HomeMy Public PortalAboutAB 03-90 Attachment APRELIMINARY OFFICIAL STATEMENT DATED JUNE 17, 2003
$5,650,000(1)
City of McCall
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Valley County, Idaho
Water Revenue Refunding Bonds, Series 2003
DATED: July 15, 2003 DUE: September 1, as shown below
MOODY’S RATING—Insured rating applied for (see the captions “Municipal Bond Insurance” and “Rating” herein).
BANK QUALIFIED—The City has designated the Bonds as “qualified tax-exempt obligations” for banks, thrift
institutions and other financial institutions. See the caption “Tax Exemption” herein for a discussion of this
designation.
BOOK-ENTRY ONLY—The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples
thereof, and will be registered in the name of Cede & Co., as bond owner and nominee for DTC. DTC will act as
securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds
purchased.
PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable on September 1, 2003 and semiannually
thereafter on March 1 and September 1 of each year. The principal of and interest on the Bonds will be payable by the
City’s Trustee, currently U.S. Bank National Association, to DTC which, in turn, will remit such principal and interest to
the DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. Interest on the Bonds shall be
credited to the Owners by the DTC Participants. Interest on the Bonds will be payable by check or draft mailed to the
persons in whose names such Bonds are registered at the address appearing upon the registration books on the 15th day
of the month next preceding an interest payment date.
MATURITIES, AMOUNTS, INTEREST RATES AND YIELDS—
Due Interest CUSIP Due Interest CUSIP Sept. 1 Amounts(1) Rates Yields 579358 Sept. 1 Amounts(1) Rates Yields 579358
2003 $160,000 % % BK7 2011 $380,000 % % BT8 2004 265,000 BL5 2012 390,000 BU5 2005 270,000 BM3 2013 400,000 BV3 2006 275,000 BN1 2014 410,000 BW1 2007 275,000 BP6 2015 430,000 BX9 2008 285,000 BQ4 2016 440,000 BY7 2009 365,000 BR2 2017 460,000 BZ4 2010 370,000 BS0 2018 475,000 CA8
REDEMPTION—The Bonds are subject to redemption prior to their stated maturities as further described herein.
SECURITY—The principal of and interest on the Bonds are payable solely from and secured by the Net Revenue of the domestic water system of the City. This pledge shall constitute a lien and charge upon the Net Revenue prior and superior to any other charges whatsoever. The City’s DEQ Loan, described herein, has a subordinate lien on the Net Revenue of the System. Additional bonds may be issued on a parity of lien with the Bonds, subject to certain conditions described herein. The Bonds are special obligations of the City payable only from the Bond Fund. The Bonds are not general obligations of the City, Valley County, the State of Idaho, or any other municipal corporation or political subdivision thereof.
CREDIT ENHANCEMENT—Applied for.
TAX STATUS—In the opinion of Moore Smith Buxton & Turcke, Chartered, Boise, Idaho, Bond Counsel, under existing law and assuming
compliance by the City with certain covenants relating to the tax-exempt status of the Bonds, interest on the Bonds is excluded from
gross income for federal income tax purposes under Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”). The
Bonds are not private activity bonds. Interest on the Bonds is included in the computation of certain federal taxes on corporations (see
“Tax Exemption” and Bond Counsel’s Opinion, attached hereto as Appendix B). Interest on the Bonds is excluded from gross income
for purposes of income taxation by the State of Idaho. Bond Counsel expresses no opinion regarding other federal or state tax
consequences arising with respect to the Bonds.
DELIVERY—The Bonds are offered by the Underwriter when, as and if issued, subject to the approving legal opinion of Moore Smith Buxton & Turcke, Chartered of Boise, Idaho (“Bond Counsel”). It is expected that the Bonds will be available for delivery to the Trustee on or about July 15, 2003.
(1) Preliminary, subject to change.
This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain information essential to the making of an informed investment decision.
City of McCall
216 East Park Street
McCall, Idaho 83638
Valley County, Idaho
(208) 634-7142
Mayor and City Council
Ralph Colton Mayor and Council Member
Marilyn Arp Council Member
Kirk Eimers Council Member
Allan Muller Council Member
Vacant Council Member
Administrative Staff
Robert Strope City Manager
Barbara Bauer Finance Director and City Clerk
William Keating Public Works Director
Bond Counsel and General Counsel to the City
Moore, Smith, Buxton & Turcke
Boise, Idaho
(208) 331-1800
Consulting Engineering/Feasibility Consultant
Holladay Engineering
Payette, Idaho
(208) 642-3304
Trustee
U.S. Bank National Association
Salt Lake City, Utah
(801) 534-6083
This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is
unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The information set forth herein has
been obtained from sources which are believed to be current and reliable, but it is not guaranteed as to accuracy or completeness and it is not to be construed as a representation by the Underwriter. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. The
information and expressions of opinion 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 an implication that there has been no change in the affairs of the City since the date hereof.
This Preliminary Official Statement has been “deemed final” by the City, pursuant to Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, except for information which is permitted to be excluded from this Preliminary Official Statement under said Rule 15c2-12.
In connection with this offering, the Underwriter may over allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
ii
Table of Contents
Page
Description of the Bonds............................................................................................................................................1 Principal Amount, Date, Interest Rates and Maturities ................................................................................1 Optional Redemption.........................................................................................................................................1 Notice of Redemption of Bonds........................................................................................................................1 Trustee and Registration Features....................................................................................................................2 Book-Entry Bonds...............................................................................................................................................2 Authorization for Issuance................................................................................................................................3 Refunding Plan ...........................................................................................................................................................3 The Project ...........................................................................................................................................................3 Purpose ................................................................................................................................................................3 Procedure.............................................................................................................................................................4 Verification of Mathematical Calculations......................................................................................................5 Sources and Uses of Funds................................................................................................................................5 City of McCall Water Fund Summary of Bonded Debt Service Requirements .................................................6 Security for the Bonds................................................................................................................................................7 Select Funds and Accounts..............................................................................................................................10 Flow of Funds under the Bond Ordinance....................................................................................................11 Additional Bonds Payable from the City’s Water Fund..............................................................................12 Special Covenants in the Bond Ordinance ....................................................................................................13 Events of Default and Remedies.....................................................................................................................13 Municipal Bond Insurance ..............................................................................................................................16 Rating .................................................................................................................................................................16 City Indebtedness – Water Revenue Bonds ..........................................................................................................16 Prior Lien Obligations......................................................................................................................................16 Outstanding Long-Term Borrowings ............................................................................................................16 Future Financing...............................................................................................................................................17 Other City Debt.................................................................................................................................................17 Debt Payment Record ......................................................................................................................................17 The City......................................................................................................................................................................17 The City Council...............................................................................................................................................17 The City Administration..................................................................................................................................17 The Staff .............................................................................................................................................................18 Basis of Accounting ..........................................................................................................................................18 Audits.................................................................................................................................................................19 City of McCall Water Fund Balance Sheet ............................................................................................................20 City of McCall Water Fund Statement of Revenues, Expenses and Changes in Fund Equity.......................21 Budgetary Process and Controls.....................................................................................................................22 Fiscal Year..........................................................................................................................................................22 Risk Management.............................................................................................................................................22 Public Employee Retirement System.............................................................................................................23 Annexations.......................................................................................................................................................24 City Facilities and Services......................................................................................................................................24 Water Supply.....................................................................................................................................................24 Storage................................................................................................................................................................25 Water Treatment Plant.....................................................................................................................................25 Distribution System..........................................................................................................................................25 Capital Improvement Plan ..............................................................................................................................25 Collection of User Charges..............................................................................................................................26 Connection Fees ................................................................................................................................................27 Rates and Charges ............................................................................................................................................27 Customers and Demand..................................................................................................................................28 Demographic Information.......................................................................................................................................29 The Initiative Process ...............................................................................................................................................32 Historical Initiative Petitions...........................................................................................................................32 Tax Exemption ..........................................................................................................................................................33 Legal and Underwriting ..........................................................................................................................................35 Litigation............................................................................................................................................................35 Approval of Counsel........................................................................................................................................35 Conflicts of Interest...........................................................................................................................................35 Official Statement .............................................................................................................................................35 Underwriting.....................................................................................................................................................36 Continuing Disclosure .....................................................................................................................................36 Concluding Statement......................................................................................................................................36 Bond Ordinance ......................................................................................................................................Appendix A Opinion of Bond Counsel.......................................................................................................................Appendix B General Purpose and Enterprise Fund Financial Statements for the Year Ended September 30 Appendix C Form of Continuing Disclosure Undertaking.....................................................................................Appendix D Book-Entry Only System ........................................................................................................................Appendix E
ii
OFFICIAL STATEMENT
City of McCall Valley County, Idaho
$5,650,000(1)
Water Revenue Refunding Bonds, Series 2003
City of McCall, Valley County, Idaho (the “City”), a municipal corporation duly organized and existing
under and by virtue of the laws of the State of Idaho (the “State”) furnishes this Official Statement in
connection with the offering of $5,650,000(1) aggregate principal amount of Water Revenue Refunding
Bonds, Series 2003, dated July 15, 2003 (the “Bonds”). The Bonds will have a lien superior to any other
pledges against the domestic water system of the City (the “System”), except for additional parity bonds
issued in accordance with the Bond Ordinance. The City has the right to issue additional bonds on a
parity of lien basis with the Bonds. The City has a loan with the Idaho Department of Environmental
Quality (the “DEQ Loan”), which has a lien on the Net Revenue of the System subordinate to the lien of
the Bonds.
This Official Statement provides information concerning the City, the Bonds and the City’s domestic
water system (the “System”).
Certain capitalized words and phrases used in this Official Statement have the meanings as defined in the
Bond Ordinance attached hereto as Appendix A.
Description of the Bonds
Principal Amount, Date, Interest Rates and Maturities
The Bonds will be issued in the aggregate principal amount of $5,650,000(1) and will be dated and bear
interest from July 15, 2003. The Bonds will mature on the dates and in the principal amounts and will
bear interest (payable semiannually on March 1 and September 1, first interest payable September 1, 2003)
until the maturity or earlier redemption of the Bonds at the rates set forth on the cover of this Official
Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-
day months.
Optional Redemption
The Bonds maturing in years 2003 through 2013, inclusive, are not subject to redemption prior to
maturity. The Bonds maturing on and after September 1, 2014 are subject to redemption, at the option of
the City and by lot within a maturity, in whole or in part on any date, on and after September 1, 2013 at
the price of par, plus accrued interest, if any, to the date of redemption.
Notice of Redemption of Bonds
Notice of Redemption (DTC). So long as the Bonds are in book-entry only form, the Trustee shall notify
DTC of an early redemption not less than 30 days prior to the date fixed for redemption, and shall
provide such information as required by a letter of representation submitted to DTC in connection with
the issuance of the Bonds.
Notice of Redemption (No DTC). During any period in which the Bonds are not in book-entry only form,
unless waived by any Owner of the Bonds to be redeemed, official notice of any redemption of the Bonds
shall be given by the Trustee on behalf of the City by mailing a copy of an official redemption notice by
first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for
(1) Preliminary, subject to change.
1
redemption, to the Owners of the Bonds to be redeemed at the address shown on the bond register or at
such other address as is furnished in writing by such Owner to the Trustee.
Trustee and Registration Features
The City has appointed U.S. Bank National Association, a national banking association organized under
the laws of the United States, to serve as Trustee for the Bonds (the “Trustee”). The Trustee is to carry out
those duties assignable to it under the Ordinance. Except for the contents of this section, the Trustee has
not reviewed or participated in the preparation of this Official Statement and does not assume any
responsibility for the nature, completeness, contents or accuracy of the Official Statement.
Furthermore, the Trustee has no oversight responsibility, and is not accountable, for the use or
application by the City of any of the Bonds authenticated or delivered pursuant to the Ordinance or for
the use or application of the proceeds of such Bonds by the City. The Trustee has not evaluated the risks,
benefits, or propriety of any investment in the Bonds and makes no representation, and has reached no
conclusions, regarding the value or condition of any assets pledged or assigned as security for the Bonds,
the technical or financial feasibility of the Project, or the investment quality of the Bonds, about all of
which the Trustee expresses no opinion and expressly disclaims the expertise to evaluate.
Additional information about the Trustee and its services may be found at U.S. Bank’s website at
http://www.usbank..com/corporatetrust.
The U.S. Bank website is not incorporated into this Official Statement by such reference and is not a part
hereof.
The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of
Cede & Co. as Bond Owner and as nominee for The Depository Trust Company (“DTC”), New York,
New York. DTC will act as securities depository for the Bonds. Individual purchases and sales of the
Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single
maturity and integral multiples thereof. Purchasers (“Beneficial Owners”) will not receive certificates
representing their interest in the Bonds.
The principal of and interest on the Bonds will be payable by the Trustee to DTC, which, in turn, is
obligated to remit such principal and interest to its participants for subsequent disbursement to the
Beneficial Owners of the Bonds, as further described in Appendix E attached hereto. Interest on the
Bonds shall be credited to the Beneficial Owners by the DTC Participants.
Book-Entry Bonds
DTC will act as securities depository for the Bonds. The ownership of one fully registered bond for each
maturity of the Bonds, as set forth on the cover of this Official Statement, each in the aggregate principal
amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See
Appendix E attached hereto for additional information.
Procedure in the Event of Revisions of Book-Entry Transfer System. If the City is unable to retain a qualified
successor to DTC, or the City has determined that it is in the best interest of the City not to continue the
book-entry system of transfer or that interests of the Beneficial Owners of the Bonds might be adversely
affected if the book-entry system of transfer is continued, the City will execute, authenticate and deliver
at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in the
denomination of $5,000 or any integral multiple thereof within a maturity. Thereafter, the principal of the
Bonds will be payable upon due presentment and surrender thereof at the principal office of the Bond
Registrar; interest on the Bonds will be payable by check or draft mailed to the persons in whose names
such Bonds are registered, at the address appearing upon the registration books on the 15th day of the
month next preceding an interest payment date, and the Bonds will be transferable as provided in the
Ordinance (defined below).
2
Authorization for Issuance
The Bonds are being issued pursuant to Idaho Code Sections 50-1027 through 50-1042, inclusive, Section
57-504, and Title 57, Chapter 9 and pursuant to Ordinance No. ___ of the Council to be adopted on June
26, 2003 (the “Ordinance”).
The City is authorized by the Constitution and laws of the State of Idaho to issue refunding bonds to refund
its outstanding bonds without an approving vote of the electors of the City whenever the Mayor and Council
determine that a savings or other beneficial public objective can be achieved thereby.
The City issued its Water Revenue bonds, Series 1994, dated September 1, 1994 (the “Series 1994 Bonds”),
in the original principal amount of $5,000,000, $3,855,000 of which is currently outstanding. Proceeds of
the Series 1994 Bonds were used to finance capital improvements outlined in the City’s Water System
Master Plan (the “Master Plan”). Further, the City issued its Parity Lien Water Revenue Bonds, Series
1996, dated August 1, 1996 (the “Series 1996 Bonds”), in the original principal amount of $4,990,000,
$4,050,000 of which is currently outstanding. Proceeds of the Series 1996 Bonds were used to finance
capital improvements of the City’s Water System, including treatment plant storage and distribution,
among others. The City currently intends to refund all of the outstanding Series 1994 Bonds and the
Series 1996 Bonds (collectively, the “Refunded Bonds”).
Refunding Plan
The Project
In August 1993, the City received the Water System Master Plan – 1993 Revision prepared by
Montgomery Watson in association with Toothman-Orton Engineering, two independent engineering
firms. In December 1993, the City received the McCall Water Treatment Plant Pilot Study prepared by
Montgomery Watson. These two studies provided the basis for the improvement project that was
funded, in part, by the Series 1994 Bonds. A portion of the Series 1994 Bonds were used to purchase sites
for the water treatment plant and storage facility, replace existing undersized water mains and
constructing new mains, installing a majority of the water meters, and realigning the City’s golf course
irrigation system. The remaining water meter installation and construction of the water treatment plant
and storage facility recommended in the Master Plan and the McCall Water Treatment Plant Pilot Study
were to be funded from proceeds of the Series 1996 Bonds. Together, the City’s water treatment facility is
referred to herein as the “Project”.
The Project was split into two phases with intake, chlorination, fire safety, and distribution facilities
constructed in the first phase, funded by proceeds of the Series 1994 Bonds and the Series 1996 Bonds
(“Phase 1”). The City was granted a loan from DEQ to complete construction of the second phase of the
water treatment facility including the gravity sand filtration component (“Phase 2”). In December of
2003, the City completed construction of Phase 2. As of May 1, 2003 disbursements from the DWSR Fund
totaled $5,671,647 and the Accrued Interest totaled $106,070. The City plans to spend the remaining
funds that have been approved by DEQ to construct a water storage tower.
Purpose
The Bonds are being issued so that the City can obtain the benefit of savings in total debt service
requirements and reduce the annual debt service requirements. The proceeds of the Bonds, funds from
the City’s existing Reserve Fund, and other available funds of the City (see “Select Funds and Accounts”
herein) will be used to provide funds to establish an irrevocable trust escrow to refund all of the City’s
outstanding Series 1994 Bonds and all of the City’s outstanding Series 1996 Bonds (collectively, the
“Refunded Bonds”). A portion of the proceeds of the Bonds will also be used to pay the costs of issuance
of the Bonds. Proceeds of the Bonds will be escrowed to the respective call dates of the Refunded Bonds,
at which time they will be called at a price of par plus accrued interest to the date of redemption.
3
Procedure
From the proceeds of the Bonds, and with other money available, the District will purchase certain direct
non-callable United States government obligations (referred to herein as “Government Obligations”).
These Government Obligations will be deposited in the custody of U.S. Bank National Association
(“Escrow Agent”). The maturing principal of the Government Obligations, interest earned thereon, and
necessary cash balance, if any, will be used to provide payment of the principal and interest on the Series
1994 Bonds when due up to and including September 1, 2006, and to call, pay and redeem on September
1, 2006, all of the outstanding principal of the Series 1994 Bonds at a price of par and to provide payment
of the principal and interest on the Series 1996 Bonds when due up to and including March 1, 2007, and to
call, pay and redeem on March 1, 2007, all of the outstanding principal of the Series 1996 Bonds at a price
of par.
The Government Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably
be pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent,
pursuant to an escrow deposit agreement to be executed by the City and the Escrow Agent. Information
on the Refunded Bonds is as follows:
Amount Refunded Amount Redemption
Refunded Bonds Outstanding Maturities Refunded Date Premium
Series 1994 Bonds $3,855,000 2003-2014 $3,855,000 September 1, 2006 $0
Series 1996 Bonds $4,050,000 2004-2016 $4,050,000 March 1, 2007 $0
Refunded Bonds
Series 1994 Bonds:
Maturity Years Principal Interest CUSIP
(September 1) Amounts Rates 579358
2003 $ 190,000 5.750% AJ1
2004 205,000 5.900 AK8
2005 220,000 6.000 AL6
2008(1) 750,000 6.250 AP7
2014(1) 2,490,000 6.375 AS1
Refunded Bonds -- Continued
Series 1996 Bonds:
Maturity Years Principal Interest CUSIP
(March 1) Amounts Rates 579358
2004 $ 185,000 5.50% BA9
2005 195,000 5.50 BB7
2006 205,000 5.75 BC5
2007 215,000 5.75 BD3
2008 225,000 5.55 BG6
2009 245,000 5.65 BH4
2010 255,000 5.70 BJ0
2011 275,000 5.75 BE1
2016(1) 2,250,000 5.85 BF8
(1) Term Bond
4
Verification of Mathematical Calculations
Balukoff, Lindstrom & Co., P.A., Boise, Idaho, independent certified public accountants, will verify the
accuracy of (i) the mathematical computations concerning the adequacy of the maturing principal
amounts of and interest earned on the Government Obligations, together with other escrowed moneys, to
be placed in the escrow account to pay when due, pursuant to stated maturity or call for redemption, as
the case may be, the principal of, premium, if any, and interest on the Refunded Bonds and (ii) the
mathematical computations of the yield on the Bonds and the yield on the Government Obligations
purchased with a portion of the proceeds of the sale of the Bonds. Bond Counsel has relied upon such
information set forth in the accountants’ report in concluding that, subject to the condition that the
District comply with certain covenants made to satisfy pertinent requirements of the Internal Revenue
Code of 1986, as amended, (the “Code”) under present law, interest on the Bonds is not includible in
gross income of the owners thereof for federal income tax purposes, and will not be treated as an item of
tax preference in computing the alternative minimum tax for individuals and corporations. See “Tax
Exemption” herein.
Sources and Uses of Funds
The proceeds of the Bonds, Reserve Fund balance and cash available in the Water Fund are estimated to
be applied as follows:
Sources of Funds(1)
Par Amount of the Bonds $ 5,650,000
Contribution from Reserve Fund
Cash Available in Water Fund
Net Original Issue Premium/(Discount)
Total Sources of Funds $
Uses of Funds(1)
Escrow Requirements $
Reserve Fund
Issuance Costs, Insurance and Underwriter’s Discount
Total Uses of Funds $
(1) Preliminary, subject to change.
5
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3
8
26
8
,
0
3
6
91
,
4
3
9
35
9
,
4
7
5
857,112
20
1
0
37
0
,
0
0
0
12
3
,
8
7
8
49
3
,
8
7
8
27
3
,
4
2
4
86
,
0
5
1
35
9
,
4
7
5
853,352
20
1
1
38
0
,
0
0
0
11
3
,
8
8
8
49
3
,
8
8
8
27
8
,
9
2
0
80
,
5
5
5
35
9
,
4
7
5
853,362
20
1
2
39
0
,
0
0
0
10
2
,
8
6
8
49
2
,
8
6
8
28
4
,
5
2
6
74
,
9
4
9
35
9
,
4
7
5
852,342
20
1
3
40
0
,
0
0
0
90
,
9
7
3
49
0
,
9
7
3
29
0
,
2
4
5
69
,
2
3
0
35
9
,
4
7
5
850,447
20
1
4
41
0
,
0
0
0
78
,
3
7
3
48
8
,
3
7
3
29
6
,
0
7
9
63
,
3
9
6
35
9
,
4
7
5
847,847
20
1
5
43
0
,
0
0
0
64
,
8
4
3
49
4
,
8
4
3
30
2
,
0
3
0
57
,
4
4
5
35
9
,
4
7
5
854,317
20
1
6
44
0
,
0
0
0
50
,
2
2
3
49
0
,
2
2
3
30
8
,
1
0
1
51
,
3
7
4
35
9
,
4
7
5
849,697
20
1
7
46
0
,
0
0
0
34
,
6
0
3
49
4
,
6
0
3
31
4
,
2
9
3
45
,
1
8
1
35
9
,
4
7
5
854,077
20
1
8
47
5
,
0
0
0
17
,
8
1
3
49
2
,
8
1
3
32
0
,
6
1
1
38
,
8
6
4
35
9
,
4
7
5
852,287
20
1
9
0
0
0
32
7
,
0
5
5
32
,
4
2
0
35
9
,
4
7
5
359,475
20
2
0
0
0
0
33
3
,
6
2
9
25
,
8
4
6
35
9
,
4
7
5
359,475
20
2
1
0
0
0
34
0
,
3
3
5
19
,
1
4
0
35
9
,
4
7
5
359,475
20
2
2
0
0
0
34
7
,
1
7
6
12
,
2
9
9
35
9
,
4
7
5
359,475
20
2
3
0
0
0
3
5
4
,
1
5
4
5
,
3
2
1
3
5
9
,
4
7
5
359,475
5,
6
5
0
,
0
0
0
$
1
,
5
6
5
,
5
1
9
$
7
,
2
1
5
,
5
1
9
$
5
,
9
0
0
,
0
0
0
$
1
,
2
8
9
,
4
9
8
$
7
,
1
8
9
,
4
9
8
$
14,405,017$
(1) E
xcl
ud
es t
h
e R
e
funded B
onds.
P
r
eliminary, s
ubj
ect
t
o
c
h
ange.
I
n
te
rest a
mounts a
re e
sti
ma
te
s o
nly, a
ssumi
ng i
nte
rest r
ate
s
r
a
n
g
i
n
g
f
rom 1.05% to 3.75%.
(2) P
r
eliminary, s
ubj
ect
t
o
c
h
ange.
I
n
te
rest a
mounts a
re e
sti
ma
te
s
o
n
l
y
,
a
s
s
u
ming
a
n
i
n
t
ere
s
t
r
a
t
e o
f
2
.
0
%
.
D
E
Q
r
e
q
u
ir
e
s
a
r
e
se
r
v
e
t
o b
e f
u
n
d
e
d
i
n
t
he
amou
n
t
o
f
o
n
e
y
e
a
r's
t
otal
d
e
b
t s
e
r
v
ic
e
f
o
r
t
he
D
E
Q
l
o
an,
f
u
n
d
e
d
i
n
e
q
u
a
l
a
nn
u
a
l p
a
ym
e
n
t
s o
v
er
f
i
v
e y
e
a
rs.
Su
b
o
rdin
a
t
e
L
i
e
n
Se
n
i
o
r L
i
e
n
DE
Q
L
oan (
2)
6
Security for the Bonds
Pledge of Net Revenues
The principal of and interest on the Bonds are payable solely from and secured by the Revenue of the
System less Operation and Maintenance Expenses of the City (the “Net Revenues”). “Revenues of the
System” means all revenues received by the City from its System and may include, at the discretion of the
City, moneys derived from one, all, or any combination of revenue sources pertaining to the System,
including, without limitation, rates, charges, rents, fees, and any other income derived from the operation
or ownership of, the use of services of, or the availability of or services pertaining to, or otherwise derived
in connection with, the System or all or any part of any property pertaining to the System. “Operation
and Maintenance Expense” means all reasonable and necessary current expenses of the City, paid or
accrued, of operating, maintaining, and repairing the System or of levying, collecting, and otherwise
administering the Net Revenues for the payment of the Bonds; and the term includes (except as limited
by contract or otherwise limited by law) without limiting the generality of the foregoing: (i) engineering,
auditing, reporting, legal, and other overhead expenses of the City directly relating and reasonably
allocable to the administration of the System; (ii) fidelity bonds and property and liability insurance
premiums pertaining to the System, or a reasonably allocable share of a premium of any blanket bond or
policy pertaining thereto; (iii) payments to pension, retirement, health, and hospitalization funds and
other insurance; (iv) any taxes, assessments, excise taxes, or other charges which may be lawfully
imposed on the City, the System, revenues therefrom, or any privilege in connection with their operation;
(v) the reasonable charges of the bond registrar, fiscal or paying agent, commercial bank, trust bank, or
other depository bank pertaining to the Bond issued by the City or pertaining to the Project, if any;
(vi contractual services, professional services, salaries, other administrative expenses, and the cost of
materials, supplies, repairs, and labor, pertaining to the issuance of the Bond and to the ordinary
operation of the System; and (vii) all other administrative, general, and commercial expenses. This
pledge constitutes a lien and charge upon the Net Revenues prior and superior to any other charges
whatsoever. Additional bonds may be issued on a parity of lien with the Bonds, subject to certain
conditions described herein.
THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY PAYABLE ONLY FROM NET REVENUES.
THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY, VALLEY COUNTY, THE STATE OF
IDAHO, OR ANY OTHER MUNICIPAL CORPORATION OR POLITICAL SUBDIVISION THEREOF.
Subordinate Lien on Net Revenues. The City currently has a loan commitment from DEQ to complete the
second phase of constructing the City’s water treatment facility. On April 23, 2001, DEQ accepted and
approved the City’s loan application from the Drinking Water State Revolving Fund (“DWSR Fund”) in
the amount of $7,999,528 at 2.0 percent interest. Money is disbursed from the DWSR Fund to the City
after approval by DEQ of disbursement requests associated with eligible costs of the project as they are
incurred. Upon final completion of the project the DEQ Loan is secured by a promissory note for the
amount of actual disbursements from the DWSR Fund, together with accrued interest, up to the DEQ
Loan amount. When issued, the promissory note with DEQ will have a lien on the City’s Water Revenues
that is subordinate to the Bonds.
Rate Covenant
The City has established, may from time to time revise, and is required to maintain and collect water
rates and charges for furnishing the services of the System to its customers, which rates and charges are,
and are required to continue to be, uniform as to all persons or properties which are of the same class,
which rates and charges are required to be collected from the users thereof.
The City has covenanted in the Ordinance and agrees with the Registered Owners and Beneficial Owners
that it will establish, revise as necessary, maintain, and collect charges sufficient, together with other
revenues received, after taking into consideration anticipated delinquencies, to provide Net Revenues for
each fiscal year equal to not less than 1.20 times the required Annual Debt Service payments on the Bonds
and any Additional Bonds then outstanding. The City further covenanted that the Revenue of the System
will at all times be sufficient to pay Operation and Maintenance Expenses, to make all payments required
7
to be made on account of the Bonds and any Additional Bonds as and when the same shall become due
and payable, and all other payments which the City is obligated to make pursuant to this Ordinance, and
to pay all governmental charges lawfully imposed on the System and all other amounts which the City
may now be or hereafter become obligated to pay from the Revenue of the System.
City of McCall – Water Fund
Historic Coverage
Actual Actual Actual Actual Actual
2002 2001 2000 1999 1998
OPERATING REVENUES
Charges for services 1,634,403$ 1,697,846$ 1,740,561$ 1,674,145$ 1,301,728$
Hook-on fees in excess of cost 225,015 184,341 107,137 172,037 101,590
Other 3,176 6,333 4,178 2,227 4,206
TOTAL OPERATING REVENUES 1,862,594 1,888,520 1,851,876 1,848,409 1,407,524
OPERATING EXPENSES
Personal services 219,873 203,624 81,276 109,076 89,915
Contractual services 123,892 228,097 270,781 70,763 132,512
Materials and supplies 44,906 39,418 35,597 27,733 46,576
Utilities 66,104 49,602 56,207 60,846 41,119
Repairs and maintenance 12,980 28,534 246,993 189,135 168,523
Bad debt expense 0 0 0 0 7,100
TOTAL OPERATING EXPENSES (1)467,755 549,275 690,854 457,553 485,745
NET OPERATING INCOME 1,394,839 1,339,245 1,161,022 1,390,856 921,779
Add: Interest income 57,550 87,237 37,220 36,443 31,246
AVAILABLE FOR DEBT SERVICE 1,452,389 1,426,482 1,198,242 1,427,299 953,025
DEBT SERVICE
Water Revenue Bonds, Series 1994 431,913 431,093 424,153 421,403 412,578
Water Revenue Bonds, Series 1996 417,928 417,003 425,903 424,621 376,512
Total Debt Service 849,841 848,096 850,056 846,024 789,090
DEBT SERVICE COVERAGE 1.71 1.68 1.41 1.69 1.21
SURPLUS FUNDS AVAILABLE AFTER 602,548 578,386 348,186 581,275 163,935
PAYING DEBT SERVICE
(1)Excludes depreciation expense
Source: Derived from Audited Financial Reports of the City of McCall
8
Ci
ty
o
f
Mc
Call
–
W
a
ter
Fund
Pr
o
j
e
c
t
e
d
C
o
ve
r
age
Pr
oj
ec
t
ed
Proje
c
t
e
d
P
roj
ected
Proje
c
t
e
d
Proj
e
c
t
ed
Proje
c
t
e
d
Pr
ojec
t
e
d
Projected
20
0
3
20
0
4
20
0
5
20
0
6
20
0
7
20
0
8
200
9
2010
OPER
ATIN
G R
EVENUES
(
A
S
S
U
MPTIONS)
Base S
e
rvic
e
R
eve
nu
e (
2
)
(
3)
1,3
4
0
,
6
4
0
$
1,
3
6
3
,
8
2
1
$
1,
3
8
7
,
6
8
5
$
1,
4
1
2
,
2
4
3
$
1,
4
1
2
,
2
4
3
$
1,
4
1
2
,
2
4
3
$
1,
4
1
2
,
2
4
3
$
1,412,243$
Ac
tu
a
l U
sage R
evenue (
2
)
(
4
)
24
3
,
2
9
4
24
7
,
0
3
6
25
0
,
8
9
8
25
4
,
8
8
0
25
4
,
8
8
0
25
4
,
8
8
0
25
4
,
8
8
0
254,880
Hook-o
n F
e
es (
5)
13
6
,
4
0
0
13
6
,
4
0
0
13
6
,
4
0
0
13
6
,
4
0
0
13
6
,
4
0
0
13
6
,
4
0
0
13
6
,
4
0
0
136,400
Non-Se
rv
i
ce O
per
at
io
ns R
eve
nue (
6)
68
,
0
5
1
68
,
0
5
1
68
,
0
5
1
68
,
0
5
1
68
,
0
5
1
68
,
0
5
1
68
,
0
5
1
68,051
Other (
6
)
55
,
1
7
6
5
5
,
1
7
6
5
5
,
1
7
6
5
5
,
1
7
6
5
5
,
1
7
6
5
5
,
1
7
6
5
5
,
1
7
6
55,176
TOTA
L O
PERAT
I
NG R
EVE
N
UES
1,
8
4
3
,
5
6
2
1
,
8
7
0
,
4
8
4
1
,
8
9
8
,
2
0
9
1
,
9
2
6
,
7
5
0
1
,
9
2
6
,
7
5
0
1
,
9
2
6
,
7
5
0
1
,
9
2
6
,
7
5
0
1,926,750
OPER
ATING E
X
PENSES
(
7)
Pa
yro
ll
25
6
,
7
4
5
26
2
,
6
5
0
26
8
,
6
9
1
27
4
,
8
7
1
28
1
,
7
4
3
28
8
,
7
8
6
29
6
,
0
0
6
303,406
Over
he
ad
73
,
3
2
5
75
,
0
1
1
76
,
7
3
7
78
,
5
0
2
80
,
4
6
4
82
,
4
7
6
84
,
5
3
8
86,651
Ci
t
y S
u
pport
20
9
,
0
7
6
21
3
,
8
8
5
21
8
,
8
0
4
22
3
,
8
3
7
22
9
,
4
3
3
23
5
,
1
6
8
24
1
,
0
4
8
247,074
Cons
umab
l
es
42
,
9
0
6
43
,
8
9
3
44
,
9
0
2
45
,
9
3
5
47
,
0
8
4
48
,
2
6
1
49
,
4
6
7
50,704
Ma
i
nte
nanc
e
a
n
d
R
epair
41
,
6
0
0
4
2
,
5
5
7
4
3
,
5
3
6
4
4
,
5
3
7
4
5
,
6
5
0
4
6
,
7
9
2
4
7
,
9
6
1
49,160
TOTA
L O
PERAT
I
NG E
XPENSES (
8
)
62
3
,
6
5
2
6
3
7
,
9
9
6
6
5
2
,
6
7
0
6
6
7
,
6
8
1
6
8
4
,
3
7
3
7
0
1
,
4
8
3
7
1
9
,
0
2
0
736,995
NE
T
O
PERAT
IN
G I
N
CO
ME
1,
2
1
9
,
9
1
0
1,
2
3
2
,
4
8
8
1,
2
4
5
,
5
3
9
1,
2
5
9
,
0
6
9
1,
2
4
2
,
3
7
7
1,
2
2
5
,
2
6
8
1,
2
0
7
,
7
3
0
1,189,755
AVAI
LABL
E
F
OR D
EBT S
E
RVICE
PARITY L
I
EN D
EBT
S
E
R
VICE
Wate
r R
eve
nue
B
ond
s,
S
eries
1
9
9
4
12
0
,
9
1
6
0
0
0
0
0
0
0
Wate
r R
eve
nue
B
ond
s,
S
eries
1
9
9
6
30
1
,
6
2
6
0
0
0
0
0
0
0
Wate
r R
eve
nue
R
ef.
B
ond
s,
S
eries
2
0
0
3
17
9
,
8
9
2
4
1
8
,
9
9
5
4
2
1
,
0
8
0
4
2
2
,
8
4
0
4
1
8
,
8
5
3
4
2
3
,
7
6
5
4
9
7
,
6
3
8
493,878
Total D
e
bt S
e
rvice
60
2
,
4
3
4
4
1
8
,
9
9
5
4
2
1
,
0
8
0
4
2
2
,
8
4
0
4
1
8
,
8
5
3
4
2
3
,
7
6
5
4
9
7
,
6
3
8
493,878
SR
. L
I
EN
D
EBT
S
E
RVICE
C
OVERAGE
2.02
2.
9
4
2.
9
6
2.
9
8
2.
9
7
2.
8
9
2.43
2.41
SR
. L
I
EN
D
EBT
S
E
RVICE
C
OVERAGE
1.80
2.
6
2
2.
6
3
2.
6
6
2.
6
4
2.
5
7
2.15
2.13
NE
T
O
F
H
OOK
-
ON F
E
E
S
SU
R
PLUS
F
U
N
DS
A
V
A
I
LA
B
LE A
F
TE
R
61
7
,
4
7
6
81
3
,
4
9
3
82
4
,
4
5
9
83
6
,
2
2
9
82
3
,
5
2
4
80
1
,
5
0
3
71
0
,
0
9
3
695,877
PAYING
S
R
.
L
IEN
D
E
B
T S
E
RVICE
ES
T
. S
U
B
ORDINATE
L
I
EN
D
.S.
(
DEQ)
0
35
9
,
4
7
4
35
9
,
4
7
4
35
9
,
4
7
4
35
9
,
4
7
4
35
9
,
4
7
4
35
9
,
4
7
4
359,474
SU
R
PLUS
F
U
N
DS
A
V
A
I
LA
B
LE A
F
TE
R
61
7
,
4
7
6
45
4
,
0
1
9
46
4
,
9
8
5
47
6
,
7
5
5
46
4
,
0
5
0
44
2
,
0
2
9
35
0
,
6
1
9
336,403
PAYING
S
R
.
&
J
R
.
L
IEN D
EBT
S
E
R
VIC
E
(1
)
Budget
e
d
(2
)
Assumes C
urr
e
nt W
ate
r R
ates a
s o
f 6
/
1/
20
0
3
(3
)
(4
)
(5
)
No i
ncrea
s
e i
n
h
ook
-o
n f
e
es
(
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9
Select Funds and Accounts
Water Fund. The City currently has a special fund known as the "City of McCall Water Fund" (the "Water
Fund"), which shall be maintained by the Treasurer and into which the Revenue of the System shall be
deposited forthwith upon its receipt.
Funds Held and Administered by the Trustee. The Trustee will hold and administer four separate funds on
behalf of the City: The Bond Fund, the Reserve Fund, the Escrow Fund and the Cost of Issuance Fund.
Each of these funds is more fully described below:
(1) Bond Fund. The City is required monthly to deposit from Net Revenues into the "City of McCall
Water Revenue Refunding Bond Fund" (the "Bond Fund") an amount equal to one-twelfth of the
next principal payment coming due on the Bonds and an amount equal to one-sixth of the next
interest payment accruing on the Bonds. If the City for any reason fails to make such required
deposit from the Water Fund, then an amount equal to the deficiency shall be deposited into the
Bond Fund out of the Reserve Fund. From the amounts so paid into the Bond Fund, which may
be reduced by earnings on deposit in the Bond Fund, the Trustee shall pay (i) on or before each
interest payment date for any of the Bonds, the amount required for the interest payable on such
date; and (ii) on or before any redemption date for the Bonds, the amount required for the
payment of principal of and interest on the Bonds then to be redeemed.
Amounts in the Bond Fund shall be invested at the written direction of the City by the Trustee in
Investment Securities until needed for the purposes of the Bond Fund. Earnings on deposits in
the Bond Fund shall remain in the Bond Fund to be used for the purposes of the Bond Fund.
(2) Reserve Fund. It is the intention of the City to fund the Reserve Fund with a surety policy. If a
surety policy is not obtained, then simultaneously with the issuance of the Bonds, there shall be
transferred from the debt service reserve fund established for the Refunded Bonds and, to the
extent necessary to achieve the Reserve Requirement, from other lawfully available moneys of
the City, to the "City of McCall Water Revenue Refunding Bonds Debt Service Reserve Fund" (the
"Reserve Fund") an amount equal to the Reserve Requirement, which sum shall be maintained as
a debt service reserve fund for the Bonds until the Bonds have been paid in full. Moneys in the
Reserve Fund may be applied by the City to the payment of the final maturity of principal of and
interest on the Bonds. So long as the amount on deposit in the Reserve Fund equals the Reserve
Requirement, earnings on amounts in the Bond Fund shall be deposited as received into the
Water Fund. In no event shall the amount accumulated in the Reserve Fund exceed the Reserve
Requirement.
Whenever any moneys are withdrawn from the Reserve Fund to pay the principal of or interest
on the Bonds, or if a deficiency exists in such Fund, the amount so withdrawn or the amount of
such deficiency shall be restored within one year from the date of withdrawal by monthly
deposits from Net Revenues until there has been restored therein the gross amount of the Reserve
Requirement.
In the event Refunding Bonds are ever issued, the amount set aside into the Reserve Fund to
secure the payment of the Bonds may be used to retire bonds or may be held in the Reserve Fund
to secure payment of the refunding bonds issued, to refund the outstanding refunding bonds, or
may be held in the Reserve Fund to secure the payment of any other issue or series of bonds
payable out of the Water Fund and issued on a parity with the Bonds.
The City may (and intends to with the issuance of the Bonds), at any time, elect to fund the
Reserve Fund with an insurance policy issued by a municipal bond insurance company having a
long-term debt credit rating, at the time the insurance policy is issued, in one of the two highest
rating categories of Moody’s Investors Services, Inc., or Standard & Poor’s Corporation, in which
10
the insurance company agrees unconditionally to provide the City with funds in the amount of
the Reserve Requirement.
(3) Escrow Fund. Proceeds of the sale of Bonds, net of deposits into the Cost of Issuance Fund and
Bond Fund, are required to be deposited into the Escrow Fund, together with other funds of the
City in an amount sufficient to defease the Refunded Bonds. Moneys in the Escrow Fund are to
be used exclusively for the payment of principal and interest on the Refunded Bonds as the same
falls due.
Moneys in the Escrow Fund shall be invested, until needed for the purposes of the Escrow Fund,
in cash and Government Obligations, as permitted in the Escrow Agreement.
Any moneys remaining in the Escrow Fund and not needed for refunding of the Refunded Bonds
shall be applied to pay any costs of issuance of the Bonds that remain unpaid, if any, and any
moneys remaining thereafter may be used by the City for any lawful purpose.
(4) Cost of Issuance Fund. The Trustee is required to deposit a portion of the Bond proceeds sufficient
to pay the reasonable and necessary costs of issuance of the Bonds into the Cost of Issuance Fund
at the time of delivery of the Bonds. Moneys in the Cost of Issuance Fund shall be used for the
payment of costs of issuance of the Bonds. Any moneys remaining in the Cost of Issuance Fund
on the date of the full and final payment of all costs of issuance of the Bonds shall be transferred
by the trustee into the Bond Fund.
Permitted Investments. Moneys on deposit in the funds held by the Trustee shall be invested and
reinvested by the Trustee.
All moneys on deposit in funds shall be invested in Investment Securities which shall mature, or be
subject to repurchase, withdrawal without penalty or redemption at the option of the holder on or before
the dates on which the amounts invested are reasonably expected to be needed for the purposes hereof.
All purchases or sales of Investment Securities shall be made at the direction of the City (given in writing
or orally, confirmed in writing), or, in the absence of such direction, by the Trustee.
Any securities or investments held by the Trustee may be transferred by the Trustee, if required in
writing by the City, from any of the funds or accounts held and administered by the Trustee on behalf of
the City to any other City account or account held by the Trustee at the then current market value thereof
without having to be sold and purchased or repurchased; and whenever any other transfer or payment is
required to be made from any particular fund, such transfer or payment shall be made from such
combination of maturing principal, redemption premiums, liquidation proceeds and withdrawals of
principal as the Trustee deems appropriate for such purpose.
Neither the City nor the Trustee shall be accountable for any depreciation in the value of Investment
Securities or for any losses incurred upon any authorized disposition thereof.
Flow of Funds under the Bond Ordinance
The Revenue of the System shall be used for payment of the following obligations in the following order
of priority:
(1) To pay the costs of Operation and Maintenance Expenses;
(2) The City is required to make monthly deposits from Net Revenues into the Bond Fund to pay the
principal of and interest on the Bonds. Deposits will be made by the third Tuesday of the month
in an amount equal to one-twelfth of the next principal payment coming due on the Bonds and
an amount equal to one-sixth of the next interest payment accruing on the Bonds. If the City for
any reason fails to make such required deposit from the Water Fund, then an amount equal to the
deficiency shall be deposited into the Bond Fund out of the Reserve Fund;
11
(3) The City is required to transfer Net Revenues within one year from the date of a withdrawal from
the Debt Service Reserve Fund to maintain the Debt Service Reserve Fund, and to provide for any
deficiency in the Debt Service Reserve Fund; and
(4) To administer surplus funds. Funds remaining in the Water Fund after having been applied to or
designated funds for the purposes described above shall constitute surplus funds and may be
used for any of the following purposes:
(a) To pay the costs of unusual or extraordinary maintenance of or repair to the System;
(b) To pay the principal of and interest on any subordinate lien obligations which may have been
issued to provide water facilities in or for the City;
(c) To improve, extend, enlarge, or replace any water facilities;
(d) To acquire or construct additional water facilities in or for the City;
(e) To prepay the principal, interest, and any costs of the Bonds; and
(f) For any other lawful purpose.
Additional Bonds Payable from the City’s Water Fund
Parity Obligations. The City may issue Additional Bonds or other additional obligations payable from the
Net Revenues of the Water Fund on a parity with the lien of the Bonds herein authorized; provided,
however, that before any such Additional Bonds or other additional parity obligations are authorized or
actually issued:
(1) The City is not, and has not been, in default as to any payments required by the provisions of the
Ordinance for a period of not less than 12 months immediately preceding the issuance of such
Additional Bonds or other additional parity obligations, and there is no deficiency in the Bond
Fund or Reserve Fund.
(2) The principal of and interest on the Additional Bonds shall be payable from the Bond Fund and
further secured by the Reserve Fund, and the Reserve Requirement shall be increased in
proportion to the Additional Bonds being issued.
(3) Prior to the delivery of any Additional Bonds, the City shall have on file at the office of the City
Clerk a certificate of a licensed professional engineer, who may be the City Engineer, or a
certificate of an independent certified public accountant, dated prior to the authorization of such
Additional Bonds, showing that the Estimated Net Revenues, determined and adjusted as
hereafter provided, for each fiscal year after the issuance of such Additional Bonds, will equal at
least 1.20 times the amount required for the payment of the average annual principal of and
interest on the Certificates, the Bonds, and any Additional Bonds then outstanding, plus the
Additional Bonds proposed to be issued.
(4) In determining Estimated Net Revenues, the Net Revenues for the past 12 consecutive months
immediately preceding the year of the proposed Additional Bonds shall be adjusted by such
engineer or accountant to take into consideration changes in Net Revenues estimated to occur
under one or more of the following conditions for each year after delivery of the Additional
Bonds for so long as the Bond and any Additional Bonds, including the Additional Bonds to be
issued, shall be outstanding:
(a) any increase or decrease in Net Revenues which would result if any change in rates or
charges adopted prior to the date of such certificate and subsequent to the beginning of such
12 month period had been in force during the full 12 month period;
12
(b) any increase or decrease in Net Revenues estimated by such engineer or accountant to result
from any additions, betterments, and improvements to and extension of any facilities of the
System which (i) become fully operational during such 12 month period, (ii) were under
construction at the time of such certificate, or (iii) will be constructed from the proceeds of the
Additional Bonds to be issued; and/or
(c) the additional Net Revenue which would have been received if any customers added to the
System prior to the date of such certificate and subsequent to the beginning of such 12 month
period were customers for the entire period.
(5) The foregoing limitations, or any of them, may be waived or modified by the written consent of
the Registered Owners of the Bonds.
Such engineer or accountant shall base his or her certificate upon, and his certificate shall have attached
thereto, audited financial statements of the Water System (unless such an audit is not available within
such 12-month period) showing income and expenses for the period upon which the same is based.
Subordinate Lien Bonds. The City may issue bonds, notes or warrants, or make pledges of the revenues
which shall be subordinate as to the lien of the Bonds and which shall provide for compliance with the
Ordinance prior to the application of any funds to said subordinate purpose.
Exemptions. The restrictions with respect to the issuance of parity obligations do not apply if such
additional parity bonds proposed to be issued are for the sole purpose of refunding outstanding water
revenue bonds or obligations.
The foregoing restrictions with respect to the issuance of parity obligations shall not apply to obligations
issued to fund the completion of the Water System improvement project under construction at the time of
the issuance of the Bonds.
Special Covenants in the Bond Ordinance
For the protection and security of the Bonds, it is covenanted and agreed to and with the Registered
Owners of the Bonds from time to time, that the City will perform the following covenants:
(1) The City will maintain its identity as a municipal corporation and will make no attempt to cause
its corporate status to be abolished.
(2) It will operate the System in an efficient and economical manner and prescribe, revise, and collect
such charges in connection therewith so that the services, facilities, and properties of the System
may be furnished at the lowest possible cost consistent with sound economy and prudent
management.
(3) It will operate, maintain, preserve, and keep the System and every part hereof in good repair,
working order, and condition.
(4) It will pay and discharge any and all lawful claims for labor, materials, and supplies which, if
unpaid, might by law become a lien or charge upon the Revenue of the System, or any part of
said Revenue of the System, or any funds in the hands of the Treasurer, prior or superior to the
lien of the Bonds or which might impair the security of the Bonds, to the end that the priority and
security of the Bonds shall be fully preserved and protected.
Events of Default and Remedies
Events of Default. If one or more of the following events occur, it is hereby declared to constitute and
Event of Default under the Ordinance.
13
(1) Failure to make any payment of interest or principal on the Bonds as the same shall become due;
or
(2) Filing by the City, or any successor or assignee of the City, while in possession of the System, of a
petition in bankruptcy or insolvency, or for reorganization under any bankruptcy act, or the
making of an assignment for the benefit of creditors; or
(3) Any other default by the City under the Ordinance, and failure to remedy the same for a period
of sixty days after written notice thereof, as set forth in paragraph B below, specifying such
failure and requiring the same to be remedied, shall have been given to the City by the Trustee,
or to the City and the Trustee by the Owners of not less than twenty-five percent in aggregate
principal amount of the Bonds at the time outstanding.
Remedies upon Event of Default. Upon the occurrence of an Event of Default, the Trustee may, in its
discretion (or, as provided hereinafter, at the direction of the Owners of not less than 25 percent in
aggregate principal amount of the Bonds at the time outstanding, shall), take one or more of the following
actions:
(1) Bring action at law or in equity for payment of any Net Revenue duly appropriated by the City
for the then-current Fiscal year and not yet paid to the Trustee.
(2) Take any other action for which provision is made in this Section 23, including, without
limitation, application of the funds under the control of the Trustee.
Prior to taking any such action, the Trustee shall cause written notice, declaring an Event of Default to
have occurred and specifying the Event of Default complained of, to be given the City. If, within 60 days
of the mailing or delivery of such written notice, such Event of Default specified in the written notice
shall have been cured, and the reasonable and proper charges of the Trustee shall be paid to the Trustee,
then in such case the Owners of not less than fifty percent in aggregate principal amount of the Bonds at
the time outstanding, by written notice to the City and the Trustee, may rescind such declaration and
annul such Event of Default in its entirety, or, if the Trustee shall have acted without a direction of the
Owners of not less than twenty-five percent in aggregate principal amount of the Bonds outstanding at
the time of the written direction, and if there shall not have been theretofore delivered to the Trustee
written direction to the contrary by the Owners of not less than fifty percent in aggregate principal
amount of the Bonds then outstanding, then any such declaration shall ipso facto be deemed to be
annulled. No such rescission and annulment shall affect any subsequent Event of Default.
The Trustee shall, within 30 days after receipt of notice of the occurrence thereof, give written notice by
first class mail to Registered Owners of all Events of Default known to the Trustee and send a copy of
such notice to the City, unless such Events of Default have been remedied. The Trustee shall not be
deemed to have notice of any Events of Default unless it has actual knowledge thereof or has been
notified in writing of such Events of Default by the Owners of at least 25 percent in principal amount of
the Bonds then outstanding.
The City covenants that if an Event of Default shall have occurred and shall not have been remedied, the
books of record and accounts of the City shall at all times be subject to the inspection and use of the
Trustee and of its agents and attorneys.
In the event the Trustee incurs expenses or renders services in any proceedings under bankruptcy law
relating to the City, the expenses so incurred and compensation for services so rendered are intended to
constitute expenses of administration under bankruptcy law. The obligations of the City to make the
payments to the Trustee for reimbursement of its fees and expenses related to events of default shall
survive discharge of the Ordinance, the resignation or removal of the Trustee and payment in full of the
Bonds.
14
During the continuance of an Event of Default, the Trustee shall apply the Net Revenues and such
moneys, securities and funds and the income therefrom as follows and in the following order:
(1) to the payment of the reasonable and proper charges and expenses of the Trustee and the
reasonable fees and disbursements of its counsel;
(2) to the payment of the Bonds, first to interest and then to principal.
If and whenever all overdue sums payable by the City under the Ordinance, shall be paid by or for the
account of the City, and all defaults under the Ordinance or the Bonds shall be made good or secured to
the satisfaction of the Trustee, the City and the Trustee shall thereupon be restored, respectively, to their
former positions and rights under the Ordinance.
No Owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, with
respect to the Ordinance, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Trustee of a continuing Event of Default;
(2) the Owners of not less than 25 percent in principal amount of the Bonds shall have made written
request to the Trustee to institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Owners have provided to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to
institute any such proceedings; and
(5) no direction inconsistent with such written request has been given to the Trustee during such
60-day period by the Owners of a majority in principal amount of the Bonds; it being understood
and intended that no one or more Owners of Bonds shall have any right in any manner whatever
by virtue of, or by availing of, any provision of the Ordinance to affect, disturb or prejudice the
rights of any other Owner of Bonds, or to obtain or to seek to obtain priority or preference over
any other Owner or to enforce any right under the Ordinance, except in the manner herein and
therein provided and for the equal and ratable benefit of all the Owners of Bonds.
The Owners of a majority in principal amount of the Outstanding Bonds shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or the Ordinance,
(2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the
Owners not taking part in such direction, and
(3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
The Trustee may, in its discretion, waive any Event of Default, provided there has been no default in any
scheduled payment of interest on or principal of the Bonds. The Owners shall have no rights described
above if the Trustee waives an Event of Default.
15
Municipal Bond Insurance
Payment of principal of and interest on the Bonds is further secured by a municipal bond insurance
policy issued through ________________________. As noted on the cover of this Official Statement, the
municipal bond insurance policy is rated “Aaa” by Moody’s Investors Service (see “Ratings” herein).
Rating
As noted on the cover page of this Official Statement, Moody’s Investors Service will assign its credit
enhanced rating of “Aaa” to the Bonds with the understanding that upon delivery of the Bonds a
municipal bond insurance policy will be issued by ______________ with respect to the Bonds (see
Appendix __ attached hereto and titled “Municipal Bond Insurance Policy Specimen”). When and if
obtained, the rating will reflect only the views of each rating agency and an explanation of the
significance of the rating may be obtained from the rating agency. There is no assurance that the rating,
once obtained will be retained for any given period of time or that the rating will not be revised
downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any
such downward revision or withdrawal of the rating will be likely to have an adverse effect on the
market price of the Bonds.
City Indebtedness – Water Revenue Bonds
Prior Lien Obligations
The City Water Fund does not have any outstanding prior lien obligations which are senior to the Bonds,
nor does it intend to issue any parity bonds within the next twelve months.
Outstanding Long-Term Borrowings
The City’s Outstanding Parity Bonds paid from Net Revenues of the Water Fund are composed of the
following three bond issues:
Date of Maturity Amount of Outstanding
Water Revenue Bonds (Parity Bonds) Issue Date Original Issue at 07/15/03
Senior Lien Bonds:
Series 1994 Bonds 09/01/94 09/01/14 $ 5,000,000 $ 3,855,000
Less: Refunded Bonds (3,855,000)
Series 1996 Bonds 08/01/96 03/01/16 4,990,000 4,050,000
Less: Refunded Bonds (4,050,000)
Series 2003 Bonds (this issue)(1) 07/15/03 09/01/18 5,650,000 5,650,000
Total Senior Lien Water Revenue Bonds $ 15,640,000 $ 5,650,000
Subordinate Lien Bonds
DEQ Loan (2) $ 5,777,717 $ 5,777,717
Total Water Revenue Bonds $ 21,417,717 $ 11,427,717
(1) Preliminary, subject to change.
(2) The City currently has a loan commitment from DEQ to complete the second phase of constructing the City’s
water treatment facility. On April 23, 2001, DEQ accepted and approved the City’s loan application from the
Drinking Water State Revolving Fund (“DWSR Fund”) in the amount of $7,999,528 at 2.0 percent interest.
Money is disbursed from the DWSR Fund to the City after approval by DEQ of disbursement requests associated
with eligible costs of the project as they are incurred. Upon final completion of the project the DEQ Loan is
secured by a promissory note for the amount of actual disbursements from the DWSR Fund, together with
accrued interest, up to the DEQ Loan amount. In February of 2003, the City completed construction of the second
phase of the water treatment facility. As of May 1, 2003 disbursements from the DWSR Fund totaled $5,671,647
and the Accrued Interest totaled $106,070. The City plans to spend the remaining funds that have been
approved by DEQ to construct a water storage tower.
16
Future Financing
At present, the City of McCall does not have any proposed bond elections scheduled. The City is
contemplating additional expenditures from the existing State Revolving Fund loan from DEQ for
needed capital improvements. The maximum loan amount is $7,999,999 of which $5,777,717 has been
spent, including accrued interest, to construct the Water Treatment Plant as of May 1, 2003.
Other City Debt
The City has not issued any debt, other than this issue of Bonds, in calendar year 2003 and does not
intend to issue any additional debt in calendar year 2003.
The City’s total debt obligations as of September 30, 2002, excluding debt of the System, were $12,488,139.
Debt Payment Record
The City has promptly met all debt service requirements on outstanding obligations. No refunding
bonds have been issued to avoid an impending default.
The City
The City Council
The City operates under a Council-Manager form of government. Five Council members are popularly
elected at large and serve staggered four year terms. The Council members in turn elect one of the
Council members to serve as Mayor for a two year period. The Council selects and hires a City Manager
who appoints department heads with Council approval. The Council-Manager form of government was
approved by popular vote on August 31, 1993.
Council Member Position Term Expires
Ralph Colton Mayor & Council Member January 2004
Marilyn Arp Council Member January 2004
Kirk Eimers Council Member January 2006
Allan Muller Council Member January 2006
Vacant Council Member January 2004
The City Administration
The City employs eleven administrators who are selected by the City Council and serve at the will of the
Council.
Biographies of certain key administrative officials follow:
Robert Strope, City Manager. Robert Strope was appointed City Manager in 1999 shortly after 21 years of
service in the United States Army. During his military career, Mr. Strope served in Idaho, Arizona,
Texas, Virginia, and Washington State and held a position equivalent to City Manager in the military
community of Wuerzburg, Germany from 1995-1998. His degrees include a Bachelor of Business
Administration - Accounting from Boise State University and a Master's of Public Administration from
the University of Idaho.
Barbara Bauer, Finance Director/Treasurer and City Clerk. Barbara Bauer joined the City of McCall as
Finance Director and City Clerk in January 2003. Ms. Bauer served thirteen years as the elected County
Treasurer and Tax Collector of Ada County, the State’s largest county, and spent four years as the
Director of the State of Idaho Disability Determinations Service. In addition to her MBA from the
University of Idaho, and BBA in Marketing from Boise State University, she has been previously
17
designated a Certified Government Financial Manager by the Association of Government Accountants,
and a Certified Finance Official by the National Association of County Treasurers and Finance Officers.
William Keating, Public Works Director. Bill Keating has worked for the City since 1981 after spending ten
years with the U. S. Forest Service in various places throughout the Northwest. Mr. Keating was
promoted to the position of Public Works Director in 1992. His responsibilities include overseeing and
direction of construction, plan reviews, operation and maintenance of the city's infrastructure (water,
sewer, streets).
The Staff
The City employs approximately 45 full-time personnel.
Basis of Accounting
The governmental fund types are accounted for using a current financial resources measurement focus.
With this measurement focus, generally, only current assets and current liabilities are included on the
balance sheet. Operating statements of these funds present increases and decreases in net current assets.
The governmental fund types and agency fund types are maintained on the modified accrual basis of
accounting. Under the modified accrual basis of accounting, revenues are recognized when they become
both measurable and available and expenditures are recorded at the time fund liabilities are incurred,
except for:
Fines and permits revenues because they generally are not measurable until received in cash.
Interest on general obligation bonds payable with is recorded when due.
Significant revenues which were measurable and available under the modified accrual basis of
accounting are property taxes to be received within 30 days after year-end, franchise taxes, special
assessments, licenses, interest revenue and charges for services which are to be received within one year.
The proprietary fund types are accounted for utilizing the accrual basis of accounting and have a flow of
economic resources measurement focus. Under this method, revenues are recorded when earned and
expenses are recorded at the time liabilities are incurred.
The basis of accounting described above are in accordance with generally accepted accounting principles.
18
Audits
The City’s audited financial statements for the fiscal years 1994 through 2003 were prepared by Balukoff,
Lindstrom & Co., P.A., CPA’s of Boise, Idaho. The independent audits indicated that the financial
statements fairly present the City’s financial condition and are in conformance with generally accepted
accounting principles applied on a consistent basis.
The audited financial statement of the City as of September 30, 2002 is attached to this Official Statement
as Appendix C. Future financial statements may be ordered by contacting the individual nationally
recognized municipal securities information repositories (“NRMSIR”). at the addresses below, or by
accessing the NRMSIR website, located at: http://www.sec.gov/info/municipal/nrmsir.htm.
Bloomberg Municipal Repository DPC Data Inc.
100 Business Park Drive One Executive Drive
Skillman, NJ 08558 Fort Lee, NJ 07024
Phone: 609-279-3225 Phone: 201-346-0701
FAX: 609-279-5962 FAX: 201-947-0107
E-Mail: Munis@Bloomberg.com E-Mail: nrmsir@dpcdata.com
FT Interactive Data Standard & Poor’s J.J. Kenny Repository
Attn.: NRMSIR 55 Water Street
100 Williams Street 45th Floor
New York, NY 10038 New York, NY 10041
Phone: 212-771-6999 Phone: 212-438-4595
FAX: 212-771-771-7391 FAX: 212-438-3975
E-Mail: NRMSIR@FTID.com E-Mail: nrmsir_repository@sandp.com
Further, a five-year summary of the City’s Water Fund Balance Sheet and Statement of Revenues,
Expenses and Changes in Fund Equity follows.
19
City of McCall Water Fund Balance Sheet
(Years Ended September 30)
2002 2001 2000 1999 1998
CURRENT ASSETS
Cash 1,257,440$ 0$ 268,343$ 399,189$ 0$
Investments 0 0 0 0 0
Receivables
Intergovernmental 0 0 0 0 2,269
Accounts, net of allowances 195,867 227,191 217,538 154,847 185,369
Grants 3,528 0 0 0 0
Other 0 0 0 6,304 0
Inventory 10,191 11,072 14,840 15,277 14,844
TOTAL CURRENT ASSETS 1,467,026 238,263 500,721 575,617 202,482
RESTRICTED ASSETS
Cash 0 1,081,514 0 0 0
Investments 1,405,836 286,557 1,270,332 819,359 781,914
DEFERRED CHARGES
Net of amortization*131,086 147,178 163,858 181,087 214,395
PROPERTY, PLANT AND EQUIPMENT
Land 447,326 447,326 447,326 447,326 447,326
Buildings 6,693,699 6,693,699 6,693,699 6,693,699 6,693,699
Improvements other than
buildings 7,426,680 7,284,008 7,284,008 7,278,303 7,278,303
Equipment 71,455 38,380 35,138 35,138 32,763
Construction progress 6,467,996 2,005,072 69,654 34,782 0
21,107,156 16,468,485 14,529,825 14,489,248 14,452,091
Accumulated depreciation (2,483,827) (2,122,900) (1,763,706) (1,404,597) (1,045,576)
18,623,329 14,345,585 12,766,119 13,084,651 13,406,515
TOTAL ASSETS 21,627,277$ 16,099,097$ 14,701,030$ 14,660,714$ 14,605,306$
CURRENT LIABILITIES
Deficit in cash 0$ 19,691$ 0$ 0$ 113,431$
Accounts and interest payable 682,974 1,268,768 81,325 89,094 90,022
Payroll payable 6,484 1,631 1,106 2,967 3,518
Compensated absences payable 14,845 4,829 4,727 6,683 5,534
Due to other funds 145,177 0 0 0 0
Deferred revenue 21,762 23,335 24,909 26,482 30,144
Capital lease obligations, current 0 0 0 0 0
Current portion of long-term debt 370,000 435,974 340,632 317,042 295,000
TOTAL CURRENT LIABILITIES 1,241,242 1,754,228 452,699 442,268 537,649
LONG-TERM DEBT
Revenue bonds payable, non-current 7,715,000 8,085,000 8,435,000 8,765,000 9,080,000
Other long-term debt, non-current 4,233,893 0 77,941 88,914 95,000
TOTAL LONG-TERM DEBT 11,948,893 8,085,000 8,512,941 8,853,914 9,175,000
FUND EQUITY
Contributed capital
Developers 691,345 691,345 691,345 691,345 691,345
Other governments 483,184 505,350 527,515 549,680 571,845
City contributed 870,985 870,985 870,985 870,985 870,985
TOTAL CONTRIBUTED CAPITAL 2,045,514 2,067,680 2,089,845 2,112,010 2,134,175
Retained earnings
Unreserved 6,391,628 4,192,189 3,645,545 3,252,522 2,758,482
TOTAL FUND EQUITY 8,437,142 6,259,869 5,735,390 5,364,532 4,892,657
TOTAL LIABILITIES AND FUND EQUITY 21,627,277$ 16,099,097$ 14,701,030$ 14,660,714$ 14,605,306$
*Net of amortization - $122,057, $105,965, $89,285, $72,056, $38,749 for years 2002, 2001, 2000, 1999 and 1998 respectively
Source: Derived from Audited Financial Reports of the City of McCall
20
City of McCall Water Fund
Statement of Revenues, Expenses and Changes in Fund Equity
(Years Ended September 30)
2002 2001 2000 1999 1998
OPERATING REVENUES
Charges for services 1,634,403$ 1,697,846$ 1,740,561$ 1,674,145$ 1,301,728$
Other 3,176 6,333 4,178 2,227 4,206
TOTAL OPERATING REVENUES 1,637,579 1,704,179 1,744,739 1,676,372 1,305,934
OPERATING EXPENSES
Personal services 219,873 203,624 81,276 109,076 89,915
Contractual services 123,892 228,097 270,781 70,763 132,512
Materials and supplies 44,906 39,418 35,597 27,733 46,576
Utilities 66,104 49,602 56,207 60,846 41,119
Repairs and maintenance 12,980 28,534 246,993 189,135 168,523
Depreciation and amortization 377,019 375,874 376,338 392,328 353,839
Bad debt expense 0 0 0 0 7,100
TOTAL OPERATING EXPENSES 844,774 925,149 1,067,192 849,881 839,584
OPERATING INCOME (LOSS)792,805 779,030 677,547 826,491 466,350
NONOPERATING REVENUES (EXPENSES)
Interest income 57,550 87,237 37,220 36,443 31,246
Hook-on fees in excess of cost 225,015 184,341 107,137 172,037 101,590
Capital grant revenue 1,636,615 0 0 0 0
Interest expense (534,712) (526,129) (545,970) (563,096) (571,535)
TOTAL NONOPERATING
REVENUES (EXPENSES)1,384,468 (254,551) (401,613) (354,616) (438,699)
NET INCOME (LOSS)2,177,273 524,479 275,934 471,875 27,651
(1)22,166 0 22,165 22,165 22,165
RETAINED EARNINGS AT
BEGINNING OF YEAR, as restated 4,192,189 3,667,710 3,347,446 2,758,482 2,708,666
RETAINED EARNINGS AT END OF YEAR 6,369,462$ 4,192,189$ 3,645,545$ 3,252,522$ 2,758,482$
(1)Add depreciation on fixed assets acquired by capital grants that reduces contributed capital from other governments
Source: Derived from Audited Financial Reports of the City of McCall
21
Budgetary Process and Controls
The budget process is mandated by Idaho Code, Section 50-1001 and following. It requires preparation of
a preliminary financial plan and presentation of that plan to the City Council which sets a hearing and
then is obligated to adopt a balanced budget. Tax levies are then certified to the County for assessment in
early September.
The City’s budget procedure is substantially as follows: (i) prior to August 15 of each year, City staff
prepares and present a preliminary budget to the City Council; (ii) the preliminary budget is then
considered and revised, if necessary, by the City Council; and (iii) the final budget is approved by the
City Council at or prior to its September meeting. Budget amendments, if any, require City Council
approval.
City of McCall Adopted Budget
Water Fund
2002-03
Revenue
Operations 1,572,943$
Intergovernmental 600,000
Other 330,076
Total Revenue 2,503,019$
Expenditures
Personnel 224,662$
Maintenance and Operation 250,098
Equipment/Capital 140,042
Debt Service:
Principal 502,962
Interest 545,136
Transfer 170,309
Contingency 67,810
Other 2,000
Total Water Fund Expenditures 1,903,019
Engineer Services 48,000
WTP Construction 522,000
Administration/Legal 15,000
Contingency 15,000
Total Water Treatment Project 600,000
Total Expenditures 2,503,019$
Source: City of McCall Adopted 2002-03 Budget
Fiscal Year
The City’s Fiscal Year begins October 1, and ends September 30.
Risk Management
The City is covered for property and casualty, as well as liability insurance through the Idaho Counties
Reciprocal Management Program (ICRMP). The City’s exposure to loss from its participation in ICRMP
is limited to the extent of their deductible only. ICRMP is a trust formed in 1985 by 40 Idaho counties to
provide for reasonably priced property and casualty insurance. Initially, this was for the counties only,
22
however, this service became available to all Idaho political subdivisions in 1989. Currently 42 counties
and 87 cities are enrolled in the ICRMP.
The City also partially self-insures health and accident insurance. An internal service fund is provided to
account for uninsured risks of loss. Self-insurance is limited to the difference between the deducible paid
by the employee and the deductible covered by the insurance policy. On October 1, 2001, the City began
contributions to employees’ flexible spending account and ceased using self-insurance fund for new
activity.
Public Employee Retirement System
The District’s employees are covered under the Public Employee Retirement System of Idaho (“PERSI”).
PERSI is the administrator of a multiple-employer cost-sharing defined benefit public employee
retirement system. A retirement board, appointed by the governor and confirmed by the legislature,
manages the system which includes selecting investment managers to direct the investment, exchange
and liquidation of assets in the managed accounts and to establish policy for asset allocation and other
investment guidelines. The retirement board is charged with the fiduciary responsibility of
administering the plan.
PERSI membership is mandatory for eligible employees of participating employers. Employees must be:
(i) working 20 hours per week or more; (ii) teachers working a half-time contract or greater; or
(iii) persons who are elected or appointed officials. Membership is mandatory for State agency and local
school district employees, and membership by contract is permitted for participating political
subdivisions such as cities and counties. As of June 30, 2002, PERSI had 62,376 active members, 18,267
inactive members (of whom 7,330 are entitled to vested benefits), and 24,018 annuitants. PERSI collects
contributions from employees and employers to fund retirement, disability, death and separation
benefits, as provided by Chapter 13, Title 59, Idaho Code.
The PERSI actuary has confirmed that the current schedule of contribution rates will at least meet the
normal costs of the system as they accrete. Because there is an Unfunded Actuarial Liability, there is an
amortization period of the Unfunded Actuarial Liability of 10.2 years.
Source: Public Employee Retirement System of Idaho.
The City contributions required and paid were $161,063, $160,951, and $156,286 for the years ended
September 30, 2002, 2001, and 2000.
Investment Practices
The City has not adopted a formal investment policy, but is governed by Idaho Code 67–1210.
Chapter 12 of Title 67, Idaho Code, provides authorization for the investment of funds as well as specific
direction as to what constitutes an allowable investment. City procedures are consistent with the State
code. The code limits investments to the following general types: (a) certain revenue bonds, General
Obligation Refunding Bonds, local improvement district bonds and registered warrants of state and local
governmental entities; (b) time deposits accounts, tax anticipation and interest-bearing notes; (c) bonds,
treasury bills, debentures or other similar obligations of the United States government and the Farm
Credit System and (d) repurchase agreements.
Investments are stated at fair value, as determined by quoted market prices, except for the certificates of
deposit, which are non-participating contracts, and therefore carried at amortized cost. The City pools its
investment funds to maximize interest income. The City allocates interest income based on month-end
balances.
23
Annexations
Since 1997, the City has annexed 913.16 acres and will consider annexation of an addition 59.239 acres on
June 12, 2003. At this time, the City has no plans for major annexations in the near future.
A table of recent annexations follows.
City of McCall -- Annexations
Calendar Year
Ordinance
No.
Number
of Acres Use of Property
1999 730 195.96 Agricultural with two dwellings.
2001 759 683.73 Agricultural proposed for residential development
2001 760 33.47 Industrial – wastewater treatment plant
2003 (proposed) 776 59.239 Industrial – airport use
Source: City of McCall
City Facilities and Services
The City of McCall is a supplier of water and has to ensure an adequate water supply, guard against the
effects of drought, and continually be prepared to protect its water supply from the encroachment and
depletion, protect its water quality from contamination, and its water rights from legal challenge.
The operations and maintenance of the Water System is the responsibility of the City’s Public Works
Department. The Public Works Department has 2 employees dedicated to water treatment and 7
employees dedicated to water distribution.
Water Supply
The City of McCall obtains its municipal raw water supply from Payette Lake. Water is pumped at two
locations on the lake; the Lake Street and Davis Beach pumping stations, drawing water at approximately
50 feet below the average surface water level.
Lake Street Pump Station. Lake Street Pump Station is located near the intersection at East Lake Street and
Pine Street, operates throughout the year, and supplies the majority of McCall’s potable water. The
station’s output pressure is typically 80 pounds per square inch (psi) at discharge rates up to 1200 gallons
per minute, (gpm). Lake Street Station is capable of discharging 1,900 gpm at 40 psi.
Davis Beach Pump Station. Davis Beach Pump Station is located west of the intersection of Lick Creek
Road and Davis Avenue. This station is primarily employed to be a backup station to the Lake Street
Station because it does not have backup generator power, its water quality is less consistent, and has less
volume capacity. The Station is capable of discharging 1,400 gpm at 50 psi.
Shore Lodge Pump Station. The role of the Shore Lodge Pump Station is to boost system pressure on the
west side of McCall to points of furthest distance from the McCall Water plant. The system pressure is
boosted to near 90 psi to assure adequate household and firefighting pressure.
Each of the three pump stations have appurtenant water rights which define the rate of diversion allowed
from Payette Lake and, the maximum allowable pumping rate. The water rights for Lake Street and
Davis Beach Pump Stations are decreed, meaning that the originally requested diversion rate has been
adjusted, through examination by Idaho Department of Water Resources, and subsequently court
appointed to reflect the maximum capacity of the pump stations. The individual water rights per station
are listed in the following table.
24
City of McCall
Municipal Water Rights
Diversion Priority
Pump Station Rate (mgd) Date Status
Lake Street 3.32 6/1/1918 Decreed
Davis Beach 1.49 6/1/1968 Decreed
Shore Lodge 3.46 3/29/1983 Permit
Source: City of McCall
Storage
The City’s System is designed to meet the current and projected 20-year demand needs of the City. The
Master Plan calls for the construction of 2 separate storage tanks handling a combined capacity of
1.9 million gallons of water. One tank is located on the west side and one on the east side of the City.
The storage tanks are buried concrete, resistant to freezing during the winter months. Additional booster
pumps, pressure reducing valves, transmission pipes and distribution pipes are included. The City has
no storage at this time. The east storage tank is the highest priority for the City.
Water Treatment Plant
The water treatment plant removes 99 percent of particles in the water through filtration. Water is
disinfected through gas pre-chlorination and post filter with sodium hypochlorite which is generated on
site at the plant. The plant reduces the turbidity of the water from approximately .45 Nepholometric
Turbidity Units (“NTU”, the standard measurement of turbidity) to less than .10 NTU. An appropriate
ph of the water is maintained in order to prevent distribution pipe corrosion. The water plant has a
capacity of 6 million gallons a day.
Distribution System
Treated water is distributed to customers through a distribution system of 4-inch to 12-inch diameter
distribution lines constructed of cast, ductile iron, transite, and plastic pipe. The water system was first
installed during the 1950’s. Expansion and improvements have been made as the needs arrived and as
finances permitted. Such improvements have included upgrading the transmission lines and
rehabilitating the pumping stations.
Capital Improvement Plan
The City prepared a Water System Master Plan in 1993, which was most recently revised and approved
by the City Council in 2001. The current Master Plan includes the following list of projects that are
identified as the highest priority for the City’s System. The City expects that the projects will be paid for
with the remaining authorized funds from the DEQ Loan (see “City Indebtedness – Water Revenue
Bonds” herein) or surplus funds of the System.
25
Capital Improvement Plan Priority Projects
Priority Description
Approximate Pipe
Length in Feet
Probable
Cost
1 1 mg East storage tank (including pumps,
transmission lines and PRV’s)
3,500 $1,200,000
2 12-inch line on Rio Vista and Boydstun Street (12-
inch river crossing to Boydstun Street to Hwy. 55)
9,850 847,100
3 6-inch line on Rio Vista (Rowland Street to Sunny
Way) and Gabi Lane
7,980 535,000
4 8-inch line on Third Street (Floyde Street to Park
Street)
2,940 212,000
5 6-inch line on Davis Avenue (Wanda Avenue to
Ruby Street)
4,660 312,000
6 12-inch line on Spring Mountain Blvd. (connect the
12-inch line from Majestic View Drive to the 12-inch
line from Lick Creek Road)
1,280 110,000
7 10-inch line on Hwy. 55 (M Resorts to Knowles
Road)
3,600 288,000
8 8-inch line on Boydstun Lane and Hayes Street
(Hwy 55 to Herrick Street)
1,560 113,000
9 6-inch line on Louisa Avenue (Pine Street to
Hemlock Street)
1,050 70,000
10 8-inch line on Miles Standish Road (University Lane
to Carico Road)
700 50,000
11 6-inch lines on Allen Avenue, Timm Street and
McGinnis Street
2,220 149,000
12 6-inch line on Saddlehorn Lane (Baycolt Way to
Buckboard Way)
750 50,000
Source: City of McCall Water System Master Plan, 2001 Revision
Collection of User Charges
The City bills its charges on a monthly basis using a computerized billing system. Payments are due on
the 1st and late after the 10th following the month in which the bills have been issued. Failure to pay
billed charges in a timely manner results in a late charge of 10 percent of the past due balance. A
1.5 monthly service charge is added to any utility bill not paid within 30 days after the due date. Failure
to pay the bill in full may result in disconnection of service.
Residential customers are metered and charged a base monthly rate of $38.70 plus $1.04 per 1000 gallons.
Commercial users are metered and charged a base monthly rate of $42.70 plus $1.04 per 1000 gallons. All
connections are metered, billing is based on water usage and the water rate structure reflects a minimum
monthly charge and a charge for all gallons consumed.
The following chart lists the ten largest Water System customers in April 2003 based upon water billings
to each of the individual customers in the chart. No independent investigation has been made of the
financial condition of the users listed or that such users will continue to be major customers of the Water
System in the future.
26
CITY OF MCCALL
Ten Largest Customers
(As of April 2003)
Customer Bill % of Total(1)
Aspen Condo Association $3,854 3.1%
Timberlake Condo Association 2,134 1.7
Whitetail – Riversedge Condominiums 1,566 1.2
Village Condo Association 1,538 1.2
Westwind Condo Association 1,500 1.2
Hunt, Robert (Holiday Inn Express) 1,272 1.0
Ponderosa Arms 1,251 1.0
Lakeview Village 978 0.7
Fircrest Condominiums 881 0.7
Wildwood Condominiums 769 0.6
(1) Based on total April 2003 bill of $123,327.
Source: City of McCall
Connection Fees
New customers are assessed connection fees at or prior to the date when service is physically connected
to the Water System. Connection fees are included as Gross Revenue and designed to cover the City’s
cost of inspection and to defray a portion of the cost of necessary capital improvements to serve new
growth and prevent growth from increasing costs to existing customers.
Resolution No. 1-97 Connection to the City Water System was passed on January 23, 1997. The charge for
installing any initial water connection to a new service location is the greater of $4,400, or actual labor and
material costs plus $3,750, per dwelling unit or commercial unit, of which 3,750. per dwelling unit or
commercial unit is held and administered as part of the Water Capital Improvements Fund. The number
of units is calculated as follows:
(1) in the case of condominium development, by the number of separately described occupable
units, according to declaration and survey plans;
(2) in the case of multifamily housing, by the number of kitchens; and
(3) in the case of hotels and motels, by the City Council on the basis of equivalent single family
residential units as done with reference to sewer service connection fees.
The City Council reviews the connection fee schedule annually in order to charge each new property
served by the Water System an appropriate amount based on the value of the then existing facilities.
Rates and Charges
City Resolution 01-22 Water Rates, enacted November 29, 2001, established the current rates for water
service as follows:
Water Service Rates and Charges
(City Resolution No. 01-22)
Residential $38.70 per month plus $1.04 per 1,000 gallons
Commercial $42.70 per month plus $1.04 per 1,000 gallons
27
Below is a table of water rate and connection charges for the City over the past five years.
Commercial Customers Residential Customers
Fiscal # of New Connection # of New Connection
Year Connections Charge Connections Charge
1998 2 $4,400 29 4,400
1998 1 3,765 20 0-Certificate(1)
1998 1 4,962 -- --
1999 2 4,400 34 4,400
1999 1 7,775 1 0-Certificate(1)
2000 1 6,537 30 4,400
2000 1 8,000 -- --
2000 1 19,400 -- --
2001 1 27,640 38 4,400
2001 3 4,400 -- --
2002 4 4,400 49 4,400
2002 1 9,487 -- --
2002 1 9,166 -- --
2002 1 64,400 -- --
(1) Certificates were issued to the developer of Spring Mountain Ranch.
Customers and Demand
On May 16, 2003, the City has 2,148 customers of which approximately 85.9 percent are residential
(including multi-family and mobile home parks) and 14.1 percent are commercial. Each year,
approximately 100 additional customers are added during the summer season of June through August.
The City serves approximately 25 customers outside its boundaries. Users outside the City limits may
not be charged less for service than resident users, but may be charged more.
During 2002, approximately 261 million gallons of water were delivered to the users of the Water System.
A critical feature of this demand is its seasonal nature, ranging from a low of approximately 13 million
gallons during April to a peak of approximately 51 million gallons during July.
The total number of Water System accounts has grown at a steady rate over the past ten years from 1,900
accounts in 1992 to 2,204 accounts in 2002. Although the exact number of customers was not tracked on
an annual basis from 1996 until 2001, the average annual increase in the number of water customers in
each of the last ten years is 1.5 percent.
The table below provides a historical view for the last five years of the City’s water demand.
City of McCall – Water Demand
(Fiscal Years Ended September 30)
Fiscal Avg. Daily Peak Total
Year Demand(1) Demand(1) Water Delivery(2)
1998 .72 1.52 261
1999 .79 1.61 289
2000 .76 1.68 279
2001 .75 1.48 272
2002 .78 1.32 283
(1) Millions of gallons per day. (2) Millions of gallons.
28
Demographic Information
The City
The City is located approximately 110 miles north of Boise, Idaho’s capital city. It is situated, at an
elevation of 5,027 feet above sea level, on the edge of a 5,337 acre glacial lake called Payette Lake, in the
Salmon River Mountains. Recreation and tourism are among the primary industries in the area with
Brundage Mountain Resort, a premier ski area, located within 10 miles of the City and Ponderosa State
Park bordering the City. In the summer months, McCall’s population increases to over 12,000 and in the
winter, the Winter Carnival attracts well over 30,000 visitors.
The County
The County is located in the west-central mountains of Idaho. It ranks 31st among Idaho counties in
population and 5th in area with 3,733 square miles. About 1.5 percent (or 53.8 square miles) of the county
is water. The federal government owns nearly 88 percent. It was established February 26, 1917 with its
county seat at Cascade.
Population
1980 1990 2000 2001 2002(1)
Valley County 5,604 6,109 7,651 7,716 7,526
City of McCall 2,188 2,005 2,084 N/A N/A
(1) Idaho County Population Estimates
Source: Bureau of the Census
Income: Historic personal income and per capita income levels for the Valley County and the state are
shown below:
Idaho and Valley County
Total Personal and Per Capita Income
Valley County Idaho Total Personal Per Capita Total Personal Per Capital Year Income (millions) Income Income Income
2001 $217 $28,315 $32,525 $24,621
2000 210 27,527 30,827 23,640
1999 195 25,528 28,538 22,387
1998 186 23,982 27,066 21,622
1997 176 22,400 25,226 20,525
Source: Division of Financial Management
29
Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable
retail sales for the City and the County are shown below:
Valley County
Retail Sales History
(FY Ending 6/30)
Fiscal
Year Taxable Sales Taxes Paid/Due
2003 (1) $ 18,447,660 $ 935,434
2002 (2) 80,140,787 4,092,308
2001 (3) 58,890,211 3,105,163
2000 65,468,502 3,366,317
1999 59,628,071 3,008,416
(1) First Quarter Only
(2) In correspondence from the Idaho State Commission, dated April 4, 2003, to the Associated Taxpayers of Idaho,
it was stated that the reports for FY2001 and 2002 were affected by periodic interruptions during creation of a new
computer system which may have caused sales tax figures to be reported a) in a time period that may or may not
have been the correct time period or b) in an accurate amount. Additionally, sales by businesses with more than
one location in the state or those with headquarters outside the state are listed elsewhere in the reports, therefore
sales shown for each county are not a complete picture of how much was sold within any particular county.
(3) FY2002 differs from FY2001 and prior , in that taxes previously reported as Taxes Collected are now reported as
Taxes Due
Note: The tax rate is five percent.
Source: Idaho State Tax Commission
Building Permits. The number and valuation of new residential, non-residential, and additions, alterations
and repairs in the County are show below:
Valley County
Building Construction
New Construction Values
Dwelling Total New New Add, Alt Total
Year Units Permits Resid. Non-Resid. & Repairs Construction
2003(1) 1 12 $300,000 $ 125,000 $ 98,940 $ 523,940
2002 196 397 25,552,800 10,815,000 4,152,499 40,520,299
2001 157 436 20,709,886 1,845,529 5,760,629 28,316,044
2000 156 485 21,331,949 6,611,984 4,042,026 31,985,959
1999 157 455 20,860,950 2,107,872 4,804,700 27,773,522
1998 156 382 17,129,680 1,720,918 3,702,497 22,553,095
(1) Through February
Source: Idaho Construction Report
Recent developments.
o On April 8, 2003, Tamarack, a $1.2 billion four season resort, (formerly West Rock) gained a 49
year lease and permits to construct the first ski resort to be built in Idaho in 20 Years. The
completed resort will offer an 18-hole golf course, Nordic and alpine skiing, hiking trails and
lakeside amenities. Projected grand opening is schedule for the summer of 2005.
o McCall RV Resort – an upscale recreational vehicle park on the north fork of the Payette River in
McCall. The resort will include space for approximately 240 high-end RV’s and a complex to
include a reception hall, banquet room, industrial kitchen, swimming pool and sauna.
30
o McCall Ice Rink and Event Center - ground was broken in early May on the $5.6 million ice rink.
Projected to be a year round rink built to NHL specifications, the complex is scheduled to open
by July 4, 2003.
Market Valuation. A five year history of assessed valuation for the City of McCall and Valley County is
shown below:
Year City of McCall % Change Valley County % Change
2002 $ 432,633,524 4.43% $ 1,521,462,736 5.48%
2001 414,278,453 5.01 1,442,473,317 4.03
2000 394,495,458 4.49 1,386,537,407 4.34
1999 377,540,837 0.03 1,328,830,901 1.89
1998 377,436,567 - - - 1,304,153,867 - - -
Industry and Employment. The following table provides information regarding the civilian labor force in
Valley County and is followed by tables that list the major employers in the City of McCall and for Valley
County.
Valley County
Resident Labor Force, Unemployment & Employment
(By Place of Residence)
Average Annual (1)
2002 2001 2000 1999 1998
Civilian Labor Force 4,045 4,102 4,107 4,044 4,188
Unemployment 372 342 320 375 388
Percent of Labor Force 9.2% 8.3% 7.8% 9.3% 9.3%
Total Employment 3,673 3,760 3,787 3,669 3,800
(1) Columns may not add to totals due to rounding
Source: Idaho Department of Labor, “Idaho Employment” newsletter
Major Employers
(as of June 2003)
Number of
Employer Product/Service Employees
Federal government, including
agriculture and forestry (1) Government 310
McCall-Donnelly School District (2) Education 210
Brundage Ski Resort (3) Recreation; ski resort 200/30-40
McCall Memorial Hospital Health services 130
Paul’s Market Retail grocery 80
Whitetail Club Hospitality 73
City of McCall Government 70
Lardo’s Grill and Saloon Food Service 35
Ridley’s Retail grocery 34
Franklin Building Supply Lumber & construction products 20
Lumberman’s Building Center Lumber & construction products 23
Best Western McCall Hospitality 14
(1) Annual average
(2) Includes part-time and substitutes
(3) Numbers reflect high season and low season
Source: Human Resource Departments of individual employers
31
The Initiative Process
Title 34, Chapter 18 of the Idaho Code reserves to the people of the State the initiative and referendum
power pursuant to which measures designed to amend the State Constitution or enact legislation, can be
placed on the statewide general election ballot for consideration by the voters. “Referendum” generally
means measures which have been passed by the legislature and then referred to the electors by a
legislative body, such as the State Legislative Assembly or the governing body of a District, county or
other political subdivision, or by petition prior to its effective date. “Initiative” generally means a new
measure placed before the voters as a result of a petition circulated by one or more private citizens.
Any person may file a proposed initiative with the Idaho Secretary of State’s office. The Idaho Attorney
General is required by law to review and make recommendations (if any) on the petition before issuing a
review to the Secretary of State. The Attorney General, after a specified time period, shall then be
directed by the Secretary or State to provide a ballot title for the initiative. Any elector that submitted
written comments who is dissatisfied with the ballot title certified by the Attorney General may petition
the Idaho Supreme Court seeking a revision of the certified ballot title.
Once the ballot title has been certified and the Secretary of State has authorized the petitioners, the
proponents of the initiative, during an 18 month circulation period or until April 30 in an election year,
whichever occurs first, may start gathering the initiative petition signatures necessary to place the
proposed initiative on the ballot. To be placed on a general election ballot, the proponents of a proposed
initiative must submit to the Secretary of State initiative petitions signed by a number of qualified voters
equal to a specified percentage of the qualified electors at the general election next preceding the filing of
the petition with the Secretary of State. For the November 5, 2002, general election the requirements were
six percent (43,685 signatures and included in this amount a minimum of 6 percent from each of the 22
counties) for all petitions for initiatives or referendums; this amount will decrease to 40,772, or 6 percent
of the number of qualified electors that voted at the November 5, 2002 election, for the November 2, 2004
general election. Any elector may sign an initiative petition for any measure on which the elector is
entitled to vote. (Note: United States District Judge B. Lynn Winmill ruled on November 30, 2001 that the
provision requiring a minimum of 6 percent of the elector signatures be from each of 22 counties was
unconstitutional in the Idaho Coalition United For Bears, et al, v. Pete T. Cenarrusa case. This ruling was
upheld and the requirement calling for a minimum of 6 percent from each of the 22 counties will not be
valid for the November 2, 2004 election or subsequent elections.)
The initiative petition must be filed with the Secretary of State not less than four months prior to the
general election at which the proposed measure is to be voted upon. State law permits persons
circulating initiative petitions to pay money to persons obtaining signatures for the petition. If the person
obtaining signature is being paid, the signature sheet must contain a notice of such payment.
Historical Initiative Petitions
According to the Elections Division of the Idaho Secretary of State, the number of initiative petitions that
have qualified for the ballot in the past decade, and the number that have passed in the general elections
in the years since 1992 are as follows:
32
Number of Number of
Year of Initiatives that Initiatives that
General Election Qualified Passed
2002 2 1
2001 0 0
2000 0 0
1999 0 0
1998 1 1
1996 4 1
1994 2 1
1992 1 0
Source: Elections Division, Idaho Secretary of State; 2002 INITIATIVE HISTORY Elections Division
For additional information concerning certain previous initiative measures which have been adopted by
the voters, see “Property Tax” herein.
Tax Exemption
General
Exclusion from Gross Income. In the opinion of Bond Counsel, under existing federal law and assuming
compliance by the City with applicable requirements of the Code, that must be satisfied subsequent to the
issue date of the Bonds, interest on the Bonds is excluded from gross income of registered owners for
federal income tax purposes under existing federal law and is not an item of tax preference for purposes
of the alternative minimum tax applicable to individuals.
Continuing Requirements. The City is required to comply with certain requirements of the Code after the
date of issuance of the Bonds in order to maintain the exclusion of the interest on the Bonds from gross
income for federal income tax purposes, including, without limitation, requirements concerning the
qualified use of Bond proceeds and the facilities financed or refinanced with Bond proceeds, limitations
on investing gross proceeds of the Bonds in higher yielding investments in certain circumstances, and the
requirement to comply with the arbitrage rebate requirements to the extent applicable to the Bonds. The
City has covenanted in the Bond Ordinance to comply with those requirements, but if the City fails to
comply with those requirements, interest on the Bonds could become taxable retroactive to the date of
issuance of the Bonds. Bond Counsel has not undertaken and does not undertake to monitor the City’s
compliance with such requirements.
Corporate Alternative Minimum Tax. While interest on the Bonds also is not an item of tax preference for
purposes of the alternative minimum tax applicable to corporations, under Section 55 of the Code,
tax-exempt interest, including interest on the Bonds, received by corporations is taken into account in the
computation of adjusted current earnings for purposes of the alternative minimum tax applicable to
corporations (as defined for federal income tax purposes). Under the Code, alternative minimum taxable
income of a corporation will be increased by 75 percent of the excess of the corporation’s adjusted current
earnings (including any tax-exempt interest) over the corporation’s alternative minimum taxable income
determined without regard to such increase. A corporation’s alternative minimum taxable income, so
computed, that is in excess of an exemption of $40,000, which exemption will be reduced (but not below
zero) by 25 percent of the amount by which the corporation’s alternative minimum taxable income
exceeds $150,000, is then subject to a 20 percent minimum tax.
For taxable years beginning after December 31, 1997, the corporate alternative minimum tax is repealed
for a small business corporation that had average gross receipts of less than $5 million for the three-year
period beginning after December 31, 1994, and such a small business corporation will continue to be
exempt from the corporate alternative minimum tax so long as its average gross receipts do not exceed
$7.5 million.
33
Tax on Certain Passive Investment Income of S Corporations. Under Section 1375 of the Code, certain excess
net passive investment income, including interest on the Bonds, received by an S corporation (a
corporation treated as a partnership for most federal tax purposes) that has Subchapter C earnings and
profits at the close of the taxable year may be subject to federal income taxation at the highest rate
applicable to corporations if more than 25 percent of the gross receipts of such S corporation is passive
investment income.
Foreign Branch Profits Tax. Interest on the Bonds may be subject to the foreign branch profits tax
imposed by Section 884 of the Code when the Bonds are owned by, and effectively connected with a trade
or business of, a United States branch of a foreign corporation.
Certain Other Federal Tax Consequences
Bonds “Qualified Tax-Exempt Obligations” for Financial Institutions. Section 265 of the Code provides that
100 percent of any interest expense incurred by banks and other financial institutions for interest allocable
to tax-exempt obligations acquired after August 7, 1986, will be disallowed as a tax deduction. However,
if the tax-exempt obligations are obligations other than private activity bonds, are issued by a
governmental unit that, together with all entities subordinate to it, does not reasonably anticipate issuing
more than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations
not required to be included in such calculation) in the current calendar year, and are designated by the
governmental unit as “qualified tax-exempt obligations,” only 20 percent of any interest expense
deduction allocable to those obligations will be disallowed.
The City is a governmental unit that, together with all subordinate entities, reasonably anticipates issuing
less than $10,000,000 of tax-exempt obligations (other than private activity bonds and other obligations
not required to be included in such calculation) during the current calendar year, and has designated the
Bonds as “qualified tax-exempt obligations” for purposes of the 80 percent financial institution interest
expense deduction. Therefore, only 20 percent of the interest expense deduction of a financial institution
allocable to the Bonds will be disallowed for federal income tax purposes.
Reduction of Loss Reserve Deductions for Property and Casualty Insurance Companies. Under Section 832 of
the Code, interest on the Bonds received by property and casualty insurance companies will reduce tax
deductions for loss reserves otherwise available to such companies by an amount equal to 15 percent of
tax-exempt interest received during the taxable year.
Effect on Certain Social Security and Retirement Benefits. Section 86 of the Code requires recipients of
certain Social Security and certain Railroad Retirement benefits to take receipts or accruals of interest on
the Bonds into account in determining gross income.
Other Possible Federal Tax Consequences. Receipt of interest on the Bonds may have other federal tax
consequences as to which prospective purchasers of the Bonds may wish to consult their own tax
advisors.
Original Issue Discount. The Bonds maturing on December 1 in the years ___ through ___, inclusive, are
“Discount Bonds.” In the opinion of Bond Counsel, the difference between the principal amount of the
Discount Bonds and the initial offering price to the public (excluding bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriter or wholesalers) at which price a substantial
amount of such Discount Bonds of the same maturity was sold constitutes original issue discount, which
is excluded from gross income for federal income tax purposes to the same extent as interest on the
Discount Bonds. Further, this original issue discount accrues on the basis of a constant yield to maturity
over the term of each Discount Bond and the basis of each Discount Bond acquired at such initial offering
price by an initial purchaser thereof will be increased by the amount of such accrued original issue
discount.
34
Legal and Underwriting
Litigation
There is no litigation pending questioning the validity of the Bonds or the power and authority of the
City to issue the Bonds.
As of the date of this Official Statement, the City is no longer involved in any litigation regarding the
water system. For historical purposes only, in 1996, pursuant to a valid bond funding and in conjunction
with the City’s Master Plan, the City initiated construction of what became known as Phase 1 of the City
water treatment facility. This facility consists of an intake, chlorination, and gravity sand filtration
system to provide City compliance with the Clean Water Act, the Safe Drinking Water Act, and the
Surface Water Treatment rules promulgated by the Environmental Protection Agency, and adopted by
DEQ.
The Master Plan had called for completion of the entire water treatment facility in 1996, however, due to
issues related to bid costs for the facility, and the available funding, the project was, with DEQ consent,
split into two phases with intake, chlorination, fire safety, and distribution facilities constructed in the
Phase 1 construction in 1996. At the same time, in July of 1996, the City initiated litigation against James
M. Montgomery Engineering, now Montgomery Watson America’s Inc. This litigation went to trial in
1998 with the City obtaining a verdict in its favor and a judgment in the amount of $1.8 Million Dollars.
In subsequent proceedings, the judgment was reversed, and the case proceeded forward to a new trial on
the issue of damages, with the matter subsequently being reset for trial for September, 2003. In December
of 2003, the City completed construction of Phase 2 of the water treatment facility including the gravity
sand filtration component. In May of 2003, the City and Montgomery reached a settlement resulting in
dismissal of the lawsuit. The terms of the settlement are subject to a confidentiality agreement between
the parties, and the case was dismissed with prejudice by Order of the Court dated, May 9, 2003.
Approval of Counsel
Legal matters incident to the authorization, issuance and sale of Bonds by the City are subject to the
approving legal opinion of Bond Counsel, substantially in the form attached hereto as Appendix B. Bond
Counsel has reviewed this document only to confirm that the portions of it describing the Bonds, the
Ordinance and the authority to issue the Bonds conform to the Bonds and the applicable laws under
which they are issued.
Conflicts of Interest
All or a portion of the fees of the Underwriter and Bond Counsel are contingent upon the issuance and
sale of the Bonds. In addition, Bond Counsel serves as General Counsel to the City. None of the City
Council members or other officers of the City has any conflict of interest in the issuance of the Bonds that
is prohibited by applicable law.
Official Statement
The City hereby deems this Preliminary Official Statement pursuant to Securities and Exchange
Commission Rule 15c2-12 as final as of its date except for the omission of information dependent upon
the pricing of the issue and the completion of the underwriting agreement, such as offering prices,
interest rates, selling compensation, aggregate principal amount, principal amount per maturity, delivery
dates, ratings, and other terms of the Bonds dependent on the foregoing matters.
35
Underwriting
The Bonds are being purchased by Seattle-Northwest Securities Corporation acting as the Underwriter.
The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased,
at a price of ________ percent of the par value of the Bonds, plus accrued interest. The Bonds will be
reoffered at an average price of ______ of the par value of the Bonds. After the initial public offering, the
public offering prices may be varied from time to time.
Continuing Disclosure
The Securities and Exchange Commission has published amendments to Rule 15c2-12 (the “Rule”) that
require at least annual disclosure of current financial information and timely disclosure of certain events
with respect to the Bonds, if material. Pursuant to the Rule, the City has agreed to provide to each
nationally recognized municipal securities information repository and to the appropriate state
information depository, if any, audited financial information of the City and certain financial information
or operating data. In addition, the City has agreed to provide to the Municipal Securities Rulemaking
Board and to any state information repository, notice of certain events, pursuant to the requirements of
Section (b)(5)(i) of the Rule. The City failed to comply with its prior undertakings for the period ending
September 30, 1998. The City subsequently complied in July of 2000 and has since been in compliance
with the filing requirements under its continuing disclosure undertakings.
A copy of the City’s continuing disclosure undertaking for the Bonds is attached hereto as Appendix D.
Concluding Statement
The information set forth herein has been obtained from the City and other sources that are believed to be
reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a
representation, warranty or guarantee by the Underwriter. So far as any statement herein includes
matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they
are intended merely as such and not as representations of fact.
The information contained herein should not be construed as representing all conditions affecting the
City or the Bonds. Additional information may be obtained from the City. The statements relating to the
Resolution are in summarized form, and in all respects are subject to and qualified in their entirety by
express reference to the provisions of such document in its complete form.
The agreements of the City are set forth in such documents, and the information assembled herein is not
to be construed as a contract with Owners of the Bonds. Information with respect to the City set forth in
this Official Statement has been supplied by the City, and the Underwriter has relied on the City with
respect to the accuracy and sufficiency of such information.
36
Appendix A
Bond Ordinance
ORDINANCE NO. _________
AN ORDINANCE OF THE CITY OF McCALL, IDAHO, AUTHORIZING AND
PROVIDING FOR THE ISSUANCE OF WATER REVENUE REFUNDING
BONDS, SERIES 2003, IN THE PRINCIPAL AMOUNT OF $5,650,000,
FOR THE PURPOSE OF CURRENTLY REFUNDING THE CITY’S
OUTSTANDING WATER REVENUE BONDS, SERIES 1994, AND ITS
PARITY LIEN WATER REVENUE BONDS, SERIES 1996; DESCRIBING
THE BONDS; SPECIFYING THE DATE, FORM, MATURITIES,
REGISTRATION, AND AUTHENTICATION OF THE BONDS; FIXING THE
RATES OF INTEREST ON THE BONDS; PROVIDING FOR THE
APPLICATION OF BOND PROCEEDS; ESTABLISHING FUNDS AND
ACCOUNTS; PROVIDING FOR THE COLLECTION AND DISPOSITION OF
REVENUES; PROVIDING COVENANTS RELATING TO THE BONDS AND TO
THE TAX-EXEMPT STATUS OF THE INTEREST ON THE BONDS;
PROVIDING FOR THE SALE AND DELIVERY OF THE BONDS; PROVIDING
FOR RELATED MATTERS; AND PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of McCall, Valley County, Idaho (the
"City"), is a municipal corporation duly organized and
operating under the laws of the State of Idaho; and
WHEREAS, the City now has outstanding a portion of its
Water Revenue Bonds, Series 1994 (the "Series 1994 Bonds"),
issued, pursuant to Ordinance No. 669, adopted on August
25, 1994, in the original principal amount of $5,000,000,
the principal amount of $3,855,000 of which remains
outstanding, and a portion of its Parity Lien Water Revenue
Bonds, Series 1996 (the "Series 1996 Bonds"), issued,
pursuant to Ordinance No. 700, adopted on July 11, 1996, in
the original principal amount of $4,990,000, the principal
amount of $4,050,000 of which remains outstanding; and
WHEREAS, the City is authorized by the Constitution
and laws of Idaho to issue refunding bonds to refund its
outstanding bonds whenever the Mayor and Council determine
that a savings or other beneficial public objective can be
achieved thereby, without an approving vote of the electors
of the City, and to sell such refunding bonds at private
sale; and
WHEREAS, Ordinance No. 669, pursuant to which the
Series 1994 Bonds were issued, sold, and delivered,
reserves the right of the City to redeem the Series 1994
Bonds maturing on and after September 1, 2007, on any
interest payment date on or after September 1, 2006, at a
redemption price of par plus accrued interest to the
redemption date, and also reserves the right of the City to
defease the Series 1994 Bonds prior to maturity in the
manner provided in Ordinance No. 669; and
WHEREAS, Ordinance No. 700, pursuant to which the
Series 1996 Bonds were issued, sold, and delivered,
Page 1
reserves the right of the City to redeem the Series 1996
Bonds maturing on and after March 1, 2008, on any interest
payment date on or after March 1, 2007, at a redemption
price of par plus accrued interest to the redemption date,
and also reserves the right of the City to defease the
Series 1996 Bonds prior to maturity in the manner provided
in Ordinance No. 700; and
WHEREAS, the Mayor and Council have determined that it
is in the best interests of the City and its water
ratepayers to advance refund its Series 1994 Bonds and its
Series 1996 Bonds in order to achieve a beneficial public
objective, and the Mayor and Council desire to issue the
refunding bonds of the City for such purpose; and
WHEREAS, the City has received an offer from Seattle-
Northwest Securities Corporation to purchase the refunding
bonds of the City, and the Mayor and Council have
determined to sell the water revenue refunding bonds of the
City to Seattle-Northwest Securities Corporation in
accordance with such offer.
NOW, THEREFORE, BE IT ORDAINED BY THE MAYOR AND
COUNCIL OF THE CITY OF MCCALL, Valley County, Idaho, as
follows:
Section 1: DEFINITIONS
As used in this Ordinance, the following words shall
have the following meanings:
Act means, collectively, Sections 50-1027 through 50-
1042, inclusive, Section 57-504, and Title 57, Chapter 9,
Idaho Code.
Additional Bonds means any bonds issued pursuant to
Section 16 of this Ordinance.
Annual Debt Service means the amount required in a
given fiscal year of the City for the payment of the
principal of, premium, if any, and interest on the Bonds
and any Additional Bonds, except interest to be paid from
the proceeds of the Additional Bonds.
Average Annual Debt Service means the average annual
amount required over the term of the Bonds from the time of
calculation for the payment of the principal of, premium,
if any, and interest on the Bonds and any Additional Bonds
(except interest to be paid from the proceeds of the
Additional Bonds).
Beneficial Owner(s) means the owners of Bonds whose
ownership is recorded under the Book-Entry-Only System
maintained by the Depository.
Page 2
Bonds means the principal amount of $5,545,000 "City
of McCall Water Revenue Refunding Bonds, Series 2003,"
herein authorized to be issued, sold, and delivered.
Bond Fund means the "City of McCall Water Revenue Bond
Fund" described in Section 13 of this Ordinance.
Bond Purchase Agreement means the agreement between
the City and the Underwriter for the purchase of the Bonds.
Bond Register means the registration books on which
are maintained the names and addresses of the owners or
nominees of the owners of the Bonds.
Bond Registrar means the Trustee, appointed and
designated in Section 6 of this Ordinance.
Book-Entry-Only System means the system of recordation
of ownership of the Bonds on the books of the Depository
pursuant to Section 3 of this Ordinance.
Business Day means a day, other than a Saturday or
Sunday, on which banks located in the State of Idaho and in
the state where the Trustee’s Principal Corporate Trust
Office is located are open for the purpose of conducting
commercial banking business.
Cede means Cede & Co., the nominee of the Depository,
and any successor nominee of Depository with respect to the
Bonds.
Certificated Bond(s) means a Bond or Bonds evidenced
by a printed certificate in the event that the Book-Entry-
Only System is discontinued.
City means the City of McCall, Valley County, Idaho.
City Clerk means the Clerk of the City, or other
officer of the City who is the custodian of the seal of the
City and of the records of the proceedings of the City, or
his/her successor in functions, if any.
Code means the Internal Revenue Code of 1986, as
amended.
Cost of Issuance Fund means the fund created by
Section 11 (A) of this Ordinance for the payment of the
costs of issuance of the Bonds.
Council means the City Council of the City.
Depository means The Depository Trust Company,
New York, New York, or its successors and assigns.
Page 3
Escrow Fund means the Escrow Fund established by the
Escrow Agreement.
Escrow Agent means U.S. Bank National Association as
escrow agent under the Escrow Agreement.
Escrow Agreement means the Escrow Deposit Agreement
between the City and U.S. Bank National Association, as
authorized in Section 11(C) of this Ordinance.
Estimated Net Revenues means, for any year,
the estimated Revenues of the System for such year less the
estimated Operation and Maintenance Expenses for such year,
based upon estimates prepared by the City Engineer or an
independent engineer, or an independent certified public
accountant. In computing Estimated Net Revenues, Revenues
of the System may be adjusted as necessary to reflect any
changed schedule of rates and charges.
Event of Default means one of the events enumerated in
Section 23A of this Ordinance.
Insurer means ____________________________________, or
any successor thereto or assignee thereof.
Interest Payment Date(s) means the payment date(s) set
forth in Section 3 of this Ordinance.
Investment Securities means investments in which a
city is authorized to invest its surplus funds under
Section 50-1013, Idaho Code.
Maximum Annual Debt Service means an amount equal to
the greatest Annual Debt Service with respect to the Bonds
and any Additional Bonds for the current or any future
fiscal year of the City.
Mayor means the Mayor of the City, or his/her
successor in functions, if any.
Net Revenues means Revenue of the System after the
deduction of Operation and Maintenance Expenses.
Operation and Maintenance Expenses or any phrase of
similar import means all reasonable and necessary current
expenses of the City, paid or accrued, of operating,
maintaining, and repairing the System or of levying,
collecting, and otherwise administering the Net Revenues
for the payment of the Bonds; and the term includes (except
as limited by contract or otherwise limited by law) without
limiting the generality of the foregoing:
Page 4
(1) Engineering, auditing, reporting, legal, and
other overhead expenses of the City directly relating
and reasonably allocable to the administration of the
System;
(2) Fidelity bonds and property and liability
insurance premiums pertaining to the System, or a
reasonably allocable share of a premium of any blanket
bond or policy pertaining thereto;
(3) Payments to pension, retirement, health, and
hospitalization funds and other insurance;
(4) Any taxes, assessments, excise taxes, or
other charges which may be lawfully imposed on the
City, the System, revenues therefrom, or any privilege
in connection with their operation;
(5) The reasonable charges of the bond
registrar, fiscal or paying agent, commercial bank,
trust bank, or other depository bank pertaining to the
Bond issued by the City or pertaining to the Project,
if any;
(6) Contractual services, professional services,
salaries, other administrative expenses, and the cost
of materials, supplies, repairs, and labor, pertaining
to the issuance of the Bond and to the ordinary
operation of the System; and
(7) All other administrative, general, and
commercial expenses.
Ordinance or Bond Ordinance means this Ordinance No.
____, adopted on June 26, 2003.
Outstanding, when used with reference to the Bonds, as
of any particular date, means Bonds, the principal of and
interest on which have not been paid pursuant to this
Ordinance or which have not been replaced pursuant to
Section 7 of this Ordinance.
Owner means a Registered Owner or a Beneficial Owner
of any Bond.
Participants means those broker-dealers, banks, and
other financial institutions for which the Depository holds
Bonds as securities depository.
Payment Date means any scheduled interest payment date
or principal payment date on the Bonds.
Policy means the municipal bond insurance policy
issued by the Insurer insuring the payment of the Bonds.
Page 5
Principal Corporate Trust Office means, with respect
to the Trustee, the office of the Trustee at Salt Lake
City, Utah; provided, however, that with respect to
payments on the Bonds and any exchange, transfer, or
surrender of the Bonds, Principal Corporate Trust Office
shall mean the office of the Trustee at U.S. Bank National
Association, 180 East 5th Street, St. Paul, MN 55101 or
such other or additional offices as may be specified by the
Trustee.
Record Date means, in the case of an interest payment
date, the fifteenth day next preceding such interest
payment date.
Refunded Bonds means, collectively, the outstanding
Series 1994 Bonds maturing on and after September 1, 2003,
and the outstanding Series 1996 Bonds maturing on and after
March 1, 2004.
Registered Owner(s) means the person or persons in
whose name or names the Bonds shall be registered in the
Bond Register maintained by the Trustee.
Representation Letter means the representation letter
from the City to the Depository, as authorized in Section 3
of this Ordinance.
Reserve Fund means the City of McCall Water Revenue
Bonds Debt Service Reserve Fund created by Ordinance No.
669 of the City, adopted on August 25, 1994, and referred
to in Section 14 of this Ordinance.
Reserve Requirement means the lesser of (i) the
Maximum Annual Debt Service on the Bonds or (ii) 125% of
the Average Annual Debt Service on the Bonds, not to exceed
10% of the proceeds of the Bonds as provided in Section
148(d) of the Internal Revenue Code of 1986, as amended.
Revenue Fund, also known as the Water Fund, means the
"City of McCall Water Revenue Fund," created by Ordinance
No. 669, adopted on August 25, 1994, and referred to in
Sections 11 and 12 of this Ordinance.
Revenue of the System means all revenues received by
the City from its System and may include, at the discretion
of the City, moneys derived from one, all, or any
combination of revenue sources pertaining to the System,
including, without limitation, rates, charges, rents, fees,
and any other income derived from the operation or
ownership of, the use of services of, or the availability
of or services pertaining to, or otherwise derived in
connection with, the System or all or any part of any
property pertaining to the System.
Page 6
Series 1994 Bonds means the City of McCall Water
Revenue Bonds, Series 1994, dated September 1, 1994, issued
pursuant to Ordinance No. 669, adopted on August 25, 1994.
Series 1996 Bonds means the City of McCall Parity Lien
Water Revenue Bonds, Series 1996, dated August 1, 1996,
issued pursuant to Ordinance No. 700, adopted on July 11,
1996.
System for purposes of this Ordinance, means the
domestic water system of the City, as the same now exists,
including its assets, real and personal, tangible and
intangible, and as it may later be added to, extended, and
improved, and shall include buildings, structures,
utilities, or other income producing water facilities from
the operation of or in connection with which the revenues
for the payment of the Bonds to be issued hereunder will be
derived, and the lands pertaining thereto.
Treasurer means the Treasurer of the City, or his/her
successor in functions, if any.
Trustee means the Corporate Trust Department of U.S.
Bank National Association as trustee, bond registrar,
transfer agent, and authenticating and paying agent for the
Bonds, appointed and designated in Section 6 of this
Ordinance.
Underwriter means Seattle-Northwest Securities
Corporation, Boise, Idaho.
Section 2: FINDINGS
The Mayor and Council hereby find, determine, and
declare:
A. That the City’s Refunded Bonds can be refunded to
the benefit of the City and its water ratepayers; that it
is desirable and necessary for the benefit of the City and
its water ratepayers to refund the Refunded Bonds of the
City for the purpose of achieving certain beneficial public
objectives; and that the net proceeds of the Bonds,
together with other lawfully available moneys of the City,
shall be used to advance refund the Refunded Bonds.
B. That it is the intent of the Mayor and Council to
issue the Bonds for the purpose of providing funds in an
amount sufficient, together with other lawfully available
funds of the City to advance refund and defease the
Refunded Bonds.
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Section 3: THE BONDS
A. Authorization. Fully registered water revenue
refunding bonds of the City, designated "City of McCall
Water Revenue Refunding Bonds, Series 2003" (the "Bonds"),
in the aggregate principal amount of $5,650,000, are hereby
authorized to be issued, sold, and delivered pursuant to
the Act.
B. Description of the Bonds. The Bonds shall be
issued in accordance with the Book-Entry-Only System
described in this Section 3, shall be dated July 15, 2003,
shall be issued in fully registered form in denominations
of $5,000 each or integral multiples thereof (provided that
no Bond shall represent more than one maturity), shall
mature in the years 2003 through 2018, and shall bear
interest from their date, or from the most recent date to
which interest has been paid or duly provided, at the rates
set forth below, payable commencing September 1, 2003, and
semiannually thereafter on each March 1 and September 1
until their respective dates of maturity or prior
redemption, and shall mature on September 1 in the
following years and principal amounts:
Maturity Date Principal Amount Interest Rate
September 1, 2003
September 1, 2004
September 1, 2005
September 1, 2006
September 1, 2007
September 1, 2008
September 1, 2009
September 1, 2010
September 1, 2011
September 1, 2012
September 1, 2013
September 1, 2014
September 1, 2015
September 1, 2016
September 1, 2017
September 1, 2018
Interest shall be computed on the basis of a twelve-
month, 360-day year.
The Bonds shall be numbered separately in the manner
and with any additional designation as the Trustee shall
deem necessary for the purposes of identification. After
execution, as hereinafter provided, the Bonds shall be
authenticated by the Trustee.
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C. The Book-Entry-Only System. The Bonds shall be
issued in book-entry-only form, with no Bonds being made
available to Beneficial Owners thereof unless the Book-
Entry-Only System is discontinued. So long as the Bonds
are issued in book-entry-only form, the City and the
Trustee shall recognize the Depository or its nominee as
the Registered Owner of the Bonds for all purposes.
Beneficial ownership interests in the Bonds will be
available to Beneficial Owners in book-entry-only form, in
accordance with the book-entry-only practices of the
Depository.
The Bonds shall be issued in the form of one Bond
representing each maturity of the Bonds, in conformance
with the book-entry-only practices of the Depository. Each
Bond shall be substantially in the form set forth in
Exhibit "A" attached hereto and incorporated herein by
reference. Each Bond shall be executed by the manual
signatures of the Mayor and Treasurer and attested by the
manual signature of the Clerk, shall have the official seal
of the City impressed thereon, and shall be manually
authenticated by the Trustee. Each Bond shall be
registered in the name of Cede & Co. as nominee of the
Depository and shall be lodged with the Depository until
maturity of the Bonds. The Bond Registrar shall remit each
payment of interest, or principal and interest, and
redemption premium, if applicable, directly to the
Depository for distribution to the Beneficial Owners by
recorded entry on the books of the Depository in accordance
with the book-entry-only practices of the Depository, and
the City and the Bond Registrar shall have no liability
therefor. Such payment shall be valid and effective fully
to satisfy and discharge the City's obligation to each
Beneficial Owner with respect to the payment thereof to the
extent of the sums so paid.
With respect to the Bonds registered in the name of
Cede & Co. as nominee for the Depository, neither the City
nor the Bond Registrar shall have any responsibility to any
Beneficial Owner with respect to:
(i) the sending of transaction statements,
or maintenance, supervision, or review of records
of the Depository;
(ii) the accuracy of the records of the
Depository or its nominee with respect to any
ownership interest in the Bonds;
(iii) the payment to any Beneficial Owner,
or any other person other than the Depository, of
any amount with respect to principal of, interest
on, or redemption premium, if any, on the Bonds;
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(iv) any consent given or other action
taken by the Depository or its nominee as owner
of the Bonds.
In the event that either the City or the Depository
shall determine to discontinue the Book-Entry-Only System
as to the Bonds, and the City elects not to designate a
substitute depository, then the City will cause its
Certificated Bonds to be issued to the Beneficial Owners in
accordance with Section 5 of this Ordinance.
The Representation Letter dated August 1, 1996, a copy
of which is annexed hereto as Exhibit "B," is hereby
authorized for use in connection with the Bonds.
Section 4: PLACE AND MANNER OF PAYMENT
Both principal of and interest on the Bonds shall be
payable in lawful money of the United States of America to
the Registered Owner thereof whose name and address appear
on the Bond Register maintained by the Bond Registrar.
Payment of each installment of interest on the Bonds
shall be made on its semiannual due date to the Registered
Owner whose name appears on the Bond Register on the 15th
day next preceding the interest payment date, at the
address appearing on the Bond Register, and shall be paid
by check or draft of the Bond Registrar mailed to such
Registered Owner on the due date at such address, or at
such other address as may be furnished in writing by such
Registered Owner to the Bond Registrar.
Principal of the Bonds shall be payable to the
Registered Owner upon presentation and surrender of the
Bonds on the date of maturity or prior redemption, at the
office of the Bond Registrar.
Section 5: EXECUTION OF CERTIFICATED BONDS
In the event that the Book-Entry-Only System is
discontinued with respect to the Bonds, the City shall
cause Certificated Bonds to be prepared, executed,
authenticated, and delivered. The Certificated Bonds shall
be substantially in the form set forth in Exhibit "C" which
is annexed hereto and by reference made a part hereof. The
Certificated Bonds shall be numbered separately in the
manner and with such additional designation as the Bond
Registrar shall deem necessary for purposes of
identification. The Certificated Bonds shall be
lithographed or printed with engraved or lithographed
borders. The Certificated Bonds shall be signed by the
Mayor, countersigned by the Treasurer, and attested by the
City Clerk (any of which signatures may be manual or by
facsimile), and the seal of the City shall be impressed
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thereon or the facsimile seal of the City shall be
imprinted thereon. The Certificated Bonds shall then be
delivered to the Bond Registrar for authentication.
In case any of the officers who shall have signed or
countersigned any of the Certificated Bonds shall cease to
be such officer or officers of the City before the
Certificated Bonds so signed or countersigned shall have
been authenticated or delivered by the Bond Registrar, or
issued by the City, such Certificated Bonds may
nevertheless be authenticated, delivered, and issued and,
upon such authentication, delivery, and issue, shall be as
binding upon the City as though those who signed and
countersigned the same had continued to be such officers of
the City. Any Certificated Bond may also be signed and
countersigned on behalf of the City by such persons as at
the actual date of execution of such Certificated Bonds
shall be the proper officers of the City although at the
original date of such Certificated Bond any such person
shall not have been such officer of the City.
Only such of the Certificated Bonds as shall bear
thereon a certificate of authentication in the form set
forth in Exhibit "C," manually executed by the Bond
Registrar, shall be valid or obligatory for any purpose or
entitled to the benefits of this Ordinance, and such
certificate of authentication shall be conclusive evidence
that the Certificated Bonds so authenticated have been duly
executed, authenticated, and delivered hereunder and are
entitled to the benefits of this Ordinance.
Section 6: THE TRUSTEE
A. Trustee: Acceptance of Duties. The Corporate
Trust Department of U.S. Bank National Association is
hereby appointed as Trustee and shall also act as bond
registrar, authenticating agent, paying agent, and transfer
agent with respect to the Bonds, subject to the terms and
conditions set forth in this Ordinance. The Trustee shall
signify its acceptance of the duties and obligations
imposed upon it by this Ordinance by executing and
delivering to the City a written acceptance thereof, and
upon executing such acceptance the Trustee shall be deemed
to have accepted the duties and obligations with respect to
all of the Bonds thereafter to be issued, but only,
however, upon the terms and conditions set forth in this
Ordinance.
B. Duties and Responsibilities of Trustee.
(1) Prior to the occurrence of an Event of
Default of which it has or is deemed to have notice
hereunder, and after the curing or waiver of any Event
of Default which may have occurred:
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(a) the Trustee undertakes to perform such
duties and only such duties as are specifically
set forth in this Ordinance, and no implied
covenants or obligations shall be read into this
Ordinance against the Trustee; and
(b) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness
of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee
that conform to the requirements of this
Ordinance: but the Trustee is under a duty to
examine such certificates and opinions to
determine whether they conform to the
requirements of this Ordinance.
(2) In case an Event of Default of which the
Trustee has or is deemed to have notice hereunder has
occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this
Ordinance, and use the same degree of care and skill
in their exercise, as a prudent person would exercise
or use in the conduct of such person’s own affairs.
(3) No provision of this Ordinance shall be
construed to relieve the Trustee from liability for
its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that:
(a) this subsection shall not be construed
to limit the effect of subsection (a) of this
Section;
(b) the Trustee is not liable for any error
of judgment made in good faith, unless it is
proven that the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee is not liable with respect
to any action it takes or omits to be taken by it
in good faith in accordance with the direction of
the Owners under any provision of this Ordinance
relating to the time, method and place of
conducting any proceeding for any remedy
available to the Trustee, or exercising any trust
or power conferred upon the Trustee under this
Ordinance; and
(d) no provision of this Ordinance shall
require the Trustee to expend or risk its own
funds or otherwise incur any liability in the
performance of any of its duties hereunder, or in
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the exercise of any of its rights or powers, if
it has reasonable grounds for believing that the
repayment of such funds or adequate indemnity
against such risk or liability is not reasonably
assured to it.
(4) The Trustee shall maintain records of all
investments and disbursements of proceeds in the funds
and accounts established pursuant to this Ordinance
through the date ending six (6) years following the
date on which all the Bonds and Additional Bonds have
been retired.
(5) Whether or not expressly so provided, every
provision of this Ordinance relating to the conduct or
affecting the liability of or affording protection to
the Trustee is subject to the provisions of this
Section.
C. Certain Rights of Trustee. Except as otherwise
provided in Section B above:
(1) the Trustee may rely and is protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, approval,
bond, debenture or other paper or document believed by
it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request, direction, order or demand of
the City under this Ordinance shall be sufficiently
evidenced by a Written Certificate (unless other
evidence thereof is specifically prescribed).
(3) whenever in the administration of this
Ordinance the Trustee deems it desirable that a matter
be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless
other evidence thereof is specifically prescribed)
may, in the absence of bad faith on its part, rely
upon a Written Certificate of the City.
(4) the Trustee is under no obligation to
exercise any of the rights or powers vested in it by
this Ordinance at the request or direction of any of
the Registered Owners or Beneficial Owners unless such
owners have offered to the Trustee security or
indemnity satisfactory to the Trustee as to its terms,
coverage, duration, amount and otherwise with respect
to the costs, expenses and liabilities which may be
incurred by it in compliance with such request or
direction, and the provision of such indemnity shall
be mandatory for any remedy taken upon direction of
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the owners of a majority in aggregate principal amount
of the Bonds.
D. Trustee Not Responsible for Recitals. The
recitals contained in this Ordinance and in the Bonds
(other than the certificate of authentication on the Bonds)
are statements of the City, and the Trustee assumes no
responsibility for their correctness. The Trustee makes
nor representations as to the value, condition, or
sufficiency of any assets pledged or assigned as security
for the Bonds, the right, title or interest of the City
therein, the security provided thereby or by this
Ordinance, the compliance of the Ordinance with the Act, or
the tax-exempt status of the Bonds. The Trustee is not
accountable for the use or application by the City of any
of the Bonds or the proceeds of the Bonds, or for the use
or application of any moneys paid over by the Trustee in
accordance with any provision of this Ordinance.
E. Compensation and Expenses of the Trustee. The
City has covenanted and agree, pursuant to this Ordinance:
(1) to pay to the Trustee compensation for all
services rendered by it hereunder and under the other
agreements relating to the Bonds to which the Trustee
is a party in accordance with terms agreed to from
time to time, and, subsequent to default, in
accordance with the Trustee’s then-current fee
schedule for default administration (the entirety of
which compensation shall not be limited by any
provision of law regarding compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request
for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance
with any provision of this Ordinance, any other
agreement relating to the Bonds to which it is a party
or in complying with any request by the City or any
rating service with respect to the Bonds, including
the reasonable compensation, expenses and
disbursements of its agents and counsel, except any
such expense, disbursement or advance attributable to
the Trustee’s negligence or bad faith; and
(3) to indemnify, defend and hold the Trustee
harmless from and against any loss, liability or
expense incurred without negligence or bad faith on
its part, arising out of or in connection with the
acceptance or administration of the office of Trustee
under this Ordinance, including the costs of defending
itself against any claim or liability in connection
with the exercise or performance of any of its powers
or duties hereunder or thereunder.
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In the event the Trustee incurs expenses or renders
services in any proceedings under bankruptcy law relating
to the City, the expenses so incurred and compensation for
services so rendered are intended to constitute expenses of
administration under bankruptcy law.
The obligations of the City to make the payments
described in this Section shall survive discharge of this
Ordinance, the resignation or removal of the Trustee and
payment in full of the Bonds.
F. Qualifications of Trustee. There shall at all
times be a trustee hereunder which shall be a corporation
or banking association organized and doing business under
the laws of the United States of America or of any state,
authorized under such laws to exercise corporate trust
powers, which has a combined capital and surplus of at
least $25,000,000, or is an affiliate of, or has a
contractual relationship with, a corporation or banking
association meeting such capital and surplus requirement
which guarantees the obligations and liabilities of the
proposed trustee, and which is subject to supervision or
examination by federal or state banking authority. If such
corporation or banking association publishes reports of
condition at least annually, pursuant to law or the
requirements of any supervising or examining authority
above referred to, then for purposes of this Section, the
combined capital and surplus of such corporation or banking
association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section,
it shall resign promptly in the manner and with the effect
specified in this Section.
G. Resignation or Removal of Trustee.
(1) No resignation or removal of the Trustee and
no appointment of a successor Trustee pursuant to this
Section shall become effective until the acceptance of
appointment by the successor Trustee under Section 6
(H).
(2) The Trustee may resign at any time by giving
written notice to the City. Upon receiving such
notice of resignation, the City shall promptly appoint
a Successor Trustee by an instrument in writing. If
an instrument of acceptance has not been delivered to
the resigning Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee
may petition a court of competent jurisdiction for the
appointment of a successor Trustee.
Page 15
(3) Prior to the occurrence and continuance of
an Event of Default hereunder, or after the curing or
waiver of any such Event of Default, the Issuer, the
Owners of a majority in aggregate principal amount of
the Outstanding Bonds may remove the Trustee and shall
appoint a successor Trustee. In the event there shall
have occurred and be continuing an Event of Default
hereunder, the Owners of a majority in aggregate
principal amount of the Outstanding Bonds may remove
the Trustee and shall appoint a successor Trustee.
H. Successor Trustee.
1. Appointment of Successor Trustee.
(a) In case at any time the Trustee shall resign
or shall be removed or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent,
or if a receiver, liquidator or conservator of the
Trustee, or of its property shall be appointed, or if
any public officer shall take charge or control of the
trust or of its property or affairs, a successor shall
be appointed by the City.
(b) If in a proper case no appointment of a
successor Trustee shall be made pursuant to the
foregoing provisions of this Section within 45 days
after the Trustee shall have given to the City written
notice or after a vacancy in the office of the Trustee
shall have occurred by reason of its inability to act,
the Trustee shall apply to any court of competent
jurisdiction to appoint a successor Trustee. Said
court may thereupon, after such notice, if any, as
such court may deem proper, appoint a successor
Trustee.
(c) Any Trustee appointed under the provisions
of this subsection (A) in succession to the Trustee
shall be a bank or trust company or national banking
association or subsidiary thereof doing business or
qualified to do business in the State of Idaho, and
having capital stock and surplus aggregating at least
$20,000,000, if there be such bank or trust company or
national banking association willing and able to
accept the office on reasonable customary terms and
authorized by law to perform all the duties imposed
upon it by this Ordinance.
2. Transfer of Rights and Property to Successor
Trustee. Any successor Trustee appointed under this
Ordinance shall execute, acknowledge and deliver to its
predecessor Trustee, and also to the City, an instrument
accepting such appointment, and thereupon such successor
Trustee, without any further act, shall become fully vested
Page 16
with all rights, powers, duties, and obligations of such
predecessor Trustee, with like effect as if originally
named as Trustee; but the Trustee, ceasing to act shall,
nevertheless, on the written request of the City, or of the
successor Trustee, execute, acknowledge and deliver such
instrument of conveyance and further assurance and do such
other things as may reasonably be required for more fully
and certainly vesting and confirming in such successor
Trustee all the right, title and interest of the
predecessor Trustee in and to any property held by it under
this Ordinance, and shall pay over, assign, and deliver to
the successor Trustee any money or other property subject
to the trusts and conditions herein set forth. Should any
deed, conveyance, or instrument in writing from the City be
required by such successor Trustee for more fully and
certainly vesting in and confirming to such successor
Trustee any such estates, rights, power and duties, any and
all such deeds, conveyances and instruments in writing
shall, on request, and so far as may be authorized by law,
be executed, acknowledged and delivered by the City.
3. Merger or Consolidation. Any company into which
the Trustee may be merged or converted or with which it may
be consolidated or any company resulting form any merger,
conversion or consolidation to which it shall be a party or
any company to which the Trustee may sell or transfer all
or substantially all of its corporate trust business,
provided such company shall be a bank or trust company
organized under the laws of any state of the United States
or a national banking association and shall be authorized
by law to perform all the duties imposed upon it by the
this Ordinance, shall be the successor to the Trustee
without the execution or filing of any paper or the
performance of any further act.
Section 7: TRANSFER AND EXCHANGE OF BONDS
A. Transfer of Bonds.
(1) Any Bond may, in accordance with its terms,
be transferred, upon the registration books kept by
the Trustee pursuant to Paragraph C of this Section 7,
by the Registered Owner, in person or by his duly
authorized attorney, upon surrender of such Bond for
cancellation, accompanied by delivery of a written
instrument of transfer in a form approved by the
Trustee, duly executed. No transfer shall be
effective until entered on the registration books kept
by the Trustee. The City and the Trustee may treat
and consider the Registered Owner as the absolute
owner thereof for the purpose of receiving payment of,
or on account of, the principal, if any, or redemption
price thereof and interest due thereon and for all
other purposes whatsoever.
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(2) Whenever any Bond or Bonds shall be
surrendered for transfer, the Trustee shall
authenticate and deliver a new fully registered Bond
or Bonds of the same series, designation, maturity, or
due date, as applicable, and interest rate and of
authorized denominations duly executed by the City,
for a like aggregate principal amount or interest
amount, as applicable. The Trustee shall require the
payment by the Registered Owner requesting such
transfer of any tax or other governmental charge
required to be paid with respect to such transfer.
With respect to each Bond, no such transfer shall be
required to be made after the Record Date with respect
to any interest payment date to and including such
interest payment date.
B. Exchange of Bonds. Bonds may be exchanged at the
Principal Corporate Trust Office of the Trustee for a like
aggregate principal amount of fully registered Bonds of the
same series, designation, maturity, or due date, as
applicable, and interest rate of other authorized
denominations or amounts, as applicable. The Trustee shall
require the payment by the Registered Owner requesting such
exchange of any tax or other governmental charge required
to be paid with respect to such exchange. With respect to
each Bond, no such exchange shall be required to be made
after the Record Date with respect to any interest payment
date of and including such interest payment date.
C. Bond Registration Books. This Ordinance shall
constitute a system of registration within the meaning and
for all purposes of the Registered Public Obligations Act
of Idaho, Chapter 9 of Title 57, Idaho Code. The Trustee
shall keep or cause to be kept, at its Principal Corporate
Trust Office, sufficient books for the registration and
transfer of the Bonds, which shall at all times be open to
inspection by the City, and, upon presentation for such
purpose, the Trustee shall, under such reasonable
regulations as it may prescribe, register or transfer or
cause to be registered or transferred, on said books, Bonds
as herein provided.
D. Duties of Bond Registrar. If requested by the
Trustee, the Mayor is authorized to execute the Trustee’s
standard form of agreement between the City and the Trustee
with respect to the compensation, obligations, and duties
of the Trustee hereunder which may include the following:
(1) to act as bond registrar, authenticating
agent, paying agent, and transfer agent as provided
herein;
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(2) to maintain a list of Registered Owners and
to furnish such list to the City upon request, but
otherwise to keep such list confidential;
(3) to give notice of redemption of Bonds as
provided herein;
(4) to cancel and/or destroy Bonds which have
been paid at maturity or upon earlier redemption or
submitted for exchange or transfer;
(5) to furnish the City at least annually a
certificate with respect to Bonds canceled and/or
destroyed;
(6) to furnish the City at least annually an
audit confirmation of Bonds paid, Bonds outstanding
and payments made with respect to interest on the
Bonds; and
(7) to comply with all applicable provisions of
the Representation Letter, as called for in Section
3(B) hereof.
Section 8: REDEMPTION PRIOR TO MATURITY; DEFEASANCE
A. Optional Redemption. Bonds maturing on or before
September 1, 2013 shall not be subject to call or
redemption prior to their stated dates of maturity. On any
interest payment date on or after September 1, 2013, at the
option of the City, the Bonds maturing on or after
September 1, 2014, shall be subject to redemption, in whole
or in part, at the discretion of the City (and by lot
selected by the Bond Registrar within a maturity), at a
price of 100% of the principal amount of the Bond being
redeemed, plus accrued interest to the redemption date,
upon notice as hereinafter provided.
B. Redemption Provisions Portions of any Bond of a
denomination of more than $5,000 may be redeemed. The
portion of any Bond of a denomination of more than $5,000
to be redeemed shall be in the principal amount of $5,000
or any integral multiple of $5,000, and in selecting
portions of such Bonds for redemption the Bond Registrar
will treat each such Bond as representing that number of
Bonds of $5,000 denomination which is obtained by dividing
the principal amount of such Bond by $5,000.
Notice of redemption of any Bonds shall be given by
mailing of notice by the Bond Registrar to the registered
owner of any Bond being called for redemption not less than
thirty nor more than sixty days prior to the redemption
date by first class mail, postage prepaid, at the address
appearing on the Bond Register, or at such other address as
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may be furnished in writing by such registered owner to the
Bond Registrar. The foregoing requirements shall be deemed
to be complied with when notice is mailed as provided
herein, regardless of whether or not it is actually
received by the owner of such Bond. The notice shall
specify the Bonds to be redeemed, the date and place of
redemption, and shall provide that the Bonds so called for
redemption shall cease to accrue interest on the specified
redemption date, provided funds for such redemption are on
deposit at the place of payment at such time, and shall not
be deemed to be outstanding as of such redemption date.
C. Defeasance. In the event that money and/or
government obligations, maturing or having guaranteed
redemption prices at the option of the owner at such time
or times and bearing interest to be earned thereon in such
amounts as are sufficient (together with any resulting cash
balances) to redeem and retire part or all of the Bonds in
accordance with their terms, are hereafter irrevocably set
aside in a special account and pledged to effect such
redemption and retirement, then no further payments need be
made into the Bond Fund or Reserve Fund for the payment of
the principal of and interest on the Bonds so provided for,
and such Bonds and interest accrued thereon shall then
cease to be entitled to any lien, benefit, or security of
this Ordinance, except the right to receive the funds so
set aside and pledged, and such Bonds and interest accrued
thereon shall no longer be deemed to be outstanding
hereunder.
Section 9: CHARGES AND RATE COVENANT
The City has established, may from time to time
revise, and shall maintain and collect water rates and
charges for furnishing the services of the System to its
customers, which rates and charges are, and shall continue
to be, uniform as to all persons or properties which are of
the same class, which rates and charges shall be collected
from the users thereof.
The City hereby covenants and agrees with the
Registered Owners and Beneficial Owners that it will
establish, revise as necessary, maintain, and collect
charges sufficient, together with other revenues received,
after taking into consideration anticipated delinquencies,
to provide Net Revenues for each fiscal year equal to not
less than 1.20 times the required Annual Debt Service
payments on the Bonds and any Additional Bonds then
outstanding. The City further covenants that the Revenue
of the System will at all times be sufficient to pay
Operation and Maintenance Expenses, to make all payments
required to be made on account of the Bonds and any
Additional Bonds as and when the same shall become due and
payable, and all other payments which the City is obligated
Page 20
to make pursuant to this Ordinance, and to pay all
governmental charges lawfully imposed on the System and all
other amounts which the City may now be or hereafter become
obligated to pay from the Revenue of the System.
Section 10: PLEDGE OF REVENUES
The Net Revenues of the System are hereby pledged for
the payment of the Bonds and shall be used and applied in
the order of priority provided in Section 12 of this
Ordinance.
Section 11: FUNDS AND ACCOUNTS – REDEMPTION OF
REFUNDED BONDS
A. Establishment of Funds and Accounts. The
following funds and accounts are created or confirmed with
respect to the Bonds.
(1) Revenue Fund, to be held by the City.
(2) Bond Fund, to be held by the Trustee.
(3) Reserve Fund, to be held by the Trustee.
(4) Escrow Fund, to be held by the Trustee.
(5) Cost of Issuance Fund, to be held by the
Trustee.
B. Delivery of Bonds; Application of Proceeds. The
Treasurer of the City is hereby instructed to make delivery
of the Bonds to the Underwriter and to receive payment
therefore in accordance with the terms of the Bond Purchase
Agreement and to deposit the proceeds of sale (after
deduction of Underwriter’s discount) as follows:
(1) A portion of the proceeds of sale of the
Bonds shall be deposited in the Cost of Issuance Fund
to be used as described in Section 11(E).
(2) Accrued interest on the Bonds from their
date to their date of delivery shall be deposited into
the Bond Fund and utilized to make a portion of the
first interest payment on the Bonds on September 1,
2003.
(3) The remaining proceeds of sale of the Bonds
shall be deposited into the Escrow Fund, together with
other funds of the City in an amount sufficient to
defease the Refunded Bonds, to be used as described in
Sections 11(C) and 11(D) of this Ordinance.
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C. Approval of Escrow Agreement; Deposits into
Escrow Fund.
(1) The Escrow Agreement, in substantially the
form set forth in Exhibit "D" which is annexed hereto
and by reference incorporated herein, with such
changes, omissions, insertions, and revisions as the
Mayor shall approve, is hereby authorized, and the
Mayor and Clerk shall sign such Escrow Agreement,
which signature shall evidence such approval. The
Mayor and the Clerk are, and each of them is, hereby
authorized to do or perform all such acts as may be
necessary or advisable to comply with the Escrow
Agreement and to carry the same into effect.
(2) The portion of the proceeds of the sale of
the Bonds specified in Section 11(B)(3) hereof,
together with other funds of the City as shall be
specified in a Written Certificate to be filed with
the Trustee at the time of the delivery of the Bonds,
if any, shall, simultaneously with the delivery of the
Bonds be invested or reinvested (except for any amount
to be retained as cash) and the obligations in which
such moneys are so invested and any remaining cash
shall be deposited in trust with the Trustee in
accordance with the provisions of the Escrow
Agreement.
D. Redemption of Refunded Bonds; Pledge, Etc. of
Escrow Fund.
(1) The Series 1994 Bonds maturing on and after
September 1, 2007, are hereby irrevocably called for
redemption on September 1, 2006. Notice of such
redemption shall be given as provided in Ordinance No.
669, adopted on August 25, 1994, pursuant to which the
Series 1994 Bonds were issued. The Series 1994 Bonds
are being redeemed at a redemption price of par plus
accrued interest to the date of redemption.
(2) The Series 1996 Bonds maturing on and after
March 1, 2008, are hereby irrevocably called for
redemption on March 1, 2007. Notice of such
redemption shall be given as provided in Ordinance No.
700, adopted on July 11, 1996, pursuant to which the
Series 1996 Bonds were issued. The Series 1996 Bonds
are being redeemed at a redemption price of par plus
accrued interest to the date of redemption.
(3) Moneys in the Escrow Fund shall be utilized
exclusively for the purpose of (i) paying the interest
on the Refunded Bonds as the same falls due; (ii)
paying the maturing principal of the Series 1994
Bonds, as the same falls due, through September 1,
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2005, and, on September 1, 2006, paying and redeeming
the outstanding Series 1994 Bonds in full, principal
and interest; and (iii) paying the maturing principal
of the Series 1996 Bonds, as the same falls due,
through March 1, 2006, and, on March 1, 2007, paying
and redeeming the outstanding Series 1996 Bonds in
full, principal and interest.
(4) Moneys in the Escrow Fund shall be invested,
until needed for the purposes of the Escrow Fund, in
cash and Government Obligations, as permitted in the
Escrow Agreement. It is hereby found and determined
by the City, pursuant to Section 57-504, Idaho Code,
that moneys in the Escrow Fund, together with other
funds of the City pledged to the payment of the
Refunded Bonds, will be sufficient to pay, when due,
pursuant to stated maturity or call for redemption,
the principal of and interest due and to become due on
the Refunded Bonds, and provision has been made in the
Escrow Agreement for the refunding of the Refunded
Bonds.
(5) Any moneys remaining in the Escrow Fund and
not needed for refunding of the Refunded Bonds shall
be applied to pay any costs of issuance of the Bonds
that remain unpaid, if any, and any moneys remaining
thereafter may be used by the City for any lawful
purpose.
(6) It is hereby found and determined that, upon
compliance by the City and the Trustee with the
foregoing provisions of this Section 11(D), adequate
provision shall have been made for the payment of the
Refunded Bonds.
E. Cost of Issuance Fund. There is hereby
established in the hands of the Trustee a separate account
designated as the "Cost of Issuance Fund." At the time of
the delivery of the Bonds, the Trustee shall deposit into
the Cost of Issuance Fund such amount as shall be required
to pay the reasonable and necessary costs of issuance of
the Bonds. Moneys in the Cost of Issuance Fund shall be
used for the payment of costs of issuance of the Bonds.
Any moneys remaining in the Cost of Issuance Fund on the
date of the full and final payment of all costs of issuance
of the Bonds shall be transferred into the Bond Fund.
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Section 12: THE REVENUE FUND
There has heretofore been created a special fund known
as the "City of McCall Water Revenue Fund," also known as
the "City of McCall Water Fund" (the "Revenue Fund"),
which shall be maintained by the Treasurer and into which
the Revenue of the System shall be deposited forthwith upon
its receipt.
A. Use of Revenues. The Revenue of the System shall
be used for payment of the following obligations in the
following order of priority:
(1) First Charge and Lien: the costs of
Operation and Maintenance Expenses;
(2) Second Charge and Lien: the principal of
and interest on the Bonds by payment into the Bond
Fund; and
(3) Third Charge and Lien: To maintain the Debt
Service Reserve Fund, and to provide for any
deficiency in the Debt Service Reserve Fund.
(4) To administer surplus funds.
B. Surplus Funds: Funds remaining in the Revenue
Fund, after having been applied to the purposes provided in
this Section, shall constitute surplus funds and may be
used for the purposes set forth in Section 15 of this
Ordinance.
Section 13: THE BOND FUND
A. There is hereby created a special fund, to be
held by the Trustee, known as the "City of McCall Water
Revenue Refunding Bond Fund" (the "Bond Fund"), into which
shall be deposited by the City, from Net Revenues, monthly,
by the third Tuesday of each month, an amount equal to one-
twelfth (1/12) of the next principal payment coming due on
the Bonds and an amount equal to one-sixth (1/6) of the
next interest payment accruing on the Bonds; provided, that
the first interest payment falling due on September 1,
2003, shall be deposited in approximately equal payments on
or before July 15 and August 15, 2003.
B. If the City for any reason shall fail to make
such required deposits from the Revenue Fund by the __ day
prior to a payment date on the Bonds, then an amount equal
to the deficiency shall be deposited into the Bond Fund out
of the Reserve Fund.
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C. From the amounts so paid into the Bond Fund, the
Trustee shall pay (i) on or before each interest payment
date for any of the Bonds, the amount required for the
interest payable on such date; and (ii) on or before any
redemption date for the Bonds, the amount required for the
payment of principal of and interest on the Bonds then to
be redeemed.
D. Amounts in the Bond Fund shall be invested at the
written direction of the City by the Trustee in Investment
Securities until needed for the purposes of the Bond Fund.
Earnings on deposits in the Bond Fund shall remain in the
Bond Fund to be used for the purposes of the Bond Fund.
Revenue deposits described in Section 13A may be reduced by
earnings on deposits in the Bond Fund.
Section 14: DEBT SERVICE RESERVE FUND
A. Deposits. There is hereby created a separate
fund, known as the "City of McCall Water Revenue Refunding
Bonds Debt Service Reserve Fund" (the "Reserve Fund"),
which shall be maintained by the Trustee. It is the
intention of the City to fund the Reserve Fund with a
policy of municipal bond insurance pursuant to Section
14(D) of this Ordinance. If a policy of municipal bond
insurance is not obtained, then, simultaneously with the
issuance of the Bonds, there shall be transferred from the
debt service reserve fund established for the Refunded
Bonds and, to the extent necessary to achieve the Reserve
Requirement, from other lawfully available moneys of the
City, to the Reserve Fund an amount equal to the Reserve
Requirement, which sum shall be maintained as a debt
service reserve fund for the Bonds until the Bonds have
been paid in full. Moneys in the Reserve Fund may be
applied by the City to the payment of the final maturity of
principal of and interest on the Bonds. So long as the
amount on deposit in the Reserve Fund equals the Reserve
Requirement, earnings on amounts in the Bond Fund shall be
deposited as received into the Revenue Fund. In no event
shall the amount accumulated in the Reserve Fund exceed the
Reserve Requirement.
B. Deficiencies or Withdrawals. Whenever any moneys
are withdrawn from the Reserve Fund to pay the principal of
or interest on the Bonds, or if a deficiency exists in such
Fund, the amount so withdrawn or the amount of such
deficiency shall be restored within one year of the date of
such withdrawal by monthly deposits from Net Revenues until
there has been restored therein the gross amount provided
heretofore in subdivision A of this Section.
C. Refunding. In the event Refunding Bonds are ever
issued, the amount set aside into the Reserve Fund to
secure the payment of the Bonds may be used to retire bonds
Page 25
or may be held in the Reserve Fund to secure payment of the
refunding bonds issued, to refund the outstanding refunding
bonds, or may be held in the Reserve Fund to secure the
payment of any other issue or series of bonds payable out
of the Revenue Fund and issued on a parity with the Bonds.
D. Reserve Equivalent. The City may, at any time,
elect to fund the Reserve Fund with an insurance policy
issued by a municipal bond insurance company having a long-
term debt credit rating, at the time the insurance policy
is issued, in one of the two highest rating categories of
Moody’s Investors Services, Inc., or Standard & Poor’s
Corporation, in which the insurance company agrees
unconditionally to provide the City with funds in the
amount of the Reserve Requirement.
Section 15: INVESTMENT OR DEPOSIT OF FUNDS
Moneys on deposit in the funds established pursuant to
Section 11 shall be invested and reinvested by the Trustee
as follows:
(a) All moneys on deposit in funds shall be
invested in Investment Securities which shall mature,
or be subject to repurchase, withdrawal without
penalty or redemption at the option of the holder on
or before the dates on which the amounts invested are
reasonably expected to be needed for the purposes
hereof.
(b) All purchases or sales of Investment
Securities shall be made at the direction of the City
(given in writing or orally, confirmed in writing),
or, in the absence of such direction, by the Trustee.
(c) (1) Any securities or investments held by
the Trustee may be transferred by the Trustee, if
required in writing by the City, from any of the funds
or accounts mentioned in Section 11 to any other City
or account mentioned in Section 11 at the then current
market value thereof without having to be sold and
purchased or repurchased; provided, however, that
after any such transfer or transfers, the investments
in each such fund or account shall be in accordance
with the provisions as stated in this Ordinance; and
(2) whenever any other transfer or payment is required
to be made from any particular fund, such transfer or
payment shall be made from such combination of
maturing principal, redemption premiums, liquidation
proceeds and withdrawals of principal as the Trustee
deems appropriate for such purpose.
(d) Neither the City nor the Trustee shall be
accountable for any depreciation in the value of
Page 26
Investment Securities or for any losses incurred upon
any authorized disposition thereof.
(e) The City acknowledges that to the extent
regulations of the Comptroller of the Currency or any
other regulatory entity grant the City the right to
receive brokerage confirmations of the security
transactions as they occur, the City specifically
waives receipt of such confirmations to the extent
permitted by law. The Trustee will furnish the City
periodic cash transaction statements which include the
detail for all investment transactions made by the
Trustee hereunder.
Section 16: SURPLUS FUNDS
Funds remaining in the Revenue Fund after having been
applied to or designated funds for the purposes provided in
Section 12A of this Ordinance shall constitute surplus
funds and may be used for any of the following purposes:
A. To pay the costs of unusual or extraordinary
maintenance of or repair to the System;
B. To pay the principal of and interest on any
subordinate lien obligations which may have been issued to
provide water facilities in or for the City;
C. To improve, extend, enlarge, or replace any water
facilities;
D. To acquire or construct additional water
facilities in or for the City;
E. To prepay the principal, interest, and any costs
of the Bonds; and
F. For any other lawful purpose.
Section 17: ADDITIONAL BONDS OR OTHER OBLIGATIONS
A. Limitation Upon Issuance of Parity Obligations.
Nothing contained in this Ordinance shall be construed in
such a manner as to prevent the issuance by the City of
Additional Bonds or other additional obligations payable
from the Net Revenues on a parity with, but neither prior
nor superior to, the lien of the Bonds herein authorized;
provided, however, that before any such Additional Bonds or
other additional parity obligations are authorized or
actually issued:
(1) The City is not, and has not been, in
default as to any payments required by the provisions
of this Ordinance for a period of not less than twelve
Page 27
(12) months immediately preceding the issuance of such
Additional Bonds or other additional parity obliga-
tions, and there is no deficiency in the Bond Fund or
Reserve Fund.
(2) The principal of and interest on the
Additional Bonds shall be payable from the Bond Fund
and further secured by the Reserve Fund, and the
Reserve Requirement shall be increased in proportion
to the Additional Bonds being issued.
(3) Prior to the delivery of any Additional
Bonds, the City shall have on file at the office of
the City Clerk a certificate of a licensed
professional engineer, who may be the City Engineer,
or a certificate of an independent certified public
accountant, dated prior to the authorization of such
Additional Bonds, showing that the Estimated Net
Revenues, determined and adjusted as hereafter
provided, for each fiscal year after the issuance of
such Additional Bonds, will equal at least 1.20 times
the amount required for the payment of the average
annual principal of and interest on the Certificates,
the Bonds, and any Additional Bonds then outstanding,
plus the Additional Bonds proposed to be issued.
(4) In determining Estimated Net Revenues, the
Net Revenues for the past twelve (12) consecutive
months immediately preceding the year of the proposed
Additional Bonds shall be adjusted by such engineer or
accountant to take into consideration changes in Net
Revenues estimated to occur under one or more of the
following conditions for each year after delivery of
the Additional Bonds for so long as the Bond and any
Additional Bonds, including the Additional Bonds to be
issued, shall be outstanding:
a. any increase or decrease in Net Revenues
which would result if any change in rates or
charges adopted prior to the date of such
certificate and subsequent to the beginning
of such twelve (12) month period had been in
force during the full twelve (12) month
period;
b. any increase or decrease in Net Revenues
estimated by such engineer or accountant to
result from any additions, betterments, and
improvements to and extension of any
facilities of the System which (i) become
fully operational during such twelve (12)
month period, (ii) were under construction
at the time of such certificate, or (iii)
Page 28
will be constructed from the proceeds of the
Additional Bonds to be issued; and/or
c. the additional Net Revenue which would have
been received if any customers added to the
System prior to the date of such certificate
and subsequent to the beginning of such
twelve (12) month period were customers for
the entire period.
(5) The foregoing limitations, or any of them,
may be waived or modified by the written consent of
the Registered Owners of the Bonds.
Such engineer or accountant shall base his or her
certificate upon, and his certificate shall have attached
thereto, audited financial statements of the water System
(unless such an audit is not available within such twelve-
month period) showing income and expenses for the period
upon which the same is based.
B. Subordinate Lien Bonds. No provision of this
Ordinance or of any instrument pertaining thereto shall be
deemed to limit or restrict the power of the City to issue
bonds, notes or warrants, or to make pledges of the
revenues which shall be subordinate as to the lien of the
Bonds and which shall provide for compliance with the
current provisions hereof prior to the application of any
funds to said subordinate purpose.
C. Refunding. The restrictions with respect to the
issuance of parity obligations shall not apply if such
additional parity bonds proposed to be issued are for the
sole purpose of refunding outstanding water revenue bonds
or obligations.
D. Complete Project. The foregoing restrictions
with respect to the issuance of parity obligations shall
not apply to obligations issued to fund the completion of
the water system improvement project under construction at
the time of the issuance of the Bonds.
Section 18: GENERAL COVENANTS
For the protection and security of the Bonds, it is
covenanted and agreed to and with the Registered Owners of
the Bonds from time to time, that the City will perform the
following covenants:
A. Maintain Corporate Status. The City will
maintain its identity as a municipal corporation and will
make no attempt to cause its corporate status to be
abolished.
Page 29
B. Budget Laws. The City will comply with
applicable state budget laws in preparing its annual budget
and in keeping accounts and records.
C. Operate System. It will operate the System in an
efficient and economical manner and prescribe, revise, and
collect such charges in connection therewith so that the
services, facilities, and properties of the System may be
furnished at the lowest possible cost consistent with sound
economy and prudent management.
D. Good Repair. It will operate, maintain,
preserve, and keep the System and every part hereof in good
repair, working order, and condition.
E. Preserve Security. It will preserve and protect
the security of the Bonds and the rights of the Registered
Owners thereof.
F. Collect Revenues. It will collect and hold in
trust the revenues and other funds pledged to the payment
of the Bonds and apply such revenue or other funds only as
provided in this Ordinance.
G. Service Bonds. It will pay and cause to be paid
punctually the principal of the Bonds and the interest
thereon on the date or dates and at the place or places and
in the manner mentioned in the Bonds, and in accordance
with this Ordinance.
H. Pay Claims. It will pay and discharge any and
all lawful claims for labor, materials, and supplies which,
if unpaid, might by law become a lien or charge upon the
Revenue of the System, or any part of said Revenue of the
System, or any funds in the hands of the Treasurer, prior
or superior to the lien of the Bonds or which might impair
the security of the Bonds, to the end that the priority and
security of the Bonds shall be fully preserved and
protected.
I. Encumbrances. It will not mortgage or otherwise
encumber, sell, lease, or dispose of the System or any part
thereof, nor enter into any lease or agreement which would
impair or impede the operation of the System or any part
thereof necessary to secure adequate revenues for the
payment of the principal of and interest on the Bonds, nor
which would otherwise impair or impede the rights of the
Registered Owner of the Bonds with respect to such revenues
of the operation of the System without provisions for the
retirement of the Bonds then outstanding from the proceeds
thereof.
J. Insurance. It will procure and keep in force
insurance upon all buildings and structures of the System
Page 30
and the machinery and equipment therein, which are usually
insured by entities operating like property, in good and
responsible insurance companies. The Trustee shall be
named as an additional loss payee on any policy, and the
City shall cause proof of such insurance to be filed with
the Trustee. The amount of the insurance shall be not less
than the full replacement cost thereof and shall be such as
may be required to adequately protect it and the Owners of
the Bonds from loss due to any casualty, and in the event
of any such loss, the proceeds shall be used to repair or
restore the System or for the payment of the Bonds issued
under this Ordinance.
K. Fidelity Bonds. It will procure suitable
fidelity bonds covering all of its officers and other
employees charged with the collection and disbursement of
revenues from the System.
L. Engineers. It will employ consulting engineers
of acknowledged reputation, skill, and experience in the
improvement and operation of the System for any unusual or
extraordinary items of maintenance, repair, or betterments
as shall be required from time to time, all reports,
estimates, and recommendations of such consulting engineers
to be filed with the Clerk and furnished to the Registered
Owner of the Bond issued hereunder, upon request.
M. Accounts. It will establish and maintain proper
methods of accounting and bookkeeping, keep proper and
separate accounts and records in which complete and
separate entries shall be made of all transactions relating
to the System, and furnish complete operating and income
statements to the Registered Owner upon request.
N. Delinquencies. It will not furnish water service
to any customer whatsoever free of charge, and it shall not
later than sixty (60) days after the end of each calendar
year, take such legal action as may be reasonable to
enforce collection of all collectible delinquent accounts.
Section 19: SPECIAL COVENANTS
The City further covenants and agrees:
A. In accordance with Section 149(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Bonds
shall be issued and remain in fully registered form in
order that interest thereon be excluded from gross income
of the Registered Owners for federal income tax purposes.
The City covenants and agrees that it will take no action
to permit the Bonds to be issued in or converted to bearer
or coupon form.
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B. The Bonds are hereby designated as "qualified
tax-exempt obligations" within the meaning and for the
purposes of Section 265(b)(3) of the Code, and the City
does not reasonably anticipate that it will designate more
than $10,000,000, including the Bonds, as qualified tax-
exempt obligations during the calendar year 2003.
C. None of the proceeds of the Bonds will be used
directly or indirectly (i) to make or finance loans to
persons or (ii) in any trade or business carried on by any
person (other than use as a member of the general public).
For purposes of the preceding sentence, the term "person"
does not include a government unit other than the United
States or any agency or instrumentality thereof, and the
term "trade or business" means any activity carried on by a
person other than a natural person. The City further
covenants and agrees to take no action which would cause
the Bonds to be "private activity bonds," nor will it omit
to take any action necessary to prevent the Bonds from
becoming "private activity bonds," within the meaning of
Section 141 of the Code.
D. The Mayor, Clerk, and Treasurer, and other
appropriate officials of the City, or any one or more of
such officials, as may be appropriate, are each hereby
authorized and directed to execute, on behalf of the City,
such certificate or certificates as shall be necessary to
establish that the Bonds are not "arbitrage bonds" within
the meaning of Section 148 of the Code and the Treasury
Regulations promulgated thereunder, and to establish that
interest on the Bonds is not and will not become includable
in the gross income of the owners of the Bonds under the
Code and applicable regulations. The City covenants and
agrees that no use will be made of the proceeds of the
Bonds, or any funds of the City which may, pursuant to
Section 148 of the Code and applicable regulations, be
deemed to be proceeds of the Bonds, which would cause the
Bonds to be "arbitrage bonds" within the meaning of Section
148 of the Code. The City further covenants to comply
throughout the term of the Bonds with the requirements of
Section 148 of the Code and the regulations promulgated
thereunder in order to prevent the Bonds from becoming
"arbitrage bonds."
E. The City will comply with the information
reporting requirements of Section 149(e) of the Code.
F. None of the proceeds of the Bond will be used to
reimburse the City for capital expenditures made prior to
the date of delivery of the Bond unless the City, not later
than 60 days after the payment of such expenditure, shall
have adopted an official intent resolution as provided by
Section 1.150-2 of the Treasury Regulations.
Page 32
G. The City will comply with the requirements of SEC
Rule 15c2-12(b)5 with respect to the continuous disclosure
of financial information and operating data and of certain
material events with respect to the Bonds, as set forth in
the Information Reporting Agreement which is annexed hereto
as Exhibit "E." The Trustee, or its successor entity, is
hereby designated as agent of the City for purposes of Rule
15c2-12(b)5.
Section 20: SALE OF BONDS
The sale of the Bonds to, and the execution of a Bond
Purchase Agreement for the purchase of the Bonds by,
Seattle-Northwest Securities Corporation, as Underwriter,
are hereby approved, and the Mayor and City Clerk are
authorized to execute the Bond Purchase Agreement,
substantially in the form annexed hereto as Exhibit ″G,″ on
behalf of the City.
Section 21: AMENDMENTS
A. Without the consent of the Registered Owners, the
City from time to time and at any time may adopt an
ordinance or ordinances supplemental hereto, which
ordinance or ordinances thereafter shall become a part of
this Ordinance, for any one or more of all of the following
purposes:
(1) To add to the covenants and agreements of
the City in this Ordinance, other covenants and
agreements thereafter to be observed, which shall not
adversely affect the interest of the Beneficial Owners
of the Bonds, or to surrender any right or power
herein reserved.
(2) To make such provisions for the purpose of
curing any ambiguities or of curing, correcting, or
supplementing any defective provisions contained in
this Ordinance, or any ordinance authorizing future
bonds in regard to matters or questions arising under
such ordinances as the Council may deem necessary or
desirable and not inconsistent with such ordinances
and which shall not adversely affect, in any material
respect, the interest of the Beneficial Owners of the
Bonds.
Any such supplemental ordinance may be adopted
without the consent of the Registered Owners of the
Bonds at any time outstanding, notwithstanding any of
the provisions of subsection B of this Section.
B. With the consent of the Registered Owners of not
less than 75% in aggregate principal amount of the Bonds at
the time outstanding, the Council may adopt an ordinance or
Page 33
ordinances supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating
any of the provisions of this Ordinance or of any
supplemental ordinance; provided, however, that no such
supplemental ordinance shall:
(1) Extend the fixed maturities of the Bonds, or
reduce the rate of interest thereon, or extend the
time of payments of interest from their due date, or
reduce the amount of the principal thereof, or reduce
any premium payable on the redemption thereof, if
applicable, without the consent of the Registered
Owners of the Bonds so affected; or
(2) Reduce the aforesaid percentage of the
Registered Owners required to approve any such
supplemental ordinance, without the consent of the
Registered Owners of the Bonds then outstanding.
It shall not be necessary for the consent of the Registered
Owners under this subsection B to approve the particular
form of any proposed supplemental ordinance, but it shall
be sufficient if such consent shall approve the substance
thereof.
C. Upon the adoption of any supplemental ordinance
pursuant to the provisions of this Section, this Ordinance
shall be deemed to be modified and amended in accordance
therewith, and the respective rights, duties, and
obligations of the City under this Ordinance and the
Registered Owners of the Bonds outstanding hereunder shall
thereafter be determined, exercised, and enforced
thereunder, subject in all respects to such modification
and amendments, and all terms and conditions of any such
supplemental ordinance shall be deemed to be part of the
terms and conditions of this Ordinance for any and all
purposes. The City shall notify the Trustee of the
adoption of any supplemental ordinance. The Trustee shall
notify the Registered Owners of the adoption of any
supplemental ordinance.
D. Any Bonds executed and delivered after the
execution of any supplemental ordinance adopted pursuant to
the provisions of this Section may have a notation as to
any matter provided for in such supplemental ordinance, and
if such supplemental ordinance shall so provide, new bonds
so modified as to conform, in the opinion of the Council,
to any modification of this Ordinance contained in any such
supplemental ordinance, may be prepared and delivered
without cost to the Registered Owners of any affected Bonds
then outstanding, upon surrender for cancellation of such
Bonds.
Page 34
Section 22: VALIDITY OF ISSUANCE
The Bonds are issued pursuant to the Idaho Revenue
Bond Act, being Idaho Code Sections 50-1027 through
50-1042. This recital is conclusive evidence of the
validity of the Bonds and the regularity of their issuance.
Section 23: EVENTS OF DEFAULT AND REMEDIES
A. Events of Default.
If one or more of the following events occur, it is
hereby declared to constitute and Event of Default under
this Ordinance.
1. Failure to make any payment of interest or
principal on the Bonds as the same shall become due; or
2. Filing by the City, or any successor or assignee
of the City, while in possession of the System, of a
petition in bankruptcy or insolvency, or for reorganization
under any bankruptcy act, or the making of an assignment
for the benefit of creditors; or
3. Any other default by the City under this
Ordinance, and failure to remedy the same for a period of
sixty days after written notice thereof, as set forth in
paragraph B below, specifying such failure and requiring
the same to be remedied, shall have been given to the City
by the Trustee, or to the City and the Trustee by the
Owners of not less than twenty-five percent in aggregate
principal amount of the Bonds at the time outstanding.
B. Remedies upon Event of Default.
1. Remedies. Upon the occurrence of an Event of
Default, the Trustee may, in its discretion (or, as
provided hereinafter, at the direction of the Owners of not
less than twenty-five percent in aggregate principal amount
of the Bonds at the time outstanding, shall), take one or
more of the following actions:
a. Bring action at law or in equity for payment
of any Net Revenue duly appropriated by the City for
the then-current Fiscal year and not yet paid to the
Trustee.
b. Take any other action for which provision is
made in this Section 23, including, without
limitation, application of the funds under the control
of the Trustee.
2. Declaration of Event of Default. Prior to taking
any such action, the Trustee shall cause written notice,
Page 35
declaring an Event of Default to have occurred and
specifying the Event of Default complained of, to be given
the City. If, within sixty (60) days of the mailing or
delivery of such written notice, such Event of Default
specified in the written notice shall have been cured, and
the reasonable and proper charges of the Trustee shall be
paid to the Trustee, then in such case the Owners of not
less than fifty percent in aggregate principal amount of
the Bonds at the time outstanding, by written notice to the
City and the Trustee, may rescind such declaration and
annul such Event of Default in its entirety, or, if the
Trustee shall have acted without a direction of the Owners
of not less than twenty-five percent in aggregate principal
amount of the Bonds outstanding at the time of the written
direction, and if there shall not have been theretofore
delivered to the Trustee written direction to the contrary
by the Owners of not less than fifty percent in aggregate
principal amount of the Bonds then outstanding, then any
such declaration shall ipso facto be deemed to be annulled.
No such rescission and annulment shall affect any
subsequent Event of Default.
The Trustee shall, within 30 days after receipt of
notice of the occurrence thereof, give written notice by
first class mail to Registered Owners of all Events of
Default known to the Trustee and send a copy of such notice
to the City, unless such Events of Default have been
remedied. The Trustee shall not be deemed to have notice
of any Events of Default unless it has actual knowledge
thereof or has been notified in writing of such Events of
Default by the Owners of at least 25% in principal amount
of the Bonds then outstanding.
C. Accounting and Examination of Records after Event
of Default.
The City covenants that if an Event of Default shall
have occurred and shall not have been remedied, the books
of record and accounts of the City shall at all times be
subject to the inspection and use of the Trustee and of its
agents and attorneys.
D. Application of Revenues and other Moneys after
Event of Default.
1. During the continuance of an Event of Default,
the Trustee shall apply the Net Revenues and such moneys,
securities and funds and the income therefrom as follows
and in the following order:
(a) to the payment of the reasonable and proper
charges and expenses of the Trustee and the reasonable
fees and disbursements of its counsel;
Page 36
(b) to the payment of the Bonds, first to
interest and then to principal.
2. If and whenever all overdue sums payable by the
City under this Ordinance, shall be paid by or for the
account of the City, and all defaults under this Ordinance
or the Bonds shall be made good or secured to the satisfac-
tion of the Trustee, the City and the Trustee shall
thereupon be restored, respectively, to their former
positions and rights under this Ordinance.
E. Rights and Remedies of Bond Owners.
1. No Owner of any Bond shall have any right to
institute any proceeding, judicial or otherwise, with
respect to this Ordinance, or for any other remedy
hereunder, unless
(a) such Owner has previously given written
notice to the Trustee of a continuing Event of
Default;
(b) the Owners of not less than twenty-five
percent (25%) in principal amount of the Bonds shall
have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(c) such Owners have provided to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such
request;
(d) the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity
has failed to institute any such proceedings; and
(e) no direction inconsistent with such written
request has been given to the Trustee during such
sixty-day period by the Owners of a majority in
principal amount of the Bonds; it being understood and
intended that no one or more Owners of Bonds shall
have any right in any manner whatever by virtue of, or
by availing of, any provision of this Ordinance to
affect, disturb or prejudice the rights of any other
Owner of Bonds, or to obtain or to seek to obtain
priority or preference over any other Owner or to
enforce any right under this Ordinance, except in the
manner herein and therein provided and for the equal
and ratable benefit of all the Owners of Bonds.
2. The Owners of a majority in principal amount of
the Outstanding Bonds shall have the right to direct the
time, method and place of conducting any proceeding for any
Page 37
remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with
any rule of law or this Ordinance,
(b) the Trustee shall not determine that the
action so directed would be unjustly prejudicial to
the Owners not taking part in such direction, and
(c) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with
such direction.
F. Waiver of Trustee.
The Trustee may, in its discretion, waive any Event of
Default, provided there has been no default in any
scheduled payment of interest on or principal of the Bonds.
The Owners shall have no rights under this Section 23 if
the Trustee waives an Event of Default. The Trustee may
consult with counsel, who may be counsel to the City, with
regard to legal questions arising under this Ordinance, and
the opinion of such counsel shall be full and complete
authorization and protection with respect to any action or
non-action taken in good faith hereunder.
Section 24: ORDINANCE A CONTRACT
The provisions of this Ordinance shall constitute a
contract between the City and the Owners so long as the
Bonds hereby authorized remain unpaid.
Section 25: SEVERABILITY
If any one or more of the covenants or agreements
provided in this Ordinance to be performed on the part of
the City shall be declared by any court of competent
jurisdiction to be contrary to law, then such covenant or
covenants, agreement or agreements, shall be null and void
and shall be deemed separable from the remaining covenants
and agreements in this Ordinance and shall in no way affect
the validity of the other provisions of this Ordinance or
of the Bonds.
Section 26: REPEALER
All prior ordinances inconsistent herewith are to the
extent of such inconsistency, hereby repealed and shall, to
the extent of such inconsistency, have no further force or
effect.
Page 38
Page 39
Section 27: BOND INSURANCE
The City has obtained a policy of municipal bond
insurance (the "Policy") from the Insurer, insuring the
timely payment of the principal of and interest on the
Bonds. A statement of insurance in the form required by
the Insurer shall appear on each Bond. The Mayor and City
Clerk are hereby authorized to execute any additional
agreements or other documents, on behalf of the City, as
may be required by the Insurer to insure the payment of the
Bonds.
Section 28: FURTHER AUTHORIZATION
The Mayor, Clerk, and Treasurer, or any one of such
officers, as may be appropriate, are hereby authorized to
execute, on behalf of the City, all such additional
certificates and other documents as may be necessary or
appropriate to effect the sale and delivery of the Bonds in
accordance with this Ordinance.
Section 29: PUBLICATION
This Ordinance, or a summary thereof in compliance
with Section 50-901A, Idaho Code, substantially in the form
annexed hereto as Exhibit "F," shall be published once in
the official newspaper of the City, and shall take effect
immediately upon its passage, approval, and publication.
DATED this 26th day of June, 2003.
CITY OF McCALL
Valley County, Idaho
By_____________________________
Mayor
ATTEST:
____________________________
City Clerk
( S E A L )
Appendix B
Opinion of Bond Counsel
MOORE SMITH BUXTON & TURCKE, CHARTERED
ATTORNEYS AND COUNSELORS AT LAW
225 NORTH 9TH STREET, SUITE 420
BOISE, ID 83702
TELEPHONE: (208) 331-1800 FAX: (208) 331-1202
RANSOM J. BAILEY JOHN J. MCFADDEN*‡
SUSAN E. BUXTON* Of Counsel
MICHAEL C. MOORE‡
BRUCE M. SMITH
PAUL A. TURCKE◊ * Also admitted in Oregon
CHRISTOPHER E. YORGASON ‡Also admitted in Washington
TAMMY A. ZOKAN+ ◊ Also admitted in South Dakota
+ Also admitted in New Mexico
July 15, 2003
Hon. Mayor and City Council
City of McCall
216 East Park Street
McCall, Idaho 83638
Seattle-Northwest Securities Corporation
802 W. Bannock, Suite 1000
Boise, Idaho 83702
In re: City of McCall, Valley County, Idaho, Water
Revenue Refunding Bonds, Series 2003, in the
Principal Amount of $5,650,000
Ladies and Gentlemen:
We have acted as bond counsel in connection with the
issuance by the City of McCall, Valley County, Idaho (the
"City"), of its Water Revenue Refunding Bonds, Series 2003,
issued in the aggregate principal amount of $5,650,000 (the
"Bonds"), which are dated July 15, 2003, and are issued pursuant
to Ordinance No. ____, adopted by the Mayor and Council of the
City on June 26, 2003 (the "Bond Ordinance").
In connection therewith, we have examined the applicable
law, a duly certified transcript of proceedings of the City,
prepared in part by us, relating to the issuance and sale of the
Bonds, and other documents which we deem necessary to render this
opinion.
We have relied upon the certified proceedings and other
certifications of public officials regarding questions of fact
material to our opinion and have not undertaken to verify the
same by independent investigation. We have not been engaged or
undertaken to review the accuracy, completeness, or sufficiency
of the Official Statement or other offering material relating to
the Bonds, and we express no opinion relating thereto, excepting
only the matters set forth as our opinion therein.
Opinion
July 15, 2003
Page 2
Based upon our examination, it is our opinion, under
existing law and as of the date hereof:
1. The City is a lawfully created and existing municipal
corporation of the State of Idaho and has full power and
authority under the Constitution and laws of the State of Idaho
to incur indebtedness and to borrow money for the purposes set
forth in the Bond Ordinance, to issue, sell, and deliver the
Bonds, and to enter into and perform its obligations under the
Bond Ordinance.
2. The Bonds have been lawfully authorized, sold, and
issued under the Constitution and laws of the State of Idaho and
constitute valid and legally binding special obligations of the
City, payable solely from the Net Revenues of the domestic water
System of the City, as provided in the Bond Ordinance.
3. Except as discussed below, the interest on the Bonds is
excludable from the gross income of the owners for federal income
tax purposes. We are further of the opinion that the interest
will not be included as an individual or corporate alternative
minimum tax preference item under Section 57(a)(5) of the
Internal Revenue Code of 1986, as amended (the "Code"). In
expressing the aforementioned opinions, we have relied on, and
assume compliance by the City with, certain representations and
covenants regarding the use and investment of the proceeds of the
Bonds. Under the Code, the City is required to comply with
certain requirements subsequent to the issuance of the Bonds to
maintain the exclusion of interest from gross income for federal
income tax purposes, including requirements relating to the
application and investment of the proceeds of the Bonds and use
of facilities financed with such proceeds. The City has
covenanted to comply with these requirements, and the opinion
expressed in this paragraph 3 hereof assumes such compliance.
However, we have not undertaken and do not undertake to monitor
compliance by the City with such requirements; and if the City
should fail to comply with such requirements, the interest on the
Bonds could become includable in gross income for federal and
State of Idaho income tax purposes retroactive to the date of
issuance of the Bonds.
4. Interest on the Bonds is excluded from gross income for
purposes of income taxation by the State of Idaho, to the same
extent that such interest is excluded from gross income for
purposes of federal income taxation.
Except as stated above, we express no opinion as to any
other federal, state, or local tax consequences of acquiring,
carrying, owning, or disposing of the Bonds. Owners of the Bonds
Opinion
July 15, 2003
Page 3
should be aware that the ownership of tax-exempt obligations may
result in collateral federal income tax consequences.
The opinions set forth above are qualified only to the
extent that certain rights and remedies of the Bond owners may be
limited or rendered ineffective by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws or judicial
decisions or principles of equity relating to or affecting the
enforcement of creditors' rights or contractual obligations
generally.
Our opinion is limited to matters of Idaho law and
applicable federal law, and we assume no responsibility as to the
applicability of laws of other jurisdictions.
Respectfully submitted,
MOORE SMITH BUXTON & TURCKE,
CHARTERED
Michael C. Moore
Appendix C
General Purpose and Enterprise Find Financial Statements for the Year Ended September 30 The City’s Auditor has not performed any further review of the City’s general purpose and enterprise fund financial statements since the date of the audit contained herein.
Appendix D
Form of Continuing Disclosure Undertaking
INFORMATION REPORTING AGREEMENT
AGREEMENT executed as of the 15th day of July, 2003, by and
between the CITY OF McCALL, Valley County, Idaho (the "Issuer"),
and U.S. BANK NATIONAL ASSOCIATION, (the "Agent").
The parties agree:
FIRST: DEFINITIONS
For purposes of this Agreement, the following terms shall have
the following definitions:
"Agent" means the Corporate Trust Department of U.S. Bank
National Association.
"Agreement" means this Information Reporting Agreement between
the Issuer and the Agent.
"Annual Financial Information" means the Financial Statements
and other financial information and operating data set forth in
Paragraph THIRD of this Agreement.
"Bonds" means the City of McCall Water Revenue Refunding
Bonds, Series 2003, dated July 15, 2003, and issued in the initial
principal amount of $____________ pursuant to the Ordinance.
"Financial Statements" means the annual financial statements
of the Issuer for the most current Fiscal Year, prepared in
accordance with generally accepted accounting principles applicable
to governmental units, as such principles may be changed from time
to time and as permitted by Idaho law, which may or may not be
audited; provided, that if and when audited financial statements
are prepared and available to the Issuer, such audited statements
will be provided.
"Fiscal Year" means the fiscal year of the Issuer, commencing
October 1 of each year and ending on September 30 of the following
year.
"Issuer" means the City of McCall, Valley County, Idaho, a
municipal corporation of the State of Idaho.
"Material Event" means any of the events listed in paragraph
FOURTH of this Agreement.
Page 1 – Exhibit "E"
"MSRB" means the Municipal Securities Rulemaking Board,
Washington, D.C.
"NRMSIR" means a nationally recognized municipal securities
information repository designated by the SEC.
"Ordinance" means Ordinance No. ___ of the Issuer adopted on
June 26, 2003, pursuant to which the Bonds were sold.
"Owners" means the beneficial owners, registered owners, and
holders of the Bonds.
"Repository" means a NRMSIR or SID.
"Rule" means SEC Rule 15c2-12(b)(5), as amended or interpreted
by the SEC.
"SEC" means the U.S. Securities and Exchange Commission.
"SID" means the state information depository for the State of
Idaho designated by the SEC, if any.
SECOND: PURPOSE
This Agreement is being executed for the benefit of the Owners
of the Bonds in accordance with the Rule. The Agent hereby accepts
appointment, pursuant to the Ordinance, as agent of the Issuer fro
purposes of the Rule.
THIRD: PROVISION OF ANNUAL FINANCIAL INFORMATION
The Issuer, through the Agent, shall file annually, with each
Repository, not later than 180 days following the end of each
Fiscal Year of the Issuer, beginning with the Fiscal Year which
ends on September 30, 2003, the following financial information and
operating data.
1. Financial Statements of the Issuer.
2. A copy of the duly-adopted budget for the then-current
fiscal year of the City.
3. A statement of authorized, issued and outstanding bond
debt secured by the Net Revenues of the Water System.
Page 2 – Exhibit "E"
4. Debt service requirements and coverage ratios similar to
the information contained in the Official Statement under
the heading "City of McCall Water Revenue Fund Historic
Coverage."
5. List of 10 largest customers billed by the City.
6. Current rates and fees charged and collected by the City
in connection with the operation of the water System,
similar to the information contained in the Official
Statement under the heading "Water Service Rates and
Charges."
7. Information on Water Treatment Plant capacity and water
demand similar to the information contained in the
Official Statement under the heading "Water Treatment
Plant & City of McCall – Water Demand Table."
If the Issuer fails to provide the required Annual Financial
Information, the Agent shall provide notice of such failure to each
NRMSIR or to the MSRB and to the SID.
The Issuer reserves the right to modify from time to time the
specific types of information provided, or the format of the
presentation of such information, in a manner consistent with the
Rule.
FOURTH: REPORTING OF MATERIAL EVENTS
The Issuer shall provide, through the Agent, in a timely
manner, notice of the occurrence of any of the following events, if
material, with respect to the Bonds:
1. Principal and interest payment delinquencies on the
Bonds;
2. Nonpayment related defaults under the Resolution;
3. Unscheduled draws on debt service reserves reflecting
financial difficulties;
4. Unscheduled draws on credit enhancements reflecting
financial difficulties;
5. Substitution of 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 Bondholders;
8. Bond calls;
Page 3 – Exhibit "E"
9. Defeasances;
10. Release, substitution or sale of property securing
repayment of the Bonds; and
11. Rating changes.
Whenever the Issuer obtains knowledge of the occurrence of a
Material Event, the Issuer shall, as soon as possible, determine
whether such event would constitute material information for Owners
of the Bonds; provided, that any event listed under 8, 9, or 11
above will always be deemed to be material.
If the Issuer determines that knowledge of the occurrence of a
Material Event would be material, the Issuer shall promptly file a
notice of such occurrence with each NRMSIR or with the MSRB and
with the SID.
FIFTH: AMENDMENTS
This Agreement may be amended only if the Issuer receives an
opinion of independent bond counsel to the effect that:
1. such amendment is made on connection with a change in
circumstances that arises from a change in legal
requirements, a change in law, or a change in the types
of activities in which the Issuer is engaged;
2. this Agreement, as so amended, would have complied with
the requirements of the Rule at the time of the primary
offering of the Bonds, after taking into account any
amendments or interpretations of the Rule as well as any
change in circumstances; and
3. such amendment does not materially impair the interest of
the Owners of the Bonds.
Page 4 – Exhibit "E"
If the amendment results in a change of the annual financial
information and operating data required to be reported pursuant to
this Agreement, the first annual report that contains the amended
operating data or financial information shall explain, in narrative
form, the reasons for the amendment and the impact of such change
in the type of operating data or financial information being
provided. If the amendment involves a change in the accounting
principles to be followed in preparing financial statements, the
first annual report shall present a comparison between the
financial statements or information based on the new accounting
principles and those prepared based on the former accounting
principles. Further, if the annual financial information required
to be provided in the annual report can no longer be generated
because the operations to which it related have been materially
changed or discontinued, a statement to that effect shall be
included in the first annual report that does not include such
information.
SIXTH: TERMINATION
The Issuer reserves the right to terminate its obligation to
provide Annual Financial Information and notices of Material
Events, as set forth above, if and when the Issuer no longer
remains an "obligated person" with respect to the Bonds within the
meaning of the Rule.
SEVENTH: REMEDIES
In the event of a failure of the Issuer to comply with any
provision of this Agreement, the Owner of any Bond may take such
actions as may be necessary and appropriate, including seeking
specific performance by court order, to cause the Issuer to comply
with its obligations under this Agreement. A default under this
disclosure Agreement shall not be deemed to constitute a default
under the Resolution, and the sole remedy under this Agreement in
the event of any failure of the Issuer to comply with this
Agreement shall be an action to compel performance.
EIGHTH: ADDITIONAL INFORMATION
Nothing in this Agreement shall be deemed to prevent the
Issuer 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
report or notice of occurrence of a Material Event, in addition to
that which is required by this Agreement. If the Issuer chooses to
include any information in any annual report or notice of
occurrence of a Material Event in addition to that which is
specifically required by this Agreement, the Issuer shall have no
obligation under this Agreement to update such information or
include it in any future annual report or notice of occurrence of a
Material Event.
NINTH: BENEFICIARIES
This Agreement shall inure solely for the benefit of the
Issuer and the Owners of the Bonds, and shall create no rights in
any other person or entities.
Page 5 – Exhibit "E"
Page 6 – Exhibit "E"
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CITY OF McCALL
Valley County, Idaho
By______________________________________
Mayor
ATTEST:
______________________________
City Clerk
U.S. BANK NATIONAL ASSOCIATION
By______________________________________
Corporate Trust Officer
Appendix E
Book Entry Only System
T H E D E P O S I T O R Y T R U S T C O M P A N Y
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC—bracketed material may be applicable only to certain issues)
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
securities (the”Securities”). The Securities will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue
of] the Securities, [each] in the aggregate principal amount of such issue,and will be deposited with DTC.
[If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be
issued with respect to each $500 million of principal amount, and an additional certificate will be issued
with respect to any remaining principal amount of such issue.]
2. 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 2 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 between 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 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”). DTC
has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with
the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser
of each Security (“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. Beneficial
Owners are, however, 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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities 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 Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect
only the identity of the Direct Participants to whose accounts such Securities 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.
5. 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. [Beneficial Owners of Securities may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Securities, such as redemptions,
tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners
of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to
obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to
provide their names and addresses to the registrar and request that copies of notices be provided directly
to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose
accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, 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 [nor its
nominee], Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of
Issuer or Agent, 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.
[9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its
Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the
Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the
Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of
tendered Securities to [Tender/Remarketing] Agent’s DTC account.]
10. DTC may discontinue providing its services as depository with respect to the Securities at any time by
giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor
depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from
sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.