insurance Policy") issued concurrently with the issuance of the Series 2004 Bonds by Ambac
Assurance Corporation, a Wisconsin -domiciled stock insurance company ("Ambac Assurance").
BONDINSURANCE
Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial
Guaranty Insurance Policy") relating to the Series 2004 Bonds effective as of the date of issuance of the Series 2004
Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The'Bank of New
York, in New York, New York or any successor thereto (the "Insurance Trustee") that portion of the principal of and
interest on the Series 2004 Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by
the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such
payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment
or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment
from the Trustee. The insurance will extend for the term of the Series 2004 Bonds and, once issued, cannot be canceled
by Ambac Assurance.
The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory
sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the
Series 2004 Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all
outstanding Series 2004 Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding
Series 2004 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund
redemption dates. In the event of any acceleration of the principal of the Series 2004 Bonds, the insured payments will
be made at such tunes and in such amounts as would have been made had there not been an acceleration.
In the event the Trustee has notice that any payment of principal of or interest on a Series 2004 Bond which has
become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential
transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled
to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available.
The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in the
Policy. Specifically, the Financial Guaranty Insurance Policy does not cover:
1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund
redemption) or as a result of any other advancement of maturity.
2. payment of any redemption, prepayment or acceleration premium.
3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying
Agent, if any.
If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires
surrender of Series 2004 Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to
permit ownership of such Series 2004 Bonds to be registered in the name of Ambac Assurance to the extent of the
payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty
Insurance Policy requires proof of Holder entitlement to interest payments and an appropriate assignment of the Holder's
right to payment to Ambac Assurance.
Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Series 2004 Bond,
appurtenant coupon, if any, or right to payment of principal or interest on such Series 2004 Bond and will be fully
subrogated to the surrendering Holder's rights to payment.
Ambac Assurance Corporation
Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin -domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do
business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the
U.S. Virgin Islands, with admitted assets of approximately $7,278,000,000 (audited) and statutory capital of
• $4,490,000,000 (audited) as of December 31, 2003. Statutory capital consists of Ambac Assurance's policyholders'
surplus and statutory contingency reserve. Standard & Poor's Credit Markets Services, a Division of The McGraw-
Hill Companies, Moody's Investors Service and Fitch Ratings have each assigned a triple-A financial strength rating
to Ambac Assurance. •
Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an
obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such
obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions
substantially identical to those contained in its Financial Guaranty insurance policy shall be treated for federal income
tax purposes in the same manner as if such payments were made by the Obligor of the Series 2004 Bonds.
Ambac Assurance makes no representation regarding the Series 2004 Bonds or the advisability of investing in
the Series 2004 Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official
Statement other than the information supplied by Ambac Assurance and presented under the heading "BOND
INSURANCE."
Available Information
The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the
"SEC"). These reports, proxy statements can be read and copied at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC maintains an internet site atht9P7//www.sec.gov that contains reports, proxy and information statements
and other information regarding companies that file electronically with the SEC, including the Company. These reports,
proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the
"NYSE") at 20 Broad Street, New York, New York 10005.
Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards
are available from Ambac Assurance. The address of Ambac Assurance's administrative offices and its telephone
number are One State Street Plaza, 19t' Floor, New York, New York 10004 and (212) 668-0340.
Incorporation of Certain Documents by Reference
The following documents filed by the Company with the SEC (File No. 1-10777) are incorporated by reference •
in this Official Statement:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and filed
on March 15, 2003, and
(2) The Company's current report on Form 8-K dated April 21, 2004 and filed on April 22, 2004.
All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after
the date of this Official Statement will be available for inspection in the same manner as described above in
"Available Information."
BOOK -ENTRY ONLY SYSTEM
The Series 2004 Bonds will be issued only as one fully registered Series 2004 Bond for each maturity, in
the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as
registered owner of all the Series 2004 Bonds. The fully registered Series 2004 Bonds will be retained and
immobilized in the custody of DTC.
DTC (or any successor securities depository) or its nominee for all purposes under the Indenture will be
considered by the City and the Trustee to be the owner or holder of the Series 2004 Bonds.
Owners of any book entry interests in the Series 2004 Bonds (the "book entry interest owners") described
below, will not receive or have the right to receive physical delivery of the Series 2004 Bonds, and will not be
considered by the City and the Trustee to be, and will not have any rights as, owners or holders of the Series 2004
Bonds under the bond proceedings and the Indenture except to the extent, if any, expressly provided thereunder.
CERTAIN INFORMATION REGARDING DTC AND DIRECT PARTICIPANTS IS SET FORTH
BELOW. THIS INFORMATION HAS BEEN PROVIDED BY DTC. THE CITY, THE UNDERWRITER AND
BOND COUNSEL ASSUME NO RESPONSIBILITY FOR THE ACCURACY OF SUCH STATEMENTS. •
DTC, the world's largest depository, is a limited -purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over two million issues of U.S. and non-U.S_ equity issues,
• corporate and municipal debt issues and money market instruments from over 85 countries that DTC's participants
("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants
of sales and other securities transactions in deposited securities, through electronic computerized book -entry
transfers and pledges among Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants
of DTC and by Members of the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and
EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock
Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available
to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"), The DTC Rules applicable to its Direct and Indirect Participants are on file with
the Securities and Exchange Commission. More information about DTC can be found at www.dtc.com.
Purchases of Series 2004 Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Series 2004 Bonds on DTC's records. The ownership interest of each actual
purchaser of each Series 2004 Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Series 2004 Bonds are to be accomplished by
entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in Series 2004 Bonds, except in the event
that use of the Book -Entry System for the Series 2004 Bonds is discontinued.
• To facilitate subsequent transfers, all Series 2004 Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an
authorized representative of DTC. The deposit of Series 2004 Bonds with DTC and their registration in the name of
Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Series 2004 Bonds, DTC's records reflect only the identity of the Direct Participants
to whose accounts such Series 2004 Bonds are credited, which may or may not be the Beneficial Owners. The
Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to
time. Redemption notices shall be sent to DTC. If less than all of the Series 2004 Bonds within a maturity are to be
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series
2004 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date. The Omnibus
Proxy will assign Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series
2004 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy).
Payment of debt service and redemption proceeds with respect to the Series 2004 Bonds will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is
to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the
City or the Trustee on payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and
• will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and debt service to
Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
BENEFICIAL OWNERS SHOULD CONSULT WITH THE DIRECT PARTICIPANTS OR INDIRECT •
PARTICIPANTS FROM WHOM THEY PURCHASE A BOOK ENTRY INTEREST TO OBTAIN
INFORMATION CONCERNING THE SYSTEM MAINTAINED BY SUCH DIRECT PARTICIPANTS OR
INDIRECT PARTICIPANTS TO RECORD SUCH INTERESTS, TO MAKE PAYMENTS, TO FORWARD
NOTICES OF REDEMPTION AND OF OTHER INFORMATION.
THE CITY AND THE TRUSTEE HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS
OF THE RECORDS OR NOTICES RELATING TO, OR PAYMENTS MADE ON ACCOUNT OF, BOOK
ENTRY INTEREST OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY
RECORDS RELATING TO THAT OWNERSHIP.
The Trustee and the City, so long as a book entry method of recording and transferring interest in the Series
2004 Bonds is used, will send any notice of redemption or of any Indenture amendment or supplement or other
notices to Bondholders under the Indenture only to DTC (or any successor securities depository) or its nominee.
Any failure of DTC to advise any Direct Participants, or of any Direct Participants or Indirect Participants to notify
any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of
the Series 2004 Bonds called for redemption, the Indenture amendment or supplement, or any other action premised
on notice given under the Indenture.
The City and the Trustee cannot and do not give any assurances that DTC, Direct Participants, Indirect
Participants or others will distribute payments of debt service on the Series 2004 Bonds made to DTC or its nominee
as the registered owner of the Series 2004 Bonds, or any redemption or other notices, to the Beneficial Owners, or
that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official
Statement.
DTC may discontinue providing its services as securities depository with respect to the Series 2004 Bonds
at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, bond certificates are required to be printed and delivered.
In addition, the City may decide to discontinue use of the system of book -entry transfers through DTC (or a •
successor securities depository). In that event, bond certificates will be printed and delivered.
SOURCES AND USES OF FUNDS
The proceeds of the Series 2004 Bonds and other available funds are expected to be used as follows:
Sources of Funds
Series 2004 Bond Proceeds* $6,1505721
Available Moneys in Series 1999 Bond
Fund and Debt Service Reserve Fund 1,263,035
Total Sources: 7 75
Uses of Funds
Deposit to Series 1999 Bond Escrow Fund $69485,180
Debt Service Reserve Fund Deposit 786,433
Costs of Issuance, Underwriter's Discount
and Bond Insurance Premium 137,400
Contingency 4,743
Total Uses: $7.413.756
* Including a $60,721 net reoffering premium. •
THE REFUNDING PROGRAM
The proceeds of the Series 2004 Bonds will be used to accomplish a current refunding of $6,365,000
outstanding principal amount of the City's Water and Sewer System Refunding Revenue Bonds, Series 1999, dated
as of May 1, 1999 (the "Series 1999 Bonds"). The Series 1999 Bonds were issued to refund bonds previously issued
by the City to refinance various capital improvements to the water storage, transmission and distribution
components of the System.
Upon the delivery of the Series 2004 Bonds, a portion of the proceeds thereof will be deposited with the
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an irrevocable Escrow
'Deposit Agreement (the "Escrow Agreement"), between the City and the Escrow Trustee. The proceeds derived
from the Series 2004 Bonds will be held by the Escrow Trustee under the Escrow Agreement in trust for the holders
of the Series 1999 Bonds, and will be sufficient to pay the principal, premium, and interest due on the Series 1999
Bonds when redeemed on August 15, 2004. Amounts held by the Escrow Trustee will be irrevocably pledged for
the benefit of the holders of the Series 1999 Bonds. After such deposit, the Series 1999 Bonds will no longer be
deemed to be outstanding and will be secured solely by the amounts held by the Escrow Trustee. See the caption
"ESTIMATED SOURCES AND USES OF FUNDS" herein.
DEBT SERVICE REQUIREMENTS
As of the date of closing, the Series 2002 Bonds and the Series 2004 Bonds constitute the only debt
obligations secured by Revenues of the System. The following table details amounts required to pay scheduled
principal and interest on the Series 2002 Bands and the Series 2004 Bonds during each year:
Series 2002 Series 2002 Series 2004 Series 2004 Total Debt
Year Principal Interest Principal Interest Service
2004 $ 4455000 $ 3535405 $ 1303000 $ 55,017 $ 9839422
2005 460,000 340,055 585,000 1899145 1,5741200
2006 4755000 324,645 5959000 174,520 1,5699165
2007 495,000 3079545 615,000 15%645 1,577,190
• 2008 515,000 2887240 635,000 1413195 155793435
2009 535,000 267,382 6555000 1223145 11579,527
2010 5555000 2453180 670,000 103,805 11573,985
2011 580,000 221,315 690,000 839370 15574,685
2012 605,000 1955505 13515,000 60,600 27376,105
2013 635,000 1673978 - - 8023978
2014 660,000 1383450 - - 798,450
2015 695,000 107,100 - - 8023100
2016 7252000 73,392 - - 7983392
2017 765,000 37,867 - - 802,867
Totals: SLOWM $62090,000 $1,082,442 $18.392.501
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
•
ESTIMATED DEBT SERVICE COVERAGE
The following table shows estimated maximum and average annual debt service coverage with respect to
the outstanding Series 2002 Bonds and Series 2004 Bonds utilizing historical Net Revenues of the System.
2002 2003
Audited (Unaudited)
Historical Gross Revenues of the System $213308,134 $2175543753
Historical Operating Expenses 15,078,396 16,943,064
Net Revenues Available for Debt Service(i) 6.229J38 $ 4.611.689
Maximum Annual Debt Service Requirement on
Series 2002 Bonds and Series 2004 Bondslzl $2,376,105 $21376,105
Average Annual Debt Service Requirement on
Series 2002 Bonds and Series 2004 Bonds(Z)t3) $1,675,537 $1,6753537
Maximum Annual Debt Service Coverage 2.62X 1.94X
Average Annual Debt Service Coverage 3.72X 2.75X
Net Revenues means gross revenues of the System less the amounts required to pay the costs of operation, maintenance
and repair of the System in accordance with generally accepted accounting principles applicable to municipal water
systems (excluding depreciation, interest and amortization expenses).
I�1 See the caption "DEBT SERVICE REQUIREMENTS" herein-
(3) For the years 2005 — 2012 while both the Series 2002 Bonds and the Series 2004 Bonds will be outstanding.
THE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE SET FORTH ABOVE ARE BASED ON
THE HISTORICAL RESULTS OF OPERATION OF THE SYSTEM. FUTURE NET REVENUES AVAILABLE
FOR DEBT SERVICE WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN BE NO ASSURANCE
THAT FUTURE NET REVENUES AVAILABLE FOR SYSTEM DEBT SERVICE WILL APPROXIMATE
SUCH HISTORICAL RESULTS. •
THE CITY
General. The City is a city of the first class organized and existing under the laws of the State of Arkansas.
The City is the seat of government of Washington County (the "County") and is the fourth largest city in the State.
The City is located in the Metropolitan Statistical Area of Fayetteville/Springdale/Rogers (the "MSA"), which
includes all of Washington and Benton Counties in the northwest comer of the State and is approximately 185 miles
northwest of Little Rock, Arkansas, 125 miles east of Tulsa, Oklahoma, and 210 miles south of Kansas City,
Missouri.
The City is served by U.S. Interstate 540, U.S. Highways 62 and 71, and State Highways 16, 45, 112, 156,
180 and 265. The Burlington Northern Railroad has several lines running through the City, and a general aviation
airport with a 6,006-foot runway is available for limited commuter travel. The Northwest Arkansas Regional
Airport is located approximately 40 minutes from downtown Fayetteville and provides daily flights to numerous
venues.
Government. The City currently operates under the Mayor -Council form of government pursuant to which
a mayor, city attorney, city clerk and eight aldermen are elected, two from each of the City's four wards. The
mayor, city attorney and city clerk are full-time positions elected to four year terms. Aldermen also serve four year
terms.
•
10
The City's elected officials and the dates on which their respective terms expire are as follows:
• Name Office Term Expires
Dan Coody Mayor 12/31/04
Kit Williams City Attorney 12/31/06
Sondra Smith City Clerk 12/31/04
Kyle Cook Alderman 12/31/06
Bob Davis Alderman 12/31/04
Lioneld Jordan Alderman 12/31/04
Shirley Lucas Alderman 12/31/06
Don Marr Alderman 12/31/04
Robert Reynolds Alderman 12/31/06
Robert Rhoades Alderman 12/31/06
Brenda Thiel Alderman 12/31/04
Population. The following is a table of population changes for the City, the MSA and the State of
Arkansas, according to the United States Census Bureau:
City of
State of
Year
Fayetteville
MSA
Arkansas
1960
203274
92,069
1,7861272
1970
30,729
127,846
119233322
1980
363608
1785609
2,286,435
1990
427099
2103908
2,3505624
2000
58,047
311,121
21673,400
Economic Data. Per capita personal income figures for the MSA and the State of Arkansas are as follows:
State of
Year MSA Arkansas
1992 $18,260 $16,425
• 1993 1%590 17,995
750
1994 19,590 17,750
1995 209193 183546
1996 203870 19,442
1997 21,586 20,228
1998 22,893 21,256
1999 24,213 22,223
2000 239316 219995
2001 24,585 22,750
2002 n/a n/a
Source: Bureau of Economic Analysis.
Retail sales figures for the MSA and the State are as follows:
MSA State of MSA as % of
Year Arkansas State of Arkansas
1993 $1,880,105,000 $16,997,721,000 11.06%
1994 2,217,2297000 19,090,5165000 11.61
1995 25486,425,000 20,99839235000 11.84
1996 21692,5545000 22,05310221000 12.21
1997 2,845,9%000 22,8721236,000 12.44
1998 3501818961000 237944,6473000 12.61
1999` n/a n/a n/a
2000 3,526,791,000 28,488,0337000 12.38
2001 378061422,000 295652,6933000 12.84
2002 31841,3263000 29,269,7751000 13.12
• 2003 31968,8121000 2919205716,000 13.26
* Methodology changed to calendar year basis. No reliable information is available for 1999.
Source: Sales and Marketing Management Survey of Buyer Power.
I
The following table shows the total assessed value of non -utility real and personal property within the City
for the years indicated: •
Year Real Property Personal Property Total
1994 $245,093,513 $ 86,322,277 $331,4155790
1995 340,593,452 ]01,274,620 441,8689072
1996 359,36%202 1133157,365 4721526,567
1997 382,7985143 1201064,627 502,862,770
1998 401,001,338 127,575,096 5289576,434
1999 413,6481415 137,4045499 5511052,914
2000 432,951,171 145,147,891 578,09%062
2001 486,853,822 155,7941579 642,648,401
2002 5415004,690 15808,783 69%693,473
2003t11 565,846,525 1679638,657 733,4853182
ttl Not certified.
Source: Washington County Tax Assessor's Office. The assessed value represents 20% of the appraised value of
property.
Building permits issued by the Cityin are shown below for the years indicated:
1999 2000 2001 2002 20031�1
Residential Building 451 361 339 328 735
Permits
Commercial Building 59 27 38 35 31
Permits •
Value of All Building
Permits $100,744,816 $1211887,263 $85,262,302 $100,809,486 $179,007,987
(n Does not include building activity of the University of Arkansas, school permits and additions/alterations to existing structures.
(3) Increase largely due to the permitting of a number of multifamily developments as well as an acceleration of permit requests in advance of
the imposition of impact fees by the City.
Source: City of Fayetteville.
Unemployment figures for the MSA and the State of Arkansas, according to the U.S. Bureau of Labor
Statistics, are as follows:
Year
MSA
State of Arkansas
1994
2.4%
5.3%
1995
2.4
4.9
1996
2.9
5.4
1997
3.0
5.3
1998
3.2
5.5
1999
2.4
4.5
2000
2.1
4.4
2001
1.7
5.1
2002
2.4
5.4
2003
3.0
6.2
2004*
3.0
5.2
* January 2004 only; preliminary.
Employment and Industry. The principal campus of the University of Arkansas is located in the City and •
had total enrollment for the Spring semester of 2004 of approximately 15,527. For the 2003-04 fiscal year ending
June 30, 2004, the University has an operating budget in excess of $206 million, which does not include the
agricultural experimentation station or other associated operations. On the Fayetteville campus, the University
12
employs approximately 2,867 faculty, administrative, secretarial, clerical and maintenance personnel in both full-
time and part-time positions, making the University the largest employer in the City.
• Other major employers in the City, their products or services and approximate number of employees are set
forth below:
Employer
Product or Service Employee Range
Pinnacle Foods, International Frozen Dinners 1,000-2,4991,000-2,499
Superior Industries Cast Aluminum Wheels
Washington Regional Medical Center Medical 1,000-2,4991,000-2,499
Northwest Arkansas Mall Retail (all stores)
Tyson Foods
Food Products 800-1,599
500-999
Fayetteville School District Education
City of Fayetteville Government 500-999300-499
Arkansas Western Gas Co. Utilities
Manufacturing 300-499
Ayrshire Electronics 300-499
McClinton Anchor Company Limestone and Hot Mix
Veteran's Admin. Medical Center Medical 300-499300-499
Wal-Mart Supercenter Retail
Washington County Government Government
300-499
Source: Fayetteville Chamber of Commerce.
THE SYSTEM
Water Supply. The water supply for the City is provided by the Beaver Water District of Benton and
Washington Counties, Arkansas (the "District"), which is the source of supply for an approximate population of
• 200,000 people in northwest Arkansas. The District was organized as a public water distribution district by order of
the Benton County Circuit Court on July 17, 1959 for the purpose of obtaining water storage rights in Beaver
Reservoir from the U.S. Corps of Engineers, and supplying treated water to municipalities within Benton and
Washington Counties. Through the joint efforts of the cities of Bentonville, Fayetteville, Rogers and Springdale,
Arkansas (the "Participating Cities"), the District entered into a contract with the U.S. Corps of Engineers providing
ct of up to 120 million gallons of water per day ("mgd").
for the supply to the Distri
The Beaver Reservoir has a capacity of 1,952,000 acre feet. The District currently has a firm pumping
capacity of 27.6 mgd to the City. The District's facilities are located on a 300 acre site owned by the District
approximately 2 1/2 miles east of Lowell, Arkansas, near its intake structure on Beaver Reservoir. The District's
water treatment plant has a present nominal design capacity of 80 mgd with a current peak demand of 67.8 mgd.
The District's 1996 master plan indicated that an expansion of capacity will be undertaken when peak demand
exceeds 70 mgd. This expansion has begun and is presently intended to provide a nominal design capacity of 140
mgd upon completion.
Water Supply Contracts with Beaver Water District. In 1967, the District and the Participating Cities
entered into a Memorandum of Understanding and Contract for Construction, Maintenance, Operation and
Expansion of Beaver Water Supply Facilities (the "Memorandum of Understanding"). Pursuant to the
Memorandum of Understanding, the District agreed to construct, operate, maintain and expand a drinking water
treatment plant as required to meet the then present and future needs of the Participating Cities. The Participating
Cities agreed to build and maintain their own water supply lines from the point of the water discharge at the
District's drinking water treatment plant to their respective distribution systems. The Participating Cities are also
permitted to serve, through their distribution systems, other smaller cities and other approved water distribution
agencies within Benton and Washington counties.
The Memorandum of Understanding provides that the Participating Cities will make payments to the
District for drinking water used by each Participating City based on the total cost to the District of the water
• delivered, including, but not limited to, amortization of the District's indebtedness, operation and maintenance of the
District's facilities and the cost of the expansion of the District's facilities.
The District issued water revenue bonds in 1990 and 1991 to finance a 40 mgd expansion to the then
existing water treatment facility. The 1990 and 1991 water bonds were defeased with 1994 water revenue bonds
13
dated as of June 1, 1994. This District also issued water revenue bonds in 2003 to finance the construction of two
raw water intakes with microtunneled piping connections to Beaver Lake, construction of a 60 inch raw water •
pipeline, improvements to and expansion of the Croxton I Water Treatment Plant, solids handling improvements for
the Croxton I Water Treatment Plant and the Steele Water Treatment Plant, improvements to the Steele Water
Treatment Plant, and property acquisition.
The Participating Cities' obligations to make payments under the Memorandum of Understanding are
evidenced, as to each Participating City, by water rate ordinances duly enacted in accordance with State law. While
each Participating City has agreed, in principle, to make payments to the District sufficient to pay its proportionate
share of the District's cost of providing water, the Participating Cities' sources of payment are limited to revenues
from their respective water systems pursuant to these water rate ordinances. The revenues derived from these water
rate ordinances are not pledged by the Participating Cities to the repayment of the District's bonds and are subject to
the debt requirements on any outstanding bonds of the Participating Cities secured by water revenues. Payments
made to the District by the Participating Cities are considered by the Participating Cities to be operating expenses.
The 1994 and 2003 water revenue bonds are currently the only outstanding bonded indebtedness of the
District. As of December 31, 2003, the 1994 water revenue bonds were outstanding in the principal amount of
$14,720,000, and had a scheduled final maturity in 2009. As of December 31, 2003, the 2003 water revenue bonds
were outstanding in the principal amount of $57,390,000, and had a scheduled final maturity in 2018.
The costs of the water storage rights are treated as a cost of water produced, and therefore the Participating
Cities pay based on water consumption. The City treats these costs as Operation and Maintenance Expenses of the
System and they are to be paid from Revenues deposited to the Operation and Maintenance Fund prior to the
payment of debt service on the Series 2002 Bonds or the Series 2004 Bonds.
The District's total water sales for the previous two fiscal years ended September 30 are represented in the
following table:
City 2002 2003
Fayetteville $4,953,866 $53040,203 •
5,025,519
5,056,008
Springdale Rogers 23776,922 23587,085
Bentonville 2,3832880 2,361,911
TOTALS: $15.170.676 $15,014al8
Source: Audited Financial Statements of the District dated September 30, 2002 and 2003.
Each Participating City is billed monthly based on metered water consumption and effective rates at that
time for drinking water purchased. On the basis of the District's annual audit, a cost for providing service to the
Participating Cities is determined. Based on the District's annual operating costs, a charge or credit is then applied
to each City for under- or over -payment for the drinking water used in that year. Net refunds for overpayments by
the Participating Cities for the two fiscal years ended September 30, 2002 and 2003 were $2,291,053 and
$1,403,320, respectively. The City received a refund of $426,277 for the fiscal year ended September 30, 2003.
The rates charged by the District to the Participating Cities since 1967 for the cost of water delivered are as
follows:
Effective Date Rate Per Million Gal.
1967 $180.00
9-1-77 270.00
9-1-82 320.00
I1-1-85 370.00
12-1-86 410.00
Effective Date Rate Per Million Gal.
2-1-89 610.00
2-1-90 810.00
2-1-91 1,010.00
11-1-03 1,160.00
Customers. At December 31, 2003, the City had approximately 30,658 active water customers and 26,427
active sewer customers. Water customers are billed solely on the basis of water usage and meter and line size. See
the caption "THE SYSTEM — Rate Structure" below. The following table classifies active sewer customers for the •
years indicated:
14
2003
2002
2001
2000
1999
• Residential
229061
20,926
209095
19,533
18,685
Commercial/Industrial
2,387
2,377
2,482
2,433
2,347
Outside City Limits
1 979
l 931
1 857
1792
1695
Totals:
26.427
25.2�4
24.434
�
2 72
Source: City of Fayetteville.
The System's 10 largest water customers, based upon water revenues produced during 2003, are as follows:
Percentage of 2003
Customer Total Revenues Water Revenues
University Arkansas
Campbell Soo $545,996.62 5.10%
Soup (Pinnacle Foods) 34%956.21 3.27%301,466.49 2.82%
Superior Industries 248,115.69 2.32%
Tyson Foods, Inc. 219,462.90 2.05%
City of West Fork 1492501.65 1.40%
City of Fayetteville 113,276.47 1.06%
City of Elkins Water District 0.90%
Mt. Olive Water Association 955954.59
35 0.62%13.
Veterans Administration 66,60.45%
Washington Regional Medical Center 48,268.63
• Source: City of Fayetteville.
Historical Statistics. The following table shows historical water usage statistics for the water distribution
component of the System:
Average Daily Use Maximum Days' Use
Year in Million Gallons in Million Gallons
1992 10.20 MG 17.84 MG
1993 10.70 MG 17.95 MG
1994 10.62 MG 18.94 MG
1995 12.45 MG 21.50 MG
1996 12.55 MG 21.50 MG
1997 12.33 MG 20.53 MG
1998 13.26 MG 23.80 MG
1999 13.30 MG 23.56 MG
2000 13.20 MG 23.77 MG
2001 13.16 MG 2039 MG
2002 13.72 MG 23.63 MG
2003 13.39 MG 26.24 MG
Source: City of Fayetteville.
•
15
The following table shows historical
sewer treatment statistics for the wastewater treatment component of
the System:
Average Daily Flow
.
Year
in Million Gallons
1992
10.40 MG
1993
11.90 MG
1994
11.35 MG
1995
11.73 MG
1996
11.69 MG
1997
11.01 MG
1998
11.22 MG
1999
11.22 MG
2000
11.79 MG
2001
12.50 MG
2002
11.95 MG
2003
10.95 MG
Source: City of Fayetteville
Present System. As described above under this caption in the subcaptions "- Water Supply" and "- Water
Supply Contracts With Beaver Water District," the City purchases treated water from the Beaver Water District. The
City distributes such treated water to its residents as well as to the residents of certain surrounding cities and
communities as described below. The City presently owns and operates a single wastewater treatment plant serving
residents of the City and surrounding areas.
The water distribution component of the System is made up of approximately 595 miles of water main,
2,350 fire hydrants and approximately 29 million gallons of storage capacity held in 14 water storage tanks. The •
water distribution component of the System provides service to the City, to the Cities of Farmington and Greenland,
to parts of the City of Johnson, and to other rural areas surrounding the City. Wholesale service is provided to the
Cities of Elkins and West Fork, to the Mount Olive Rural Water System and to the Rural Development Authority of
Washington County, Arkansas.
The City currently has no written agreements with respect to the provision of its water services to, and the
operation of the water systems of, the Cities of Farmington, Greenland and Johnson. Continuing water sales and the
operation of these systems is based on terns and provisions of expired contracts and mutual understandings between
the City and each of the Cities of Farmington, Greenland and Johnson. The City has a current contract in place with
respect to wholesale service to the Mount Olive Rural Water System and is currently in the process of renegotiating
wholesale contracts with the City of West Fork and with the Rural Development Authority of Washington County,
Arkansas. There is no written agreement currently in force with respect to the sale of water to the City of Elkins,
and continuing sales are based on the terms and provisions of an expired contract and mutual understandings
between the City and the City of Elkins.
The sewage collection component of the System consists of approximately 480 miles of sewer main and
11,300 manholes. The type of pipe in the sewage collection system is principally vitrified clay pipe with varying
amounts of ABS composite pipe, plastic pipe and cast iron pipe. The age of the sewage collection system varies
from new to 87 years. The City has implemented an ongoing sewer rehabilitation program with over $16 million
spent in related capital improvements during the last decade.
Sewer collection and treatment services are provided to residents of the City, to the Cities of Farmington
and Greenland, and to small parts of the City of Johnson. Some rural residents in the City's growth area also receive
sewer collection and treatment service. Wholesale service is provided to the City of Elkins.
Total revenues collected for water and sewer services to nonresidents of the City represented approximately
15% of total revenues of the System during 2003. Revenues collected for water services to nonresidents represented
approximately 21% of the total revenues of the System during 2003. The City of Farmington was the largest •
nonresident water customer accounting for less than 3.5% of total revenues of the System during 2003. Revenues
collected for sewer services to nonresidents of the City represented approximately 7.9% of total revenues of the
n was the largest nonresident sewer customer accounting for
System during 2003. The City of Farmingto
approximately 5% of total revenues of the System during 2003. When added together, the water and sewer service
16
revenues derived from the City of Farmington accounted for approximately 4.3% of total revenues of the System
during 2003.
• The City's existing wastewater treatment plant ("WWTP") went into operation in 1987 and is currently
permitted at 12.4 mdg. Treatment stages consist of the plant headworks (bar screens, vacutators and influent lift
station), primary sedimentation, aeration basins, secondary sedimentation basins, biological and chemical nutrient
removal, and U.V. disinfection. The sludge treatment plan employs dewatering of secondary sludge with ultimate
disposal of the residuals in a sanitary landfill. Average daily flow treated was 10.95 mgd in 2003. Peak flow in
2003 was approximately 23.4 mgd. The WWTP is operated on a contract basis by Operations Management
International, the 2003 operations having no permit violations. The existing WWTP was planned to meet the 2005
needs of the City.
r-1
L
•
A comprehensive study of the System was completed in February of 1997 and updated in 2002. This
comprehensive improvement program addressed sewer lines, pumping stations and treatment works, including the
construction of a new 10 mdg wastewater treatment facility west of the City. Final design of the project is underway
and the 300 acre west plant site has been acquired by the City. Project construction is scheduled to commence in the
third quarter of 2004, final completion being anticipated in the third quarter of 2006. The improvements are
predicted to meet 20-year needs by providing a net treatment works capacity of 21.2 mgd plus correct wet water
overflow problems.
Projected Capital Expenditures. The City anticipates the cost of contemplated expansions and capital
improvements to the System over the next five years, including the construction of the wastewater treatment plant,
to be as set forth in the following table. Said expansions and improvements are expected to be financed from a
combination of System revenues and the receipts from a dedicated 3/4% City sales and use tax (the "Sales Tax")
approved by the voters of the City at an election held November 6, 2001. Collection of the Sales Tax commenced
on April 1, 2002. Pursuant to the election, Sales Tax revenues are dedicated to the payment of debt service on
obligations to be issued to finance wastewater treatment and sewerage improvements. The precise breakdown of
funding sources for the new wastewater treatment plant has yet to be finalized; however, it is likely that the costs
thereof will be financed by a combination of sources, including, but not limited to, System revenues and proceeds
from debt issuances secured by System revenues and/or Sales Tax revenues.
2004t
2005
2006
2007
2008
Miscellaneous Water
System Improvements
$ 8,4881436
$ 698,000
$ 5723000
$ 5793000
$ 712,000
Miscellaneous Sewer
System Improvements
639465365
115005000
12500,000
13500,000
1,5001000
Wastewater Treatment
Plant Expansion
122,022,491
180,000
180,000
180,000
180,000
TOTALS:
$137.457.2Q�
2.378.000
$� 2.000
2 25 0
2 2 0
' From the City's 2004 annual budget.
Source: Water and Wastewater Director, City of Fayetteville, Arkansas.
Rate Structure. Effective January 11, 2004, the following tables set forth the City's current water rate
structure:
WATER RATES
Monthly Treated Water Rates
Usage Rate (in gallons) Inside City Outside City
First 10,000 $2.81 $3.52
Next 290,000 2.42 3.03
Next 4,700,000 1.76 2.20
Over 5,000,000 1.60 1.98
17
Monthly Meter Service Charge
Meter Size (inches) Inside Citv
Outside City
5/8 $ 3.88
$ 4.92
3/4 4.14
5.26
1 5.39
6.84
1Y2 9.40
11.94
2 13.69
17.39
3 31.90
40.51
4 52.80
67.05
6 105.60
134.11
8 158.40
201.16
Monthly Standby Fire Protection Service Charge
Line Size (inches) Inside/Outside City
2 $ 6.60
3 19.80
4 39.60
6 110.00
8 231.00
10 396.00
Monthly Wholesale Treated Water Rates (Outside City Limits)
Usage Rate Per 1,000 Gallons $ 2.01
Reduced Demand 1.81
Meter Charge 55.55
Effective February 9, 2004, the following tables set forth the City's current sewer rate structure:
SEWER RATES
Monthly Quantity Charge
User Type Usage Rate Per 1,000 Gallons
Effective 2-9-04 Effective 12-31-04 Effective 12-31-05
Residential $2.61 $2.84 $3.10
Commercial/Industrial 2.04 2.22 2.42
Outside City Limits 6.03 6.57 7.16
City of Elkins
5.24 5.71 6.22
Monthly Service Charge
Meter Size (inches)
Effective 2-9-04
Inside City
Effective 12-31-04
Effective 12-31-05
5/8
$ 8.72
$ 9.50
$ 10.36
3/4
10.08
10.99
11.98
1
11.34
12.36
13.47
1'/:
15.85
17.27
21.99
2
21.10
23.00
46.31
50.77
73.
.01
4
77.51
84.49
120.26
6
149.26
163.64
238.37
8
232.26
253.16
356.48
CI
m
Monthly
Service Charge
Outside City
Meter Size (inches)
Effective 2-9-04
Effective 12-31-04
Effective 12-31-OS
$ 8.72
$ 9.50
$ 10.35
5/8
11.
12.94
14.10
1/4
16.28
17.75
19.35
1
28.90
31.50
34.33
1
41.51
45.25
49.32
z
105.75
115.27
397.02
160.09
0
174.50
190.21
4
317.78
346.38
377.56
475.47
518.26
564.90
0
Extra Strength Surcharge
For all commercial and industrial customers whose wastewater discharge is greater than 300 mg/I of BOD5
and/or TSS, an extra strength surcharge is levied as follows:
Effective 2-9-04 Effective 12-31-04 Effective 12-31-05
Extra Strength BOD5 $0.2246/lb $0.2449/lb $0.2669/lb
Extra Strength TSS
$0.1123/Ib $0.1224/lb $0.1334/lb
Rate Comparison. The following is a comparison of the monthly water and sewer charges for the City of
Fayetteville with the charges of other area municipalities, based upon combined water and sewer charges for the
average residential unit with 6,000 gallons of water consumption per month:
• City Cost Per Month
Fayetteville $45.12
Bentonville 51.70
Fort Smith 37.76
Rogers 40.78
Springdale 36.02
Source: City water and sewer departments as of March 1, 2004.
Billing Procedures, Delinquency and Uncollectible Accounts. The City Code of Ordinances provides that
bills for water and sewer services are rendered in the net amount due. Water bills are due and payable on or before
the twentieth day following the billing date stated on the water bill. Currently, water bills not paid on or before the
due date are considered delinquent and an additional charge of 10% of the total current bill is assessed against the
account.
In the event that bills due the City for water service are not paid on or before the twentieth day following
the billing date stated on the water bill, notice by mail is sent to each customer concerned advising him that such bill
is due and payable immediately. Should any delinquent bill remain unpaid, the appropriate ordinance provides that
service will be discontinued on the twenty-eighth day following the billing date stated on the water bill, and the
customer's deposit will be forfeited in an amount sufficient to cover the gross amount of his due bill. The forfeiture
of the deposit will take place if the customer has not paid the delinquent bill plus all applicable service charges
within seven days after disconnection. If the forfeited deposit is not sufficient to cover the delinquent bill plus all
applicable service charges and the bill is delinquent by more than 90 days, the matter is turned over to a collection
agency. Over the last five years, the City's bad debt expense experience has been as follows:
•
19
Fiscal Year Ending
December 31
1999
2000
2001
2002
200P1
Unaudited.
Water and Sewer
Operating Revenues
$19,3562739
19,462,422
19,3975672
19,946,464
20,364,602
Bad Debt
Bad Debt Expense
Percentage
$ %275
.35%
61,391
.31
1213921
.63
61,615
.31
87,800
.43
Financial Information. Set forth in Appendix A to this Official Statement are the audited general purpose
financial statements of the City for the year ended December 31, 2002, which financial statements have been audited
by BKD, LLP, independent certified public accountants, as stated in their report also appearing in Appendix A. The
notes set forth in Appendix A are an integral part of such financial statements, and the statements and notes should
be read in their entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of
the City's Water and Sewer Fund for the year ended December 31, 2003.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
•
11
•
20
Following is a summary of revenues, expenses and changes in fund equity of the City's Water and Sewer
• Fund for the five years ended December 31, 2003. Information for the summary for the years ended December 31,
1999, 2000 and 2001 was derived from the financial statements of the City audited by Arthur Andersen LLP,
independent certified public accountants. Information for the summary for the year ended December 31, 2002 was
derived from the financial statements of the City audited by BKD, LLP, independent certified public accountants.
The audits were performed for the purpose of rendering an opinion on the general purpose financial statements of
the City taken as a whole, and not for the purpose of rendering an opinion on the fair presentation of the City's
Water and Sewer Fund. The following table should be read in conjunction with the audited financial statements and
related notes in Appendix A. Information for the summary for the year ended December 31, 2003 was derived from
the unaudited financial statements of the City's Water and Sewer Fund attached as Appendix B.
City of Fayetteville, Arkansas Water and Sewer Fund
Statement of Revenues, Expenses and Changes in Fund Equity
For the Years Ended December 31,
1999 2000 2001 2002 2003t'I
Operating revenues:
Water services $ I0,717,253 $ 10,874,563 $ I81641,780 $ I8,029,779 $ 10,052,460
355
Sewer services 8,639,486 8,587,859 8,641,780 8,929,779 9.611 J87
Other I9 356 73 19.462A22 19,397,672 19,946 464 20,364 602
Total operating revenues
Operating expenses: 2,430,483 2,410,107 2,544,236 2,485,972 21866,394
Operations and administration
Water supply 3,528,175 3,748,951 3,816,720 4,319,415 4,616,576
Water transmission and distribution 1,180,593 11057,616 1,037,574 1,190,411 1,253,010
Sewer collection 1,131,662 1,137,836 1,042,260 1,185,122 11255,818
Wastewater treatment 3,970,703 3,919,332 4,138,194 41234,671 4,866,555
Customer service 1,513,294 1414.992 1.552456 1,662,805 2084,711
Total operating expenses
before depreciation 13,754,910 13,688,824 14,131 440 15,078,396 16,943,064
Operating income before depreciation 5,601,929 5,773,588 5,266,232 4,869,068 3,421,538
Depreciation
3,432.070 3.568 916 3.798.815 3,981,891 4,004,983
Operating income (loss) 2,169,759 2.204.672 1,467.417 986 177 (583.4451
• No income (expense) -
Intergovernmental 550,000 915,000 239,112 268,700
Interest expenses and fees (670,521) (651,383) (900,628) (592,878) (421,563)
Interest income 729,392 791,237 1,093,183 858,731 962,583
Net increase in fair value of
investments (decrease) (23,579) 82,003 6,033 218,637 (248,614)
Other 197,442 111,836 216.377 234239 227,568
Total nonoperating income (expense) 782,734 1.248.693 654.077 987,429 519.974
Income before operating transfers 21952,493 3,453,365 21121,494 1,973,606 (63,471)
Capital Contributions - - 3,455,445 3,195,752 3,495,312
11149,040
Operating transfers in - (244.411)
Operating transfers out -
Net income (loss) 2,952,493 3,453,365 5,576,939 5,169,358
Add back depreciation on assets acquired
2 163.774 2,5
with contributed capital 96.745 2,267,5 2 7,467 990
Increase in retained earnings 5,116,267 6,050,110 7 844.531 7 467 9
Retained earnings, beginning of year 52,714,552 57,721,928 63,772,038 71,616,570
Cumulative effect of change in I08 891 -
accounting principle
Retained earnings, beginning of year, as
Restated 52.605.661 57,721,228 63,772,038 71,616,570
Retained earnings, end of year 57 72028 63,772,038 71,616,562 79,084560
Contributed capital, beginning of year 45,180,987 46,356,387 47,294,676 46,931,575
Capital contributions 3,474,102 3,535,034 1,904,491 558,746
Cumulative effect of change in -
amounting principle (134,928)
Depreciation on assets acquired with
contributed capital (2 163.774) (2 596 745) (2267.5221 (2,298.632
Contributed capital, end of year 46356 397 47.294.676 46 931.575 45391 689
$104078 1 " 11 1 066 714 $118948 144 e 124 216 242
Total fund equity, end of year-,---�-2
4 336A70
Change in net assets 124,276,249
Total net assets, beginning of year $128-612,112
• Total net assets, end of year
Unaudited. Changes in financial statement presentation are a result of the application of the requirements of GASB 34.
21
DEFINITIONS OF CERTAIN TERMS
The following are definitions of certain terms used in this Official Statement:
"Act" — Arkansas Code Annotated (1998 Repl. and Supp. 2003) §§ 14-164-401 et seq., §§ 14-234-201 et
seq. and §§ 14-235-201 et seq., as from time to time amended.
"Additional Bonds" — Bonds in addition to the Series 2002 Bonds and the Series 2004 Bonds which are
issued under the provisions of the Indenture.
"Ambac Assurance" — Ambac Assurance Corporation, a Wisconsin -domiciled stock insurance company,
the issuer of the Financial Guaranty Insurance Policy.
"Annual Debt Service"— With respect to all or any particular amount of Bonds or Subordinate Obligations,
as the case may be, the Debt Service for any particular Fiscal Year required pursuant to the provisions of the
Indenture to be paid or set aside during such Fiscal Year, less the amount of such payment which is provided from
the proceeds of the sale of Bonds or Subordinate Obligations or from sources other than Net Revenues.
"Authorizing Ordinance" — Ordinance No. 4554 of the City, adopted and approved on April 6, 2004,
authorizing the issuance of the Series 2004 Bonds pursuant to the Indenture.
"Bond Counsel" — Any firm of nationally recognized municipal bond counsel selected by the City and
acceptable to the Trustee.
"Bond Fund" — The fund by that name created and established in the Indenture.
"Bonds" — The Series 2002 Bonds, the Series 2004 Bonds and all Additional Bonds issued by the City
pursuant to the Indenture.
"City" — The City of Fayetteville, Arkansas, a municipality and political subdivision under the laws of the
State of Arkansas.
"Code" — The Internal Revenue Code of 1986, as from time to time amended, and applicable regulations •
issued or proposed thereunder.
"Cost of Issuance Fund'— The fund by that name created and established in the Indenture.
"Debt Service" — With respect to all or any particular amount of Bonds or Subordinate Obligations, as the
case may be, the total as of any particular date of computation and for any particular period of the scheduled amount
of interest and amortization of principal payable on such Bonds or Subordinate Obligations, excluding amounts
scheduled during such period which relate to principal which has been retired before the beginning of such period.
"Debt Service Reserve Fund" — The fund by that name created and established in the Indenture.
"Depository" — A national or state banking corporation or association (which may also include the Trustee
and any Paying Agent) which holds membership in the Federal Deposit Insurance Corporation.
"Escrow Agreement" — The Escrow Deposit Agreement dated May 20, 2004, between the City and the
Escrow Trustee, providing for the redemption of the Series 1999 Bonds.
"Escrow Trustee" — The Bank of Oklahoma, N.A., in its capacity as escrow trustee under the Escrow
Agreement.
"Event of Default" — Any event of default specified in the Indenture. See the caption "SUMMARY OF
THE INDENTURE — Events of Default" herein.
"Financial Guaranty Insurance Policy" — The financial guaranty insurance policy issued by Ambac
Assurance insuring the payment when due of the principal of and interest on the Series 2004 Bonds as provided
therein.
"Fiscal Year" —The 12-month period used, at any time, by the City for accounting purposes with respect to
the System, which may be the calendar year. Currently, the fiscal year of the City ends on December 31 of each
year.
"Government Securities" — (i) bonds, notes, certificates of indebtedness, treasury bills or other securities •
constituting direct obligations of, or obligations on which the full and timely payment of principal and interest is
fully and unconditionally guaranteed by, the United States of America (including any such securitandis issued
evidences
deuceor s
in book -entry form on the books of the Department of Treasury of the United States of America), ( )
22
of direct ownership or proportionate or individual interest in future interest or principal payments on specified direct
obligations of, or obligations on which the full and timely payment of principal and interest is fully and
unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company
organized and existing under the laws of the United States of America or any state thereof in the capacity of
custodian in form and substance satisfactory to the Trustee.
"Holder" or "bondholder" or "owner of the Bonds" — The registered owner of any Bond.
"Indenture" — The Trust Indenture dated as of May 1, 2002, as supplemented and amended by a First
Supplemental Trust Indenture dated as of May 15 2004, each by and between the City and the Trustee, pursuant to
which the Bonds are issued, and any further amendments and supplements thereto.
"Investment Securities" — if and to the extent the same are at the time legal for investment of funds held
under the Indenture:
(1) Government Securities;
(2) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed
by the full faith and credit of the United States of America:
— Senior debt obligations issued by the Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC).
— Obligations of the Resolution Funding Corporation (REFCORP).
— Senior debt obligations of the Federal Home Loan Bank System.
— Senior debt obligations of other Government Sponsored Agencies approved by
Ambac Assurance;
(3) U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic
commercial banks which have a rating on their short term certificates of deposit on the date of
purchase of "P-1" by Moody's and "A -I" or "A-1+" by S&P and maturing no more than 360
• calendar days after the date of purchase. (Ratings on holding companies are not considered as the
rating of the bank.);
(4) Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P;
(5) Pre -refunded Municipal Obligations defined as follows: any bonds or other obligations of any state of
the United States of America or of any agency, instrumentality or local governmental unit of any such
state which are not callable at the option of the obligor prior to maturity or as to which irrevocable
instructions have been given by the obligor to call on the date specified in the notice; and
(A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the
highest rating category of Moody's or S&P or any successors thereto; or
(B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an
escrow consisting only of cash or obligations described in paragraph (2) above, which
escrow may be applied only to the payment of such principal of and interest and redemption
premium, if any, on such Obligations or other obligations on the maturity date or dates
thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as
appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized
independent certified public accountant, to pay principal of and interest and redemption
premium, if any, on the bonds or other obligations described in this paragraph on the
maturity date or dates specified in the irrevocable instructions referred to above, as
appropriate;
(6) Municipal obligations rated "Aaa/AAA" or general obligations of States with a rating of at least
"AVA" or higher by both Moody's and S&P.
• (7) Investment agreements approved in writing by Ambac Assurance (supported by appropriate opinions
of counsel); and
23
(8) Other forms of investments (including repurchase agreements) approved in writing by Ambac
Assurance.
"Moody's" — Moody's Investors Service and any successor thereto.
"Net Revenues" — Revenues less Operation and Maintenance Expenses.
"Operation and Maintenance Expenses" — For any period, all ordinary and necessary expenses of operation,
repair, maintenance and insuring of the System under generally accepted accounting principles, except that there
shall not be included (i) any. allowance for depreciation, (ii) any deposits or transfers to the credit of (a) the
Fund or to any fund or account created for the payment of debt service on any Subordinate Obligations, (b) the Debt
Service Reserve Fund or any debt service reserve fund or account created in connection with any Subordinate
Obligations, or (c) the Renewal and Replacement Fund, or (iii) any payments with respect to obligations not payable
in whole or in part under any circumstances from Revenues. Operating Expenses shall specifically include
obligations of the City to the Beaver Water District of Benton and Washington Counties, Arkansas.
"Operation and Maintenance Fund" — The fund by that name described in the Indenture.
"Outstanding" — When used with reference to the Bonds, as of any particular date, the aggregate of all
Bonds authenticated and delivered under the Indenture except:
(a) Bonds cancelled at or prior to such date or delivered to or acquired by the Trustee at or
prior to such date for cancellation;
(b) Bonds deemed to be paid in accordance with Article V III of the Indenture; and
(c) Bonds in lieu of or in exchange or substitution for which other Bonds shall have been
authenticated and delivered pursuant to the Indenture.
Notwithstanding the provisions of (a), (b) and (c), Series 2004 Bonds, the principal of and/or interest on which has
been paid by Ambac Assurance pursuant to the Financial Guaranty Insurance Policy, shall be deemed to remain
Outstanding for all purposes. •
"Paying Agent" — Any bank or trust company named by the City as the place at which the principal of and
premium, if any, and interest on the Bonds are payable.
"Permitted Encumbrances" — (i) Any mortgage lien for the security of the Bonds; (ii) liens for taxes,
assessments and other governmental charges not [hen delinquent or which can be paid without penalty; (iii) unfiled,
inchoate mechanics' and governmental
materialmec s liens; of t workmen's, repairmen's, warehousemen's, and carriers' liens and
others similar liens, if any, arising in the ordinary course of business; and (v) any easements, restrictions, mineral,
oil, gas and mining rights and reservations, zoning laws and defects in title or other encumbrances to which System
facilities may be subject because of their acquisition, construction and installation as part of the System.
"Person" — Any natural person, firm, association, corporation, limited liability company, partnership, joint
stock company, joint venture, trust, unincorporated organization or firm, or a government or any agency or political
subdivision thereof or other public body.
"Qualified Accountant" — An independent certified public accountant or firm of in
certified
public accountants not in the regular employ of the City.
"Rebate Fund" — The fund by that name created and established in the Indenture.
"Record Date" — With respect to any interest payment date of the Bonds, the first day of the calendar month
in which such interest payment date falls.
"Renewal and Replacement Fund — The fund by that name confirmed and described in the Indenture.
"Reserve Requirement" — At any particular time, an amount equal to 50% of the aggregate maximum
Annual Debt Service in any Fiscal Year thereafter with respect to Outstanding Bonds of all series.
"Revenues" — 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. Revenues
shall specifically include, but shall not be limited to, revenues from water sales, sewer service charges, fire
•
protection charges and interest income on Revenue Fund balances. Notwithstanding the foregoing, Revenues shall
not include acreage, connection, front -footage, tap -on, assessment and similar fees, charges, contributions or grants
24
derived by the City in connection with the provision of or payment for capital improvements constituting a part of
the System.
• "Revenue Fund" —The fund by that name confirmed and described in the Indenture.
"S&P" — Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and any
successor thereto.
"Series 1999 Bonds" — City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue
Bonds, Series 1999, issued in the original aggregate principal amount of $8,365,000.
"Series 2002 Bonds" — Collectively, the Series 2002A Bonds and the Series 2002B Bonds.
"Series 2002A Bonds" — One of the initial series of Bonds issued under and secured by the Indenture in the
aggregate principal amount of $2,730,000.
"Series 2002B Bonds" — One of the initial series of Bonds issued under and secured by the Indenture in the
aggregate principal amount of $6,540,000.
"Series 2004 Bonds" — An additional series of Bonds being issued under and secured by the Indenture in
the aggregate principal amount of $6,090,000.
"Subordinate Obligations" — Debt obligations of the City secured by a pledge of Net Revenues that is
subordinate to the lien thereon securing the payment of the Bonds, as permitted by the provisions of the Indenture.
"System" — The City's combined water and sewer utility system.
"Trustee" — The banking corporation or association designated as Trustee in the Indenture, and its
successor or successors as such Trustee. The original Trustee is Bank of Oklahoma, N.A., Tulsa, Oklahoma.
"Trust Estate" — The property described in the granting clauses of the Indenture.
SUMMARY OF THE INDENTURE
• The following statements are brief summaries of certain provisions of the Indenture. The statements do not
purport to be complete, and reference is [Wade to the Indenture, copies of which are available for examination at the
offices of the City Clerk of the City, for a full statement thereof.
Funds and Disposition of Revenues. Net Revenues are pledged by the Indenture to the payment of the
principal of and premium, if any, and interest on the Bonds, subject to various provisions permitting application for
other purposes. The following funds are referenced with respect to the Bonds:
Fund Held By
Revenue Fund City
Operation and Maintenance Fund City
Bond Fund Trustee
Debt Service Reserve Fund Trustee
Renewal and Replacement Fund City
Cost of Issuance Fund Trustee
Rebate Fund Trustee
Application of Revenues. The application of Revenues is as follows:
(a) Revenue Fund. All Revenues shall, as and when received, be deposited into the Revenue Fund.
All moneys at any time in the Revenue Fund shall be applied to the payment of Operation and Maintenance
Expenses of the System, the payment of Annual Debt Service on the Bonds and any Subordinate Obligations, the
maintenance of the Debt Service Reserve and the debt service reserves for any Subordinate Obligations, and the
• providing of the Renewal and Replacement Fund in the order, at the times and in the amounts set forth as follows:
(b) Operation and Maintenance Fund. Prior to making the required payments into the Bond Fund and
Debt Service Reserve Fund, into the bond funds and debt service reserve funds for any Subordinate Obligations, and
into the Renewal and Replacement Fund, there shall be paid from the Revenue Fund into the Operation and
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Maintenance Fund, not later than the fifth business day preceding the fifteenth day in each month while any of the
Bonds shall be Outstanding, an amount sufficient to cause amounts on deposit therein to equal projected Operation •
and Maintenance Expenses for the next two succeeding months (as shown in the budget of proposed Operation and
Maintenance Expenses for the then current Fiscal Year) and from which disbursements shall be made only for those
purposes. Fixed annual charges such as insurance premiums and the cost of major repair and maintenance expenses
may be computed and set up on an annual basis, and 1/12 of the amount thereof may be paid into the Operation and
Maintenance Fund each month.
If in any month for any reason there shall be a failure to transfer and pay the required amount into the
Operation and Maintenance Fund, the amount of any deficiency shall be added to the amount otherwise required to
be transferred and paid into the Operation and Maintenance Fund in the next succeeding month.
(c) Bond Fund. Immediately following the making of required deposits into the Operation and
Maintenance Fund, there shall be paid from the Revenue Fund into the Bond Fund, on the fifth business day
preceding the fifteenth day of each month until all Outstanding Bonds with interest thereon have been paid in full, or
provision made for such payment, a sum equal to (i) 1/6 of the installment of interest coming due on the Bonds
(whether at maturity, upon mandatory redemption, or otherwise) during the then next six (6) months, and (ii) 1/12 of
the installment of principal coming due on the Bonds (whether at maturity, upon mandatory redemption, or
otherwise) during the then next twelve (12) months (provided, however, that the first payments required under the
Indenture with respect to a series of Bonds shall be prorated from the date of issuance of such series of Bonds and
subsequent payment obligations shall be reduced to the extent of investment earnings and other moneys credited to
the Bond Fund from sources other than monthly payments). All moneys in the Bond Fund shall be used solely for
the purpose of paying Annual Debt Service on the Bonds or for any redemption of the Bonds, except as specifically
provided in the Indenture. The Trustee shall withdraw from the Bond Fund, on the date of any principal or interest
payment, an amount equal to the amount of such payment for the sole purpose of paying the same.
If Revenues are insufficient to make the required payment into the Bond Fund, the amount of any such
deficiency in the payment made shall be added to the amount otherwise required to be paid into the Bond Fund not
later than the fifth business day preceding the fifteenth day of the next succeeding month.
When the moneys held in the Bond Fund and the Debt Service Reserve Fund shall be and remain sufficient •
to pay in full the principal of and premium, if any, and interest on all Bonds then Outstanding, there shall be no
obligation to make further payments into the Bond Fund.
(d) Debt Service Reserve Fund. See the caption "SECURITY FOR THE BONDS — Debt Service
Reserve" herein.
Renewal and Replacement Fund. After making the required deposits into the Operation and
(e)
Maintenance Fund, into the Bond Fund and Deb[ Service Reserve Fund, and into the bond funds and debt service
reserve funds with respect to any Subordinate Obligations, there shall be paid from the Revenue Fund into the
Renewal and Replacement Fund not later than the fifth business day preceding the fifteenth day of each month while
any of the Bonds are Outstanding, an amount sufficient to cause the amount on deposit therein to equal $300,000 or
such greater amount as the City may determine from time to time is appropriate, provided that the amount to be
deposited in any month need not exceed 1/12 of the amount then required to be on deposit therein. The moneys in
the Renewal and Replacement Fund shall be used solely for the purpose of paying the cost of necessary repairs or
replacements 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.
(f) Surplus. Any surplus in the Revenue Fund after making all disbursements and providing for all
funds described above may be used, at the option of the City for any lawful purpose.
investment of Funds. At the direction of the City or absent such direction, the Trustee shall invest moneys
in funds or accounts held by the Trustee in Investment Securities with maturity or redemption dates consistent with
the times at which said moneys will be required for the purposes provided in this Indenture; provided, however, the
stated maturity dates of Investment Securities of Debt Service Reserve Fund moneys shall not exceed five years
from the date of investment therein. Moneys in separate funds or accounts may be commingled for the purpose of
investment. The City may invest moneys held in the Revenue Fund, Operation and Maintenance Fund and Renewal
and Replacement Fund in any investment obligations permitted by Arkansas law.
Obligations purchased as an investment of moneys in any fund or account created by the Indenture shall be •
deemed at all times to be a part of such fund or account, and any income or loss due to an investment thereof shall
be charged to the respective fund or account for which the investment was made except as otherwise provided in the
Indenture.
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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 Securities credited to such fund or account at the price at which such Investment Securities 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 Securities minus the amortization of any premium or plus the amortization of any
discount thereon and (ii) the market value of such Investment Securities, provided that Investment Securities
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.
Valuation of Funds and Accounts. In determining the value of any fund or account held by the Trustee
under the Indenture, the Trustee shall credit Investment Securities at the fair market value thereof, as determined by
the Trustee based on accepted industry standards and from accepted industry providers. No less frequently than
annually, and in any event within thirty (30) days prior to the end of each Fiscal Year, the Trustee shall determine
the value of each fund and account held under the Indenture and shall report such determination to the City.
The Trustee shall sell or present for redemption any Investment Securities as necessary in order to provide
money for the purpose of making any payment required under the Indenture, and the Trustee shall not be liable for
any loss resulting from any such sale.
Responsibility of Trustee. The Trustee shall not be responsible or liable for any loss suffered in connection
with any investment of moneys made by it at the direction of the City.
Operation and Maintenance of System; Disposition of System Assets. The City covenants that it will
continuously operate the System in a diligent fashion in accordance with prudent utility practice and as a
revenue -producing undertaking in compliance with all applicable laws and regulations and all the covenants and
obligations under the Indenture.
The City further covenants that it will maintain the System in sound condition and repair, that it will not
sell or otherwise dispose of any property necessary to the proper operation of the System or to the maintenance of
Revenues, and that it will not enter into any lease or agreement which will impair or impede the operation of the
• System or adversely affect the rights of the bondholders.
Insurance. 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 of Arkansas to assume the risk thereof, all properties of the System, other than water storage tanks, mains
and lines for the transmission, distribution or collection of water or wastewater, against loss or damage from fire,
lightning, tornado, winds, strike, malicious damage or 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 Bond 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 Section 506 of the Indenture.
Damage or Destruction; Condemnation. The City covenants and agrees that in the event of damage to or
destruction of the System, or if all or any part of the System shall be taken under the exercise of eminent domain, it
will immediately notify the Trustee.
All insurance money paid or net amounts awarded shall be paid to the City, and the City shall proceed to
restore, repair, replace or rebuild System facilities as nearly as possible to the condition they were in immediately
prior to such damage or condemnation, to the extent that the same may be feasible, subject to such alterations as the
City may elect to make. If the insurance money or net amounts awarded shall be insufficient to pay all costs of the
restoration, the City shall pay the deficiency and shall nevertheless proceed to complete the restoration and pay the
cost thereof. Any balance of the insurance or condemnation proceeds remaining over and above the cost of the
restoration shall be deposited into the Revenue Fund.
The City's obligations to make all payments set forth in the Indenture and to perform all other covenants
and agreements on its part to be performed shall not be affected by any such damage or destruction or
condemnation.
Notwithstanding the foregoing provisions, the City shall not be required to repair, restore, replace or
rebuild System facilities, or any part thereof, if the City shall elect to redeem prior to maturity on the next possible
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redemption date all of the Bonds then Outstanding, together with accrued interest to the redemption date, and to pay
all charges, fees and expenses necessarily incurred and required to be incurred in connection with such redemption,
and all other amounts then owing by the City. In that event, the proceeds of all insurance or condemnation awards
shall be placed in and become part of the Bond Fund. If there be any deficiency in the moneys on deposit in the
Bond Fund after the deposit of all such proceeds, the City shall immediately deposit therein the amount of the
deficiency.
Accounting; Reports. The City covenants that it will keep the funds and accounts of the System separate
from all other funds and accounts of the City, and that it will keep accurate records of all items of cost and of all
expenditures relating to the System, and of the collection and application of Revenues, in accordance with generally
accepted accounting principles. Such records and accounts shall be open to inspection by the Trustee under
reasonable circumstances.
The City further covenants that at the end of each Fiscal Year it will cause an audit to be made of the books
and accounts for that Fiscal Year pertaining to the System by a Qualified Accountant. Copies of each such audit
shall be filed with the Trustee and furnished to the holders of outstanding Bonds making written request therefor.
Annual Budget. The City shall prepare an annual budget for System operations for each Fiscal Year. A
copy of each budget shall be filed with the Trustee and a copy shall be maintained in the office of the Finance and
Internal Services Director of the City.
Defeasance. Any Bond shall be deemed to be paid within the meaning of the Indenture when payment of
the principal of and premium, if any, and interest on such Bond (whether at maturity or upon redemption as provided
in the Indenture, or otherwise), either (i) shall have been made or caused to be made in accordance with the terms
thereof, or (ii) shall have been provided for by irrevocably depositing with the Trustee, in trust and irrevocably set
aside exclusively for such payment, (I) moneys sufficient to make such payment or (2) Government Securities
(provided that such deposit will not affect the tax-exempt status of the interest on any of the Bonds or cause any of
the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148(a) of the Code, as reflected in an
opinion of Bond Counsel delivered to the Trustee), maturing as to principal and interest in such amounts and at such
times as will provide sufficient moneys to make such payment, and all necessary and proper fees, compensation and
expenses of the Trustee and any Paying Agent pertaining to the Bonds with respect to which such deposit is made •
shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any said Paying
Agent.
Events of Default. Each of the following events shall constitute and is referred to in the Indenture as an
"Event of Default":
(a) Default in the due and punctual payment of any interest on any Bond;
(b) Default in the due and punctual payment of the principal of or premium, if any, on any Bond,
whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon the maturity thereof by
declaration;
(c) Default in the payment of any other amount required to be paid under the Indenture or the
performance or observance of any other of the covenants, agreements or conditions contained in the Indenture, or in
the Bonds issued under the Indenture, and continuance thereof for a period of sixty (60) days after written notice
specifying such failure and requesting that it be remedied, shall have been given to the City by the Trustee, which
may give such notice in its discretion and shall give such notice at the written request of holders of not less than
fifty-one percent (51%) in aggregate principal amount of the Bonds then Outstanding, unless the Trustee, or the
Trustee and holders of an aggregate principal amount of Bonds not less than the aggregate principal amount of
Bonds the holders of which requested such notice, as the case may be, shall agree in writing to an extension of such
period prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the
applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if corrective
action is instituted by the City within such period and is being diligently pursued; and
(d) The filing of a petition in bankruptcy by or against the City under the United States Bankruptcy
Code or the commencement of a proceeding by or against the City under any other law concerning insolvency,
reorganization or bankruptcy.
The term "default' as used in clauses (a), (b) and (c) above shall mean default by the City in the
performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture,
or in the Bonds Outstanding thereunder, exclusive of any period of grace required to constitute a default an "Event
of Default' as described above.
EEO
Acceleration. Upon the occurrence of an Event of Default, the Trustee may, and upon the written request
of the holders of not less than 51% in aggregate principal amount of Bonds Outstanding shall, by notice in writing
• delivered to the City, declare the principal of all Bonds then Outstanding, together with any premium and the
interest accrued thereon, immediately due and payable, and such principal and interest shall thereupon become and
be immediately due and payable.
Other Remedies; Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may, as
an alternative, pursue any available remedy by suit at law or in equity, including, without limitation, mandamus to
enforce the payment of the principal of and premium, if any, and interest on the Bonds then Outstanding.
If an Event of Default shall have occurred, and if it shall have been requested so to do by the holders of
51% in aggregate principal amount of Bonds Outstanding and if it shall have been indemnified as provided in the
Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred upon it by
the Indenture as the Trustee, being advised by counsel, shall deem most expedient in the interests of the
bondholders.
No remedy by the terms of the Indenture conferred upon or reserved to the Trustee (or to the bondholders)
is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default or Event of Default shall
impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or
acquiescence therein; and every such right and power may be exercised from time to time and as often as may be
deemed expedient.
No waiver of any default or Event of Default under the Indenture, whether by the Trustee or by the
bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or
remedies consequent thereon.
Rights and Remedies of Bondholders. No holder of any Bond shall have any right to institute any suit,
action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust thereof
• or for the appointment of a receiver or any other remedy thereunder, unless a default has occurred of which the
Trustee has been notified as provided in the Indenture, or of which by the Indenture it is deemed to have notice, nor
unless such default shall have become an Event of Default and the holders of not less than 51% in aggregate
principal amount of Bonds Outstanding shall have made written request to the Trustee and shall have offered it
reasonable opportunity either to proceed to exercise the powers granted or to institute such action, suit, or
proceeding in its own name, nor unless also they have offered to the Trustee indemnity as provided in the Indenture
nor unless the Trustee shall thereafter fail or refuse to exercise the powers granted, or to institute such action, suit, or
proceeding in its own name; and such notification, request and offer of indemnity are declared in every such case at
the option of the Trustee to be conditions precedent to the execution of the powers and trusts of the Indenture, and to
any action or cause of action for the enforcement of the Indenture or for the appointment of a receiver or for any
other remedy thereunder; it being understood and intended that no one or more holders of the Bonds shall have any
right in any manner whatsoever to affect, disturb or prejudice the lien of the Indenture by action of the holder or
holders or to enforce any right under the Indenture except in the manner therein provided, and that all proceedings at
law or in equity shall be instituted, held and maintained in the manner therein provided for the equal benefit of the
holders of all Bonds Outstanding thereunder. Nothing in the Indenture contained shall, however, affect or impair the
right of any bondholders to enforce the payment of the principal of and premium, if any, and interest on any Bonds
at and after the maturity thereof, or the obligation of the City to pay the principal of and premium, if any, and
interest on each of the Bonds issued under the Indenture to the respective holders thereof at the time and place in
said Bonds expressed.
Supplemental Indentures Not Requiring Consent of Bondholders. The City and the Trustee may, from time
to time and at any time, without the consent of or notice to the bondholders, enter into supplemental indentures as
follows:
(a) to cure any formal defect, omission, inconsistency or ambiguity in the Indenture;
(b) to grant to or confer or impose upon the Trustee for the benefit of the bondholders any additional
rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or
• imposed and which are not contrary to or inconsistent with the Indenture as theretofore in effect, provided that no
such additional liabilities or duties shall be imposed upon the Trustee without its consent;
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(c) to add to the covenants and agreements of, and limitations and restrictions upon, the City in the
Indenture other covenants, agreements, limitations and restrictions to be observed by the City which are not contrary
to or inconsistent with the Indenture as theretofore in effect; •
(d) to confirm, as further assurance, any pledge under, and the subjection to any claim, lien or pledge
created or to be created by, the Indenture, of the Trust Estate or of any other moneys, securities or funds;
(e) to comply with the requirements of the Trust Indenture Act of 1939, as from time to time
amended;
(f) to authorize the issuance and sale of one or more series of Additional Bonds;
(g) to make such additions, deletions or modifications as may be necessary to assure compliance with
Section 148(f) of the Code relating to required rebate to the United States or otherwise as may be necessary to assure
exemption from federal income taxation of interest on the Bonds; or
(h) to modify, alter, amend or supplement the Indenture in any other respect which is not materially
adverse to the bondholders and which does not involve a change described in clause (a), (b), (c), (d), (e) or (f) below
and which, in the judgment of the Trustee, is not to the prejudice of the Trustee.
Supplemental Indentures Requiring Consent of Bondholders. Subject to the terms and provisions contained
in this paragraph, and not otherwise, the holders of not less than 2/3 in aggregate principal amount of the Bonds then
Outstanding shall have the right, from time to time, anything contained in the Indenture to the contrary
notwithstanding, to consent to and approve the execution by the City and the Trustee of such indenture or indentures
supplemental to the Indenture as shall be deemed necessary and desirable by the City for the purpose of modifying,
altering, amending, adding to, or rescinding, in any particular, any of the terms or provisions contained in the
Indenture or in any supplemental indenture; provided, however, that nothing contained in the Indenture shall permit
or be construed as permitting (a) an extension of the maturity (or mandatory redemption date) of the principal of or
the interest on any Bond issued thereunder, or (b) a reduction in the principal amount of or redemption premium or
rate of interest on any Bond issued thereunder, or (c) the creation of any lien on the Trust Estate or any part thereof,
except as expressly permitted in the Indenture, or (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 indenture, or (f) deprive the holder of any Bond then Outstanding of the lien created on the Trust
Estate.
If, at any time the City shall request the Trustee to enter into any supplemental indenture for any of the
purposes described above, the Trustee shall, at the expense of the City, cause notice of the proposed execution of
such supplemental indenture to be mailed by first class mail to each registered owner of the Bonds. Such notice
shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file
at the principal office of the Trustee for inspection by bondholders. The Trustee shall not, however, be subject to
any liability to any bondholder by reason of its failure to mail such notice, and any such failure shall not affect the
validity of such supplemental indenture when consented to and approved as provided above. If the holders of not
less than 2/3 in aggregate principal amount of the Bonds Outstanding at the time of the execution of any such
supplemental indenture shall have consented to and approved the execution thereof, no holder of any Bond shall
have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the City from
executing the same or from taking any action pursuant to the provisions thereof.
SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT
The City has entered into an undertaking in the form of the Continuing Disclosure Agreement as required
by the Indenture for the benefit of the Beneficial Owners of the Series 2004 Bonds to cause certain financial
information to be sent to certain information repositories annually and to cause notice to be sent to such information
repositories of certain specified events, pursuant to the requirements of Section (b)(5)(i) of Rule 15c2-12 of the
Securities Exchange Act of 1934, as amended (the "Rule"). The City has not failed to comply with any previous
undertaking pursuant to the Rule.
•
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The Continuing Disclosure Agreement contains the following covenants and provisions:
(a) The City shall, not later than August I of each year, commencing August 1, 2004, provide to each
Repository and the Trustee its Annual Financial Information consistent with the requirements of subsection (d)
below.
(b) If, on the date specified in subsection (a) above for providing the Annual Financial Information to
Repositories, the Trustee has not received a copy of the Annual Financial Information, the Trustee shall contact the
Disclosure Representative to determine if the City is in compliance with subsection (a).
(c) If the Trustee is unable to verify that the Annual Financial Information has been provided to the
Repositories by the date required within subsection (a), the Trustee shall file a notice to such effect with the
Repositories and the MSRB.
(d) The City's Annual Financial Information shall contain or incorporate by reference the following:
(i) The following general categories of financial data and operating data with respect to the
City's water and sewer system (the "System") for the prior fiscal year:
(A) Changes in wholesale water rates charged by the Beaver Water District;
(B) Changes in the City's water and sewer rate structure;
(C) Annual System operating revenues, bad debt expense and bad debt expense
percentage;
(D) Costs for projected System capital improvements for the current fiscal year;
(E) Usage percentages of all water users consuming more than 5% of the System's
water output;
(F) Average daily water use and maximum day's water use; and
(G) Average daily sewage flow.
• (ii) The City's audited financial statements for the prior fiscal year, prepared in accordance
with accounting principles generally accepted in the United States ("GAAP") as such principles are
modified by the governmental accounting standards promulgated by the Government Accounting Standards
Board ("GASB") and by mandated principles of the State of Arkansas, if any, as in effect from time to
time, which financial statements have been audited by such auditor as shall then be required or permitted
by the laws of the State of Arkansas. If the City's audited financial statements are not available by the time
its Annual Financial Information is required to be filed pursuant to subsection (a) above, the Annual
Financial Information shall contain the unaudited financial statements of the City in a format similar to its
audited financial statements contained in the Official Statement for the Series 2004 Bonds, and the audited
financial statements shall be filed in the same manner as the Annual Financial Information when they
become available.
(e) The City has agreed to instruct the Trustee to deliver to each National Repository, or the MSRB
and the Arkansas State Repository, notice of the occurrence of any of the following Specified Events, if deemed
material:
(i) Principal and interest payment delinquencies;
(i i) Non-payment related defaults;
(iii) Unscheduled draws on any debt service reserve reflecting financial difficulties;
(iv) Unscheduled draws on any credit enhancement reflecting financial difficulties;
(v) Substitution of any credit or liquidity providers, or their failure to perform;
(vi) Adverse tax opinions or events affecting the tax-exempt status of the Series 2004 Bonds;
(vii) Modifications to rights of Bondowners;
• (viii) Bond calls;
(ix) Defeasances;
(x) Release, substitution or sale of property securing payment of the Series 2004 Bonds; or
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(xi) Rating changes.
(f) The City has agreed that the foregoing undertakings shall be for the benefit of the Beneficial
Owners of the Series 2004 Bonds, and shall be enforceable by any Beneficial Owner of the Series 2004 Bonds in an
action for specific performance against the City. is
(g) The continuing obligation of the City to provide Annual Financial Information and notice of the
occurrence of Specified Events, if material, will terminate if the City is no longer an "obligated party" within the
meaning of the Rule or upon the maturity, defeasance, prior redemption or payment in full of the Series 2004 Bonds.
The City and the Trustee may amend the Continuing Disclosure Agreement, and any provision of the Continuing
Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel,
reasonably acceptable to each of the City and the Trustee, to the effect that such amendment or waiver would not, in
and of itself, cause the undertakings under the Continuing Disclosure Agreement to violate the Rule, taking into
account any subsequent change in or official interpretation of the Rule.
(h) The following terms used under this caption shall have the meanings set forth below:
"Annual Financial Information" means the annual financial information to be provided by the City of the
type described in the Continuing Disclosure Agreement.
"Arkansas State Repository" means any public or private repository or entity as may be designated by the
State of Arkansas as a state repository for purposes of the Rule and recognized as such by the SEC. As of the date
of the Continuing Disclosure Agreement, there is no Arkansas State Repository.
"Beneficial Owner'" means any person which has the power, directly or indirectly, to vote or consent with
respect to, or to dispose of ownership of, any Series 2004 Bonds, including persons holding Series 2004 Bonds
through nominees or depositories.
"Disclosure Representative" means the City's Finance and Internal Services Director or his or her designee,
or such other officer or employee as the City shall designate in writing to the Trustee from time to time.
"MSRB" means the Municipal Securities Rulemaking Board.
"National Repository" means any nationally recognized municipal securities information repository for •
purposes of the Rule.
"Participating Underwriter" means Stephens Inc.
"Repository" means each National Repository and the Arkansas State Repository.
"Specified Events,, means each of the events with respect to the Series 2004 Bonds listed in subsection (e)
above.
(i) A failure by the City to comply with the provisions of the Continuing Disclosure Agreement will
not constitute an Event of Default under the Indenture, and the sole remedy in such an event shall be an action to
compel specific performance. Nevertheless, such a failure to comply must be reported in accordance with the Rule
and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or
sale of the Series 2004 Bonds in the secondary market. Consequently, such a failure may adversely affect the
transferability and liquidity of the Series 2004 Bonds.
UNDERWRITING
Under a bond purchase agreement entered into by and among the City and Stephens Inc. (the
"Underwriter"), the Series 2004 Bonds are being purchased at a purchase price of $6,083,730.95 (representing the
stated principal amount of the Series 2004 Bonds plus a net reoffering premium of $60,720.95 and less an
underwriting discount of $66,990.00) plus accrued interest from May 1, 2004 to the date of delivery of the Series
2004 Bonds. The bond purchase agreement provides that the Underwriter will purchase all of the Series 2004 Bonds
if any are purchased. The obligation of the Underwriter to accept delivery of the Series 2004 Bonds is subject to
various conditions contained in the bond purchase agreement, including the absence of pending or threatened
litigation questioning the validity of the Series 2004 Bonds or any proceedings in connection with the issuance
thereof, and the absence of material adverse changes in the financial condition of the System.
The Underwriter intends to offer the Series 2004 Bonds to the public initially at the offering prices as set •
forth on the cover page of this Official Statement, which offering prices (or bond yields establishing such offering
prices) may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join
32
with dealers and other underwriters in offering the Series 2004 Bonds to the public, and may offer the Series 2004
Bonds to such dealers and other underwriters at a price below the public offering price.
• The City has agreed to indemnify the Underwriter against certain civil liabilities in connection with the
offering and sale of the Series 2004 Bonds, including certain liabilities under federal securities laws.
TAX MATTERS
Federal Income Taxes. In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations,
rulings and judicial decisions, interest on the Series 2004 Bonds is excluded from gross income for federal income
tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion
described in the preceding sentence assumes the accuracy of certain representations and compliance by the City with
covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Series
2004 Bonds. Failure to comply with certain of such requirements may cause interest on the Series 2004 Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2004
Bonds. The City has covenanted to comply with such requirements.
Notwithstanding Bond Counsel's opinion that interest on the Series 2004 Bonds is not a specific preference
item for purposes of the federal alternative minimum tax, such interest will be included in adjusted current earnings
of certain corporations, and such corporations are required to include in the calculation of alternative minimum
taxable income 75% of the excess of such corporation's adjusted current earnings over its alternative minimum
taxable income (determined without regard to such adjustment and prior to reduction for certain net operating
losses).
Tax Treatment of Original Issue Discount. The difference between the initial public offering price, as set
forth on the cover page hereof, of Series 2004 Bonds maturing August 15, 2009, 2010 and 2011 (the "OID Bonds"),
and their principal payable at maturity constitutes original issue discount treated as interest which is excluded from
gross income for federal income tax purposes subject to the caveats and provisions described above.
In the case of an owner of an OID Bond, the amount of original issue discount which is treated as having
• accrued with respect to such OID Bond is added to the cost basis of the owner in determining, for federal income tax
purposes, gain or loss upon disposition of such OID Bond (including its sale, redemption or payment at maturity).
Amounts received upon disposition of such OID Bond which are attributable to accrued original issue discount will
be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by reference to the
yield to maturity of each individual OID Bond bearing original issue discount, on days which are determined by
reference to the maturity of such OID Bond. The amount treated as original issue discount on such OID Bond for a
particular semiannual accrual period is equal to (i) the product of (a) the yield to maturity for such OID Bond
(determined by compounding at the close of each accrual period) and (b) the amount which would have been the tax
basis of such OID Bond at the beginning of the particular accrual period if held by the original purchaser, (ii) less
the amount of any payments on such OID Bond during the accrual period. The tax basis is determined by adding to
the initial public offering price on such OID Bond the sum of the amounts which would have been treated as original
issue discount for such purposes during all prior periods. If such OID Bond is sold between semiannual
compounding dates, original issue discount which would have accrued for that semiannual compounding period for
federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.
Owners of OID Bonds should consult their own tax advisors with respect to the determination for federal
income tax purposes of original issue discount accrued with respect to OID Bonds as of any date, with respect to the
accrual of original issue discount for such OID Bonds purchased in the secondary markets and with respect to the
state and local tax consequences of owning OID Bonds.
Tax Treatment of Original Issue Premium. The Series 2004 Bonds maturing August 15, 20055 2006, 2007,
2008 and 2012 (the "Premium Bonds"), will be reoffered at a price in excess of the principal amount thereof. Under
the Code, the difference between the principal amount of a Premium Bond and the cost basis of such Premium Bond
to an owner thereof is "bond premium." Under the Code, bond premium is amortized over the term of a Premium
Bond (i.e., the maturity date of a Premium Bond or its earlier call date) for federal income tax purposes. An owner
of a Premium Bond is required to decrease his or her basis in such Premium Bond by the amount of the amortizable
• bond premium attributable to each taxable year (or portion thereof) he or she owns such Premium Bond. The
amount of the amortizable bond premium attributable to each taxable year is determined on an actuarial basis at a
constant interest rate determined with respect to the yield on a Premium Bond compounded on each interest payment
date. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes.
33
Owners of Premium Bonds (including purchasers of Premium Bonds in the secondary market) should
consult their own tax advisors with respect to the precise determination for federal income tax purposes of the
treatment of bond premium upon sale, redemption or other disposition of Premium Bonds and with respect to the
state and local consequences of owning and disposing of Premium Bonds.
Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to
the Series 2004 Bonds.
The accrual or receipt of interest on the Series 2004 Bonds may otherwise affect the federal income tax
liability of the owners of the Series 2004 Bonds. The extent of these other tax consequences will depend upon such
owner's particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion
regarding any such consequences. Purchasers of the Series 2004 Bonds, particularly purchasers that are
corporations (including S corporations and foreign corporations operating branches in the United States), property or
casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of Social Security or
Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may
be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult
their tax advisors as to the tax consequences of purchasing or owning the Series 2004 Bonds.
Changes in Federal Tax Law. From time to time, there are legislative proposals in the Congress that, if
enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the
Series 2004 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether
if enacted it would apply to bonds issued prior to enactment. Purchasers of the Series 2004 Bonds should consult
their tax advisors regarding any pending or proposed tax legislation. The opinions expressed by Bond Counsel are
based upon existing legislation as of the date of issuance and delivery of the Series 2004 Bonds, and Bond Counsel
has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation.
State Taxes. Bond Counsel is of the opinion that, under existing law, the interest on the Series 2004 Bonds
is exempt from all state, county and municipal taxes in the State of Arkansas.
RATINGS •
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), has given
the Series 2004 Bonds the rating of "AAA" based on the delivery of the Financial Guaranty Insurance Policy by
Ambac Assurance and has assigned an underlying rating of "A" to the Series 2004 Bonds. Such ratings reflect only
the view of S&P at the time such ratings were given. An explanation of the significance of the ratings may be
obtained from S&P. There is no assurance that such ratings will continue for any given period of time or that the
ratings will not be revised downward or withdrawn entirely by S&P if in its judgment circumstances so warrant.
Any downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Series
2004 Bonds.
Neither the City nor the Underwriter have undertaken any responsibility subsequent to the issuance of the
Series 2004 Bonds to assure the maintenance of the ratings or to oppose any revision or withdrawal of the ratings.
No application has been made to any rating agency other than S&P for a rating on the Series 2004 Bonds.
LEGAL MATTERS
Legal Opinions. Legal matters incident to the authorization and issuance of the Series 2004 Bonds are
subject to the unqualified approving opinion of Kutak Rock LLP, Little Rock, Arkansas, Bond Counsel, a copy of
whose approving opinion will be delivered with the Series 2004 Bonds. Certain legal matters will be passed upon
for the City by its counsel, Kit Williams, Esq., City Attorney.
Litigation. There is no litigation pending seeking to restrain or enjoin the issuance or delivery of the Series
2004 Bonds or questioning or affecting the legality of the Series 2004 Bonds or the proceedings and authority under
which the Series 2004 Bonds are to be issued, or questioning the right of the City to issue the Series 2004 Bonds.
Except as set forth in the following paragraph, there is no action, suit or proceeding known to be pending or
threatened, restraining or enjoining the City in any way which could have a material adverse effect on the City or the
System's financial affairs. •
The City is presently a defendant or co-defendant in an action where the amount of damages sought
exceeds $50,000. In this case, the City has prevailed at the trial court level. This case is currently on appeal and is
being actively defended by counsel for the City. As of the date of this Official Statement, the City believes the
34
likelihood of an unfavorable outcome is remote. Further, the City does not know of any fact or set of facts from
which the liability might arise which individually or collectively would materially affect Net Revenues or the
. financial position of the System.
FINANCIAL STATEMENTS
•
•
The general purpose financial statements of the City at December 31, 2002 and for the year then ended,
included herein as Appendix A, have been audited by BKD, LLP, independent certified public accountants, as set
forth in their report dated April 2, 2003, which report is also included in Appendix A. The notes set forth in
Appendix A are an integral part of the financial statements, and the statements and notes should be read in their
entirety. Set forth in Appendix B to this Official Statement are the unaudited financial statements of the City's
Water and Sewer Fund for the year ended December 31, 2003. Additional financial information concerning the City
may be obtained from the City's Finance and Internal Services Director, City of Fayetteville, City Administration
Building, 113 West Mountain, Fayetteville, Arkansas 72701.
MISCELLANEOUS
Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not
so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of
the estimates will be realized. This Official Statement is not to be construed as a contract or agreement between the
City and the purchasers or owners of any of the Series 2004 Bonds.
ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT
The information contained in this Official Statement has been taken from sources considered to be reliable,
but is not guaranteed. To the best of the knowledge of the City, this Official Statement does not include any untrue
statement of a material fact, nor does it omit the statement of any material fact required to be stated herein, or
necessary to make the statements herein, in light of the circumstances under which they were made, not misleading.
35
The execution and delivery of this Official Statement has been duly authorized by the City of Fayetteville,
Arkansas.
CITY OF FAYETTEVILLE, ARKANSAS •
By:
Mayor
•
•
36
•
•
•
APPENDIX A
AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS
OF THE CITY FOR THE YEAR ENDED DECEMBER 31, 2002
A-1
[THIS PAGE LEFT BLANK INTENTIONALLY] •
A-2
•
r -I
L
I
4M W.laPMAvarx• S %a 260E
MN rl%wa Av .Cite i(e e.o. BoaM
Fen&mua An TL'A) N ui fl tAB Tr M38r
aTJ ar2.1Wa FuanALY'. Wi SINM Fu Satard1250
Independent Accountants' Report on Financial Statements
and Supplementary information
The Honorable Mayor and City Council
City of Fayetteville, Arkansas
Fayetteville, Arkansas
215E Ilankmw
VA.BaK&M
Pn Bbtk Aa TIBI I M66
6 0491M Fan Bra: i4a
bI1dt
We have audited the accompanying general purpose financial statements of the City of Fayetteville,
Arkansas as of and for the year ended Docember 310 2002, as fisted in the table of contents. These
general purpose financial statements are the responsibility of the Citys management. Our responsibility
is to express an opinion on these general purpose financial statements based on our audit,
We enadneted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
pnesmuttion. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all material
respects, the financial position of the City of Fayetteville. Arkansas as of Dcccmber 31, 2002, and the
results of its operations and the cash flows of its proprietary fund types for the year then ended in
couformity with accounting principles generally accepted in the United States of America.
In accordance with Governnrenr.4udiTing Standards, we have also issued our report dated April 2, 2003,
on our consideration ofthe Citys internal control over financial reporting and our tests of its compliance
with certain provisions of laws, regulations, contracts and grants. That report is an integral pan of an
audit performed in accordance with Government Audirurg Sl =Iia ds and should he read in conjunction
will, (his report iu comideriug die results of our audit.
falailat The accompanying supplementary information as listed in the table of contents is prescatul ]or purposes
lm of additional analysis and is not a required part of the general purpose financial statements. Such
Sheens information has been subjected to the procedures applied in the audit of the general purpose financial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose
financial statements taken as a whole.
A-3
The Honorable blayor and City Counoil
City of fayettevilie, Arkansos
Page 2
The necompanying information in the introductory and statistical sections as listed in the table of contents
is presented for purposes of additional analysis and is not a required part of the general purpose financial
statement. Such information has not been subjected to the procedures applied in Ore audit of the general
purpose finnocial statements and, accordingly, we express no opinion on it.
April 2, 2003
•
C J
WH
•
•
is
Page Left Blank Intentionally
A-5
Coy of Fayvftovaq Adwtsas
Camblned Balatra Sheet
An Fund Types, Accooad Gmups, and Dlw tely Presented Canponwd UNm
December 31. 20W
Assets:
Gash
InvotbrlaMs
Recabahfm:
GLliarla apNalh
Acmied i0107811
DUO tram e8ter funds
Due kern compowdunb
Due kcm odwrpbwrnm+arts
Inwn:odcs
Ropelde4endaumdmpe
endathwauem
Pe Uk ad Mete:
krveumants
Raoervebies.
Accrued hltennt
Dui ken omw powenneNe
I'r, paw wpen me
Prtperh.OW and equtrmW
(nel c(amtmtwsd
depademay *tree appkafA)
Advatns Inaher funds
Unamodhwd Wnd issuanw cosh
8m.er doah:
7amiadsvatebb in dsbi
rarvice hcd
MI01ud to be pmvWed for mWw ad
of gea l Ic g wm debt
Tatal assets and other dabb
s. "
Bpeow Debt Cldtad
Genital Ravens SOMoe pmeds
S 3792W S
1MOOS $
91893A72
4,3M M
534.494
21.161
40.528
25.205
277,9M
67,190
95,332
SS
1.100,462
414.209
1,696
108,765
4.731
5,981r027
8,103
789,729
$ 3.039
S1,111,m
10374161
275,515
123.283
1.570.701
137,617
S 12.511.511 S d.97d,$3S S 8.755.359 S 547.099
I
•
r
L -A
Vvi
Tali)
Total
muctyy
(ma� ndum
(mrmuindum
pMwW81YFund Twee Fun3T)om
Amon Gtoups
.Only)
mM
Geroeei Genem
tnna l Tmm and
FWd Lonpfam
fiimiry Camponam
Reportbg
Ent&?d46 somw Aaron
Asaata Dept
acv nem t7114f
Entity
$ 394285
S 1Aoo S
367,522 $
S 5 1,283,107 $
785.942
S 2,069.049
27,884,832
4A29TM
2pa,503
127,568.512
1,938.748
129,S05.280
3,501.944
H9
4,786
SASO,757
0,490
S,443.256
103,448
23.818
15T,049
080.452
10203
695.658
03Ao2
30,810
12,930
695.040
595,040
65A"
65.357
252251
18,865
31356A88
3A5008
672,859
123.871
698.233
898,233
56.812
88.305
374,130
374.130
2,8452m3
H,HZH,300
8A261300
8.858
18A59
MOSS
20.338
78OX5
789,565
6.215
621S
6,216
141.289.702
6,583,403
53A58.705
200,891,900
361,012
201A72.912
110.000
110.Coo
105,961
196.961
IMAM
6.158.259 6.758,359
6.758.359
•
20.948.811 20,948,011
20.946A11
5 177248.688
$ 9A47.261 S
20A94,857 5 53A58,795
S 27.707,170 S 378.396.178 S
3,122,407
5 381,518M3
A-7
Cny Of Fatan"Jua, Arkansas
Cemlaned BabstMe Shoot conHruad
At Fund Typos,A m CmuPa, and Morole[y P(eaan dCaugonom Unaa
Deoembat 31, 2002
Uaibirdiat Fund Egaey.
and Other Crodas
Uati63lcs:
Arsour" PeYabla
Dupto oeerfun baelfa¢ensei
Ow to aharWnds
Due to mtam ammaitent
Ow m olhx govaminan[s
Cwmniet depoabs
Defend reuenua
PeYabm eosn m lbistrd
assets:
Ac nts payable
Atauad Wereit
Cunene melutaea of
nve bonds
Adv*omfw oa+v Nods
Caoara21on94Mm dated
Revenue bonds payable, nel of
Mount matudlld
Unstnoclbdd bond disbUmIM
Taal Oebnitla
Fund awityand oQwrmadba:
Imvesbnem In adwWal Ilmd
assets
CoarbuW mpnal
Retained earnings:
Itasoj ed tar mvamto bonds
unit ed
Fund baknca:
Raarvod eon:
ACuanses of oBlv2anda
Debt servke
We Ibef c"Oballons
DROP mambas
RelYama A benefm
Dmpbraenforvsn m
pmpa]d espardiumum
unmamod:
Dasi2mbad:
Capital arposmoants
UwfeegrutM
Total Find equity and
Mbar Credits
Teal tladaaea, fund agony
and shot sodas
71m aCovnpanyylq roles era an mia9ml pan M
She gemai p upase ratancial statements.
AM062 E 28t= S $ 2.066.032
idol 52 190,308
32,939 18260 136.020
41212
107.767 B9A0B 471,710
3A17,020 849.535 2,664,682
10,000
8,758,359
67,100
i MT65
2554
61,932,437
aA75,726
4255420
0.601,484
4.3 101 8758.359 61,932437
t 11,31� E 4,974.833 E' 8,750.369 S 8s.5B7,02B
•
•
m
•
0
TOW
Told
F)19r4ry
(m3n1ora0EOm
0oe010mndaat
Pmpdalary Fuld 1)2N Ftud Types
Attaunt 2TM
Onty)
'pYy1
General G4neral
-
Int4mal Tint ane
Fmd lAngd
P*u
Wnp=nl ft;)Orwv
Entemdi somko Agw"
Assets Dom
Gwelmneat
CYdta Entity
S 1.544,020 5 119,351 S 905,693 S
739.609 124.064
250.389 147.423
1,469.612
85,830 tg675
59,672
328,154
1.355,000
110,000
21,410,000
(748,375)
29,191,920 243,415 1,077,791
56.671.219 167545
2,809,795
91.964,754 OA36AOI
404,S50
707,431
18,8t4,58S
S S 5,557,710 5
154;657
$ 5,712,367
2,70001
2,709=
695,040
05,040
65,357
fiS,38T
81212
61.212
1,409,812
,9,
2,309.087
2,80309,041OB7
5%B72
69,672
320,154
32BI154
1,356.000
1,356,000
110,W0
110,000
27,707,170 27.707.110
27.707.170
21,410,OW
21A10.000
(744.375)
L749.375/
2,707,170 62.941.513
220,044
03.161:557
53ASB,795 53,858,795
70,831 53,W..9,426
55,838,764
55,836,754
2,938,795
2193B,795
101,391.055
I OI A91,055
110,000
110,000
6,758,359
61758,359
404,950
404,850
79TA31
797,43t
18,614.5B5
16,014.WS
87,109
67009
1114329
1111324
61,932.437
61,932,437
12,731,154
2.931,732
15.982.888
160.464,760 9.603.948 19,818,B66 53.858 7%
315,454663
2,002,363
314.367,020
3 177.24SAM 5 9447,261 S 20,894.857 $ 53.868.795 S
27.707,119 E 778,796.176 3
3,122.407
E 381418,503
MJ
City of Fayetteville, kkanaaa •
Combined Statement of Revenues. FXpentlituma,
and Changes in Fund Bafsom,
An Govennt r" Fund Types antl Disomkay Presented Component Unfb
For the Year Ended December 31. 2002
Special Del# Cophal
Damaral Revenue Serow Pn*l is
i vy Texas $ 11,091,00 S 1,460,011 $ 6,185.701 5 16.744.162
Taxes
Uceraes and pe4mts 842806
baengwerananWl 1.775,444 4,G72,518 554,841
Charges for services 1.184,515 512,527 490,330
HAGS and brhieaec 1253,452 -
UtvestmenteaMngc 316,342 170,957 48.943 1.665,700
Net kwmale In the h9vaWe
of kwesvients 61256 39,562 393,685'
Other 886.754 7,756 1,155.147
Total revenues 18,312,399 6.08,334 0.234.644 21141.485
Eglenditures:
Curmnt:
General govcmmenl - 4=1690
fbnar7 t tiim sdrv)tas 1,48Q573
Fella 7,3SS.W
Fka 4279.362
PutmGmtka 460.35t 3,528.068
tifhan development 311Za188 1,90.3,305
General servims 1.395,577
OBalmet parking 172,606
Communitydavempnenl 6551114
Ong law enbrocrwo 433.56T
Ursry
Tourlan, promotion and oevebpnheN •
Debtsevvice:
Pdrldpw, interest and
Paying agenttoes 1.374,012
Capital outlay 12604,188
Total eapendbaes 21 252,372 6.932,663 1.374.012 12.694.108
Excess (dertensw l of revonues over
(under) expendllures J&M0.0331 _ r34.3291. 4�.,001632 8.54T.497
Other financing saaces (uses):
Operafiflg transfars In 3,01%875 48,675 1.595.370
Oyeratingeanslersout (388,864) (61,101) (4,212,855)
Operating kanders 5'orn Ornery gmnunant
Operating transfer io inhnsry govensmod
Operating franstem from Component elks 62,939
Operatrg traasfem to oompornent utt (B93,210) (184.239)
Band proceeds z5ew.106
Bond issue coat f244.9471
TOM ama rMnity
saurocs(was) 1.936.B01 142,526) 1,856.309 20.740,065 -
Ermeaa (dogciancy) of ravenuas over (under)
expondituroe and other
financing sources (uses) (1,003.232) (46.855) 6,618,941 29.293.562
Fund balonce, Oeglmatg of year 9,697,T23 4,371.958 239.418 A538,875
Fund bslanca, and of year $ !IV491 S 4,325,101 3 0.768L350 S 61.932.437
The acmmpanyang notes are an integral pert of
the general purpose enandal atateraeNa.
•
A-10
•
Total
Total
Cawvndan
(mamuand=
orm
onM
P*lwy
Component Repm9np
Goy "nt
units Entity
S 38.410,564 S 1g09,011 S 37.599.675
1842 906
642.906
7,002,604
626,901
7,829.668
410S,372
347,169
2.542,541
U53,452
1.253,462
2,207,942
64.766
2.272,706
494,503
17,250
611,711
2,27.&W
80,"()
_2,34D099
2=690 21338.090
1,488573 1,488.573
7,353,946 7,358,944
4,979,162 4.979,362
4,008,424 4,008,424
5,156,176 5,156,176
1,995,577 1,395.577
172.805 172.806
855.114 855,114
433.567 433,597
1.5656594 1,565,594
• 1.128.118 1,128.113
1,374,012 1.374.012
12,094.188 IZ694,188
42253235 2.693707 44,96W*2
10.44767 (66,1D71 10„}46,61n
4,682,620
4,662,62D
(4,662,820)
(4,662,820)
1.642.447 1,642,447
(869520) (869,520)
62.939
62,939
(877,449)
(877,449)
25,388,106
25.388,11)(1
(244.947)
(244,9471
24,328,649
772,927 25,101,576
34.762,416 694.820 35,447,236
46.947.972 2.14&9i2 49,094,864
S 81,710,388 S 2,331,732 S 8 5542.120
•
A-11
Cly of Fayallcv9le, Arkblsas
Combined Statement of Revenua4. E"nd s
and Chmffgm in Fund BelBnrna • Budget end Aatual (GAAP Bs3ia)
Con ral, Spedel ROhawa, Debt Semm. and Capaal Pta)sde Funds
For an Yew Ended December 31, 2D02
Rev4nues:
Txri
Llodnses and pe WW
Inlargovenunerdal
chages forsen4cw
FStes end rarfWtu=
Invaa5oant urnings
Net Increase fn ew &r value
Of Irwealmerds
ohm
kmr rr
Current "
Goners) GOvernumad
Adminaeallm Sambas
PoOce
rile
P111dto Works
L mn Development
6aneralSorvkea
Off so" park4a
cermmtlaty6welepment
thug Lbw enTmmment
Dobt sada:
Principal. Intgredand
paying afford roam
CspPd uuOay
TOW avmdikaes
Expos(daffdanq)Ofwvanu over
(toper) expenditures
mer Nnan" muroee Noeafc
Dporafing trend(sm in
6pereung "Pl feli Opt
Cpera:trg handler from componem units
QpgrsOng tronafer t9 carnpmeniunBs
Bond pmooals
Blind facia@ ONt
Talal wtw flnanclng
senses (cowl
Exrms {deficlertOy) of revarwta Omer
(undo) expenditurem and oMw
financing saxxs (was)
Frail babnos, txalmdng of yoar
fund balanw, and of year
Genera€
Valance
Favor"
22s2t
Actual
nsdavarabla)
_ Dudaet.
$ 1t,M3,5C0
S 11,991,570
S 148.170
S 1.324.981
821,000
842JO
21,908
1,747.657
1,T75A44
27.747
5,175,824
/,197f4D0
1,184,515
(12,985)
400,035
1,171,000
1.253.452
82A52
422.800
318342
(105AW)
205,450
81.2m
61258
787.893
886.754
99m1
7,2260•
17 g90350
18 312339
321XS
- 7,113,750
2,853A79
2,338JW
514,389
/.683,644
1,486.673
202471
7,605.139
7,358.946
206,103
4,900.707
4,979,302
Tom
86S,5B1
480,356
185,235
3070,em
3.427.567
3.212.BBB
214AII
2.8851134
/.B9Q948
t sssi 7
204,371
sW.W0
1A42,459
433,558
•
22.768725 21252,372 1.534353 9.28.777
(4796375) (2.940.033) 1.056,342 (2.183.027t
3.015,310 3.018.575 31565 53,000
(410.0"1 (388,864) 21,20 (6101(12)
(700,120) (593,210)
1,899,101 1.938.501 24790 (6.102)
_(2.897774). (1,003,232) i 881,132 (2.t91.129)
9$97,723 9697.723 4,371,SU
S B,B00,449 5 8,694,491 S 1.861.132 S 2,180.$27
The acvinpaaytig Was are m hnt%ral pan of the genval WRt594 fmndst 41i1d16AtL
A-12
•
•
fioe®I Bavenm
De16 Servke
Ca0091 Prokctt
Vada
VVAS c
Vadmm
Fa blo
Fa blo
FawraMe
A a1
(Un(mamNa)
Budget
ActuA
IJnla 14
dle9et
A w
_(1Gda b%)
3 1,468.011
f 164.330
f 6.270,000 5
61185,701
f (94,20) f
1S.M.870
f 16,7A4,182
$ 1,479,312
4,672.519
(902,805)
4051.508
5%.841
(1156.867)
517,527
1/2,492
300,000
498,850
19&330
176.957
(49.493)
62561
48.941
(13,818)
1,283.036
1,605,703
402,084
39.562
39=
393,685
MASS
7,768
498
5./67.853
1,385.147
(3,782,7061
6.8961334
(215,416)
6AM1561
6934.644
(97417)
24,057,607
21241,6W
(2916,184
3,520,068
342,768
1,943,300
1,0511826
172JS06
382074
855.114
587.045
433,567
1
1,417.051 1,374,012 43.049
72,025,670 12 S4,188 59,a3/,490
8.932.68J
.114 1,417,061 IX4.012 43,049 72,025,676 12,694,788 59,331,490
(34,326) 2.148,698 4915.500 4.860,632 (54.868) (47.967,811) 8.547.a97 5851SX0
48,575 (4.425) 1,537.721 1.595,370 57.649
(61,101) 1 (2,460) 2,469 (4,H/,532) 44,212,885) 228,677
75.000 62.939 112.061)
(415.632) (164,239) 231593
25,388.106 25,388.105
(244,9471 (244,947)
(12526) (4.424) 1610262 1,658,9J9 481057 2028,5,795 20.746,085 460,270
(48,855)
2.144.274 6,526.752
6.518441
1G,811) (27b82.016)
29293.582 N,975,578
4.371.956
239,418
239,418
32,638.875
32,638.875
3 4.325.101 f
2,144274 $ 6 7706.170
f 8,7&3 9
f (6,81/) 5 4.W%.M
f 81,932A37 f 55?75,578
A-13
City of Fayetteville. Arkansas
Combined Statement or Revenues, Expenses, and Changes in Fund Equity
All Proprietary Fund Types
For the Year Ended December 31. 2002
Operating revenues: _
Aldine fees
Rents and leases
Solid waste fees
Water services
Sewer services
Shop charges
Clow
Total operating revenues
Operating expenses:
Operations and administration
Landside operations
Alrside operations
Feted based operations
Water supply
Water imnsmission and distribution
Sewer Qoft gn
Wastewater treatment
Customer services
Solid waste services
Total operating expenses before
depredation
Operating income
before depreciation
Depreciation
Operating loss
t4onopera0ng income (expense):
intergovernmental
Stale tourist taxes
interest expense and paying
agent fees
Interest Income
Net increase in the fair value of Investments
Other
Total nonoperating Income
Capital Contributions
Income (loss) before operating transfers
Ismorletay Funds
Total
Internal (memorandum
Enterprise Service only)
$ 500,22T $ $ 500,221
412.614 412,614
5,4754126 5.475,126
11,018,885 11,016,685
8,929,776 8,929,779
3,571,740 3.671,740
18.989 _18.980_
26,353,405. 3,571,740 29,925,145
2A"1194
20390,967 4,935,161
381,972
381,972
427,934
427,934
507545
507,545
4,319,415
4,319,415
1,190,411
1,190,411
1,185,122
111855122
4,234,671
4.234,071
1,682,805
1.882,805
5,758,680
5,758,680
22212,749 2390,967 24.603.716
4,140656
1,180,773
5.321,429
5.501.997
1,528,876
7,030,873
(1,361,341)
(348,103)
(1.709.444)
2,717,255
2,717.255
280,789
280,789
(955,5071
(955,507)
1.119.827
180,407
11300234
274,792
34,766
309,558
32f)J53
20,942
349,695
3,765,909
236,115
4,002A24
3.105,752
3.195.752
•
•
•
A-14
•
•
City of Fayettakn0e, Arkansas -
Combined Statement of Revenues, Expenses, and Changes in Fund Equity, conlutued
All Propinetary FU1W Types
For the Year Ended December 31. 2002
Operating transfers:
Opereting transfers from oenlponerd units
Operating transfers to cemponmrt units
Net income (loss)
Add track depradatlwr On assets aMAred
with canubuted capital
Increase (decrease) in retained earnings
Retained eami ngs, beginnung of year
Retained earnings, end of year
Contributed capital, beginning of year
Capital contributions
Oepmciation on meta aogwfcd
with contnbulad capital
Contributed capital, and of year
Total fund equity, end of year
Proprietary Funds
Total
Internal
(menwrandurn
Entdflarse Sarviae
- only)
806,584
806,58t
(764,9M
(764.998)
51641,903 (111,968}
5.529,915
3,143,277 13,114 3,156,391
8,785.180
(98,874)
8,686XIS
88.008=9
9,5351175
95,54544
94,793.549
9,436,301
104.229.650
56,255,750
180,659
58.436,409
558,746
55%748
O,143277)
(13,114)
(3,156.391)
55,671219
167,545
55,838,764
$ 150.464,768
S 9.603.848
S 1601068,614
The accompanying notes are an Integral pan of the general purpose financial statements.
A-15
City of Fayetteville, Maras
.
Combined Statement of Cash Roam
As Pn4viofary Fund Types
For the Year Ended DeccMer 31. 2002
Tate!
tniemel
Imengrarpum
nites0Asa-
Service"
only)
Cash 00ws from operaNnI; ad des:
g (7,361,341)
$ (348.101)
3 (1,709,4u)
opera" lass
1068 atIUSIM" t0 i6000* Op6Iffi1g M5 to rid
cash provided by operating scNvitles:
5rsol.90
ItwA876
7A10,an
Depredation expose
Deoneass in customer accounts receivable
16T,5T1
434
laa,W5
Decrease in due Into ode+ftmds
66.705
' 1.681
56,396
Decrease in due from Other 9wcmrents
639.420.
M.420
(lmreax) deanaut: In YNenbry
8.633
2(1,417
(15,920)
IT=)
(Increase) dacrease at prepate a gorses
Del wwInammilspayaNe
(40.1,`h09)
{(4,265)
-f4A168)
irporease In Otheraanred wpenowes
0,748
10,585
100,333
DecrlsiR n Mle bona hlrr0a
102,996
(649.5561
102.90
(649,5581
Increase n eaadwand osammerdeposas
335RIC
3.617
339,533
Crier revsnue
Net rash prodded try OPem gadWNbs
4,534,995
1,166.248
5T01,243
Desh fbwa tram nmcapNal f xoncin9 ace 49m
mbrgovanmerdat
292,1H
280,789
282,141
280,789
Taxes
Opmalwnl bmhs8as from component tadb
806,561
. 806,681
00arating transferee to component MRS
(764,998)
(T844998)
Net rash provided by thahcaphal Fnandng 8&VUS
614,513
614,513
Lash noes tom capital and rebted P4wndng ac6.ddas:
2,425,114
CaP9=15
�
2,425.114
9.158.760
9,155.760
Bond proceeds
(97,435)
(97,435)
Bond ontre costs
Payment of bond principal
(14,790.ODD)
(14.790.000)
AcQuivsv4n and corcebuc6cn of fixed assets
(3,974,029)
(2.065.504)
(6.029,533)
mlerestpaxionbords
(1,148,505)
11,148,505)
Proceeds flash the sale of Road assets
87,255
67.258
Net cash used tof capsal and m42W E=Ktng acNvi6os
f8426sflM
(1.98a,248)
(10414,344)
Cash Rows from h vwft acaYsies:
pordwe of Inveslmsnl securities, net
(165.Y78)
(165,278)
Proceeds ban sale of investment seced8es,mat
1,633,156
632.833
2,265,990
Interest and dividends on unno"munt2
1,141252
189,107
1,330,418
Parch= of (w&kftcd inveshnee secunfies. net
(108)
618,198
(Ice)
576.166
Proceeds tun saw d reellaw rNes4meR 2edin11e5, mM
Net cash provided by nvesing addvities
3,187,208
822.000
4,039208
Net deaaasan cash
(89,380)
483,668
1,000
(89.380)
404,668
Cash, beginning of year
Casty, era Of year
S 394,208
$ 1,000
S 395.288
Noncash treastey, [appal, and financing adlvhles
Water and Sewer Fund recelved comributh" affixed asses of 59,75d.498
The 2caw ar6trig rims are an i1tagral part bfth6 general POIp090 fin2Tfdai slaiemeRta.
•
•
•
A-16
•
0
•
City of Fayenevilta. Arkansas
Combined Statement of Changes in Plan Net Assets
All Trust Furs
For Uie Year Ended December 31, 2002
Fiduciary
Furls
Pension
Trust
Addifio= .
$ 55.272
Member contributions
778,652
City conollutions
(1,153A96)
Imestmenteamings
- 1311123
Net increase in the fair value of trivestments
264,060
State insurance taxes
6,123-
Other
82. 634
Total additions
Deductions:
45.231
coramc(ual services
2274,536
Benefit payments
Total deductions
2,319.7M
Decrease In net assets
(2237,135)
Net assets, beginning of year
22,054,001
Net assets, and of year
$ 19,816,866
The acconpen ying rwies are an integral part
of the gareral purpose financial statements.
A-17
n
L.J
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A, REPORTING ENTITY
The City of Fayetteville, Arkansas (the "City") is a municipality governed by an elected
mayor and an eight -member council. As required by accounting principles generally
accepted in the United States ("GAAP"), these financial statements present the City
(the primary government) and its component units. The component units are included
in the Citys reporting entity because of the significance of their operational or financial
relationships with the City based upon the criteria of Governmental Accounting
Standards Board CGASB") Statement 14, "The Financial Reporting Entity" Generally,
GASB Statement 14 requires entities upon which the City is able to impose its will, or
that are fiscally dependent upon the City, to be included as part of the City's financial
reporting entity. Additionally, those entities that the nature and significance of their
relationship with the City is such that exclusion from the Citys financial reporting entity
would render the Citys financial statements incomplete or misleading, should also be
included as part of the City's reporting entity.
Those entities that meet the above established criteria for inclusion, as well as meet
either of the following criteria (1) provide services entirety or almost entirely for the City
or (2) whose board is substantively the same as the City's board, are required to be •
Included as part of the primary govemmenfs financial statements through "blended"
presentation. Those entities that meet the above established criteria for inclusion, but
do not either (1) provide services entirely or almost entirety for the City or (2) have the
same or substantially the same board as the City, are required to be presented
'discretely' or in a separate column as part of the City's reporting entity, but not part of
the primary government.
Those commissions and boards which have been included within the CiVs financial
statements along with the criteria used in making this determination are as follows:
Discretely Presented Component Units
Advertising and Promotion Commission - The Commission is governed by seven
members appointed by the City Council. The Mayor and one City Alderman serve as
two of the seven members of the Commission. The City levies and collects taxes to
fund the Commission. The Commission's purpose is to promote and develop tourism
for the City of Fayetteville. The Commission is discretely presented as a separate
column in the City's general purpose financial statements. The Advertising and
Promotion Commission does not prepare separate audited financial statements.
•
E
10
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
avetteviile Library Board - The City appoints all five board members and controls a
major portion of the budget. The library serves the fesdents of the City and
Washington County. The Library is discretely presented as a separate column in the
City's general purpose financial statements. The Library does not issue separate
audited financial statements.
B. FUND ACCOUNTING
The accounting and reporting policies of the City conform to GAAP applicable'to local
governmental units. GASB is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. Additionally, the City has
elected to apply only FinanciatAcoounting Standards Board ("FASB") pronouncements
issued poor to November 30, 1989 that do not conflict with or contradict a GASB
pronouncement to its proprietary fund activities. A description of the more significant
accounting and financial reporting policies and practices of the City follows.
The accounts of the City are organized on the basis of funds and account groups, each
of which Is considered a separate accounting entity. The operations of each fund are
accounted for by providing a separate set of self -balancing accounts which comprise
its assets, liabilities, fund balancetretalned earnings, revenues, and
• expenditures/expenses, Funds are classified into three categories: governmental,
proprietary, and fiduciary. Each category, in turn, is divided into separate "fund types."
Account groups are used to establish accounting control and accountability for the
Crtys general fixed assets and general long-term debt. The various funds and account
groups are grouped in the accompanying combined financial statements as follows:
Governmental Fund Types:
General Fund - The general fund is the principal operating fund of the City. It is
used to account for all financial resources except those required to be accounted
for in other funds.
Special Revenue Funds - Special revenue funds are used to account for the
proceeds of specific revenue sources which are designated to finance particular
functions or activities of the City.
Debt Service Fund -The debt service fund is used to account for the accumulation
of resources for, and the payment of, general long -tern debt principal, interest and
related costs, other than debt service payments made by proprietary funds.
A-19
i
City of Fayetteville, Arkansas
Notes to the General Purpose Financlal:Statements
December 31, 2002
Capital Prolects Funds - Capital projects funds are used to account for financial
resources to be used for the acquisition or construction of major capital facilides,
other than those financed by proprietary fund types.
Proprietary Fund Types:
Enterprise Funds - Enterprise funds are used to account for operations (a) that are
financed and operated in a manner similar to private business enterprises, where
the Intent of the governing body is that the costs of, providing goods or services to
the general public on a continuing basis be financed or recovered primarily through
user charges; or (b) where the goveming body has decided that periodic
determination of revenues earned, expenses Incurred and/or net income is
appropriate for capital maintenance, public policy, management control,
accountability, or other purposes.
internal Service Fund - The internal service fund is used to account for the financing
of goods or services provided by one department to other departments of the City,
on a cost reimbursement basis.
Fiduciary Fund Types;
Trust Funds and Aooncv Funds -Trust funds and agency funds are used to account •
for assets held by the City in a trustee capacity or as an agent for individuals,
private organizations, other governments, and/or other funds. Trust funds are
accounted for in essentially the same manner as proprietary funds since capital
maintenance is critical. Agency funds are custodial in nature and do not Involve
measurement of results of operations.
Account Groups:
General Fixed Assets - This account group is used to maintain control over the
Citys fixed assets, otherthan infrastructure and those fixed assets reported in the
proprietary funds.
General LoncFTerm Debt - This account group is established to account for ail
general obligation debt of the City, other than debt related to proprietary funds.
Additionally, long-term liabilities expected to be financed from governmental funds
are accounted for in the general long-term debt account group.
The two account groups are not funds. They are concerned only with the
measurement of financial position. They are not involved with measurement of
results of operations.
•
A-20
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Other:
Use of estimates
The preparation offinancfal statements in conformity with accounting principles
generally accepted in the United States of America requires management to maize
estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Total Column on Combined Financial Statements - The total columns on the
accompanying combined financial statements are captioned "memorandum only" to
.indicate that they are presented drily to facilitate financial analysis. Data in these
columns are not intended to present financial position, results of operations, or cash
Flows in conformity with GAAP, Neither is such data similar to a consolidation as
interfund eliminations have not been made in the aggregation of this data.
C. BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its
• measurement focus. Al governmental funds are accounted for using a current
financial resources measurement focus. With this measurement focus, only current
assets and current liablities generally are included on the balance sheet. Operating
statements of these funds present increases (i.e., revenues and other financing
sources) and decreases (i.e., expenditures and other financing uses) in net current
assets.
L
All proprietary funds and pension trust funds are accounted for on a now of economic
resources measurement focus. With this measurement focus, all assets and all
liabilities associated with the operation of these funds are included on the balance
sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and
retained earnings components. Proprietary fund operating statements present
increases (i.e., revenues) and decreases (i.e., expenses) in total net assets.
The modified accrual basis of accounting is used by all governmental fund types and
agency funds. Under the modified accrual basis of accounting, revenues are
recognized when susceptible to accrual (I.e., when theybecome both measurable and
available). Measurable means the amount of the transaction can be determined and
available means collectible within the current period or soon enough thereafter to be
used to pay liabilities of the current period. Expenditures are recorded when the
related fund liability is Incurred. Principal and interest on general long-term debt are
recorded when due.
A-21
0
City of Fayefteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Those revenues susceptible to accrual are interest revenue, property taxes. and grant
revenues. Sales taxes collected and held by the State at year-end on behalf of tfie City
are atsomoognized as revenue. Fines, permits, and parking meter revenues are not
susceptible to accrual because generally they are not measurable until received in
cash. Grants and similar items are recognized as revenue as soon as all eligibility
requirements have been met.
The accrual basis of accounting is utilized by proprietary fund types. Under this
method, revenues are recorded when earned and expenses are recorded at the time
related fund liabilities are incurred.
D, BUDGETS AND BUDGETARY ACCOUNTING
The City is required by State statute to prepare and submit an annual budget to the
City Council. Prior
February
1 of resolution. drrer enenacted
through passage of a City Buare preparedared for the legally
Fund,
special revenue funds, debt service funds, and capital projects funds. These budgets
are prepared on the modified accrual basis for revenues and expenditures. In addition,
encumbrance accounting is employed. Under this system, purchassorders, contracts,
and other commitments for the expenditures of funds are recorded as encumbrances in
order to reserve a portion of the applicable appropriation. At the end of the year, •
encumbrances for which goods and/or services have not been received are canceled.
Encumbrances and unencumbered appropriations lapse at the and of the year.
Encumbrances which lapsed at December 31,2002, aril were reinstated as of January
10 2003, for the General Fund, special revenue funds, and capital projects funds,
totaled $149,1399 S447,330, and $23,861,234, respectively -
Appropriations for budgeted funds cannot exceed the estimated revenues and existing
fund balances and it is unlawful for the Clty to create or authorize creation of a deficit
fund balance or retained earnings in any fund. Budgetary control is maintained at the
program (operating unit within a division, e.g., administration, maintenance,
construction, etc. within the Street Division) level. The Administrative Services Director
is authorized to amend the budget in amounts up to $15,000. The Mayor is authorized
to appropriate additional amounts up to $20,000.
Adjustments which exceed the Mayor's authority must be approved bythe City Council.
Budgeted amounts as presented in the accompanying combined financial statements
are as originally adopted, and amended throughout the year, at the budgetary level of
control.
For 2002, the original budgeted expenditures and transfers out of $22,027,849 were
increased to $23,902,934 for the General Fund; increased from $201,950 to $592,642
•
A-22
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
for the Off Street Parting Fund; increased from $647,000 to $1,465,699 for the
Community Development Fund; increased from $1,507,ti60 to $2,995,134 for the Parks
Development Fund; increased from $13,3340000 to $29.940,991 for the Sales Tax
Construction Fund and increased from $26,417,000 to $21,348,809 for the Library
Construction Fund. In all other funds, amendments were not significant in relation to
the original appropriations:
E. ASSETS, LIABILITIES, AND FUND EQUITY
Fixed Assets and Dearedation - Purchases of fixed assets by governmental fund types
are recorded as expenditures at the time of their purchase. Such assets, excluding
infrastructure assets, are then capitalized in the general fixed assets account group.
General fixed assets are not depreciated and are recorded at historical costs. Donated
assets are recorded at their estimated fair market value on the date donated.
infrastructure assets, such as bridges, streets, curbs, gutters, drainage systems,
lighting systems, sidewalks, and other elements of the public domain, are not reported
in the balance sheet.
Foxed assets for proprietary funds are stated at cost or, for contributed items, at
estimated fair market value at the date of contribution. The costs of normal
maintenance and repairs that do not add to the value of the asset or materially extend
• asset lives are not capitalized. Improvements are capitalized and depreciated over the
remaining useful lives of the fixed assets. Depredation of all exhaustible fixed assets
used by proprietary funds is charged as an expense against their operations.
Depreciation has been provided using the straight-line method over the following
estimated useful lives:
•
Years
auidings 10-50
Improvements other than buildings 10-50
Machinery, equipment, and vehicles 3-to
Receivables - Customer Accounts - Based on historical collection experience,
uncollectible receivables are not significant. Accordingly, no allowance has been made
for doubtful accounts at December 31, 2002. Accounts that are determined to be
uncollectible are charged off to expense when such determination is made,
Investments -Certificates of deposit and money market Investments that mature within
one year of the date of acquisition are recorded at amortized cost. All other
Investments are recorded at fair value with the resulting unrealized gains and losses
recognized in the current period.
A-23
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Due fromlto other governments - Due from other governments consists prfmanly of
December taxes, state tumback, cost sharing, and grant reimtulrsernant requests
receivable at year-end. Due to other governments consists primarily of grant
subreciplent expense reimbursements, cost sharing, and fourth quarter parking
revenue distributions.
Inventories - Inventories in the governmental funds are stated at cost. Inventories in
the proprietary funds are stated at the lower of cost or market. Inventory cost is
determined by the average cost method. The cost Is recorded as an expense upon
consumption.
Prepaid Expenditures/Expenses - Payments made to vendors for services that will
benefit periods beyond December 31 t 2002, are recorded as prepaid expenditures in
governmental funds and prepaid expenses in proprietary funds. Prepaid expenditures
are accounted for on the consumption basis in governmental funds.
Property Taxes - The City levies property taxes applicable to the following year during
the month of October. Property taxes assessed during the previous yearare due and
payable after February 1. Taxes are delinquent after the first week in October.
Property taxes attach as a lien on property as of February 1. Delinquent property taxes
as of December 31, 2002, were not significant
The assessed value of taxable property upon which property taxes are levied is •
determined by the County Assessor, The Assessor estimates full market value of the
property and applies a statutory rate of 20% to arrive at an assessed value.
Washington County is the collecting agent forthe levy and remits the collections to the
City, net of a collection fee. Each unit of government receives its proportionate share of
tax receipts from the County Assessor, based on its individual mill levy, in the month
following the collection.
The amount of properly taxes the City may levy for general government operations is
subject to a statutory limitation of 5 mills established by the State of Arkansas. The tax
levy limitation may not be increased except by amendment to the State Constitution.
The City has levied A mills each for the Policemen's and Firemen's Pension Funds.
AdyarLce to Other Funds- Noncurrent p<?rWns of long-term interfund loans receivable
are reported as advances and are offset by a fund balance reserve account which
indicates that they do not constitute expendable available financial resources;
therefore, they are not available for appropriation.
Bond Issuance Costs - In governmental fund types, bond Issuance costs are recorded
as expenditures in the current period. Issuance costs for proprietary funds are deferred
Ll
A-24
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
and amortized over the term of the bonds. The unamortized amount of these deferred
charges is classified as "Unamottized bond Issuance costs" in the accompanying
combined financial statements.
Interfund Transactions - Quasi-extemal transactions are accounted for as revenues,
expenditures, or expenses. Transactions that constitute reimbursements to a fund for
expenditurestexpenses initially made from it that are property applicable to another
fund, are recorded as expenditurestexpenses in the reimbursing fund and as reduction
of expenditurestexpenses in the fund that is reimbursed.
Operating transfers recorded in the combined financial statements are as,follows:
Governmental Discretely Presented
Funds Pmpristm Funds Component unh Total
Opetafing transfers in $ 4,662,64
Operating trawfum out S (4,662,820) ; - $ - $(4,882,82e)
OperAng transfers from
primary govemmem $ - $ - $ 1.842.447 $1,642,447
• OpemBrigtransfersm -
pdmarygowmmem $ $ S (889,520) $ (969,520)
Operating tmnsfom from
oompunont units $ 62.939 $ 806,581 $ $ 869,520
OperaBng tmnsfas to
component units S (877,449) $ (764,998) $ $(1,642,447)
Rebatabie Arbltraae - Rebatable arbitrage is treated as an expense when due.
•
Compensated Absences - Vacation leave is granted to all full-time employees. The
annual amount of vacation time accrued varies from 10 to 30 days depending upon
years of service. The maximum amount of vacation time that may be accumulated by
general employees and uniformed police officers is 52 days. The maximum amount
that may be accumulated by uniformed firefighters is 60 days. Accumulated vacation
leave vests and the City is obligated to make payment even if the employee terminates.
The liability for unused and unpaid vacation leave attributable to the City's
governmental funds is recorded in the respective funds and charged as an expenditure,
as eamed. The City believes these liabilities should be funded as incurred and are
appropriated in the current year. The amount attributable to the proprietary funds is
IaM
•
City of Fayetteville, Arkansas
Notes to the General Purpose Flnanclal Statements
December 31, 2002
charged to expense and a corresponding liability is established in the applicable
proprietary funds, as earned. As of December 31, 2002, $942,261 and $268,024 of
accrued vacation I save have been reported as "Accrued expenditures/expenses' in the
governmental and proprietary funds, respectively. Compensatory leave time may be
taken to lieu of overtime pay by any hourly employee if the employee has voluntarily
executed a "nonexempt employee compensatory time understanding" agreement. The
City is obligated to make payment even if the employee terminates. Compensatory
lime, attributable to governmental funds is recorded in the respective funds and
charged as an expenditure as earned. The amount attributable to the proprietary funds
is charged as an expense as earned. As of December 31, 2tm2,.$131,249 and
$601304 of accrued compensatory time have been reported as "Accrued
expenditureslexpenses" in the governmental and proprietary funds, respectively.
Sick time accumulates and vests for all City employees. A police officar•s sick time
accumulates up to a maximum of90days. Afirefighter's sick time accumulates up to a
maximum of four and one-half months. For all other employees, accumulated sick
time, up to a maximum of 60 days, is paid upon termination. Vested or accumulated
sick leave that is expected to be liquidated with expendable available financial
resources is reported as an expenditure and a fund liability of the governmental fund
that will pay it. Amounts of vested or accumulated sick leave that are not expected to
be liquidated with expendable available financial resources are reported in the general •
long-term debt account group. No expenditure Is reported for these amounts. Vested
or accumulated sick leave of proprietary funds is recorded as an expense and liability
of those funds as the benefits accrue to employees. As of December 31, 2002,
$2,282,170 has been recorded for accrued sick leave in the general long-term debt
account group, and $274,92T and $407,195 have been reported as "Accrued
expenditureslexpenses" in the governmental and proprietary funds, respectively.
Fund Equity - Contributed capital in proprietary funds represent amounts that have
been received as capital grants or contributions from developers, customers, or other
funds priorto the implementation of GASB 33. The City records depreciation expense
taken on contributed assets as an add back to retained earnings and a reduction of
contributed capital. Reserves represent those portions of fund equity not appropriable
for expenditure or legally segregated for a specific future use. Designated fund
balances represent tentative plans for future use of financial resources.
CI
A-26
•
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December31, 2002
F. STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the City considers cash to be currency on
hand and demand depositswith banks. The City does not include cash equivalents in
the statement of cash flows.
2. CASH AND INVESTMENTS
The City's cash and investments consist of deposits with financial institutions, certificates
of deposit, U.S. Government and agency securities, corporate bonds, corporate stocks,
and money market funds. The City's investment policies are governed by State Statutes.
Permissible Investments include direct obligations of the U.S. Government and agencies,
collateralized certificates of deposit, prerefunded mutllGipa.l bonds, corporate bonds,
collateralized repurchase agreements, Treasury money markets, local government trusts,
and savings accounts. Pension fund assets held in trust may be invested in corporate
equity and debt securities. Certificates of deposit, money market investments, and U.S.
Government and agency obligations that mature within one year of the date of acquisition
are recorded at amortized cost. All other investments are recorded at fair value.
Collateral, of at least 102%, is required for all amounts of demand deposits and certificates
of deposit that are not covered by federal deposit insurance. Deposits are cared at cost
The bank balances and investments are categorized below to give an indication of the
level of custodial credit risk assumed by the City at year-end.
DEPOSITS PRIMARY GOVERNMENT
_ Category Bank Carrying
Deposit 1 2 3 Balance Amount
Cash and certificates .
of deposiis S2,575321 1� - .. .c ` 2uT5.321_ S 1,523.707
Risk Cattgodas:
(1) insured er eotlatemlized with securitles held by ete City or by its agent in the Cltys nine.
(2) CODaterafted with securities held by the pledging financial Institution'seusl depanmontor agentin pts Citys name.
(3) Uncollaterafized
A-27
City of Fayetteville,
Arkansas
Notes to the General Purpose
Financial Statements
December 31,
2002
INVESTMENTS PRIMARY GOVERNMENT
Category .
Carrying
Fah
Investments
1 - 2
3 Amount
Value
U.S. Government and
agency obligations
$106,320,290 $ -
$ - $106,320,290
$t0%327'854
Corporate stock
8,139,765 -
- 8,13%765
89139,764
Corporate bands
4.130.736
4.130,738
4-130,738
fiso.791 ems= 3 $116,590,791 $118,%8,354
Investment agreements 17,562,021 17,562,021
Total Investments 51361 1 A136160'175
Risk Categories:
(1) insured or registered, or securities held by the City or its agent in the Chys name.
(2) Uninsured and unregistered,with securities held by ete countarpmty's trus(depadrrlentoragentin theCitys name.
(3) cUninsured and ount unregistered,trust wttth securities
rites hold by
the the cow Caysnor rly m ore City'e name or held by the
A reconciliation of cash and investments as shown on the Combined Balance Sheet for the
primary government follows:
Carrying Amount as shown above: Balance Sheet
Deposits $ 1.523.107 Cash $ 1,283.107
investments 136,152,812 Investments 1270568,512
Restricted investments 8.826,3W
Total e1 7 875 10 Total 8137 875 919
DEPOSITS COMPONENT UNITS
comporml Inh category Bank Carrying E
certificatesCash and
of ..-...its
Risk Categories:
(1) Insured or eorlateretized with securities held by the City or by its agent in the Cltys name-
(2) Collateralized with secun'tasheld by the pledging financial lnstitution'strust deparenentor agenttn1he Otys norne.
(3) Uncoilateralaed,
•
•
•
MM
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
INVESTMENTS COMPONENT UNITS
Category Carrying Fair
Investments 1 2 3 Amount Value
U.S. Government and $ _ $ 1,527,536 $ 1,527,667
agency obligations $1,527.536 $
Corporate Bonds 41,165 - - 41.165 41 165
Al 566.70 $ 1.560,701 $ 1,568,832
Investment Agreements 172.379 178 379
S 1 741.080 S 1.747 211
Total Investments
Risk Categories:
(1) insured or registered, w securities held by the City or its agent in the dtys name.
(2) uninsured and unregistered, vdih sewriHes held by the ocunterparlys t stdepartmentoragentin the Citys name.
(3) tarparty
camaer ed an nest unragisterad, with
,ant or agent, s heldby the l in the coCitu in the Ws name or held by the
A reconciliation of cash and investments as shown on the Combined Balance Sheetforthe
component units follows:
• Carrying Amount as shovm above: Balance Sheet:
Deposits S 983,610 Cash S 785.942
Investments 1.741,080 Investments 1938748
S 2.7,24212&6
GASB Statement 3, "Deposits with Financial Institutions. Investments (including
Repurchase Agreements), and Reverse Repurchase Agreements; requires the
assignment of dskcatsgorieS to investments, except those investments not evidenced by
securities. Accordingly, the Citys, the Library's and the Advertising and Promotion
Commission investment agreements have not been assigned a risk category. The
investment agreements are money market mutual funds in which the City, the Library and
the Advertising and Promotion Commission have partial ownership In a pool of
investments. The pooled investments are in government securities except for the
Policemen's and Firemen's Pension Funds Investments, which are a combination of
governmental and commercial securities
•
A-29
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31; 2002
3, INTERFUND RECEIVABLES AND PAYABLES
lnterfund receivables and payables result from transactions between various.funds within
the City. The balances by fund at December 31, 2002 are:
Fund
jZ toffrom other funds:
General fund:
Special revenue funds:
Street
Off street parking
Community development
Drug taw enforcement
Parks development
Capital projects fund:
Sales tax construction
Wastewater Hnprovemernt
Enterprise funds:
Airport
Solid waste
Water and sewer
Internal service turn:
Shop
Trust funds:
Policemen's pension and relief
municipal judge re0remem
Agency funds:
Returned dick
Payroll 1,1019
Total a S
lnterfund
Receivables
Parades
$ 277,906
S 32,939
36,337
4,694
10,889
561
1,161
2,618
1,331
17,674
194
136,020
123293
1%811
96
70,360
12,323
2,731
247,970
39,819
-
10,569
1.542
3,223
144t2OO
S 595.040
Due toffrom orimary covemmenffcoin onent units
Primary government
General fund $ 65,332 $ -
spolai revenue fund 55
Component units
Advertising 6 promotion fund - 66,387
Total Awsg=5��5 38Z
•
•
•
A-30
•
•
city of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A reconciliation of advances toffrom other funds as shown on the Combined Balance
Sheet failaws:
Myances toRrom other funds:
General fund $ 110,000 5
Agency funds: 40,000
Retumed check
payroll 70.000
Total S 11D.0{xtS 110.000
A reconciliation of interfund receivables and payables as shown on the Combined Balance
Ci f fmltnws-
liacohables
Payables
Due from other funds
5 595,040
S -
Advances to other funds
1100000
Due from component units
650387
Due to other funds
'
595,tM0
Advances from other funds
-
110,000
Due to primary government
-
65,387
4. FIXED ASSETS
A summary of changes In general fixed assets for the primary government and the
discretely presented component units for the year ended December 31, 2002 follows:
By major class:
Primary DoveMMo=
Land
Bulldings
Improvements other
than b uldin9s
FvNWro end Fbdvfvs
Machinery, equipment,
and vehldes
Total pdnuvy government
Dlsaately prosotded components:
Library
AdveaLsirg and pmmo9on
Total component units
Balance Balance
January 1, December 31.
2002 Additnns Reductions 2002
5 9,135,029
5 788.199
5 (382,695)
510,13%433
23,766.870
4,698,a18
(2,998,858)
25.488.826
7,613,689
1,007,791
(263.085)
8.358.395
Woo
63,103
(24,915)
118,272
a 916 957
4529
1,689 012
22Mg 1
(1,752.1021
S f5�, d1�e,6�51
9,753,a67
3�.. a58'795
LS.510
6 70.631
4 -
$ -
$ 70,631
237.142
73.234
- — --
..5-19+-SA
A-3I
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Balance
Balanea
Jan aty i.
December 31,
2002
AddBFans
Delatons
2002
By sourcas of Invastments:
primary goverronant:
-
S -
511,933,070
General obligation bonds
511,933A70
8
sales tax revemle
13,667*475
6/768063
(171520)
20,264,018
Special revenue
81918,059
783217
(186.124)
9,535,152
Fedora[grants
2,175,814
19.270
(34.868)
2,16D,416
Genres fund revenues
8,103,232
456255
(5,047,343)
3,512.144
Contributions
6235,0
210-116
6 453.995
Total prmary government
a51. 0.3529.
18 :10 f
4rF4fAA 1
553858,7�
By major function:
prbnery government
General gcvofMW t
$14,685,842
$ 109075169
$ (30552,583)
S 13.040,428
Adndnlstradve serAm
1,778,192
555,165
(651.647)
1,691.711
Public safety
8,004.147
960,752
(M5.900)
84158,9m
Public Works
1,640.883
439,626
(171556)
1,998,953
Urban 6evelcpmenl
22,9Di A35
4,202,607
(193,998)
27,000.044
General SpMces
2023,030
79.601
(43.971!
2.058.650
Total primary government
IMAOI=
e 8244.921
8 (5 429.8551
$.53956-795
A summary of proprietary fund types fixed assets balances
at December 31, 2002 follows:
y�n,en.
wd Aot.
0¢ Taea
Eopf�
^+➢°� cmem,eiim
LeriO BVIkLwc
&4E4r�e_
a1My«(.ti
cvpad4on In Rogow
TWeI
F }ernriea Fib
Aipei f ATW,133 ft27a],SB1
f a2wain
f 9NIM
j{1tA5a,a14) f;6}B4OM
} t3,5pgaT2
cm M4,ai1 ➢.TptA2t
-
-
f2Ae➢.875) -
2Ra0.17f
TpnCcMM 1ft,15a a.1(e.Y6}
-
-
(551.68bj -
EIW14
Solid Warm p8,12I 2.979,]ab
a3,e62
Mrace
(rt],228) ;%4
2,2KM
WSW adS�
gi'J 141
1B]2*§Tt1-3,738.11
114324444
M30a➢(e
MzMi SAZLOZ
M.20702
f0 T]iIN STaOa obi
1MOd058a
0
•
CI
A-32
E
CI
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Outstanding commitments at December 31, 2002 under authorized contracts for capital
projects of governmental funds are presented In the follovAng table:
Projects funded primar8y
by sales tax revenue:
Street &bridge improvements
Sidewalks and trails
Water and sewer
Improvements
Fad@les improvements
Information technology
t-brery facilities
Projects funded by
federal grants:
Projects funded by
property tax:
projects funded by
HMR tax revenues:
Fedktios
Facnli6es
Park improvements
Street improvements
Ffl0lydie5 improvements
Park improvements
Total
Expenditures
Incurredto Remaining
December V. 2tx12 Commitments
S 2,238,250
760,607
1,28OA62
619,240
2,711,988
4.537,004
512,243
1,042,733
$ 5.037,728
228,494
210,441
676.255
138,485
15,671,590
101,097
369,160
2W.324
5 22 721 AR
E
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Construction in progress in the proprietary fund Was is comprised of the following as of
December 31, 2002:
Expenditures nnamed
to Remaining
December 31, 2002 Commitments
Projects funded primarily
by federal grants:
Airport Improvements $ 2.688.040 S 1.674,594
Projects funded by
solid waste revenues:
Solid Waste improvements 2,865 190203
Projects funded by
various sources:
Wastewater Treatment palm 3.568.020 48,911
Projects funded by.
water sewer revenue:
operatlons Center 170,092 1.942.606
Total G 8.429.017 $ 3,885.314
In management's opinion, the funding sources identified above are adequate to meat all .
estimated future commitments.
5. LEASING ACTIVITIES
The Continuing Education Center (7CEC") Fund leases building space and the Off -Street
Parking Fund leases parking facilities to outside partes under long-term operating lease
agreements. The off -Street Parking Fund capital leaseassets arereoorded in the General
Fixed Assets Account Group, therefore, no depreciation is recorded.
The CEC Fund binding lease expires November 1, 2004. The two Off -Street Parking
Fund lease agreements expire September 30, 2004 and July 14, 2005.
•
A-34
•
0
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
The Cltys investment in property leased to others under operating leases at December 31.
2002 consists of:
Bulldings and atuctures
Land
Less -Accumulated
deprecation
CEC
$ 3,791,621
264.691
4,056,312
off street Parking
$ 615,445
404.135
1.019,530
Minimum future rental revenues to be received under noncancelable operating leases as
of December 31, 2002 are:
2003
2004
2005
Total minimum rtlture
rental revenues
6. LONG-TERM DEBT
CEC Oft street Parking Total
$ 122,000 $ 87,900 $ 209,900
101,667 67,875 169,542
4.225 4,225
g� 7 S 16Q,00q S 383.6fi7
GENERAL OBLIGATION BONDS - Issuance of general obligation bonds by the City
is governed by Arkansas Statutes. The Statutes require voter approval for issuance of
gprjer�;i obligntion bonds. General the governmenha
t.. The CiCitycurren currently has no u
o authorized but unissued faithation bonds pledge the full f
d general obligation
bonds.
SALES AND USE TAX CAPITAL IMPROVEMENT BONDS — Issuance of sales and
use tax capital improvement bonds is governed by Arkansas Statutes. The Statutes
require voter approval for the issuance of the bonds. The bonds are special obligations
of the City secured by and payable solely from receipts of the sales and use tax. The
City currently has no authorized but unissued sales and use tax capital improvement
bonds.
A-35
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
The total general long-term debt payable as of December 31, 2002, and a summary of
debt act(vity for the year then ended is as follows:
Balance Balance
January 1, December 31,
2002 Additions Reductions 2002
Desciiption
Sales and use tax capital
improvement bonds:
Refunding bonds 1997 $ 1,370.000
Series 2002
Vested compensated
absences (sick leave) 2,403,355
$ - $ 3454000 $ 1,025,000
250000,000 600,000 24,400,000
121,185 2262170
Total general long-term debt 13113.3155 S 27.7071Z0
Principal and 'interest payments of capital improvement bonds for subsequent fiscal
years areas follows:
Amount
Principal
Interest
Fiscal Years
2003
5 6,215,000
$' 798,225
2004
6,740,000
5ag.995
2005
5,565,000
339,945
2006
4,205,000
153,680
2007
2.700.000
43,200
Total
$„ ,75 425.000
$ 1 25 M
0
A-36
0
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A summary of capital improvement bonds outstanding as of December 31, 2002 is as follows:
Sales lax capital improvements
Sales and use tax capital
improvements
Outstanding
Bond Issue Due Dates Interest Rates Amount
1997 2003-2005 4.55%-4.65% $1,025,000
2002 2003-2007 2.00%-4.00% $24.400,000
The Sales Tax Capital Improvement Refunding Bonds, Series 1997, were issued to
refund the Sales Tax Capital Improvement Bonds, Series 1986 which were issued to
acquire, construct, and equip an arts center in a joint venture with the University of
Arkansas. The bonds are secured by a pledge of and first lien on a portion of the Citys
share of receipts from a 1 % sales and use tax levied by Washington County.
The Sales and Use Tax Capital Improvement Bonds, Series 2002, in the amount of
$25,000,000, were issued in June 2002 for the purpose of financing a portion of the
costs of certain improvements to the City's wastewater treatment plants and sewerage
and related facilities. The bonds are secured by and payable solely from receipts from
a three-quarters of one percent city-wide sales and use tax.
The City is subject to a statutory limitation by the State of Arkansas for bonded
• indebtedness payable principally from property taxes net of debt service fund cash and
Investments available to pay these bonds. At December 31, 2002, the statutory debt
limit and legal debt margin for the City were $137,202,633 and $136,416,446,
respectively. The City currently has no debt outstanding which is payable from
property tax.
•
A-37
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
REVENUE BONDS - Revenue bonds outstanding consist of debt issued by antarprise
funds of the City. A summary of debt activity for these revenue bonds as of December 31,
2002 Is as follows:
Balance
Balance
January 1,
December 31,
Description
2002 Additions PRducllons -
2002
CEC Fund:
Hotel & restaurant gross receipts
tax rehuxl'st9 bonds. series 1995
$ 11025,000 $ - S $25,000
S 700,000
Water and sewer Fund:
Water and sewer revenue, aeries 1994
3,2150000 3,215,000
Water and sewer refunding revenue.
series 1999
7,350,000 - 485.000
6,ass,000
Water and sewer subordinate revenue
geris 2M 1
10,OD0,000 10,OW,000
Water and sewer revenue refunding,
series 2002A & 2002B
- 9,270.000 69040DO
8.530,000
Town Center Fund:
Hotel & restaurant gross roceipts
tax bonds, series 1998
_6&25.000 75,000
. 6620.000
Total
$2&B5 000 & 9.270.00d S tE MM
22,765,000
Less current maturities
1,365 000
Revenue bonds payable.
net or current maturities
• iq o.600
Principal and interest payments of the revenue bonds for subsequent fiscal years are
as follows:
Amount
Pd al interest
Fecal years:
2003
$ 1,355,o00 $ 970,798
2004
1,415,00D 930,065
2005
1,480,Ooo 874,026
2008
1,5301000 818.324
2007
1,595,000 759,026
• � r r r �� :3�b�3S3
•
•
M1
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
A summary of revenue bands outstanding as of December 31, 2002 is as follows:
Outstandn9
Bond Isw9
Due Dates
tntorest Raton
Amount
Hotel and restaurant
1995
2003.2004
520%•5.25%
3 700,000
Hotel and restaurant
1998
2003-2015
3AS%4.60%
6.620,000
Water and sewer
1009
2003.2012
3.76%4.45%
6.865.000
Water and sewer
2002A
2003.2003
2.35%4.05%
2,645,000
Water and sewer
20029
2003-2017
2.35%-4.95%
5.935.000
t22 7,65M
The revenue bonds are not general obligations of the City or payable from proceeds of
an ad valorem tax, but are payable from the net revenues of the respective enterprise
funds.
The Hotel and Restaurant Gross Receipts Tax Refunding Bonds, series 1995 are
secured by a lien on pledged revenues consisting of collections from a 1% gross
receipts tax on hotels, motels, and restaurants: revenues derived from leasing the CEC
to the University of Arkansas: and funds received from the State under tourist meeting
• and entertainment facilities assistance laws,
The Hotel and Restaurant Gross Receipts Tax Bonds, series 1998 are secured by a
lien on pledged revenues consisting of collections from a 1% gross receipts tax on
hotels, motels, and restaurants; revenues derived from leasing the CEC to the
University of Arkansas; revenues derived from the operation of the Town Center, and
funds received from the State under tourist meeting and entertainment facilities
assistance laws. The bonds were issued to provide funds to constrict and equip the
Town Center, a mut6-purpose civic center, and related parking facilities. The bonds are
issued on a parity of security with the Hotel and Restaurant Gross Receipts Tax
Refunding Bonds, series 1995.
0
The Water and Sewer System Refunding Revenue Bonds, series 1999, are secured
by a lien on the net revenues of the City's water and sewer system. The bonds are
secured by a statutory mortgage lien upon the water transmission and distribution
system. The bond ordinance requires that the City maintain gross revenues of the
water and sewer system of at least 110% of the amount required each fiscal year to (1)
pay operating expenses of the system, (2) pay principal and interest requirements and
trustee fees on series 1999 and parity bonds, and (3) make any deposits needed to
maintain the debt service funds and the renewal and replacement fund at the required
levels. Prior to issuing parity indebtedness, the ordinance requires that the net
A-39
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
revenues of the system for the preceding two years be at least 1 0% of the maximum
principal and interest requirements on all bonds and an parityindebtedness then
outstanding and the proposed parity indebtedness.
Water and Sewer System Refunding Revenue Bands, series 2002A and 2002B, in the
amount of $9,2TO,000 were issued in May 2002. The bonds are secured by a pledge
of the net revenues of the City's water and sewer system. The bond ordinance
requires that the City maintain net revenues of the water and sewer system of at least
an amount equal to (1)125% of the average annual debt service on all indebtedness,
(2) fund debt service reserve deficiencies on all series 1999 bonds and subordinate
obligations, and (3) fund required deposits to the renewal and replacement fund. The
pledge of revenues is junior and subordinate to the pledge of revenues securing the
1999 bonds, The $cries 2002 Bonds were issued for the purpose of refunding the
City's $3,215,000 outstanding principal amount of the Water and Sewer System
Revenue Bonds, Series 1994 and refunding the City's $10,000,000 outstanding
principal amount of the Water and Sewer System Subordinate Revenue, Sedes 2000.
The 1994 series was an advanced refunding and the trust account assets and Itabdities
are not included in the accompanying combined financial statements. At December31,
2002, the 1994 bonds outstanding of $2,826,000 are considered defeased. The
economic gain on refunding the 1994 bonds was $10,940. The Series 2000 bond issue •
was a current refunding and the economic loss calculated on the refunding was
$1.142.980. The Series 2000 bonds were short-term variable rate bonds with the total
principal of $10,000,000 due in the year 2006. The refundings were issued to take
advantage of lower interest rates, to restructure existing bond covenants and to
mitigate any interest risk on the variable interest rate of the Series 2000 bond issue.
C. CONDUIT DEBT OBLIGATIONS
From time to time, the City has issued revenue bonds to finance residential housing,
health care and related facilities to persons of low or moderate income or for the
elderly. The bonds are secured by the property financed and are payable solely from
payments received on the underlying mortgage loans. Neither the City, the State nor
any political subdivision thereof is obligated in any manner for the repayment of the
bonds.
Fayetteville Arkansas Public Facilities Board Single Family Mortgage Revenue
Refunding Bonds issued in 1993 in the amount of $7,750,000 and Fayetteville
Arkansas Public Facilities Board Variable Rate Refunding Revenue Bonds in the
amount of $23,770,000 Issued in 2o02 were outstanding as of December 31, 2002.
A-40
City of Fayetteville, Arkansas .
Notes to the General Purpose Financial Statements
December 31, 2002
7, RETIREMENT PLANS
Each eligible employee is included in one of five defined benefit retirement plans, a
defined contribution plan and/or a deferred compensation plan which the City of
Fayetteville sponsors or has adopted. These are the Policemen's Pension and Relief
Fund, the Firemen's Pension and Relief Fund, the Municipal Judge Retirement Plan,
the Arkansas Loral Police Retirement System, the Arkansas Local Fire Retirement
System, the General Employee Retirement Savings Plan, and the General Employee
Non -Qualified Deferred Compensation Plan (the "Deferred Compensation Plan").
Three of the plans are included in the City's reporting entity. The Policemen's and
Firemen's Pension and Relief Funds are funded and administered through the
Fayetteville Policemen's Relief Association and the Fayetteville Firemen's Relief'
Association. The Municipal Judge Retirement Plan Is administered 4y the City. The
other defined benefit plans and the General Employee Retirement Savings Plan and
Deferred Compensation Plan are not administered by the City and are not included as
a part of the City's reporting entity. The Arkansas Local Police and Fire Retirement
systems are administered by the State of Arkansas Police and Fire Pension Board.
The General Employee Retirement Savings Plan and the Deferred Compensation Plan
assets are held in custody by a bank trustee.
• Six -year historical trend Information for each of the City's single employer defined
benefit plans and for each of the City's agent multiple-empoyer defined benefit plans is
included as required supplemental information after the notes to the general purpose
financial statements. A summary of significant data for each of the retirement plans
follows.
CI
A. GENERAL EMPLOYEE RETIREMENT SAVINGS PLAN
Plan Description — The General Employee Retirement Plan is a defined contribution
plan qualified under section 401(a) of the Internal Revenue Code. BanoOkiahoma
Trust administers the plan for the City. The initial eligibility for participation in this plan
is the first day of the month following the employee's one-year anniversary of
employment. Participation in the plan is voluntary and available to all regular full-time
general employees of the City who are at least 20 years of age and who worked at
least 1,000 flours In the first 12 months of employment. The plan requires participating
employees to contribute at least 3% of their base wages to the Retirement Savings
Plan or the Deferred Compensation Plan. The City contribution to the Retirement
Savings Plan is 12% of base wages of contributors to either the Retirement Savings
Plan or the Deferred Compensation Plan. There is 100%o immediate vesting in
amounts contributed by the City.
A-41
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
For the year ended December 31, 2002, the " Generatotal l payroll
for all
employees
s
amounted to $21,875,897, Total covered payroll
Savings Plan amounted to $6,463,898. Contributions to the Employee Retirement
Savings Plan were as follows:
EmpbYar - Employee -
Required and Contributed. Reoutred Actual Contributed
covered payroll % .amount % ematinf % amount
$ 9,463,898 12% $ 10139,390 3% S 297,246 6% $ 80t,224
B. MUNICIPAL JUDGE RETIREMENT PLAN
Plan Description - The City contnbutes a portion of court fees to the Municipal Judge
Retirement Plan. The plan was established by the City in accordance with Arkansas
Statutes and is included in the City's primary financial reporting enttly. Any judge of the
municipal court who has served at least 20 years in office. irrespective of age, shall be
eligible to receive retirement benefits. If a judge who is eligible to receive retirement
benefits resigns,
uW to one half thesfrom
ayfi06, or bleatlterminationwillbepayableforthheeded in office by urema der of
te. benefits
thhe judge's natural lifsalary payable
Major assumptions used by the actuary in determining the trend information are 7%
interest, 4.5% salary scale and mortality based on the 83 GAM table.
Three Year Trend Information for the Municipal Judge Retirement Fund follows.
Annual Pension
Yearended
cost (APO)
12131100
$ 9,477
12/31/01
$ 13,079
12/31/02
$ 173870
Percentage of
Net Pension
APG Contributed
Obligation
191.63019
$ (122,614)
141.49%
$(128,041)
103.56%
$ (128*677)
•
•
•
A-42
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Listed below is the City's annual pension cost and the net pension obligation for 2002.
Actuarially required contribution $ 0
Interest on net pension obligation (81963)
Adjustment to actuarially required
contribution —�
Annual pension cost 18,506
Actual contribution made
Decrease in net pension obligation (636)
Net pension obligation beginning of year 128 041
Net pension obligation end of year S138 6771
Any deficiencies for retirement obligations shall be met by payment from the Gity's
General Fund.
The current municipal judge has been employed by the City for twelve years;
consequently, there are no vested obligations under the plan.
G. POLICEMEN'S AND FIREMEN'S PENSION AND RELIEF FUNDS
• Plan DescTi - The Policemen's Pension and Relief Fund and the Firemen's
Pension and Relief Fund are single employer defined benefit pension plans for the
police and fire personnel employed by the City prior to January 1, 1983. These plans
do not prepare separate financial statements. Both plans became closed, by State
law, to now employees effective January 1, 1983.
For the year ended December 31, 2002, the City's total payroll for all employees
amounted to $21,875,897, including police and fire personnel. Total police and fire
personnel payroll amounted amounted o $352 372171,700 and $ and $568 837 respectively. Totalpolice
and fire covered payroll
payroll refers to eligible compensation paid by the City to active employees covered by
the Policemen's and Firemen's Pension and kefief Funds.
The State of Arkansas Fire and Police Pension Review Board is responsible for the
coordination of the actuarial valuations performed on the Policemen's and Firemen's
Pension and Relief Funds. Actuarial evaluations are performed biennially. Aduarial
assumptions used in evaluating the fund include entry age cost method, book valuefor
valuing assets, level percent dosed amortization method, an amortization period of 6
years for active participants and 5 years for retirees, 6% investment rate of return,
4.2%to 8% salary increases, and 4% inflation rate.
A-43
City of Fayetteville, Arkansas
fdotss to the General Purpose Financial Statements
December3l, 2002
As of December 31, 2001, the most recent information available from the Pension
Review Board, employee membership data related to the plans was as follows:
Police Fire
Retirees and beneflc%ries currently
reeeMing benefits
Active plan padlaipa ts:
Fully vested 4 12
Nonvestod 2 1
Totej scum plan participants A 18
Minimum benefits are determined by state statute. Annual voluntary retirement
benefits for police and fire equal 90% of the members highest year's pay. Members
are eligible for these benefits after 20 years of service. Employees retiring after
January 1.1987, are entitled to additional compensation of $240 annually for each year
worked in excess of 20 years, up to a maximum additional annual compensation of
$1,200. Benefits for participants overage 59 are increased by 1.25% of final salary for
each year worked in excess of 25 years up to a maximum benefit of 100% of final
salary.
The plans require employees to contribute 6% of their eligible gross salary. These •
contributions are refundable, without interest, upon termination of employment prior to
becoming eligible for retirementor death benefits. The Policemen`s Pension and Relief
Fund and Fireman's Pension and Relief Fund balances have been reserved for
member tions
n the amount of $249,565 and $155,286 respectively. The
reserves represent l t life -to -date contributions from participants currently employed and
contributing.
The City's contribution to the Policemen`s and Firemen's Pension and Relief Funds is
partiallyfunded by a .8 mill property tax levy and a portion of a statewide 21t2%taxon
insurance premiums of out -of -stale insurance companies. On behalf payments from
the state insurance tax of $177,082 for the Policemen's Fund and $87,878 for the
Firemen's Fund were received by the City from the Arkansas Local Police and Fire
Retirement System, a state agency. The Policemen's Pension and Relief Fund also
receives an a1100-00n of 10% of all fines and foffeitues collected by the City for
violations of ordinances or state laws.
Contributions to the Policemen's and Firemen's Pension and Relief Plans based on
covered payroll, for the year ended December 31, 2002, were $292,650 of which
$237,378 and $55,272 were by the City and employees, respectively. Ind b State
ortion of
the City's contribution to the plans based on covered pay Y
•
A-44
•
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
statute and equals or exceeds the empoyers' oontributwn. Contributions made by the
City represent 12% of covered payroll while contributions made by the police officers
and firefighters were 6% of covered payroll. Contributions from property taxes were
$261,384 to each fund.
The Firemen's Pension and Relief Fund elected to participate in the Deferred
Retirement Option Program (DROP) effective January 1,1996. Individual accounts are
maintained for members who elect to participate. The membees DROP account
Includes the monthly amount of his retirement as if he had retired as of the date he
elected to, participate in DROP, interest eamings, and one-half of the employers
contribution to the Firemen's Pension and Relief Plan made on behalf of that
employee. The Firemen's Pension and Relief Fund balance has been reserved in the
amount of $797,431 for the ampunts payable to participants in DROP.
Three Year Trend Information
for Policemen's Pension
and Relief Fund
Annual Pension Percentage of
Net Pension
Year ended
Cost (APC)
APC Contributed
Obligation
12/31/00
$ 0500096
65A5%
$(2,9301678)
12/31/01
$ 9247436
60.24% .
$(2,563,150)
12131/02
$ 1,399,872
41.58%
$(10745,359)
Three Year Trend Information for Firemen's Pension and
Relief Fund
Year Ended
Annual Pension
Percentage of
Net Pension
Cost (APC)
APC Contributed
Obligation
12131/00
$ 266,262
190.30%
$(2,073,953)
12/31/01
$ 285,463
140.55%
$(2,189.696)
12/31/02
$ 1,542,481
27.07%
$(19064,737)
A-45
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Listed below is the Citys annual pension cost and the net pension obligation for 2002.
Police
Fire
Actuarially required contribution
$110920437
$ 1,279,840
Interest on net pension obligation
(153,789)
(131,382)
Adjustment to actuarially required
contribution
461.224
394.023
Annual pension cost
11399*872
1,542A!11
Actual contribution made
582,081
417.522
Increase in net pension obligation
817,791
10124,959
Net pension obligation beginning of year
(2.563.150)
(2,189.696)
Net pension obligation end of year
$ (1-745.359)
& (1.064.737)
e^MgryofSignificantAccountingPoliciesandPlanAssetMatters-ThePolicemens
Wand Firemen's Pension and Relief Funds financial statements are prepared on the
accrual basis of accounting. Both employer and employee contributions are
recognized as revenue in the period in which employees provided services.
Certificates of deposit and money market investments, that mature within one year
from the date of acquisition, are carried at cost. All other investments are carried at fair
value on the balance sheetwith the resulting unrealized gains and losses recognized in
the current period. There are no loans to or leases with related parties to the pension
plans. Administrative costs are funded by investment earnings In the funds.
D- ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM
Me
and fire personnel employed after December 31,1982,
Local Police and Fire Retirement System. A financial
plan may be obtained from the Arkansas Local Police and Fire
Retirement System, PO Drawer 34164, Little Rock, Arkansas, 72203. Participation is
a condition of employment. This plan, which is an agent multiple -employer public
employee retirement system, is a defined benefit plan providing death, disability, and
retirement benefits for Its members. Normal retirement age underthis plan is age 55
with 20 years of credited service or age 60 with less than 20 years of credited service.
A member may retire at any age with 28 years or more of credited service.
For the year ended December 31, 2002, the Citys total payroll for all employees
amounted to $21,875,897 including police and fire personnel. Total police and fire
personnel payroll amounted to $4,171,700 and $3,684,540, respectively. Total police
and fire covered payroll amounted to $3,673,749 and $2,802,111, respectively.
Covered payroll refers to all ramming compensation paid by the City to active
employees covered by the Arkansas Local Police and Fire Retirement System, The
State of Arkansas is responsible for the coordination of the actuarial valuations
•
•
•
A-46
City of Fayettev111e, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2602
performed on the Arkansas Local Police and Fire Retirement System. Actuarial
assumptions used were entry age cost method, IeVel percent amortization method, 30
year amortization period for active participants, five year smoothed market valuation
method, 8% investment rate of return, 4%to 9.1 %salary Increases, 3% post -retirement
annual Increases, and 4% rate of inflation. As of December 31, 2001, the most recent
information available from the State. City of Fayetteville employee membership data
related to the plans was as follows:
Police Fire
Refines and beneficlades currently
receiving benefits 8 8
Active plan parti6gaants:
Fully vested 4e 40
Nonvested 43 3
Total active plan participants 21 ZZi
Employees terminating from the plan before normal retirement age, with 5, but less
than 20 years of credited service, may receive future benefits provided the employee
• does not withdraw his/her accumulated contributions and lives to his/her annuity
starting date.
The plan requires employees to contribute 6% of theireligible gross salary. Employer
contributions are established by the Arkansas Local Police and Fire Retirement
System, and are determined based on level -rate principles. City contribution rates for
the police plan were set at 6% through September; at which time they were increased
to 10.06%. The Increase was implemented after the adoption of a new benefit plan.
The required city contributions for the fire plan were 6%.
•
A-47
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
Total contributions to the pension plats for.thO y&ar ended December 31, 2002,were
$838,474 of which $449,922was contributed by the City and $388,552 was contributed
by employees. The Citys contribution was actuarially determined as described above
and was based on an actuarial valuation as of December 31, 2001. Payments from a
state insurance tax of $248,055 for Policemen and $112,472 for Firemen were
received by the City forthe Arkansas Local Police and Fire Retirement System.
Three YearTrend information forArkansas local Police and Fire Retirement System.
Annual Pension
Percentage of
Net Pension
Year ended
Cost (APC)
APC Contributed
Obligation
Police
12/31/99
$ 250,736
100%
$0
12131/00
$ 326,517
100%
$0
12/31/01
$ 344,714
100%
$0
Annual Pension
Percentage of
Net Pension
Year ended
Cost (APC)
APC Contributed
Obligation
•
Fire
12/31 /98
$ 197,069
100%
$0
12/31100
$ 250,345
100%
$0
12/31/01
$ 277,238
100°/a
$0
8. ENTERPRISE FUNDS SEGMENT INFORMATION
The City maintains five enterprise funds which provide water and sewer services,
solid waste collection and disposal, airport facilities, continuing education facilities,
and convention facilities.
•
F
•
•
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
These funds were setup to operate primarily from proceeds of user charges. Segment
information for the year ended December 31 r 2002 is as follows:
Twm
Slid
Water SM
Awipad
CEC
00n
Waste
Sewer
Total
cperabep mntlms
5809,611 E
122,OW S
- $
S475,126 E
19A4%. E
26,359A05
O¢praaalian
11021,574
94AT
367,780
135.969
3.881,891
5.501,997
Opera1Rt91n1xxna {Iws)
(1,M,214)
(25,884)
(3T2,901)
(419,619)
966,1 TY
(1.361,341)
Opam* g tr Slera in (4Mq nM
2z,541
19,642
41A80
Tax me nwa
-
200:788
b.ergsv�ertanentai revenues
2-425,114
=441
268,700
2.717=5
14e; inwm Voss)
1,114.373
229.508
(645.209)
Q%215)
5.169.358
5,641,903
3.754.496
3.754.4g6
c,n:«e aplal rgnnsn„1 *
-
prapery, plant, erM equilx^sne
P,ftwns
2.03z.Bea
-
-
61,022
%A34.6V
7,T28.527
oelegms
14,328
-
107,211
401.112
5MA49
No"thins OaDU
2:5844128
-
(555)
3325.781
22,625.512
28, WRO
Total assets
MWZ748
21579,222
9,418,080
6.570,691
142.168,947
177,246,e88
Baths eM o rbng*m
UaSlllllaa
360=
5.540,000
14,5/0.000
21,410.(100
Total eglely
$15.980.M S
1,87a.950 E
2.711.70 S
S,e72,726 S
1242T6.249 3
t50.464.763
9. COMMITMENTS AND CONTINGENCIES
Utigation
The City is a defendant in a lawsuit challenging the constitutionality of a city ordinance to
regulate operation of a racetrack facility that sits astride the city limits. The circuit judge
upheld the constitutionality of the ordinance and the plaintiff has appealed the rase and
filed a civil suit alleging inverse condemnation and is seeking $600,000 In damages. The
City feels there is a low probability of substantial damages being assessed againstthe City.
A-49
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31; 2002
The City, two City police officers and others are defendants In a lawsuit alleging
defamation, false light, invasion of privacy, conversion, and violation of 42 U.S.C. 1983,
The Citys insurance company, National Casualty Company, is defending the case and the
City's exposure is limited to the insurance deductible of $50,000. The City believes the
case does not have merit and the City will prevail.
The City is involved in other pending lawsuits in the normal course of operations.
Management does not believe that the outcome of these claims will have a material
adverse effect on the Citys financial condition.
Contingencies
Necessary improvements to the wastewater collection and treatment system have been
identified by the City. In 1999, the City took preliminary steps to implement these
Improvements by purchasing land suitable for the site of a second treatment plant and by
submitting a permit application. The total cost for the project is estimated at $121 million.
In an election held November 6, 20017 the voters of the City of Fayetteville approved a
314% safes and use tax dedicated to the payment of debt service on obligations issued to
finance these Improvements. The State of Arkansas has committed $100,000,000 for a
loan to the City to finance the project. The City issued new bonds of $25,000,000 in 2002 •
to finance the remainder of the costs.
10.CONTINGENT LIABILITIES
In the normal course of operations, the City receives grant funds from various federal and
state agencies. The grant programs are subject to audit by the granting authority, the
purpose of which is to ensure compliance with conditions precedent to the granting of
funds. The City believes that any liability for reimbursement which may arise as a result of
audits of grant funds would not be material.
The City is party to other proceedings which normally occur in governmental operations. In
the opinion of management and legal counsel, the proceedings are not likely to have a
material, adverse impact on the affected funds of the City.
11,RISK MANAGEMENT
The Citys comprehensive risk management program is administered with the assistance of
a professional risk management broker. The City is exposed to the risk of various losses
such as thettof, damage to, and destruction of assets; errors and omissions; and personal
injury, natural disasters and employee health and accident benefits. The City limits losses
and manages risk through the putchaseof insurance policies with several differentcarders.
•
Will
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
in addition, the City Instituted various safety programs to reduce losses. The budgeting
process includes provisions for accumulating funds to cover deductibles and any minor
items which would not be covered by commercially purchased policies. There have been
no significant reductions in insurance coverage from coverage in the prior year, and there
were no settlements that exceeded Insurance coverage in the past three fiscal years.
12.NEW APPLICABLE GASS STANDARDS
In 1999, GASB Statement 34 "Basic Financial Statements -and Management's Discussion
and Analysts -for State and LocalGovemments"was issued. This Statement establishes
standards for preparing government -wide financial statements and fund -level financial
statements and becomes effective for the City of Fayetteville in 2003. The City has not
adopted this statement nor determined the effects of adoption. Management intends to
delaythe retroactive reporting of all major general feed assets until afterinitial adoption as
permitted under GASB 34.
GASB has issued Statement No. 37, "Basic Financial Statements - and Management's
Discussion and Analysis -for State and Local Governments: Omnibus - an Amendmentof
GASB Statements No. 21 and No. 34". The amendments to Statement 21 are necessary
because of the changes to the fiduciary fund structure required by Statement 34. The
amendments either clarify certain provisions that, in retrospect, may not be sufficiently
• clear for consistent application or modify other provisions that the GASB Board believes
may have unintended consequences in some circumstances. This statement will become
effective for the City in the year 2003. The City has not adopted this statement nor
determined the effects of adoption.
GASB has issued Statement No. 38, "Certain Financial Statement Note Disclosures;
which modifies, establishes, and rescinds certain financial statement disclosure
requirements. This Statement will become effective for the City in the year 2003. The City
has not adopted this statement nor determined the effects of adoption.
GASB has Issued Statement No. 39. "Determining Whether Certain Organizations Are
Component Units.* The.Statement provides additional guidance to determine whether
certain organizations forwhich the City is not financially accountable should be reported as
component units. This statement will become effective for the City in the year 2004. The
City has not adopted this statement nor determined the effects of adoption.
A-51
•
City of Fayetteville, Arkansas
Notes to the General Purpose Financial Statements
December 31, 2002
13.SUBSEQUENT EVENT
In April 200% the City began the process of refunding the Hotel and Restaurant Gross
Receipts Tax Bonds, Series 1998. The bonds will be secured by a lien on pledged
revenues from the collections of the 1% gross receipts tax on hotels, motels, and
restaurants levied for advertising and promotion. The pledge of revenues is to be
subordinate to the pledge of revenues supporting.the Series 1995 Hotel and Restaurant
Gross Receipts Tax Refunding Bonds, The City is refunding the 1998 fonds to take
advantage of lower interest rates.
•
•
A-52
•
•
APPENDIX B
UNAUDITED FINANCIAL STATEMENTS OF THE CITY'S
WATER AND SEWER FUND FOR THE YEAR ENDED
DECEMBER 31, 2003
B-1
[THIS PAGE LEFT BLANK INTENTIONALLY]
LJ
•
B-2
CITY OF FAYETTEVILLE, ARKANSAS
• WATER AND SEWER FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 2003
UNAUDITED
ASSETS
Cash $ 711,I60
Investments 211498,687
Accounts Receivable 216119925
Due From Other Funds 54,416
Inventories 547,588
Prepaid Expenses 40,032
Restricted Assets
Investments 1,737,062
Accrued Interest 1,033
Fixed Assets
Property, Plant, and Equipment 191,228,754
Accumulated Depreciation (71,765,823)
Unamortized Bond Issue Cost 131,634
TOTAL ASSETS $ 146,796,468
• LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable $ 197631410
Accrued Expenses 612,748
Customer Deposits 1,444,990
Due to Other Funds 223,269
Payable from Restricted Assets
Revenue Bonds - Current Portion 970,000
Accrued Interest 2321748
Deferred Interest (460,247)
Bonds Payable - Less Current Portion 13,5403000
Unamortized Bond Discount (1439169)
TOTAL LIABILITIES 18,1835749
NET ASSETS
Invested in Capital Assets, Net of Related Debt 104,9523931
Restricted for Debt Service 5331543
Unrestricted 231126,245
is TOTAL NET ASSETS $ 1289612,719
B-3
CITY OF FAYETTEVILLE, ARKANSAS
WATER AND SEWER FUND
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
UNAUDITED
OPERATING REVENUES
Water Services
Sewer Services
Other
TOTAL OPERATING REVENUES
OPERATING EXPENSES
Water Supply
Operations and Administration
Water Transmission and Distribution
Sewer Collection
Waste Water Treatment
Customer Services
Depreciation
TOTAL OPERATING EXPENSES
OPERATING INCOME (LOSS)
NONOPERATING INCOME (EXPENSE)
Interest Income
Interest Expense
Net Decrease in Fair Value of Investments
Other
TOTAL NONOPERATING INCOME
INCOME BEFORE CONTRIBUTIONS AND TRANSFERS
Capital Contributions
Transfers In
Transfers Out
CHANGE IN NET ASSETS
TOTAL NET ASSETS, BEGINNING OF YEAR
TOTAL NET ASSETS, END OF YEAR
$ 101700,460
99052,355
611,787
2073647602
4,616,576
2,866,394
1,253,010
1,255,818
4,866,555
21084,711
4,004,983
20,948,047
(583,445)
9623583
(4212563)
(2483614)
227,568
519,974
(63,471)
3,495,312
1,149,040
(244,911)
4,336,470
124,276,249
$ 1285612,719
•
APPENDIX C
Proposed Form of Bond Counsel Opinion
Kutak Rock LLP, Bond Counsel, will render an opinion with respect to the Series 2004 Bonds, dated the
date of issuance and delivery thereof, in substantially the following form:
May _, 2004
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephens Inc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
• Series 2004
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance and sale by the City of Fayetteville,
Arkansas (the "City"), a political subdivision of the State of Arkansas, of its $6,090,000 Water and Sewer System
Refunding Revenue Bonds, Series 2004 (the "Bonds").
The Bonds are being issued pursuant to the provisions of the Constitution and laws of the State of
Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998 Repl. & Supp. 2003) §§14-
164-401 et seq., §§14-234-201 et seq. and §§ 14-235-201 et seq.(collectively, and as from time to time amended, the
"Authorizing Legislation"), pursuant to Ordinance No.4554 of the City, duly adopted and approved on April 6,
2004 (the "Bond Ordinance" ), and pursuant to a Trust Indenture dated as of May I, 2002, as amended and
supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended and supplemented, the
"Indenture"), by and between the City and Bank of Oklahoma, N.A., as trustee (the "Trustee"). Reference is hereby
made to the Indenture and to all indentures supplemental thereto for the provisions, among others, with respect to
the conditions for the issuance of parity debt by the City, the nature and extent of the security for the Bonds, the
rights, duties and obligations of the City, the Trustee and the holders of the Bonds, and the terms upon which the
Bonds are issued and secured.
Reference is made to an opinion of even date herewith of Kit Williams, Esq., City Attorney, a copy of
which is on file with the Trustee, with respect, among other matters, to the status and valid existence of the City, the
power of the City to adopt the Bond Ordinance and enter into and perform its obligations under the Indenture, the
valid adoption of the Bond Ordinance and the due authorization, execution and delivery of the Indenture by the City,
and with respect to the Indenture being enforceable upon the City.
We
have examined
the law and such
certified
proceedings and other
papers
as we have deemed necessary
to render this
•
opinion. As to
questions of fact
material
to our opinion, we have
relied
upon the representations of the
C-1
City contained in the Bond Ordinance and the Indenture and in the certified proceedings and other certifications of I
public officials furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly created and validly existing as a municipal corporation of the State of Arkansas.
Pursuant to the Constitution and laws of the State of Arkansas, including, particularly, Amendment 65 and the
Authorizing Legislation, the City is empowered to adopt the Bond Ordinance, to execute and deliver the Indenture,
to perform the agreements on its part contained therein, and to issue the Bonds.
2. The Bond Ordinance has been duly adopted by the City and constitutes a valid and binding
obligation of the City enforceable upon the City in accordance with its terms.
3. The Indenture has been duly authorized, executed and delivered by the City and is a valid and
binding obligation of the City enforceable upon the City in accordance with its terms.
4. The Bonds have been validly authorized, executed, issued and delivered by the City and represent
valid and binding special obligations of the City. The principal, premium, if any, and interest on the Bonds shall be
payable from, and shall be secured by an assignment and pledge by the City to the Trustee of, the Net Revenues (as
defined in the Indenture) of the City's water and sewer system, subject to a parity pledge of Net Revenues securing
the City's Water and Sewer System Refunding Revenue Bonds, Series 2002, and any Additional Bonds (as defined
in the Indenture) issued hereafter.
5. The Net Revenues have been duly and validly assigned and pledged to the Trustee under the
Indenture, and the Indenture creates, as security for the Bonds, a valid security interest in the Net Revenues.
6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not a
specific preference item for purposes of the federal alternative minimum tax. The opinion described in the
preceding sentence assumes the accuracy of certain representations and compliance by the City with covenants
designed to satisfy the requirements of the Internal Revenue Code of 1986, as amended, that must be met subsequent
to the issuance of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City
has covenanted to comply with such requirements.
The interest on the Bonds is exempt from all state, county and municipal taxes in the State of
Arkansas.
8. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and
the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended, in connection with
the offer and sale of the Bonds.
It is to be understood that the rights of the registered owners of the Bonds and the enforceability of the
Bonds, the Bond Ordinance and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally
applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.
Very truly yours,
•
APPENDIX D
Specimen of Financial Guaranty Insurance Policy
•
s
•
D-1
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•
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17
11
KUTAK ROCK LLP ATLANTA
• CHICAGO
DENVER
SUITE 1100 DENVEw
425 WEST CAPITOL AVENUE 068 MOINES
FAYETTEVILLE
NORTHWEST ARKANSAS OFFICE LITTLE ROCK, ARKANSAS 72201-3409 IRVINE
THE THREE SISTERS BUILDING 501-975-3000 KANSAS CITY
214 WEST DICKSON STREET FACSIMILE 501-975-3001 LINCOLN
FAYETTEVILLE. ARKANSAS 72701-6221 OKLAHOMA CITY
479-073-4200 www.kutakrock.com
OMAHA
PABADENA
RICHMOND
SCOTTSDALE
May 20, 2004 WASHINGTON
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephens Inc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
• $6,090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance and sale by the City of
Fayetteville, Arkansas (the "City"), a political subdivision of the State of Arkansas, of its
$6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Bonds").
The Bonds are being issued pursuant to the provisions of the Constitution and laws of the
State of Arkansas, including, particularly, Amendment 65 and Arkansas Code Annotated (1998
Repl. & Supp. 2003) §§14-164-401 et seq., §§14-234-201 et seq. and §§14-235-201
et seq. (collectively, and as from time to time amended, the "Authorizing Legislation"), pursuant
to Ordinance No. 4554 of the City, duly adopted and approved on April 6, 2004 (the "Bond
Ordinance" ), and pursuant to a Trust Indenture dated as of May 1, 2002, as amended and
supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended and
supplemented, the "Indenture"), by and between the City and Bank of Oklahoma, N.A., as
trustee (the "Trustee"). Reference is hereby made to the Indenture and to all indentures
supplemental thereto for the provisions, among others, with respect to the conditions for the
issuance of parity debt by the City, the nature and extent of the security for the Bonds, the rights,
duties and obligations of the City, the Trustee and the holders of the Bonds, and the terms upon
• which the Bonds are issued and secured.
10-61623.1
KUTAK RiIOCK LLP
• Approving Opinion
May 20, 2004
Page 2'I
Reference is made to an opinion of even date herewith of Kit Williams, Esq., City
Attorney, a copy of which is on file with the Trustee, with respect, among other matters, to the
status and valid existence of the City, the power of the City to adopt the Bond Ordinance and
enter into and perform its obligations under the Indenture, the valid adoption of the Bond
Ordinance and the due authorization, execution and delivery of the Indenture by the City, and
with respect to the Indenture being enforceable upon the City.
We have examined the law and such certified proceedings and other papers as we have
deemed necessary to render this opinion. As to questions of fact material to our opinion, we
have relied upon the representations of the City contained in the Bond Ordinance and the
Indenture and in the certified proceedings and other certifications of public officials furnished to
us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly created and validly existing as a municipal corporation of the
State of Arkansas. Pursuant to the Constitution and laws of the State of Arkansas, including,
particularly, Amendment 65 and the Authorizing Legislation, the City is empowered to adopt the
• Bond Ordinance, to execute and deliver the Indenture, to perform the agreements on its part
contained therein, and to issue the Bonds.
2. The Bond Ordinance has been duly adopted by the City and constitutes a valid
and binding obligation of the City enforceable upon the City in accordance with its terms.
13. The Indenture has been duly authorized, executed and delivered -by the City and is
a valid and binding obligation of the City enforceable upon the City in accordance with its terms.
4. The Bonds have been validly authorized, executed, issued and delivered by the
City and represent valid and binding special obligations of the City. The principal, premium, if
any, and interest on the Bonds shall be payable from, and shall be secured by an assignment and
pledge by the City to the Trustee of, the Net Revenues (as defined in the Indenture) of the City's
water and sewer system, subject to a parity pledge of Net Revenues securing the City's Water
and Sewer System Refunding Revenue Bonds, Series 2002, and any Additional Bonds (as
defined in the Indenture) issued hereafter.
5. The Net Revenues have been duly and validly assigned and pledged to the Trustee
under the Indenture, and the Indenture creates, as security for the Bonds, a valid security interest
in the Net Revenues. Under the laws of the State of Arkansas, including, particularly, Arkansas
Code Annotated (2001 Repl. & 2003 Supp.) Section 4-9-109(d)(14), the pledge, assignment and
security interest in the Net Revenues securing the Bonds is and shall be prior to any judicial lien
hereafter imposed on the Net Revenues to enforce a judgment against the City on a simple
10-61623.1
KUTAK ROCK LLP
• Approving Opinion
May'20, 2004
Page 31
contract, and it is not necessary to file a Uniform Commercial Code financing statement in order
to perfect a security interest in the Net Revenues.
6. Interest on the Bonds is excluded from gross income for federal income tax
purposes and is not a specific preference item for purposes of the federal alternative minimum
tax. The opinion described in the preceding sentence assumes the accuracy of certain
representations and compliance by the City with covenants designed to satisfy the requirements
of the Internal Revenue Code of 1986, as amended, that must be met subsequent to the issuance
of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be
included in gross income for federal income tax purposes retroactive to the date of issuance of
the Bonds. The City has covenanted to comply with such requirements.
7. The interest on the Bonds is exempt from all state, county and municipal taxes in
the State of Arkansas.
8.
The Bonds are exempt from
registration pursuant
to the Securities Act of 1933, as
amended, and
the Indenture is not required
to be qualified under
the Trust Indenture Act of 1939,
as amended, in connection with the offer and sale of the Bonds.
• It is to be understood that the rights of the registered owners of the Bonds and the
enforceability of the Bonds, the Bond Ordinance and the Indenture may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting creditors' rights
heretofore or hereafter enacted to the extent constitutionally applicable and that their
enforcement may also be subject to the exercise of judicial discretion in appropriate cases.
Very truly yours,
LLF
10-61623.1
i?
KUTAK ROCK LLP ATLANTA
• CHICAGO
DENVE
SUITE 1100 DENVER
425 WEST CAPITOL AVENUE DES MOINES
FAYETTEVILLE
NORTHWEST ARKANSAS OFFICE LITTLE ROCK, ARKANSAS 72201-3409 IRVINE
THE THREE SISTERS BUILDING 501-975-3000 KANSAE CITY
214 WEST DICKSON STREET LINCOLN
FAYETTEVILLE, ARKANSAS 72701-5221 FACSIMILE 501-9]5-3001 OKLAHOMA CITY
470-070-4200 www.kutakrook.com OMAHA
PASADENA
RICHMOND
SCOTTSDALE
May 20, 2004 WASHINGTON
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Stephens Inc.
Fayetteville, Arkansas
Ambac Assurance Corporation
New York, New York
$6,090,000
• City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
This opinion supplements our bond approving opinion, dated the date hereof, relating to
the above -captioned bonds (the "Bonds"). Except as otherwise defined herein, the terms used
herein shall have the meanings prescribed for them in said opinion. In addition to the documents
specifically mentioned in that opinion, we have examined the portions of the Official Statement
dated April 23, 2004, with respect to the Bonds (the "Official Statement"), captioned
"INTRODUCTORY STATEMENT," "THE SERIES 2004 BONDS," "SECURITY FOR THE
BONDS," "ESTIMATED SOURCES AND USES OF FUNDS," "DEFINITIONS OF
CERTAIN TERMS," "SUMMARY OF THE INDENTURE," "SUMMARY OF THE
CONTINUING DISCLOSURE AGREEMENT," "TAX EXEMPTION," and "APPENDIX C —
Form of Opinion of Bond Counsel' (the "Relevant Captions") insofar as they relate to this
opinion.
In connection with this opinion, we have also examined:
(a) An executed counterpart of the Trust Indenture dated as of May 1, 2002,
as amended and supplemented by a First Supplemental Trust Indenture dated as of
• May 1, 2004 (as amended and supplemented, the "Indenture"), by and between the City
and Bank of Oklahoma, N.A., as trustee (the "Trustee");
10-61625.1
KUTAK ROCK LLP
• Supplemental Opinion
May 20, 2004
Page 2
(b) An executed counterpart of the Escrow Deposit Agreement dated May 20,
2004 (the "Escrow Agreement'), by and between the City and Bank of Oklahoma, N.A.,
as escrow trustee (the "Escrow Trustee");
(c) An executed counterpart of the Continuing Disclosure Agreement dated
May 20, 2004 (the "Continuing Disclosure Agreement'), by and between the City and the
Trustee;
(d) An executed counterpart of the Tax Regulatory Agreement dated as of
May 1, 2004 (the "Tax Regulatory Agreement'), by and between the City and the
Trustee; and
(e) An executed counterpart of the Bond Purchase Agreement dated April 23,
2004 (the "Bond Purchase Agreement'), by and between the City and Stephens Inc. (the
"Underwriter").
Based on our examination, we are of the opinion, as of the date hereof and under existing
law, as follows:
• 1. The statements contained in the Official Statement under the Relevant
Captions, insofar as such statements purport to summarize certain provisions of the
Bonds, the Indenture and the Continuing Disclosure Agreement, or conclusions of law
and legal opinions, are true, accurate and correct summaries thereof in all material
respects and do not omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.
2. The Indenture has been duly authorized, executed and delivered by the
City and, assuming due authorization, execution and delivery by the Trustee, the
Indenture represents the valid and binding agreement of the City enforceable in
accordance with its terms.
3. The Escrow Agreement has been duly authorized, executed and delivered
by the City and, assuming due authorization, execution and delivery by the Escrow
Trustee, the Escrow Agreement represents the valid and binding agreement of the City
enforceable in accordance with its terms.
4. The Continuing Disclosure Agreement has been duly authorized, executed
and delivered by the City and, assuming due authorization, execution and delivery by the
Trustee, the Continuing Disclosure Agreement represents the valid and binding
agreement of the City enforceable in accordance with its terms.
5.
The Tax Regulatory Agreement has been
duly authorized, executed
and
• delivered
by the City and, assuming due authorization,
execution and delivery by
the
10-61625.1
KUTAK ROCK LLP
I
• Supplemental Opinion
May20, 2004
Page 3
I
•
'Trustee, the Tax Regulatory Agreement represents the valid and binding agreement of the
City enforceable in accordance with its terms.
6. The Bond Purchase Agreement has been duly authorized, executed and
delivered by the City and, assuming due authorization, execution and delivery by the
I Underwriter, the Bond Purchase Agreement represents the valid and binding agreement
of the City enforceable in accordance with its terms.
The obligations of the parties, and the enforceability thereof, with respect to the
documents and other items described above are subject, in part, to the provisions of the
bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors' rights generally,
now or hereafter in effect. Certain of the obligations, and the enforcement thereof, are also
subject to general equity principles, which may limit the specific enforcement of certain
remedies but which do not affect the validity of such item.
' This opinion is being rendered to you solely for your benefit.
Very truly yours,
10-61625.1
170
1]
•
•
NORTHWEST ARKANSAS OFFICE
THE THREE 818TER8 BUILDING
214 WEST DICKSON STREET
FAYETTEVILLE. ARKANSAS 72791-5221
479-073-4200
City of Fayetteville, Arkansas
Fayetteville, Arkansas
KUTAK ROCK LLP
ATLA„TA
CHICA00
SUITE 1100
DENVER
425 WEST CAPITOL AVENUE
DES MOINES
FAYETTEVILLE
LITTLE ROCK, ARKANSAS 72201-3409
IRVINE
KANSASCITY
501-975-3000
LINCOLN
FACSIMILE 501-975-3001
OKLAHOMA CITY
www.kutokrock.eDm
OMAHA
PABADENA
RICHMOND
SCOTTSDALE
WASHINGTON
May 20, 2002
Bank of Oklahoma, N.A., as Trustee
Tulsa, Oklahoma
Ambac Assurance Corporation
New York, New York
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System Refunding Revenue Bonds
Series 2004
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the issuance by the City of
Fayetteville, Arkansas (the "City") of its $6,090,000 aggregate principal amount of Water and
Sewer System Refunding Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), and have
delivered on this date our approving opinion with respect thereto. All capitalized terms not
otherwise defined herein shall have the meanings assigned thereto in such approving opinion.
A portion of the proceeds of the Series 2004 Bonds will be deposited with the Bank of
Oklahoma, N.A., Tulsa, Oklahoma, as escrow trustee (the "Escrow Trustee"), under an Escrow
Deposit Agreement dated May 20, 2004 (the "Escrow Agreement"), between the City and the
Escrow Trustee, for the purpose of defeasing the City's previously issued $8,365,000 aggregate
original principal amount of Water and Sewer System Refunding Revenue Bonds, Series 1999
(the "Series 1999 Bonds"). The Series 1999 Bonds were issued by the City pursuant to
Ordinance No. 4159 adopted on April 20, 1999 (the "1999 Authorizing Ordinance"). This
opinion is being delivered in connection with the defeasance of the Series 1999 Bonds pursuant
to Section 25 of the 1999 Authorizing Ordinance.
In connection with this opinion, we have examined (i) the Escrow Agreement, (ii) the
1999 Authorizing Ordinance, and (iii) the approving opinion of Kutak Rock LLP dated May 27,
• 1999 (the "1999 Bond Counsel Opinion"). For purposes of this opinion, we have also reviewed
originals, certified or otherwise identified to our satisfaction, of (a) a certificate of the Escrow
10-62201.1
i
KUTAK ROCK LLP
Defeasance Opinion
• May 26, 2004
Page 2.
Trustee with respect to receipt of proceeds of the Series 2004 Bonds and the receipt of moneys
transferred from the bond fund and the debt service reserve fund for the Series 1999 Bonds, all of
which moneys were deposited with the Escrow Trustee pursuant to the terms of the Escrow
Agreement and (b) such other documents, opinions, certificates and other items as we have
deemed relevant and necessary in rendering this opinion.
It is our opinion, under existing law, that:
1. The issuance of the Series 2004 Bonds and the deposit of a portion of the
proceeds thereof with the Escrow Trustee pursuant to the Escrow Agreement to defease the
Series'l999 Bonds will not adversely affect the exclusion from gross income for federal income
tax purposes of interest on the Series 1999 Bonds and will not cause the Series 1999 Bonds to be
treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of
1986, as amended. For the purposes of this opinion, we have assumed the correctness of the
1999 Bond Counsel Opinion and the continuing exclusion from gross income for federal income
tax purposes of the interest on the Series 1999 Bonds.
2. The requirements of Section 25 of the 1999 Authorizing Ordinance as to the
• discharge of the lien thereof on the net revenues of the City's water and sewer system securing
the Series 1999 Bonds have been satisfied, and the lien of the 1999 Authorizing Ordinance
against the net revenues of the City's water and sewer system has been discharged.
•
Very truly yours,
y4ak T� LL
1 ofi220I.1
0
K]
KIT WILLIAMS
FAYETTEVILLE CITY ATTORNEY
AVID J. WHITAKER
sistant City Attorney
Judy Housley
Office Manager
Phone (479) 575-8313
FAX (479) 575-8315
May 20, 2004
Bank of Oklahoma, N.A.; as trustee
Tulsa, Oklahoma '
Stephens Inc.
Little Rock, Arkansas
Kutak Rock LLP .
Little Rock, Arkansas
Ambac Assurance Corporation
New York, New York
THE CITY OF FAYETTEVUE, ARKANSAS
113 W. Mountain, Suite 302
Fayetteville, AR 72701-6083.
Re: 16,090,000 City of Fayetteville, Arkansas Water and Sewer System
Refunding Revenue Bonds; Series 2004
Ladies and Gentlemen:
I am the elected City Attorney of Fayetteville, Arkansas (the "City") and• have acted 'in that capacity'in connection with the issuance and sale by the City of its $6,690,000 Water and .
Sewer System RefundingRevenue Bonds, Series 2004 (the "Bonds"), which Bonds are being
sold pursuant to the terms of a Bond Purchase Agreement' dated April 23, 2004 (the "Bond
Purchase Agreement"), by.and between Stephens Inc. and the City. 'The terms defined iri.the
Bond Purchase Agreement are used in this opinion with the meanings, assigned to them -in the.
Bond Purchase' Agreement. .
In this connection, I, have, reviewed certain documents with respect to the Bonds, and
have examined such records, certificates and other documents as I have. considered' necessary or
appropriate for the purposes of this opinion, including'Ordinance No.-4530 adopted'6y the City
Council on. December 2, 2003, Ordinance No. 4536 -adopted by the. City. Council on December
30, " 2003, . and Ordinance. No. 4540 adopted , by the City Council ' oil February 3, 2004
(collectively, they"Rate Ordinances"), Ordinance No. 4554 adopted by the City Council -on April
6, 2004 (the "Bond Ordinance"), the Trust Indenture dated as of May 1; 2002, as amended and
supplemented by the First Supplemental Trust -Indenture dated as of May.1, 2004 (as amended
and supplemented, the "Indenture'.'), by and between the City and Bank of Oklahoma, N.A., as
• trustee (the I "Trustee"), the Escrow Deposit Agreement dated' May 201 2004 (the "Escrow
Agreement"), by and.between the City and Bank of Oklahoma, N.A., as escrow trustee; the Tax
• Regulatory Agreement dated as of May 1, 2004 (the "Tax Regulatory Agreement"), by and
between the City and the Trustee, the Continuing Disclosure Agreement dated May 20, 2004 (the
"Disclosure Agreement"), by and between the City and the Trustee, the Preliminary Official
Statement dated April 15, 2004 (the "Preliminary Official Statement") and the Official Statement
dated April 23, 2004 (the "Official Statement") relating to the offering of the Bonds, and a
closing certificate of 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 is a duly organized and validly existing political subdivision and city of
the first class, organized under the laws of the State of Arkansas, with full power and authority to
adopt the Bond Ordinance and the Rate Ordinances and to execute and deliver the Bonds, the
Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure Agreement
and the Bond Purchase Agreement.
2. The City has duly approved the Preliminary Official Statement and the Official
Statement
3. The Bond Ordinance and the Rate Ordinances have been duly adopted by the City
by all action necessary under the Authorizing Legislation and the laws and Constitution of the
State of Arkansas, and remain in full force and effect.
a4. The Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the
Disclosure Agreement and the Bond Purchase Agreement have been duly authorized, approved,
executed and delivered by the City 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, constitute valid and binding agreements of the City enforceable in
accordance with their terms.
5. The information in the Official Statement under the captions "THE CITY," "THE
SYSTEM" and "LEGAL MATTERS" (apart from financial or statistical data contained or
incorporated therein, as to which no view is expressed) is fair, accurate and complete and does
not omit any matter which, in my opinion, for the purposes for which the Official Statement is to
be used, should be included or referred to therein.
6. Excepting those matters discussed in the Official Statement, there is no action,
suit or proceeding at law or in equity before or by any court, 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 Bond Ordinance, the Rate Ordinances,
the Indenture, the Escrow Agreement, the Tax Regulatory Agreement, the Disclosure Agreement
or the Bond Purchase Agreement and, to the best of such counsel's knowledge, there is no
investigation, pending or threatened, and no threatened action, suit or proceeding involving any
of the matters hereinabove mentioned in this paragraph 6.
0
. 7. The execution and delivery of the Indenture, the Escrow Agreement, the Tax
Regulatory Agreement, the Disclosure Agreement and the Bond Purchase Agreement, and
compliance with the provisions thereof, under the circumstances contemplated thereby, do not
and will not in any material respect conflict with or constitute on the part of the City a breach of
or default under any agreement or other instrument to which the City is a party or any existing
law, regulation, court order or consent decree to which the City is subject.
8. Based upon the examinations which I have made as Fayetteville City Attorney,
nothing has come to my attention which would lead me to believe that the Official Statement
(except for the financial statements and other financial data included in the Official Statement, as
to which no view is expressed) 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 the light
of the circumstances under which they were made, not misleading.
I hereby consent to the references made to me in the Official Statement. This opinion is
being rendered to you solely for your benefit.
aSierely,
LLIAMS
• Fayetteville City Attorney
0
21
AmbacAmbac Assurance Corporation
One State Street Plaza, 15ch Floor
New York, New York 10004
• Financial Guaranty Insurance Policy Telephone: (212) 668-0340
Obligor CITY OF FAYETTEVILLE, ARKANSAS Policy Number. 22458BE
Obligations: Premium:
$6,090,000 Water and Sewer System Refunding Revenue Bonds, $24,410.10
Series 2004, dated May 1, 2004, and maturing on August 15 in the
years 2004 through 2012, both inclusive. The Paying Agent is
Bank of Oklahoma, N.A., Tulsa, Oklahoma.
Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the
premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the
"Insurance Trustee"), for the benefit of the Holders, that portion of the principal of and interest on the above -described obligations
(che "Obligations") which shall become Due for Payment bur shall be unpaid by reason of Nonpayment by the Obligor.
Ambac will make such payments co the Insurance Trustee within one (1) business day following written notification to Ambac of
Nonpayment. Upon a Holder's presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons,
uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse co the Holder the amount of
principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of
the surrendered Obligations and/or coupons and shall be fully subrogated to all of die Holder's rights to payment thereon.
In cases where the Obligations are issued in registeredform, the Insurance Trustee shall disburse principal to a Holder only upon
presentation and surrender to che Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together
with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such
Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its
nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation to the
Insurance Trustee of proof char the claimant is the person encided to the payment of interest on the Obligation and delivery to the
Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the.
. Holder or such Holder's duly authorized represenrative, transferring to Ambac all rights tinder such Obligation co receive the
inceresc in respect of which the insurance disbursement was made. Ambac shall be subrogaced to all of the Holders' rights to
payment on registered Obligations to the excenc of any insurance disbursements so made.
In the event char a trustee or paying agent for the Obligations has notice char any payment of principal of or incerest on an
Obligation which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a
preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance with
a final, nonap'pealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the excenr
of such recovery if sut£cienc funds are not otherwise available.
As used herein, the term "Holder" means any person ocher than (i) the Obligor or 60 any person whose obligations constitute the
underlying security or source of payment For the Obligations who, at the rime of Nonpayment, is the owner of an Obligation or of
a coupon relating to an Obligation. As used herein, 'Due for Payment", when referring to the principal of Obligations, is when
the scheduled maturity date or mandatory redemption dace for the application of a required sinking fund installment has been
reached and does nor refer to any earlier date on which payment is due by reason of call For redemption (ocher than by application
of required sinking Fund installments), acceleration or ocher advancement of maturity; and, when referring to inreresc on the
Obligations, is when the scheduled date for payment of interest has been reached. As used herein, "Nonpayment" means the failure
of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest
on che Obligations which are Due for Payment.
This Policy is noncancelable. The premium on this Policy is not refundable for any reason, including payment of the Obligations
prior to maturity. This Policy does nor insure against toss of any prepayment or ocher acceleration payment which at any time
may become due in respect of any Obligation, ocher than at the sole option of Ambac, nor against any risk ocher than Nonpayment.
In witness whereof, Ambac has caused this Policy to be affixed with a facsimile of its corporate seat and to be signed by its duly
authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of die
countersignature of its duly authorized representative. ' U//'I
♦mot �rj` •'. 2�
President i ��r.l'� i % Secretary
i ♦ (I /,TY/� n
I
Effective Date: May 20, 2004 ��`�— Aurhorized Representative
THE BANK OF NEW YORK acknowledges chat it has agreed
to perform the duties of Insurance Trustee under this Policy.
Form No.: 213-0012 (1/01) A- 6709 Authorized Officer of Insurance Trustee
0
S
E
•
CERTIFICATE OF BOND INSURER
In connection with the issuance of $6,090,000 in aggregate principal amount of the City
of Fayetteville, Arkansas (the "Obligor"), Water and Sewer System Refunding Revenue Bonds,
Series 2004, dated May 1, 2004 (the "Obligations"), Ambac Assurance Corporation ("Ambac")
is issuing a financial guaranty insurance policy and endorsement thereto (the "Insurance Policy")
guaranteeing the payment of principal and interest when due on the Obligations, all as more
fully set out in the Insurance Policy.
Ambac On behalf of Ambac, the undersigned hereby certifies that:
(i) the Insurance Policy is an unconditional and recourse obligation of Ambac
(enforceable by or on behalf of the holders of the Obligations) to pay the scheduled payments of
interest and principal on the Obligations in the event of a Nonpayment as defined in the
Insurance Policy;
(ii) the insurance premium of $24,410.10 was determined in arm's length negotiations
in accordance with our standard procedures, is required to be paid as a condition to the issuance
of the Insurance Policy and represents a reasonable charge for the transfer of credit risk;
(iii) no portion of such premium represents a payment for any direct or indirect services
• other than the transfer of credit risk, including costs of underwriting or remarketing the
Obligations or the cost of insurance for casualty of Obligation financed property;
(iv) we are not co -obligors on the Obligations and do not reasonably expect that we
will be called upon to make any payment under the Insurance Policy;
(v) the Obligor is not entitled to a refund of any portion of premium for the Insurance
Policy in the event that the Obligations are retired prior to their stated maturity; and
(vi) we would not have issued the Insurance Policy in the absence of a debt service
reserve fund of the size and type established by the documents pursuant to which the Obligations
are being issued, and it is normal and customary to require a debt service reserve fund of such a
size and type in similar transactions.
IN WITNESS WHEREOF, Ambac Assurance Corporation has caused this certificate to
be executed in its name on this 20" day of May, 2004, by one of its officers duly authorized as
of such date.
AMBAC ASSURANCE CORPORATION
By cAAA
Dwight K a
Vice President and
• Assistant General Counsel
9
0
23
A�
I •
May 19, 2004
City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, Arkansas 72701
Kutak Rock LLP
425 West Capital Avenue
Ambac Little Rock, Arkansas 72201
Ladies and Gentlemen:
Ambac Assurance Corpomdon
One Sute Sweet P1=
New York, NY 10004
212.668.0340
A member of Ju Ambu R'ndrmd Goup, 1mr.
Stephens Inc.
3425 North Futrall Drive
Fayetteville, Arkansas 72703
This opinion has been requested of the undersigned, a Vice President and an Assistant General
Counsel of Ambac Assurance Corporation, a Wisconsin stock insurance corporation ("Ambac
Assurance"), in connection with the issuance by Ambac Assurance of a certain Financial
Guaranty Insurance Policy and endorsement thereto, effective as of the date hereof (the
"Policy"), insuring $6,090,000 in aggregate principal amount of the City of Fayetteville,
Arkansas (the "Obligor"), Water and Sewer System Refunding Revenue Bonds, Series 2004,
dated May 1, 2004 (the "Obligations").
• In connection with my opinion herein, I have examined the Policy, such statutes, documents and
proceedings as I have considered necessary or appropriate under the circumstances to render the
following opinion, including, without limiting the generality of the foregoing, certain statements
contained in the Official Statement of the Obligor dated April 23, 2004 relating to the
Obligations (the "Official Statement") under the headings "BOND INSURANCE" and
"APPENDIX D — SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY".
Based upon the foregoing and having regard to legal considerations I deem relevant, I am of the
opinion that:
1. Ambac Assurance is a stock insurance corporation duly organized and validly existing
under the laws of the State of Wisconsin and duly qualified to conduct an insurance
business in the State of Arkansas.
2. Ambac Assurance has full corporate power and authority to execute and deliver the
Policy and the Policy has been duly authorized, executed and delivered by Ambac
Assurance and constitutes a legal, valid and binding obligation of Ambac Assurance
enforceable in accordance with its terms except to the extent that the enforceability (but
not the validity) of such obligation may be limited by any applicable bankruptcy,
insolvency, liquidation, rehabilitation or other similar law or enactment now or hereafter
enacted affecting the enforcement of creditors' rights.
3. The execution and delivery by Ambac Assurance of the Policy will not, and the
consummation of the transactions contemplated thereby and the satisfaction of the terms
• thereof will not, conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Authority, Articles of Incorporation or By -Laws of
Ambac Assurance, or any restriction contained in any contract, agreement or instrument
•
to which Ambac Assurance is a party or by which it is bound or constitute a default
under any of the foregoing.
4. Proceedings legally required for the issuance of the Policy have been taken by Ambac
Assurance and licenses, orders, consents or other authorizations or approvals of any
governmental boards or bodies legally required for the enforceability of the Policy have
been obtained; any proceedings not taken and any licenses, authorizations or approvals
not obtained are not material to the enforceability of the Policy.
AmbaC 5. The statements contained in the Official Statement under the heading "BOND
INSURANCE", insofar as such statements constitute summaries of the matters referred
to therein, accurately reflect and fairly present the information purported to be shown
and, insofar as such statements describe Ambac Financial Group, Inc. and Ambac
Assurance, fairly and accurately describe Ambac Financial Group, Inc. and Ambac
Assurance.
6. The form of Policy contained in the Official Statement under the heading "APPENDIX
D — SPECIMEN OF FINANCIAL GUARANTY INSURANCE POLICY" is a true and
complete copy of the form of Policy.
The opinions expressed herein are solely for your benefit, and may not be relied upon by any
• other person.
Very truly yours,
" e I(t,.-
Dwight Kwa
Vice President and
Assistant General Counsel
0
9
0
EXECUTION COPY
0 CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement dated May 20, 2004 (this "Agreement"), is
executed and delivered by the City of Fayetteville, Arkansas (the "City") and the Bank of
Oklahoma, N.A., as trustee (the "Trustee"), in connection with the issuance of the City's
$6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the "Bonds").
The Bonds are being issued pursuant to the terms and provisions of Ordinance No. 4554 duly
adopted by the City Council of the City on April 6, 2004 (the "Authorizing Ordinance"), and a
Trust Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental
Trust Indenture dated as of May 1, 2004, each by and between the City and the Trustee. In
connection with the issuance of the Bonds, the City and the Trustee agree as follows:
Section 1. Purpose of this Agreement. This Agreement is being executed and
delivered by the City and the Trustee for the benefit of the Beneficial Owners of the Bonds and
in order to assist the Participating Underwriter in complying with, and constitutes the written
undertaking for the benefit of the Beneficial Owners of the Bonds required by, Section (b)(5)(i)
of Securities and Exchange Commission Rule 15c2-12 under the Securities Act of 1934, as
amended (17 C.F.R. Section 240.15c2-12) (the "Rule"). The City hereby represents that it has
not failed to comply with any previous undertaking pursuant to the Rule.
Section 2. Definitions. In addition to the definitions set forth in the Authorizing
Ordinance, which apply to any capitalized term used in this Agreement unless otherwise defined
in this Section, the following capitalized terms shall have the following meanings:
"Annual Financial Information" shall mean the annual financial information provided by
the City pursuant to, and as described in, Sections 3 and 4 of this Agreement.
"Arkansas State Repository" shall mean any public or private repository or entity as may
be designated by the State of Arkansas as a state repository for the purpose of the Rule and
recognized as such by the SEC. As of the date of this Agreement, there is no Arkansas State
Repository.
",`Beneficial Owner" shall mean any person which has the power, directly or indirectly, to
vote or consent with respect to, or to dispose of ownership of, any Bonds, including persons
holding Bonds through nominees or depositories.
"Disclosure Representative" shall mean the City's Finance and Internal Services Director
or his or her designee, or such other officer or employee as the City shall designate in writing to
the Trustee from time to time.
"MSRB" shall mean the Municipal Securities Rulemaking Board established in
accordance with the provisions of Section 1511(b)(1) of the 1934 Act.
"National Repository" shall mean any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule. The National Repositories currently approved
by the Securities and Exchange Commission are set forth in Exhibit B hereto.
10-58778.3
. "Participating Underwriter" shall mean Stephens Inc.
"Repository" shall mean each National Repository and the Arkansas State Repository,
1J
if any.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as the same may be amended
from time to time ("1934 Act").
"Specified Events" shall mean any of the events with respect to the Bonds listed in
Section 5(a) of this Agreement.
Section 3. Provision of Annual Financial Information.
(a) The City shall, not later than August 1 of each year, commencing
August 1, 2004, provide to each Repository, to the Trustee, and to Ambac Assurance
Corporation, One State Street Plaza, New York, New York 10004, Attention:
Surveillance Department, its Annual Financial Information which is consistent with the
requirements of Section 4 of this Agreement. The City's Annual Financial Information
may be submitted as a single document or as separate documents comprising a package,
and may cross-reference other information as provided in Section 4(b) hereof; provided
that the audited financial statements of the City may be submitted separately from the
balance of its Annual Financial Information and later than the date required above for the
filing of the Annual Financial Information if they are not available by that date. If the
City's fiscal year changes, it shall give notice of such change in the same manner as for a
material Specified Event under Section 5 of this Agreement.
(b) If, on the date specified in subsection (a) for providing the Annual
Financial Information to Repositories, the Trustee has not received a copy of the Annual
Financial Information, the Trustee shall contact the Disclosure Representative to
determine if the City is in compliance with subsection (a).
(c) If the Trustee is unable to verify that the Annual Financial Information has
been provided to the Repositories by the date required in subsection (a), the Trustee shall
file a notice with the Repositories, Ambac Assurance Corporation and the MSRB in
substantially the form set forth in Exhibit A and as required by the Rule.
(d) The City shall:
(i)
determine
each
year
prior to the date for providing the Annual
Financial
Information the
name
and
address of each Repository; and
(ii) file a report with the Trustee certifying that the Annual Financial
Information has been provided pursuant to this Agreement, stating the date it was
provided, and listing all of the Repositories to which it was provided.
10-58778.3
• Section 4. Content of Annual Financial Information.
(a) The City's Annual Financial Information shall contain or incorporate by
reference the following:
(i) The following general categories of financial information and
operating data with respect to the City's water and sewer system (the "System")
for the prior fiscal year:
(A) Changes in wholesale water rates charged by the Beaver
Water District;
(B) Changes in the City's water and sewer rate structure;
(C) Annual System operating revenues, bad debt expense and
bad debt expense percentage;
(D) Costs for projected System capital improvements for the
current fiscal year;
(E) Usage percentages of all water users consuming more than
5% of the System's water output;
(F)
Average
daily water use
and maximum day's water use;
• and
(G) Average daily sewage flow.
(ii) The City's audited financial statements for the prior fiscal year,
prepared in accordance with generally accepted accounting principles ("GAAP")
as such principles are modified by the governmental accounting standards
promulgated by the Government Accounting Standards Board ("GASB") and by
mandated principles of the State of Arkansas, if any, as in effect from time to
time, which financial statements have been audited by such auditor as shall then
be required or permitted by the laws of the State of Arkansas. If the City's audited
financial statements are not available by the time its Annual Financial Information
is required to be filed pursuant to Section 3(a) hereof, the Annual Financial
Information shall contain the unaudited financial statements of the City in a
format similar to its audited financial statements contained in the Official
Statement for the Bonds, and the audited financial statements shall be filed in the
same manner as the Annual Financial Information when they become available.
(b) Any or all of the items listed above may be incorporated by reference from
other documents, including official statements of debt issues of the City or related public
entities, which have been submitted to each of the Repositories or the Securities and
• Exchange Commission. If the document has been incorporated by reference in a final
official statement, it must be available from the Municipal Securities Rulemaking Board.
The City must clearly identify each such other document incorporated by reference.
10-58778.3 3
• Section 5. Reporting of Specified Events.
(a) This Section 5 shall govern the giving of notices of the occurrence of any
of the following events with respect to the Bonds, if material:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults;
(3) Unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) Substitution of any credit or liquidity providers, or their failure to
perform;
(6) Adverse tax opinions or events affecting the tax-exempt status of
the Bonds;
(7) Modifications to rights of Bondowners;
. (8) Bond calls;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the
Bonds; and
(11) Rating changes.
(b) The Trustee, upon obtaining actual knowledge of the occurrence of any of
the Specified Events, shall promptly inform the Disclosure Representative of any
Specified Event that has occurred, and shall request that the City promptly notify the
Trustee in writing whether to report the event pursuant to subsection (e).
(c) If the City determines that the occurrence of a Specified Event is material
to a Beneficial Owner of the Bonds, the Disclosure Representative shall promptly notify
the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence
pursuant to subsection (e) below.
(d) If the City determines that the occurrence of a Specified Event is not
material, the Disclosure Representative shall so notify the Trustee in writing and instruct
the Trustee not to report the occurrence pursuant to subsection (e) below.
(e) If the Trustee has been instructed by the Disclosure Representative to
report the occurrence of a Specified Event, the Trustee shall file a notice of such
occurrence with Ambac Assurance Corporation (at its address as provided in Section 3(a)
10-58778.3
• hereof) and each National Repository, or with Ambac Assurance Corporation, the MSRB
and the Arkansas State Repository. The Trustee shall not be obligated to report the
occurrence of a Specified Event if there is no instruction to do so from the Disclosure
Representative. Notwithstanding the foregoing:
(i) notice of the occurrence of a Specified Event described in
subsections (a)(1), (4) or (5) shall be given by the Trustee unless the Disclosure
Representative gives the Trustee affirmative instructions not to disclose such
occurrence; and
(ii) notice of the Specified Events described in subsections (a)(8) and
(9) need not be given under this subsection any earlier than the notice (if any) of
the underlying event is given to Beneficial Owners of affected Bonds pursuant to
the Indenture.
Section 6. Termination of Reporting Obligation. The City's obligations under this
Agreement shall terminate if the City is no longer an "obligated person" within the meaning of
the Rule. The City's obligations under this Agreement shall terminate upon the maturity,
defeasance, prior redemption or payment in full of all of the Bonds.
Section
7. Amendment; Waiver.
Notwithstanding any
other provision
of this
Agreement, the
City and the Trustee may
amend this Agreement (and
the Trustee shall
consent
. in its discretion, such consent not to be unreasonably withheld, to any amendment so requested
by the City), and any provision of this Agreement may be waived, if such amendment or waiver
is supported by an opinion of counsel, reasonably acceptable to each of the City and the Trustee,
to the effect that such amendment or waiver would not, in and of itself, cause the undertakings
herein to violate the Rule taking into account any subsequent change in or official interpretation
of the Rule.
Section 8. Additional Information. Nothing in this Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set
forth in this Agreement or any other means of communication, or including any other
information in any Annual Financial Information or notice of occurrence of a Specified Event, in
addition to that which is required by this Agreement. If the City chooses to include any
information in any Annual Financial Information or notice of occurrence of a Specified Event in
addition to that which is specifically required by this Agreement, the City shall have no
obligation under this Agreement to update such information or include it in any future Annual
Financial Information or notice of occurrence of a Specified Event.
Section 9. Default.
(a) In the event of a failure of the City to provide to the Repositories the
Annual Financial Information as undertaken by the City in this Agreement, the Beneficial
Owner of any Bonds may take such actions as may be necessary and appropriate,
including seeking mandamus or specific performance by court order, to cause the City to
• comply with its obligations to provide Annual Financial Information or notices under this
Agreement.
10-58778.3 5
• (b) Notwithstanding the foregoing, no Beneficial Owner of the Bonds shall
have the right to challenge the content or adequacy of the information provided pursuant
to Sections 3, 4 or 5 of this Agreement by mandamus, specific performance or other
equitable proceedings unless the City shall have been given ninety (90) days' written
notice by a Beneficial Owner of the Bonds to remedy the alleged inadequacy of the
information provided and unless Beneficial Owners of Bonds representing at least 25%
aggregate principal amount of outstanding Bonds shall join in such proceedings.
(c) A default under this Agreement shall not be deemed an Event of Default
under the Trust Indenture, and the sole remedy under this Agreement in the event of any
failure of the City or the Trustee to comply with this Agreement shall be an action to
compel performance.
Section 10. Duties, Immunities and Liabilities of Trustee. Article X of the Trust
Indenture is hereby made applicable to this Agreement as if this Agreement were (solely for this
purpose) contained in the Trust Indenture The Trustee shall have only such duties as are
specifically set forth in this Agreement, and the City agrees to indemnify and save the Trustee,
its officers, directors, employees and agents, harmless against any liabilities which it may incur
arising out of or in the exercise or performance of its powers and duties hereunder, including the
costs and expenses (including attorneys' fees and expenses) of defending against any claim of
liability, but excluding liabilities due to its own negligence or willful misconduct.
Section 11. Beneficiaries. This Agreement shall inure solely to the benefit of the City,
• the Trustee and the Beneficial Owners from time to time of the Bonds, and shall create no rights
in any other person or entity.
Section 12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same
instrument.
•
CITY OF FAYETTEVILLE, ARKANSAS
By:
Title: Mayor
BANK OF OKLAHOMA, N.A., as Trustee
By:_
Title:
10-58778.3 6
• (b) Notwithstanding the foregoing, no Beneficial Owner of the Bonds shall
have the right to challenge the content or adequacy of the information provided pursuant
to Sections 3, 4 or 5 of this Agreement by mandamus, specific performance or other
equitable proceedings unless the City shall have been given ninety (90) days' written
notice by a Beneficial Owner of the Bonds to remedy the alleged inadequacy of the
information provided and unless Beneficial Owners of Bonds representing at least 25%
aggregate principal amount of outstanding Bonds shall join in such proceedings.
(c) A default under this Agreement shall not be deemed an Event of Default
under the Trust Indenture, and the sole remedy under this Agreement in the event of any
failure of the City or the Trustee to comply with this Agreement shall be an action to
compel performance.
Section 10. Duties, Immunities and Liabilities of Trustee. Article X of the Trust
Indenture is hereby made applicable to this Agreement as if this Agreement were (solely for this
purpose) contained in the Trust Indenture The Trustee shall have only such duties as are
specifically set forth in this Agreement, and the City agrees to indemnify and save the Trustee,
its officers, directors, employees and agents, harmless against any liabilities which it may incur
arising out of or in the exercise or performance of its powers and duties hereunder, including the
costs and expenses (including attorneys' fees and expenses) of defending against any claim of
liability, but excluding liabilities due to its own negligence or willful misconduct.
• Section 11. Beneficiaries. This Agreement shall inure solely to the benefit of the City,
the Trustee and the Beneficial Owners from time to time of the Bonds, and shall create no rights
in any other person or entity.
•
Section 12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same
instrument.
CITY OF FAYETTEVILLE, ARKANSAS
By:
Title: Mayor
BANK OF/ OKKLAH�O1MA, N.A., as Trustee
By:�`—
Title: I ice President & Trust Officer
10-58778.3 6
• EXHIBIT A
CJ
Ll
NOTICE TO REPOSITORIES REGARDING
FINANCIAL INFORMATION
NAME OF ISSUER: City of Fayetteville, Arkansas
NAME OF BOND ISSUE: $6,090,000 Water and Sewer System Refunding Revenue Bonds,
Series 2004
DATE OF ISSUANCE: May 20, 2004
NOTICE IS HEREBY GIVEN that the City of Fayetteville, Arkansas (the "City") has not
yet provided Annual Financial Information with respect to the above -named Bonds as required
by Section 3 of the Continuing Disclosure Agreement dated May 20, 2004, between the City and
Bank of Oklahoma, N.A., as trustee. [The City anticipates that the Annual Financial Information
will be filed by .1.
Dated:
cc: City of Fayetteville
Stephens Inc.
BANK OF OKLAHOMA, N.A., as Trustee
16-58778.3
A-1
• EXHIBIT B
List of Nationally Recognized Municipal Securities Information Repositories
at the time of execution and delivery of the
Continuing Disclosure Agreement
This list may change from time to time. The Agreement requires that information and
notices be provided to each Repository. This list should be checked for changes each time
information or notice is to be provided.
A current list may be obtained from the Securities and Exchange Commission over the
Internet at http://www.sec.gov/info/municipal/nrmsir.htm.
Bloomberg Municipal Repository
100 Business Park Drive
Skillman, New Jersey 08558
Phone: (609) 279-3225
Fax: (609) 279-5962
E-mail: Munis@Bloomberg.com
DPC Data Inc.
One Executive Drive
• Fort Lee, New Jersey 07024
Phone: (201) 346-0701
Fax: (201) 947-0107
E-mail: nrmsir@dpcdata.com
•
FT Interactive Data
Attn: NRMSIR
100 William Street
New York, New York 10038
Phone: (212) 771-6999
Fax: (212) 771-7390 (Secondary Market Information)
(212) 771-7391 (Primary Market Information)
Email: NRMSIR@FTID.com
Standard & Poor's Securities Evaluations, Inc.
55 Water Street
45t' Floor
New York, NY 10041
Phone: (212) 438-4595
Fax: (212) 438-3975
Email: mmsir repository@sandp.com
10-58778.3 B-I
0
CI
25
•
•
TRUSTEE'S CERTIFICATE
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as trustee for $6,090,000 City of Fayetteville,
Arkansas Water and Sewer System Refunding Revenue Bonds, Series 2004 (the `Bonds'), hereby
certifies that:
1. Pursuant to the provisions of a Trust Indenture dated as of May 1, 2002, as amended
and supplemented by a First Supplemental Trust Indenture dated as of May 1, 2004 (as amended
and supplemented, the "Indenture") by and between the City of Fayetteville, Arkansas (the "City")
and Bank of Oklahoma, N.A., arrangements have been made for Bank of Oklahoma, N.A. to serve
as trustee and paying agent (the "Trustee") with respect to the Bonds. The Trustee hereby accepts
such appointment.
2. Pursuant to the provisions of the Indenture and directions from the City, Cynthia
Wilkinson, Vice President and Trust Officer, has duly authenticated the initial Bonds in the
aggregate principal amount of $6,090,000, being in the form of nine typewritten registered bonds,
numbered R04-1 through R04-9, inclusive, of the Series 2004 Bonds.
3. Each person who, on behalf of the Trustee, authenticated the initial Bonds or
executed the First Supplemental Trust Indenture, the Tax Regulatory Agreement dated as of May 1,
2004, or the Continuing Disclosure Agreement dated May 20, 2004, with respect to the Bonds was
at the date thereof and is now duly elected, appointed or authorized, qualified and acting as an
officer or authorized signatory of the Trustee and is duly authorized to perform such acts at the
respective times of such acts, and the signatures of such persons appearing on such documents are
their genuine signatures.
4. The following are names, titles and specimen signatures of each of the above -
mentioned officers of the Trustee:
Name
Office
Cynthia Wilkinson Vice President and Trust Officer
Judy Foster Asst Vice President and Trust O1
5. The Trustee is a national banking association duly organized, validly existing and in
good standing under the laws of the United States of America. The Trustee has all requisite power
and authority to carry out its obligations as Trustee under the Indenture.
IN WITNESS WHEREOF, BANK OF OKLAHOMA, N.A., has caused this certificate to
be executed in its corporate name by an officer thereunto duly authorized.
Dated: MayV 2004.
BANK OF OKLAHOMA, N.A.
Tulsa, Ok oma
By
Name: M bell
Title: Vice President & Trust Officer
10-61609.1
• EXCERPT OF JOINT RESOLUTION REGARDING
D THVISE
O OF NIZATION AND OPERATION OF THE
TRUSTBANK OF ALBUQUERQUE, N.A.
BANK OF ARKANSAS, N.A.
BANK OF OKLAHOMA, N.A.
BANK OF TEXAS, N.A.
BANK OF TEXAS TRUST COMPANY, N.A.
and
SOUTHWEST TRUST COMPANY
♦D♦
"RESOLVED, that the senior fiduciary officer of each entity (Bank of Albuquerque,
N.A. (BAG), Bank of Arkansas, N.A. (BARK), Bank of Oklahoma, N.A. (SOK), and Bank of
Texas, N.A. (BOT), Bank of Texas Trust Company (BOTTC), and Southwest Trust
Company (SWTC)) shall be responsible for the day-to-day executive management of
respective entities. Trust Officers appointed from time to time by the Boards of Directors
or Board Trust Committees shall have the authority to execute, on behalf of the
respective organizations, contracts, documents, or papers pertaining to the performance
of the fiduciary powers of and, if necessary, to cause the seal of the organization to be
affixed thereto; and the senior fiduciary officer of BAQ, BARD, SOK, SOT, BOTTC, and
SWTC shall designate those Trust Officers and staff members who are authorized and
empowered, and the limits of such authority, to purchase or otherwise acquire, sell,
assign, transfer and deliver all shares of stocks, bonds, debentures, notes, real estate,
evidence of indebtedness, deeds, conveyances, contracts, including oil and gas interests
of all kinds and of contracts for the development thereof, and to execute mortgages, and
releases of mortgages on any and all property or securities now or hereafter standing in
the name of the organization in any fiduciary capacity, and to make, execute, and deliver,
any and all written instruments necessary or proper to effectuate the authority hereby
delegated."
All other officers and agents designated by the respective Boards of Directors and assigned to
the Trust Division, shall, under the supervision of the senior fiduciary officer, perform any duties as may
be required of such last name officer or agent, and may exercise any of the powers and authorities by
this Resolution vested in him/her.
CERTIFICATION
I, the undersigned, Secretary of Bank of Albuquerque, N.A.; Bank of Arkansas, N.A. Bank of
Oklahoma, N.A.; and Bank of Texas, N.A. hereby certify that the above is a true and correct excerpt
from the Joint Resolution Regarding the Organization and Operation of Bank of Albuquerque, N.A., Bank
of Arkansas, N.A., Bank of Oklahoma, N.A.; Bank of Texas, N.A.; Bank of Texas Trust Company, N.A.;
and Southwest Trust Company, passed at a regular monthly meeting as reflected by the Minutes in the
Minute Book of said entity, and I further certify that at* said meetings, a quorum of the Directors was
present and voting throughout, and I further certify that the following officers and agents are duly
elected, qualified, and now acting:
Dated this a day of / ► ` q 09y
Frederic DorwaCrtfary, Bank of Albuquerque, N.A.;
• Bank of Arkap4as, N.A.; Bank of Oklahoma, N.A.;
and Bank of Texas, N:.A.
•
EXCERPT 0r� 11411,1NUTES 0'
DIRECT^vIN ' RUST COMMI--
ID
°ursuant
to the authority vested in the Directors' Trust
Commttee
under the resolution of the Board of Directors OF the
Sank of Oklahoma dated April 8, 1981 the manager of the Trust
Division
is hereby directed to establish an internal Trust
Committee.
The manager of the Trust Division is designated as
Chairman
of the Internal Trust Committee and shall appoint,
with the aooroval
of the Chief Executive Officer of the bank, at
least six
trust officers but not more than ten to serve as
committee
members. He shall also designate two additional trust
officers to serve as alternates, anyone of whom is authorized to
serve in
the place of any regular member who is unable to
attend a committee meeting. The Executive Officers oP the bank
shall.. also
be members of this- committee. A major'v of such
committee
shall constitute a quorum for the transaction of
business.
The Internal Trust Committee shall have the folkwring duties,
• powers and responsibilities .to be performed within policies and
guidelines which may be established from time to time by the
Directors' Trust Committee:
i 1. To establish policies for the conduct of fiduciary
responsibilities and obligations of the Trust Division;
2. To review the Administrative practices in the Trust
Division to confirm that accounts are being handled in
accordance with division policies;
3
3. To/coordinate and review the marketina plans of the
Trust Division;
4. To review the Security Working List used by the
Investment Officers on a periodic basis and receive
recommendations for changes therein from time to
time;
5. To approve all fiduciary appointments accepted or
rejected by the Senior Trust Officers;
i 6. To receive _reports on the termination of all trust
• estates and other fiduciary accounts administered by
the Trust Division;
7. To review the schedule of fees for trust services;
8. To keep minutes of all meetings of the Internal Trust
Committee and to review the minutes of the Trust
review Committee and Investment Policv Committee;
i
I
S. TO perform such other duties as the Directors' Trust
Committee, the Grief Executive Officer of the Sank or
j
triE T rust Division Manager may, rrcm tlmc i0 t1;71e,
assign to the !eternal Trust Committee.
•
G
The manager of the Trust Division is further directed to
establish the Trust Review Committee. The manager of the
Trust Investment Department is deslonated as cihairyman. The
Committee shall consist of eight to te.^. members .-Opoinied by
the manager of the Trust Division with the approval of the
Chief Executive Officer of the Bank. Two alternate members
shall also be appointed by the division manager. The Executive
Officers ci the Bank shall also be members of this committee.
A majority of such committee shall constitute a quorum far the
transaction of business. -
The Directors' Trust Committee hereby delegates to the Trust
Review Committee the following duties, powers and
responsibilities.
. To review each .fiduciary account accepted by the
Bank within 60 days after receiot of the assets or as
soon there21ter as practicable;
2. To. review each fiduciary account and the assets held
by such trust at least once every 12 month period in
accordance with the requirements of Regulation 9;
3. To review
the
minutes of the Trust
Policy Committee
making a
record of such action in
.the minutes and
reviewing
the
transactions of
the Investment
DepaP�tment
to
see that they are in
conformity with
current .policy
and that exceptions thereto are
documented
by
theinvestment and
account officers, -
To keep
minutes of
each meeting
showing which
accounts
have been
reviewed, approved,
or such
other actions
which
may have been
taken by the
committee
in connection with the
review of the
particular
accounts;
5. To perform such other duties as may be assigned to
it from time to time by the Directors' Trust
Committee, the Chief Executive Officer of the Bank or
the Trust Division Manager.
The manager of the Trust
Division
is hereby directede;.�Io
establish the !nvestnent
Policy
Committee. This committee shall
consist of eight members
appointed by
the manager of the Trust
Division with the approval of
Chief-
Executive Officer of the
0-
Sank.
The manager Of the
Trust Division shall serve as
Chairman.
The EX EIZU live Officers
of the
Sank shall also be
member
of this committee. Two
alternate
members are to be
appointed
by the Division
Manage,-.
majority Pf such
committee
shall constitute a
quorum for
the transaction of
business.
This Committee shall have the
following duties,
priorities
and responsibilities_:
t o sat Investment �OIICy IOf the I rUSt Division. under
a. monthly review program which considers the current
econpmic environment;
2. To consider changes, deletions and additions to the
working list of the Investment Department;
3. To review the Common Trust =und Accounts on each
valuation date;
4. To perform such other duties as may be assigned to
it from time to time by the Directors' Trust Committee
• Chief Executive Officer of the Sank or by the Trust
Division (Manager.
;he officers assigned to the Trust Division by the Board of
Directors and the management or the Bank shall have the
following powers and duties, in addition to those herein above
setIarch:
1. The Manager of the Trust Division shall be
responsible for the executive Management of the
Trust Division, and he and the other trust officers
under his supervision shall hive the zutnonty to
execute. on behalf of the Sank, contracts, documents
or papers pertaining to the performance by the Trust
Division -of the fiduciary powers cif the bank, and, if
necessary, to cause the seal of the bank to be affixed
thereto; and he, and the other officers assigned to
the Trust Division under his supervision, are hereby
authorized and empowered where Permitted by the
governing instrument of an account to purchase or
otherwise acquire, sell, assign, transfer and deliver
all shares of stocks, bonds, debentures, notes, real
estate_, evidence of indebtedness, deeds,
. conveyances, contracts, including oil and gas
interests of all kinds and of contracts _ for the
development thereof, and to execute mortgages, and
releases of mortgages on any and all _propert\L, or
securities now or hereafter standing in the name of
the bank in any fiduciary capacity, and to make,
execute and deliver, any and all writ..L2n instruments
necesSafv or proper to effeCtUate the authority
hereby delegated and confer red Loan the manager of
the ! rust Division and Che I rust Ci iiC2I 1YJL C
U rider ills supervision
2. Either he, or any other offlcer of the Trust Division
or any other Trust Operations Officer of the Sank
performing operation functions for the Trust Division,
shall have the authority to sign checks against the
balances to the credit of the Trust Division of this
Bank, When such ofllcers are designated by the
manager of the Trust Division and, such checks are
cauntersianed by another of the designated signatory
officers;
3. The Manager, and any Senior Vice President, any
Vice President, and any Trust Officer assigned to the
Trust Division will have the authority to execute
acceptances of trusts under the authority granted by
the Directors' Trust Committee and within the policy
guidelines as set out by the Trust Division Manager.
Such Officers are also authorized to qualify the bank
as executor administrator, Guardian EsCra`.V =gent,
• Investment Agent, Receiver or assignee, and in any
other fiduciary capacity appropriate to the business
of the Trust Division, and in. accordance_ with Trust
Division PaIicias, such officers shall exercise
generally all of the authority vested by the by-laws
of this bank in an Executive Officer thereof, provided
at all questionable matters, which in the opinion of
the Division Manager requires further consideration,
shall be submitted to the Internal Trust Commit:.=
bet -are acceptance;
4. The Division Manager will establish policies for the
app val for . the invasion of principal and the
pay ants from income in any account where such
pa ments are discretionary and the Trust Division
Manager may delegate_ to designated Trust Officer
such authority as he deems appropriate far the_
exercise of the discretionary powers con,ferr-d upon
the bank in its fiduciary capacity in various
account_=.
�. The Division Nlanao_er shall cause a r.ocrt to be mega
monthly to the Chler Executive Officer cf the Bank,
1 or his designata_, summarizing the operational
administrative and financial status of the division.
• He shall make such further and additional reports as
i may be required from time to time by the Directors'
f Trust Committee, the Chief Executive Officer of the
Bank, the Comptroller of the Currerf�y or any
governmental agency exercising supervisory powers
j over the Trust Division for the Bank of Oklahama;
•
6. The Division manager aria the other i rust Ol doer
under his supervision shall have Lire auuhcrity to
authorize admissions and 'xithdrawals to tile comman
trust funds administered 'oy this bark in accordance
with the terms of the Common Trust Fund Agreements
and the provisions of the Comptroller of the
Currencys Regulation A.
T he manager of
the Trust Division, shall keep
the records of the
Trust
Division
separate and distinct from
other books and
records
of the
bank, and they shall contain fu!I information
relative
to each
account, ail in accordance with
the Regulation 9
of the
Comptroller
of Currency governing
fiduciary cowers of
national
banks,
and the laws of the State of
Oklahoma.
This Committee of
the Soard of
Directors shall cause external
audits to be made
at regular intervals of the Trust Division, or
in lieu thereat adopt an adequate
continuous audit
system, as
the committee may
elect, all in
compliance with the
reculations
of the Comptroller
of Currency
governing fiduciary
powers of
national banks.
The Manager of the Trust Division is charged with the
responsibility of
keeping Trust Securities and Investments held
in Trust by the
Trust Division separate_ and distinct from the
securities owned
by the bank and, in addition thereto, that the
said Trust Securities
may be kept in any manner allowed by the
regulation of the
Comptroller of Currency, as may be amended
and issued from
time to time hereafter. Whenever the said
securities are deposited in the security vault of the bank, or in
any depository,
and are withdrawn therefrom, such deposits or
withdrawals siloll
be made only upon the written rea,uest of any
officer assigr{ed
to the Trust Division, or upon the written
request of other
trust personnel who may be appointed, from
time to time, by
the manager of the Trust Division.
Funds held by the
awaiting investment o
or un istripute f
Investments of trust
with the regulations
accordance with the
creating the fiduciary
• of Oklahoma.
Trust Division in a fiduciary capacity
r distribution shall not be held univestecl.
or any longer than is reasonable.
funds shall be made only in compliance
of the Comptroller of the Currency, in
terms and provisions of the instrument
relationship, and the statutes of the state
The investment of fiduciary funds in stock or obligations of the
bank, the sale or transfer of property held by the bank as
fiduciary to any officer, director, employee or relative thereof,
any transactions beR eon var.cus 6rust accounts, the Moan of
• money from the tank to any account, the loan of ,;,Gney from
one iiduclary accoun_ t0 2nGiiier, I_ arChl%iced 2Xcept In thos2
Instainces s02cliically autnOriZ2Q 'by rile terms and provtslGns or
-he regUlatlOns Oi the COmOtroller Oi the CUr'2n Cy, ii"12 !2W<_ Cf
the star'_ Oi Oklahoma; and the gov2I . trust instrument.
•
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JI=C I ORS'
Under the authority of Section 1. io, statute cb8 (12 U.S.C. 92a); R.S.
5240 as amended (12 U.S.C. 481) and the Cornotroller of the Currency's
Regulation C, iduciary Pm ers of National Sankand Collactive Investment
unds, " the Board of Directors of the Bank of Oklahoma, by This re5eiutian,
ner=_oy assigns the administration of the Trust Oivisian to the Directors' Trust
Com�mlttee, Ccflfer5 on. delegates t0, and c551gn5 to this CCmmlCtee all Of its
authority, and full responsibility for the araper.exercise of all the fiduciary
po%%,ers, duties, obligations, and rasocnsibilities of the Sank of Oklahoma
relating to the e>:ercise of its trust dowers, in cc.moliance with applic_ble
and ree_ulaticns, including the right to dal=_gate and assign such of its
au ChGrlty and responsibility to other ccm;iutC2e(5) It fray, H) Its discretion
25icJll Sil, and�cr Co SUCon Oi fICel'(S) as It m_y d=_Sicl-,ate.
-- c4is e:__c_, ec cae cerc__tca to acher___ 3 a c:zange e�
.ed June ?G, !975, ac \acicna_ Sank a; =c!sa, 7a1s:, Ok!ana_
ac Oklaco—q, !975.
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•
ESCROW TRUSTEE'S CERTIFICATE
Bank of Oklahoma, N.A., Tulsa, Oklahoma, as escrow trustee for $6,365,000 aggregate
outstanding principal amount of City of Fayetteville, Arkansas Water and Sewer System Refunding
Revenue Bonds, Series 1999 (the "Series 1999 Bonds"), hereby certifies that:
1. Pursuant to the provisions of an Escrow Deposit Agreement dated May 20, 2004
(the "Escrow Agreement"), by and between the City of Fayetteville, Arkansas (the "City") and
Bank of Oklahoma, N.A, as escrow trustee (the "Escrow Trustee"), arrangements have been made
for the deposit of moneys with the Escrow Trustee sufficient in amount to refund the Series 1999
Bonds as provided in the Escrow Agreement.
2. Each person who, on behalf of the Trustee, executed the Escrow Agreement is now
duly elected, appointed or authorized, qualified and acting as an officer or authorized signatory of
the Trustee and was duly authorized to perform such acts at the respective times of such acts, and
the signatures of such persons appearing on such document are their genuine signatures.
The following are names, titles and specimen signatures of each of the above -
mentioned officers of the Trustee:
i lature
C
Judy Foster Asst. Vice President & Trust Officer — G.�•
4. The Escrow Trustee is a national banking association —duly organized, validly
existing and in good standing under the laws of the United States of America. The Escrow Trustee
has all requisite power and authority to carry out its obligations as Escrow Trustee under the Escrow
Agreement.
Name
Office
Cynthia Wilkinson Vice President and Trust Officer
IN WITNESS WHEREOF, BANK OF OKLAHOMA, N.A., has caused this certificate to
be executed in its corporate name by an officer thereunto duly authorized.
Dated: May V. 2004.
BANK OF OKLAHOMA, N.A.
Tulsa, Oklahoma
By: Uet eae44W
Nam : Maa Cg&bell
Title: Vice President & Trust Officer
1061613.1
27
•
. CERTIFICATE OF UNDERWRITER
The undersigned, on behalf of Stephens Inc., as underwriter in connection with the
issuance of $6,090,000 aggregate principal amount of Water and Sewer System Refunding
Revenue Bonds, Series 2004 (the "Series 2004 Bonds"), by the City of Fayetteville, Arkansas
(the "Issuer"), hereby represents that:
The Yield on the Series 2004 Bonds, as set forth in Section 4.10(b) of the Tax Regulatory
Agreement dated May 1, 2004 (the "Tax Regulatory Agreement'), by and between the Issuer and
Bank of Oklahoma, N.A., as trustee for the Series 2004 Bonds (the "Trustee"), calculated in
accordance with the Regulations, is equal to 3.1393674%.
The offering prices of the Series 2004 Bonds set forth in Section 4.5 of the Tax
Regulatory Agreement represent the maximum initial offering prices at which a substantial
amount of each maturity of the Series 2004 Bonds were offered for sale and sold to the public
(exclusive of bond houses, brokers or similar persons acting in the capacity of underwriters or
wholesalers) through a bona fide offering. Such initial offering prices were established by a
bona fide bid without regard to any amounts which would increase the Yield on any maturity of
the Series 2004 Bonds above its market yield. The description of the interest rates and Yields
contained in the final Official Statement with respect to the Series 2004 Bonds constitutes a true
and correct summary thereof.
To the best knowledge of the undersigned, the representations of the Issuer contained in
the Tax Regulatory Agreement are true and correct.
With respect to the Debt Service Reserve Fund established for the Series 2004 Bonds, the
establishment of the Debt Service Reserve Fund at the level of funding described in Section 4.8
of the Tax Regulatory Agreement is, in the best judgment of the undersigned, reasonably
required to market the Series 2004 Bonds at an economical interest rate for the Issuer and is, in
the judgment of the undersigned, established at a level of funding comparable to that found for
obligations similar to the Series 2004 Bonds issued within the past year.
We understand that this Certificate shall form a part of the basis for the opinion, dated the
date hereof, of Kutak Rock LLP, as Bond Counsel, to the effect that interest on the Series 2004
Bonds is not includible in the gross income of the recipients thereof for purposes of federal
income taxation under existing laws, regulations, rulings and judicial decisions.
below.
IN WITNESS WHEREOF, the undersigned has set his hand as of the date set forth
STEPHENSINC.
By: C
. Dated: May 20, 2004 AuthorOFd Representative
1061612.1
Fes]
• TRUSTEE'S RECEIPT AND CERTIFICATE
AS TO APPLICATION OF FUNDS
The undersigned, Bank of Oklahoma, N.A., as trustee (the "Trustee") under a Trust
Indenture dated as of May 1, 2002, as amended and supplemented by a First Supplemental Trust
Indenture dated as of May 1, 2004 (as amended and supplemented, the "Indenture"), by and
between the City of Fayetteville, Arkansas (the "City") and the Trustee, with respect to the
City's $6,090,000 Water and Sewer System Refunding Revenue Bonds, Series 2004 (the
"Bonds"), hereby certifies that:
1. The Trustee has received this date on behalf of the City, from Stephens Inc. (the
"Purchaser"), $6,093,782.21, that being the agreed purchase price of the Bonds pursuant to the
Bond Purchase Agreement dated April 23, 2004, between the City and the Purchaser.
2. The proceeds of the sale of the Bonds have been deposited or will be applied, in
accordance with the written directions of the City, as follows:
(a) $5,222,145.07 has been transferred to the 1999 Escrow Fund established
under an Escrow Deposit Agreement dated May 20, 2004 (the "Escrow Agreement"), by
and between the City and Bank of Oklahoma, N.A., as escrow trustee (the "Escrow
Trustee"), to be held and invested as provided in the Escrow Agreement for the purpose
of refunding the City's Water and Sewer System Refunding Revenue Bonds, Series 1999;
• (b) $786,432.50 has been deposited by the Trustee in the Debt Service
Reserve Fund created by the Indenture;
•
(c) $50,640.10 has been deposited by the Trustee into the Cost of Issuance
Fund to pay costs of issuance of the Bonds, including specifically those costs of issuance
set forth in Exhibit F to the City's Closing Certificate;
(d) $24,410.10 has been wire transferred to Ambac Assurance in payment of
the premium for a financial guaranty insurance policy; and
(e) The remaining $10,154.44 has been deposited by the Trustee in the Bond
Fund created by the Indenture.
Dated: May 20, 2004
BANK OF OKLAHOMA, N.A.,
as True
By:
Title: N&e President & Trust Officer
10-61615.1
F a7
CI
CI
• ESCROW TRUSTEE'S RECEIPT
The undersigned, Bank of Oklahoma, N.A., as escrow trustee (the "Escrow Trustee")
under the provisions of an Escrow Deposit Agreement dated May 20, 2004 (the "Escrow
Agreement"), by and between the City of Fayetteville, Arkansas (the "City") and the
undersigned, hereby certifies that:
The
Escrow
Trustee
has received
this date
for deposit in the 1999 Escrow Fund
established
under the
Escrow
Agreement, the
following
sums:
(1)
$5,222,145.07 of
proceeds of the
City's Water and Sewer System
Refunding
Revenue Bonds, Series
2004 (the "Series
2004 Bonds");
(2) $465,492.72 from the Bond Fund established for the City's Water and
Sewer Refunding Revenue Bonds, Series 1999 (the "Series 1999 Bonds"); and
(3) $797,542.66 from the Debt Service Reserve Fund established for the
Series 1999 Bonds.
Dated: May 20, 2004
BANK OF OKLAHOMA, N.A.,
• as Escrow Trustee
c
Z)ABy: ' f
Title: Vce President & Trust Officer
•
10-61614.1
•
0
• UNDERWRITER'S RECEIPT
The undersigned, on behalf of Stephens Inc., as purchaser (the "Purchaser") of
$6,090,000 City of Fayetteville, Arkansas Water and Sewer System Refunding Revenue
Bonds, Series 2004 (the "Bonds"), hereby acknowledges receipt of each and all of the
Bonds, said Bonds being in the form of nine typewritten fully registered bonds in the
name of Cede & Co., as nominee of The Depository Trust Company, in the authorized
denomination, bearing interest and containing such other terms and provisions as set forth
in that certain First Supplemental Trust Indenture dated as of May 1, 2004, by and
between the City of Fayetteville, Arkansas (the "City") and Bank of Oklahoma, N.A., as
trustee (the "Trustee"). The Bonds have been checked, inspected and approved by the
Purchaser.
I
•
The Purchaser further acknowledges the receipt of, or waives the requirement for,
each opinion, document and certificate contemplated by the Bond Purchase Agreement
dated April 23, 2004, between the City and the Purchaser, and acknowledges that each
such opinion, document and certificate, to the extent received, is satisfactory to the
Purchaser as to form and substance.
Dated: May 20, 2004
STEPHENS INC.
By:
Title:
I0-61611.1
31
11
1,14i10fu4 00t44 FAX 501 372 1250 DKD LLP I0004/004
City of Fayetteville, Arkansas
Fayetteville, Arkansas
Kutak Rock, LLP
Little Rock, Arkansas
100 W. Capital Avenua. suite 25011
5000 Ropers Avenue, Suit: 700 P.O. Box 3667
FOR SmMM, AR 72903-2073 Unle Rock, AR 72203�3667
479452-1040 Fax 479452.5542 501 M-1040 Fax 501372.1250
Stephens, Inc.
Little Rock, Arkansas
200 E. 111h Avenue
P.O. Box 8306
FM BIu". AR 71611.8306
070 5349172 Fax 070 SU-2146
0kt2.00M
We agree to the inclusion in this official statement dated April 23, 2004 of our report dated
April 2, 2003, on our audit of the 2002 financial statements of the City of Fayetteville, Arkansas
issued in connection with the sale of the $6,090,000 City of Fayetteville, Arkansas Water and
Sewer System Refunding Revenue Bonds, Series 2004.
April 23, 2004
20W. LIF NL71997/AFS LF 194
Soluums
for
Success
11
9KID) Lt�
AmNld/W
Monce Roe I'1
MWiWvw
0
P-A
0
0
OS/18/04 09:44 FAX Sol 372 1250 BRD LLP _ 10002/004
400 W. CBP11al Avuv1C. Suk 2500
S000 Ropaa AvenuaS000 700 P.O. Box 3667
Fan Smdh. AR 7296-2079 Li814 Pock. AR 722033687
479452-1040 FUA794125542 501372-104D Fac 501372/250
Independent Accountants' Report
City,of Fayetteville, Arkansas Kutak Rock, LLP
113 West Mountain 425 West Capitol Avenue, Suite 1100
Fayetteville, Arkansas 72701 Little Rock, Arkansas 72201
Bank of Oklahoma, N.A. Stephens, Inc.
P.O. Box 2300 3425 North Futrall
Tulsa, Oklahoma 74192 Fayetteville, Arkansas 72703
200 E 111h Avenue
P.O. Box 6306
Pna Bluff, AR 71811-8306
870534-9172 Fu 670534-2148
Ekd.cax0
We have audited the accompanying schedule of debt service coverage of the City of Fayetteville,
Arkansas as of May 177 2004. This schedule is the responsibility of the City's management- Our
responsibility is to express an opinion on this schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
• America. Those standards require that we plan and perform the audit to obtain reasonable assurance
abouf whether the schedule of debt service coverage is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the schedule of debt
service coverage. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall schedule presentation. We believe that
our audit provides areasonable basis for our opinion.
The accompanying schedule of debt service coverage was prepared to comply with Section 213 of the
Trust Indenture for the Series 2D02 Bonds and is not intended to be in conformity with accounting
principles generally accepted in the United States of America.
We have been informed that, under the City's interpretation of Section 213 of the Trust Indenture dated as
of May 1, 2002 (the "Indenture'), by and between the City and the Bank of Oklahoma, N.A., as trustee,
the net revenues of the System are defined as revenues (as defined in the indenture) less operation and
maintenance expenses (as defined in the Indenture). Furthermore, we have been informed that Water and
Sewer System Revenue Bonds outstanding or proposed to be issued and subject to the coverage test set
forth in Section 213 of the Indenture include the City's Series 2002 Bonds and Series 2004 Bonds.
801e110as in our opinion the schedule of debt service coverage referred to above presents fairly, in all material
tar respects, the net revenues of the System during the year ended December 31, 2003, the maximum annual
Success debt service (principal and interest) an the Series 2002 Bonds and the Series 2004 Bonds, and the debt
service coverage of 1.94 as of May 17, 2004.
This report is intended solely for the information and use of the City of Fayetteville, Arkansas, Bank of
Oklahoma, N.A-, Kutak Rock, LLP and Stephens, Inc. and is not intended to be and should not be used by
anyone other than these specified parties. QQ ����
�w7Lip
. May 17, 2004
2004cilEN-rnl9977AFStF221 Anwncard
A4M6 Rw4nl Of
wanuWal
05/18/04 09:44 FAX 501 372 1250— --BQD LLP_ 0003/004
• City of Fayetteville, Arkansas
Schedule of Debt Service Coverage
(Assuming issuance of t e 2004 Bonds)
s May
Annual lDbt Service Re uirem
pied
Z9Q M Total
Year
$ 796,405 S 185,017 $ 983,422
.2004 $00,055 774.145 11574,200
2005 799.645 769,520 1,569,165
2006 802,545 774,645 11577,190
2007 803,240 776,195 1157g,435
2008 802.382 777,145 1,579,527
2009 800,180 773,805 1,573,985
2010 801,315 773137D 1.574,685
2011 800,505 1,575,600 2,376,105
2012 802,978 602,978
2013 798,450 798.450
2014 802,100 802,100
2015798,392 798,392
2016 8021817 802,867
2017
$ 11,213,059 $ 7,179,442 $ _ 18.392.501
"Nat Revenues' for the Year Ended December 31 2003
21,554.753
Gross revenues 16,943,064
Operating expenses
$ 4,611,688
Net revenues for the year ended December 31. 2003 —
Deb S rvlce COVere e
Net revenues for the year ended December 31, 2003
$ asllses
Maximum annual debt servlce(Fiscal year ended December 31, 2012)
2.376,105
1.94
Coverage
1.30
Minimum required coverage
Note: Net revenues means gross revenues of the System less the amounts required to pay the costs of operation,
maintenance and repay of the System In accordance with accounting principles generally accepted In the United
slates of America applicable to municipal water systems (excluding depreciation, interest and amortization
expenses).
0
,�CK
0
t1-12-9d U :2151i HOM DTC UNDERWRITING
�•.�. ur r�rtl ILVtLLL PAGE
N2
eh
1A C
Blanket Issuer Letter of Representations
Cro be CAmp*d by bluer]
City of Fayetteville, AR
[N. o!local
pit I •- ti
I..• u..
Ladies and Geatlem
This letter sets forth our understanding with respect to an laces (the 'Securitlef) that Issuer
shall request be made eligible for deposit. by The Depository Tnut ComparW ('DTC).
THE DEPOSITORY TRUST C04IPANY
Very w}y yours.
,Fayetteville, AR 72701
ts®� trrpi
501-575-8330
t x®ec1
i
SCT. M' A
SA -%IEEE OFFEUNG DOMfE,VT LLNCUAGE
DESCBiBLNG BOOS"IN"MY-ONLY ISSUANCE
(Aopared by DTG—braekated material may be applkable only to certain .4sn )
5. Conveyance of notices and other cummunicati= by DTC to Direct Partc:pans, by Di.-ect
Partapatts to Indirect Paraapeam and by Direct Participants and Indbect Pazticpants to Bene9aal
Owners ...ill'oe governed by anangements among them, subtect to any statutcry or regulntary
regsuresaents as 7=y be In dfie- from dine to time.
j8 Ardst empbm zcdott thal) be seat to Cede & Co. 5 Less tlsall a the Securities ��hin an sae are
being redeemed. DTC•s practice is to determine by lot the amount of the nstetest of each Direct
Partldpw in snub issue to be re&e.•ned_;
7. Neither ► will consent or %-ate with respect to Securities. Uwler its uss
DTC msib an Oninibus Proxy w the Issuer as woo as possible afia- the tecond date.
0111nibux Proxy atsigns Cade & CoA c=s=ttag or voting rigirts to ewse Direct
accoune the Securities am credited on the record d2te (i6eatified in a n •.
wift be made to DTC. DTC4 pracbm is to
°.
. .. respective
►
v payment an pay�a
Przcdczv� as is the case with securities held for the accourroz of cuscizien in bewer form or registered
'strect =ae,* and will be the re2paasibilftyDMO the Agent. or
interestIssuft subject to any sbWory or regulabory requirtunemts as may be in 2ffecr from time to
PXfMd= Of prinelpel and DTC is the responsibibty of the Lmmr or the Ag=
DirectPOYMC31ts to the Bene5cial • t _ r _.
•t . ..t.,.. Direct
BeneScial Owner 3hM gtw notice to elect tc have its secusitic, purchased or tandernid, ttkm -
Participantch -
Directm=tb2ft by
the
Agent The requirement for pbyskzal dclivety of Securities in ..
t be - ,.
r. ° -
►respede to the
ul
C] J
"STANDARD
r
City of Fayetteville, Arkansas
Credit Analysts: Wendy Wipperman, Dallas (1) 214-871-1421; Horacio Aldrete-Sanchez, Dallas (1) 214-871-1426
Credit Profile Rationale
USE6.135 mil Wtr and Swr Sys Standard & Poor's Ratings Services raised its Standard & Poor's underlying
R1dg Rev Bonds, Series 2004 rating (SPUR) on Fayetteville, Ark.'s series 2002A and series 2002E water
dtd 05/01/2004 due 08115n012
A and sewer system revenue refunding bonds to 'A' from 'A-' reflecting the
Sale data: 20-APR-2004 refunding of the system's existing senior -lien debt under the current
AFFIRMED 1 subordinate -lien indenture and the closure of the senior -lien indenture and
W.3m5M l:W' V&Swr Rev assigned its'A' standard long-term rating, and stable outlook, to the city's
Bond's. van is series series 2004 water and sewer system revenue refunding bonds.
A:
ulcruDED aA Standard & Poor's also affirmed its'A' standard long-term rating on the city's
4,E92to`mI wtr,'a's4irs.!Rey water and sewer system revenue debt outstanding.
RrtlglBorMs1[Serie's 2002A88 '.
bta o, sroirzooz� e;; � I
oensrzooz zo�r„ ° The upgrade reflects the systems:
p6nCOk 3; . Growing service area and diverse customer base, which extends
STABe li . beyond the city limits;
• Strong debt service coverage (DSC) and system liquidity;
. Demonstrated willingness to increase rates, as necessary, to maintain
sound DSC; and
• Dedicated sales and use tax, which will fund the construction of a new
wastewater treatment plant.
Offsetting credit factors include the system's:
• Relatively high utility rates, limiting rate flexibility, and
• Significant future capital needs.
A pledge of net revenues of the city's water and sewer system secures the
bonds.
The University of Arkansas and food -processing industry anchor Fayetteville's
economy. With a student enrollment of 15,500, the university represents about
25% of the city's total estimated population of 62,000. Despite a high student
population, per capita incomes are 109% and 90% of state and national
medians, respectively. Unemployment averaged a low 2.9% in 2003, which
was well below state and national averages.
Fayetteville purchases water from Beaver Water District at a cost of $1.016
per 1,000 gallons. The district increased wholesale rates effective Nov. 1,
2003, which was the first rate increase since 1991. A planned expansion to
the district's water treatment plant necessitated the rate increase. The city
owns its wastewater treatment plant, and contracts privately for the plant's
operation. The plant has a design capacity of 17.0 million gallons per day
(mgd) and is permitted at 12.4 mgd, which is designed to meet the system's
needs through 2005. In 2003, average daily flow was 10.95 mgd with a peak
flow of about 23.40 mgd, which necessitated the need for an expansion. The
construction of a second 10-mgd wastewater treatment facility is in its final
design phase. Management expects project construction to begin in the third
quarter of 2004 and project completion in the third quarter of 2006.
• Utility rates are high for the region, limiting the system's rate flexibility. Water
rates were increased by 10.15% effective Jan. 11, 2004, and sewer rates
were increased by 9.14% effective Feb. 9, 2004. Following the rate increases
adopted in 2004, the combined residential water and sewer bill for 7,500
gallons is relatively high at $53.26. DSC is strong. Fiscal 2002 net system
revenues provided 3.65x annual DSC requirements and 2.74x maximum
annual debt service (MADS) coverage. Unaudited fiscal 2003 net system
revenues generated 2.75x annual DSC requirements and 1.80x MADS.
System liquidity was strong with 535 days' cash on hand at fiscal year-end
2002.
The system has met the requirements of the EPA's 1996 Administrative Order
for the remediation of wastewater inflow and infiltration problems. The
projected $146.8 million, 2004-2008 capital improvement plan includes
funding for the construction of a second wastewater treatment facility at an
estimated $122.0 million and water and sewer system distribution and
collection improvements. Management expects to finance the construction of
the wastewater treatment plant primarily through a $100 million loan from the
Arkansas Department of Environmental Quality to be secured by a dedicated
0.75% local sales and use tax. The city will use bond proceeds to refund its
series 1999 system revenue bonds outstanding.
Outlook
The stable outlook reflects the system's stable service area economy. The
stable outlook also reflects Standard & Poor's expectation that the utility will
maintain its strong financial performance and DSC and that the city will
• increase its utility rates to meet projected increased operational and debt
service costs.
Legal Provisions
A pledge of the combined water and sewer system's net revenues on a parity
basis with the series 2002 water and sewer system refunding revenue bonds
secures the series 2004 bonds. Currently, Fayetteville has $6.365 million of
series 1999 senior -lien bonds outstanding, which it will refund with this
issuance under the provision of the 2002 trust indenture; the city cannot issue
senior -lien bonds. The indenture allows for the issuance of additional parity
bonds if net revenues from the prior year are sufficient to provide 1.3x
average annual DSC requirements on all existing and proposed bonds with
revenues adjusted for rate increases, system expansions, or acquisitions. A
debt service reserve funded at an amount equal to 50% of MADS
requirements provides additional bondholder security. A rate covenant
requires net revenues to be sufficient to pay 1.25x annual debt service
expenses and any deficiency payments to the debt service reserve and
renewal and replacement funds. Operating and maintenance expenses
include debt payments to Beaver Water District. The renewal and replacement
fund is required to be funded at a minimum of $300,000.
Service Area Economy
The University of Arkansas, with an enrollment of 15,500 students, anchors
Fayetteville's economy. The university has been undergoing an aggressive
capital improvement program over the past several years and is the city's
leading employer with 2,416 employees. Additional leading employers include
Pinnacle Foods Corp.; Tyson Foods Inc., which produces its entree and
. Mexican food lines in the city; Washington Regional Medical Center; Wal-Mart
Stores Inc.; and Superior Industries International Inc. Assessed value growth
has been healthy and increased by 33% between 1999 and 2003.
System Operations
• Currently, Fayetteville has about 30,658 water customers and 26,427 sewer
customers. Customer base growth has been healthy and has increased by
14% since 1999. The customer base is moderately concentrated: The 10
leading customers account for about 18% of water revenues. The University
of Arkansas (5.1 %), Pinnacle Foods (3.3%), and Superior Industries (2.8%)
were the three leading water customers in 2003.
As a participating city, Fayetteville purchases treated water from Beaver
Water District and distributes it to its residents and residents in surrounding
cities, including Farmington, Ark.; Greenland, Ark.; Johnson, Ark.; and Elkins,
Ark. A written agreement does not govern the provision of water to residents
in these cities and rural areas. In addition, Fayetteville provides water to
Mount Olive Rural Water System on a contractual basis; it is also currently
renegotiating wholesale contracts with the city of West Fork, Ark. and
Washington County Rural Development Authority. Total revenues from
nonresident customers accounted for about 15% of fiscal 2003 total system
revenues.
Currently, Fayetteville owns a single wastewater treatment facility, which is
operated by Operations Management International on a contractual basis. The
city extended its contract with Operations Management International for a five-
year period, expiring in 2008. Fayetteville increased its wastewater treatment
capacity to accommodate the needs of Elkins, which operates as a wholesale
customer, as well as Farmington, Greenland, and a portion of Johnson. The
city has contractual agreements with Farmington (1994) and Greenland
(1993).
. Rates
The system's utility rates are high compared with the systems of the
municipalities of Rogers, Ark.; Fort Smith, Ark.; and Springdale, Ark. but below
the rates charged to the residents of Bentonville, Ark. The city plans to
increase sewer rates again by 8.8% effective Dec. 31, 2004, and 9.1%
effective Dec. 31, 2005, to meet the system's increased operating costs and
debt service needs. Following the planned rate hikes, an average combined
residential utility bill will be $58.57 for 7,500 gallons of consumption.
.11
an
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Subscriber services: (1) 212438-7280. Copyright 2003 by The McGraw-Hill Companies, Inc.
Reproduction in whole or in part prohibited except by permission. All rights reserved. Information has
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are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
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The McGraw Will Companies
The MtGrow •Hill Cmpanres
STANDARD
&POOR'S
May 17, 2004
Ambac Assurance Corporation
Underwriting Support
One State Street Plaza - 15th Floor
New York, NY 10004
Vincent S. Orgo
Administrative Officer
55 Water Street, 38th Floor
New York, NY 10041-0003
lei 212 438-2074
vincent_orgo@sstandardandpoors.com
Attention: Ms. Danielle T. Brackett, Vice President
Malachy Fallon
Managing Director
500 North Akard Street
Lincoln Plaza, Suite 3200
Dallas, TX 75201
lot 214 871-1402
maLfallon@standardandpoors.com
Re: $6,090,000 City of Fayetteville, Arkansas, Water and Sewer Refunding Revenue Bonds,
Series 1004, dated. May 1, 2004, due: August 15, 2004-2012, (POLICY #22458BE)
Dear Ms. Brackett:
Standard & Poor's has reviewed the rating on the above -referenced obligations. After such
review, we have changed the rating to "AAA" from "A". The rating reflects our assessment of the
likelihood of repayment of principal and interest based on the bond insurance policy your company
• is providing. Therefore, rating adjustments may result from changes in the financial position of
your company or from alterations in the documents governing the issue.
The rating is not investment, financial, or other advice and you should not and cannot rely upon
the rating as such. The rating is based on information supplied to us by you but does not represent
an audit. We undertake no duty of due diligence or independent verification of any information.
The assignment of a rating does not create a fiduciary relationship between us and you or between
us and other recipients of the rating. We have not consented to and will not consent to being
named an "expert" under the applicable securities laws, including without limitation, Section 7 of
the Securities Act of 1933. The rating is not a "market rating" nor is it a recommendation to buy,
hold, or sell the obligations.
This letter constitutes Standard & Poor's permission to you to disseminate the above -assigned
rating to interested parties. Standard & Poor's reserves the right to inform its own clients,
subscribers, and the public of the rating.
Standard & Poor's relies on the issuer and its counsel, accountants, and other experts fo the
accuracy and completeness of the information submitted in connection with the rating. This rating
is based on financial information and documents we received prior to the issuance of this letter.
Standard & Poor's assumes that the documents you have provided to us are final. If any
subsequent changes were made in the final documents, you must notify us of such changes by
sending us the revised final documents with the changes clearly marked.
0
Ms. Danielle T. Brackett
Page 2
May 17; 2004
Standard & Poor's is pleased to be of service to you. For more information please visit our
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Thank you for choosing Standard & Poor's and we look forward to working with you again.
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a division of The McGraw-Hill Companies, Inc.
1 .ey
By: Vincent S. Orgo
Administrative Officer
M
i
10
KUTAK ROCK LLP
ATLANTA
CHICAGO
SMITE 1100
DENVER
425 WEST CAPITOL AVENUE
DES MOINES
FAYETTEVILLE
NORTHWEST ARKANSAS OFFICE
LITTLE ROCK, ARKANSAS 72201-3409
IRVINE
THE THREE SISTERS BUILDING
501-975-3000
KANSAE CITY
214 WEST DICKSON STREET
LINCOLN
FACSIMILE 501-975-3001
FAYETTEVILLE. ARKANSAS 7II701-6221
OKLAHOMA CITY
479-973-4200
www.kutakrock.com
OMAHA
PASADENA
RICHMOND
SCOTTSDALE
GORDON M. WILBOURN
June 15, 2004
wAe HINGroN
WASHINGTO
gordon.wilboum®kutakrock.mm
(501) 9753101
TO THE ATTACHED DISTRIBUTION LIST:
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System
Refunding Revenue Bonds
Series 2004
Ambac Assurance Corporation Policy No. 22458BE
Gentlemen and Ms. Wilkinson:
Enclosed is a copy of the final transcript with respect to the above -captioned matter. If
you have any questions or require anything additional, please let me know. As always, it was a
pleasure working with each of you.
Sincerely,
don M. Wilbourn
paj
Enclosure
10-63445.1
KUTAK ROCK LLP
DISTRIBUTION LIST
$6,090,000
City of Fayetteville, Arkansas
Water and Sewer System
Refunding Revenue Bonds
Series 2004
Ambac Assurance Corporation
(2 unbound)
Policy No. 22458BE
Ambac Assurance Corporation
Attention: Corporate Records
One State Street Plaza, Floor 15
New York, NY 10004-1538.
City of Fayetteville, Arkansas Mr. Steve Davis
(1 bound) Finance and Internal Services Director
City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, AR 72701
Bank of Oklahoma, N.A.
(1 bound)
Ms. Cynthia Wilkinson
Corporate Trust Division
Bank of Oklahoma, N.A.
Bank of Oklahoma Tower
One Williams Center, 15t' Floor
Tulsa, OK 74103 '
Stephens Inc. Mr. Dennis R. Hunt
(1 bound) Senior Vice President and Manager
Stephens Inc.
3425 North Futrall Drive, Suite 201
Fayetteville, AR 72703
Counsel for the City of Kit Williams, Esq.
Fayetteville, Arkansas City Attorney
(1 bound) City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, AR 72701
10-63445.11