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2234ORDINANCE NO. 2234 COUNCIL MEMBER RYAN INTRODUCED THE FOLLOWING ORDINANCE: AN ORDINANCE AUTHORIZING THE ISSUANCE OF A WATER SYSTEM REVE BOND, SERIES 2010/2012 OF THE CITY OF BLAIR, NEBRASKA, IN THE PRINCIP AMOUNT OF TWO MILLION EIGHT HUNDRED FORTY -ONE THOUSAND FOU HUNDRED DOLLARS ($2 IN THE FORM OF A PROMISSORY NOTE ISSUE TO EVIDENCE INDEBTEDNESS TO THE NEBRASKA DEPARTMENT OF ENVIRONMENTAL QUALITY; APPROVING THE FORM OF SAID BOND (ISSUED AS A SING PROMISSORY NOTE) AND RELATED LOAN AGREEMENT AND AMENDMEN N NO. F THE ONE; PLEDGING AND HYPOTHECATING THE REVENUES AND EARNINGS BY T HE WATERWORKS PLANT AND WATER SYSTEM OWNED OR TO BE OWNS CITY FOR THE PAYMENT OF SAID BOND; PROVIDING FOR THE ISSUANCE AND SALE OF SAID BOND; AUTHORIZING THE DELIVERY OF SAID BOND AND RELATED LOAN AGREEMENT AND AMENDMENT NO. ONE TO THE NEBRASKA DEPARTMENT O F ENVIRONMENTAL QUALITY; PROVIDING FOR THE COLLECTION, SEGREGATION � AND APPLICATION OF THE REVENUES OF SAID WATERWORKS PLANT BE SYSTEM; DETERMINING THAT INTEREST ON SAID BOND SHALL COME EXCLUDABLE FROM GROSS INCOME FOR PURPOSES OF FEDERAL AID BOND TAXATION; PROVIDING FOR THE DISPOSITION OF THE PROCEEDS OF AND ORDERING THE ORDINANCE PUBLISHED IN PAMPHLET FORM. BE IT ORDAINED BY THE MAYOR AND COUNCIL OF THE CITY OF BLAIR, NEBRASKA, AS FOLLOWS: Section 1. The Mayor and Council of the City of Blair, Nebraska (the "City ") hereby fold and determine as follows: (a) The City owns and operates a waterworks plant and system (which plant and system, together with any additions, extensions and improvements thereto hereafter madame hereinafter referred to as the "Water System ") which represents a revenue - producing undertaking of the City. (b) the Nebraska Department of Environmental Quality ( "NDEQ ") has approved a project of the City for its Water System consisting of construction and installation of replacement water mains and related improvements, rehabilitations and repairs and also for providing for a new radio meter reading system for water service meters which has been designated as DWSRF Project No. D311530 (the "Project ") and has agreed to lend from monies in NDEQ's Drinking Water Facilities Loan Fund or from other sources in the total principal amount of $2,841,400 (the "2010 /2012 NDEQ Loan") and in connection with such loan has agreed to accept one or more bonds payable from the revenues of the Water System to be evidenced by and in the form of a single promissory note (the "NDEQ Note" and also sometimes referred to herein as the "Seris 2010/12 Bond7% with such loan to be governed as to terms and conditions by an agreement with NDEQ entitled "Loan Agreement (Governmental Borrower) Between Nebraska Department of Environmental Quality and the City of Blair, Nebraska, NDEQ Project No. D311530 (the "Existing NDEQ Contract"), as amended by an amendment entitled "Amendment No. One to Agreement for Loan Between Nebraska Department of Environmental Quality and City of Blair Project No. D311530" (the "Amendment" an d together with the Existing NDEQ Contract, the "NDEQ Contract"). (c) The City has issued and outstanding the following bonds which are a lien upon and secured by a pledge of the revenue and earnings of the Water System (collectively, the "Outstanding Bonds "): (i) Water System Revenue Refunding Bonds, Series 2000, Date of Original Issue — September 22, 2000, issued pursuant to Ordinance No. 1909 of the City (the "Series 2000 Ordinance "), in the original principal amount of $3,395,000 (the "Series 2000 Bonds "), of which bonds in the principal amount of $260,000 presently remain outstanding and unpaid; (ii) Water System Revenue Bond, Series 2000B, dated September 8, 2000, issued pursuant to Ordinance No. 1907 of the City (the "Series 2000B Ordinance "), in the original principal amount of $6,815,700 (the "Series 2000B Bond "), issued to evidence a loan from the Nebraska Department of Environmental Quality of which the remaining balance for principal is $2,619,457 (as of June 15, 2012 and based upon the original amortization schedule); and (iii) Water System Revenue Bond, Series 2006, dated May 26, 2006, issued pursuant to Ordinance No. 2065 of the City (the "Series 2006 Ordinance "), in the original principal amount of $2,700,000 (the "Series 2006 Bond "), issued to support payments on bonded indebtedness incurred by the Papio - Missouri River Natural Resources District, of which the remaining principal balance outstanding is $900,000. (iv) Water System Revenue Bond, Series 2010, dated August 12, 2010, issued pursuant to Ordinance No. 2187 of the City (the "Series 2010 Ordinance "), in the original drawable principal amount of $2,341,400 (the "Series 2010 Bond") issued to NDEQ under the terms of the Existing NDEQ Contract and which is to be incorporated into the Series 2010/1 Bond (the "Series 2010 Bond "). 2 (v) Water System Revenue Bonds, Series 2010B, Date of Original Issue — September 28, 2010, issued pursuant to Ordinance No. 2191 of the City (the "Series 201OB /C Ordinance, in the original principal amount of $6,500,000 and presently outstanding in the principal amount of $6,500,000 (the "Series 2010B Bonds "). (vi) Water System Revenue Bonds, Series 2010C, Date of Original Issue — September 28, 2010, issued pursuant to the Series 201OB /C Ordinance, in the original principal amount of $770,000 and presently outstanding in the principal amount of $770,000 (the "Series 2010C Bonds "). (v) Water System Revenue Bonds Taxable Series 2012, Date of Original Issue — June 5, 2012, issued pursuant to Ordinances Nos. 2217 and 2219 of the City (together, the "Series 2012 Ordinance") in the original principal amount of $9,480,000 and presently outstanding in the principal amount of $9,480,000 (the "Series 2012 Taxable Bonds "). The Series 2000 Ordinance, the Series 2000B Ordinance, the Series 2006 Ordinance, the Series 2010 Ordinance, the Series 2010 B/C Ordinance and the Series 2012 Ordinance are referred to in this Ordinance collectively as the "Outstanding Parity Bond Ordinances ". In addition to the Outstanding Bonds, the City has issued and outstanding, as indebtedness constituting a junior lien pledge to the Outstanding Bonds, the following water revenue bond anticipation note indebtedness (the "Outstanding Notes "): Water System Revenue Bond Anticipation Notes, Series 2012, Date of Original Issue — September 28, 2012, issued pursuant to Ordinance No. 2224 (the "Series 2012 Note Ordinance ") in the original amount of $5,000,000 (the "Series 2012 Notes "), issued to pay a portion of the cost of certain enlargements, expansions and improvements to the existing waterworks plant and system of the City, of which the remaining principal balance outstanding is $5,000,000. The Outstanding Bonds and the Outstanding Notes constitute the only presently outstanding indebtedness of the City payable from the revenues of the Water System and for which the revenues of the Water System have been pledged. (d) Under the terms of the Outstanding Parity Bond Ordinances the issuance of "Additional Bonds" which are payable on a parity with the Outstanding Bonds and equally and ratably secured therewith are permitted provided that either (i) the "Net Revenues" (as defined in each of such ordinances and as defined in this Ordinance) have been at least equal to 1.30 times the "Average Annual Debt Service Requirements" (as defined in each of such ordinances and as defined in this Ordinance) of the Outstanding Bonds and the ,Additional Bonds proposed to be i ssued or (ii) the City shall have received a projection (the "Projection") made by a firm o consulting engineers projecting that such "Net Revenues" in each of the three full fiscal years after the issuance of such "Additional Bonds" will be at least equal to 1.35 time such "Average Annual Debt Service Requirements" of the Outstanding Bonds and the proposed Additional Bonds; and provided further that such Additional Bonds shall be issued pursuant to an ordinance which shall provide for an increase in the monthly credits to Bond Payment Account sufficient to pay, when due, the principal of and interest on the Outstanding Bonds and the proposed Additional Bonds; with respect to such requirements the following determinations are hereby made: (i) this Ordinance provides for an increase in the monthly credits to Bond Payment Account sufficient to pay, when due, the principal of and interest on the Outstanding Bonds and the Series 2010/12 Bond (as the proposed Additional Bonds to be issued): (ii) Prior to issuance of the Series 2010/2012 Bond, there shall be placed on file with the City Clerk and furnished to NDEQ the Projection the Series 2012 Note Ordinance provides that the Series 2012 Notes are payable only and solely from the Retained Revenues Account (as defined and described in the Outstanding Parity Bond Ordinances and are subject to the prior payment of operation and maintenance expenses and all payments with respect to the Outstanding Bonds and any Additional Bonds which may from time to time be issued and outstanding (all as described in the Outstanding Parity Bond Ordinances and the Series 2012 Note Ordinance further provides for a lien in favor of the Series 2012 Notes upon the revenue and earnings of the Water System which shall be in all respects junior to the lien in favor of the Outstanding Bonds and any Additional Bonds from time to time issued an outstanding; (e) in connection with the NDEQ Loan, as evidenced by the Series 2010/12 Bond, it is necessary and advisable for the City to approve the execution and delivery of the NDEQ Contract and the NDEQ Note in substantially the forms attached hereto; (fj all conditions, acts and things required by law to exist or to be done precedent to the issuance of the Series 2010/12 Bond as an Additional Bond of equal lien and standing with the Outstanding Bonds and as provided for in the Outstanding Parity Bond Ordinances do exist and have been done or are required to exist or to have been done, upon the filing and furnishing of the Projection, in regular and due form and time as required by law. 4 Section 2. In addition to the definitions provided in parentheses elsewhere in this Ordinance, the following definitions of terms shall apply, unless the context shall clearly indicate otherwise: "Additional Bonds" shall mean any and all bonds hereafter issued by the City pursuant to the terms of this Ordinance which are equal in lien to the Outstanding Bonds and the Series 2010/12 Bond, including any such bonds issued pursuant to Section 6 and refunding bonds issued pursuant to Section 7, as and when such bonds become equal in lien to the Outstanding Bonds and the Series 2010/12 Bond, according to their terms and the. terms of said Sections 6 and 7. "Average Annual Debt Service Requirements" shall mean that number computed by adding all of the principal and interest due when computed to the absolute maturity of the bonds for which such computation is required and dividing by the number of years remaining that the longest bond of any issue for which such computation is required has to run to maturity. In making such computation, the principal of any bonds for which mandatory redemptions are scheduled shall be treated as maturing in accordance with such schedule of mandatory redemptions. "Deposit Securities" shall mean direct obligations of or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. "Net Revenues" shall mean the gross revenues derived by the City from the ownership or operation of the Water System, including investment income, but not including any income from sale or disposition of any property belonging to or forming a part of the Water System, less the ordinary expenses to the City of operating and maintaining the Water System payable from the Operation and Maintenance Account described in Section 4 of this Ordinance. Operation and maintenance expenses far .purposes of determining "Net Revenues" shall not include depreciation, amortization (of financing expenses) or interest on any bonds or other indebtedness. Net Revenues for all purposes of this Ordinance shall be shown by an audit for the fiscal year in question as conducted by independent certified public accountants. For purposes of this ordinance, whether or not in accordance with applicable accounting principles, there shall not be included in revenues or expenses gain or loss from the early extinguishment of indebtedness, investment income from any securities deposited in escrow for the defeasance of any bonds relating to the Water System or unrealized gain or loss on securities held by the City's Water System. In the event that the City proposes 5 to issue Additional Bonds and the audit report for the most recently completed fiscal year is not yet available, "Net Revenues" may be shown as of the most recent fiscal year for which the audit report is available as supplemented by such unaudited financial information as the City shall have available, provided that (i) the lower amount of "Net Revenues" (as between that shown by the available audit report and that shown by the unaudited financial information certified by the City) shall be utilized for purposes of showing compliance with the requirements for issuance of Additional Bonds, (ii) as of such time, the Series 2000 Bonds, the Series 2006 Bond, the "Series 2010B Bonds, the Series 2010C Bonds and the Series 2012 Bonds shall no longer be outstanding and (iii) if as of such time the Series 2000B Bond shall remain outstanding, NDEQ shall consent to such determination of "Net Revenues" as provided in this sentence of this definition. Section 3. To provide for the payment of the costs of the Project, there shall be and there is hereby ordered issued the Series 2010/12 Bond, in the form of and evidenced by a single promissory note (sometimes referred to in this Ordinance, according to the context, as the "NDEQ Note" and sometimes as the "Series 2010/12 Bond") in the principal amount of Two Million Eight Hundred Forty -one Thousand Four Hundred Dollars ($2,841,400), with such NDEQ Note to be substantially in such form and to have such payment terms as are set forth in Exhibit A to this Ordinance, which exhibit is by such reference incorporated herein as if fully set forth. In connection with the issuance of the NDEQ Note the City shall also enter into the NDEQ Contract in substantially the form set forth in Exhibit B to this Ordinance, which exhibit is by such reference incorporated herein as if fully set forth. The terms and conditions of the NDEQ Note and the NDEQ Contract are hereby approved and the Mayor and the City Clerk are hereby authorized to execute and deliver the NDEQ Note and the NDEQ Contract for and on behalf of the City in substantially the form presented but with such changes from the forms presented and attached hereto as such officers shall deem appropriate for and on behalf of the City. Section 4. The revenues and earnings of the Water System are hereby pledged and hypothecated for the payment of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds and interest on such Series 2010/12 Bond, the Outstanding Bonds and any such Additional Bonds, and the City does hereby agree with the holders of said Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds as follows: D (a) BLAIR WATER SYSTEM FUND —The entire gross revenues and income derived from the operation of the Water System, including pledges and appropriations from other sources, if any, shall be set aside as collected and deposited in a separate fund designated as the "Blair Water System Fund." For purposes of allocating the monies in the Blair Water System Fund, the City shall maintain the following accounts: (1) Bond Payment Account; (2) Operation and Maintenance Account; (3) Debt Service* Reserve Account (with sub - accounts therein); and (4) Retained Revenues Account. (b) BOND PAYMENT ACCOUNT - Out of the Blair Water System Fund there shall be credited monthly on or before the first day of each month to the Bond Payment Account, starting with the month of January, 2013, the following amounts: (1) during the period from January 1, 2013, until and including that June 30 or December 31 (as the case may be with respect to the earliest occurring of such dates) which immediately follows the "Initiation of Operation" (as defined in the NDEQ Contract; in this Ordinance hereafter referred to as the "Initiation of Operation") of the Project an amount such that if the same amount were credited on the first day of each calendar month from such date of credit until the next payment date upon which any amount falls due on the NDEQ Note, whether for principal or interest, the amount accumulated by such monthly credits would equal the amount falling due on such payment date on the NDEQ Note, provided, however, that such credits shall be required only as and to the extent that such payments are not provided from other sources including amounts advanced by NDEQ pursuant to the NDEQ Contract and the NDEQ Note; (2) during the period from and including that January 1 or July 1 (as the case may be with respect to the earliest occurring of such dates) which immediately follows the Initiation of Operation until the NDEQ Note has been paid in full an amount equal to one -sixth of the installment amount (principal and interest) due on the next installment payment date for the NDEQ Note; (3) During such periods and in such amounts, all such payments as are as required under the terms of the Outstanding Parity Bond Ordinances (without any duplication of payment for the Series 2010 Bond) with respect to the principal and interest on the Outstanding Bonds. 7 The City Treasurer is hereby authorized and directed, without fiirther authorization, to withdraw monies credited to the Bond Payment Account, or if the monies in such Account are insufficient, then from the Debt Service Reserve Account (as and to the extent that amounts are available in a sub - account therein designated in the authorizing ordinance) and next from the Retained Revenues Account, an amount sufficient to pay, when due, the principal of and interest on the Series 2010/12 Bond, the Outstanding Bonds or any Additional Bonds and to transfer the appropriate amounts due to the paying agent and registrar for the Series 2000 Bonds, the Series 2006 Bonds, the Series 2010B Bonds, the Series 2010C Bonds and the Series 2012 Bonds and the direct payee for the Series 2000B Bond, the Series 2006 Bond and the Series 2010/12 Bond and the respective paying agents or direct payees (as may be applicable) for any issues of Additional Bonds, on or before each principal and interest payment date. Upon the issuance of any Additional Bonds pursuant to this Ordinance, appropriate additional credits to the Bond Payment Account shall be provided for sufficient to pay principal and interest on said Additional Bonds. (c) OPERATION AND MAINTENANCE ACCOUNT - After any credits required to be made by the foregoing subparagraph (b) have been made in full, out of the Blair Water System Fund there shall be monthly credited into the Operation and Maintenance Account such amounts as the City shall from time to time determine to be necessary to pay the reasonable and necessary expenses of operating and maintaining the Water System, and the City may withdraw funds credited to the Operation and Maintenance Account as necessary from time to time to pay such expenses. As an operational expense the City shall pay any and all administrative fees required to be paid in connection with the NDEQ Loan or due under the NDEQ Contract. (d) DEBT SERVICE RESERVE ACCOUNT - Within the Debt Service Reserve Account there shall be established separate sub - accounts for each series of bonds payable on a parity with the Series 2010/12 Bond and the Outstanding Bonds from the revenues of the Water System, as shall be deemed appropriate by the Mayor and Council in connection with each such issue. In view of the provisions of the NDEQ Contract, it is hereby determined that no sub - account shall be established for the Series 2010/12 Bond. For the Series 2000 Bonds, the Series 2010B Bonds, the Series 2010C Bonds and the Series 2012 Bonds there have previously been established separate sub - accounts in accordance with the terms of the Series 2000 Ordinance, the Series 201OB /C Ordinance and the Series 2012 Ordinance into which there has been deposited and shall be maintained amounts set under the terms of the Series 2000 Ordinance, the Series 2010B /C Ordinance and the Series 2012 Ordinance, which shall be maintained as the required balances, respectively, so long as any of the 8 Series 2000 Bonds, the Series 2010B Bonds, the Series 2010C Bonds and the Series 2012 Bonds remain outstanding in accordance with the terms of the Series 2000 Ordinance, the Series 201OB /C Ordinance and the Series 2012 Ordinance. Under the terms of the Series 2000B Ordinance and the Series 2006 Ordinance no separate sub - account has been required for the Series 2000B Bond or the Series 2006 Bond, respectively. In issuing any series of Additional Bonds a separate sub - account in the Debt Service Reserve Account may be established for such series of Additional Bonds but is not required under the terms of this Ordinance. The balance in any such additional sub - account may be funded from monies on hand or from periodic deposits from revenues in the Blair Water System Fund or from the proceeds of such Additional Bonds. Each sub - account in the Debt Service Reserve Account shall be of equal standing with each other sub - account in the Debt Service Reserve Account and available monies from the Blair Water System Fund required to be credited to each such sub - account at any time shall be allocated on a ' pro rata basis between sub - accounts then requiring credits in accordance with the respective unpaid principal amounts then outstanding for each such issue for which there is a sub - account requiring credits. Each sub - account in the Debt Service Reserve Account shall constitute a separate fund held in trust by the City Treasurer for the separate benefit of the issue of bonds for which it is established. Anything in this Subsection 4(d) to the contrary notwithstanding, the amount required to be maintained in the Debt Service Reserve Account or any sub - account therein shall not at any time exceed the maximum amount permitted to be invested without yield restriction under Section 148 of the Code or any successor provision or related statutory limitation and applicable regulations of the United States Treasury Department. (e) RETAINED REVENUES ACCOUNT Monies in the Blair Water System Fund remaining after the credits required in the foregoing Subsections (b), (c) and (d) shall be credited to the Retained Revenues Account. Monies in the Retained Revenues Account may be used to make up any deficiencies in any of the preceding Accounts, to retire any of the Series 2010/12 Bond, the Outstanding Bonds or any Additional Bonds prior to their maturity, to pay principal of and interest on any junior lien water system revenue bonds or notes (including the Series 2012 Notes) or to provide for any other lawful purpose of the City as directed by the Mayor and City Council. The provisions of this Section 4 shall require the City to maintain a set of books and records in accordance with such accounting methods and procedures as are generally applicable to municipal utility enterprises, which books and records shall show credits to and expenditures from the several Accounts and sub - accounts required by this Section. Except as specified below 9 for the Debt Service Reserve Account, the City shall not be required to establish separate bank or investment accounts for said Accounts. Monies credited to the Debt Service Reserve Account or any sub - account therein shall, if maintained in a demand or time deposit account, be kept in a separate account and not commingled with other City or Water System funds. If invested, monies credited to the Debt Service Reserve Account or any sub - account therein may be commingled with other City funds, including Water System funds, so long as the City maintains books and records clearly identifying the specific investments, or portions thereof, which belong to the Debt Service Reserve Account and specific sub - accounts therein. Monies in any of said Accounts except the Debt Service Reserve Account may be invested in permissible investments for a City of the class to which the City of Blair belongs as of the time of such investment. Monies in the Debt Service Reserve Account or any sub - account therein may be invested in Deposit Securities or in certificates of deposit, savings accounts or other interest bearing accounts in banks which are members of the Federal Deposit Insurance Corporation, except that whenever the amount so deposited exceeds the amount of the F.D.I.C. insurance available thereon, the excess shall be secured in the manner required by Section 16 -715 R.R.S. Neb. 2007. Investments made from or attributable, in whole or in part, to the Debt Service Reserve Account shall mature or be redeemable at the option of the holder, without penalty, in not more than ten years. Investments made from or attributable to the Bond Payment Account shall mature or be redeemable at the option of the holder by no later than the time monies are required for payments due from such account. Income from or profit realized from investment for any Account or sub - account shall be credited to such Account or sub - account until such Account or sub - account contains any amount then required to be therein, and thereafter such income or profit shall be transferred to the Blair Water System Fund and treated as other revenues from the operation of the Water System. The pledge of the revenues and earnings of the Water System provided for in this Ordinance for the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds, subject to the right of the City to issue Additional Bonds as provided in this Ordinance and the Outstanding Parity Bond Ordinances, is intended as a first and prior pledge of, lien on and security interest in such revenues and earnings for the payment of principal of and interest on the 10 Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds, superior to any pledge or promise made with respect to any other indebtedness of the City as to its Water System, and is intended to be a full exercise of the powers of the City provided for in Sections 18 -1803 to 18- 1805, R.R.S. Neb. 2007, as amended, with respect to its Water System. Section 5. So long as any of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds issued pursuant to this Ordinance shall remain outstanding and unpaid, the City covenants and agrees to establish, revise, from time to time as necessary, and collect such rates and charges for the water and water service furnished from the Water System adequate to produce revenues and earnings sufficient at all times: (a) To provide funds to pay, when due, the principal of and interest on the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds issued pursuant to this Ordinance. (b) To pay all proper and necessary costs of operation and maintenance of the Water System and to pay for the necessary and proper repairs, replacements, enlargements, extensions and improvements to the Water System, h the payment as the same fall due of any administrative fees related to Series 2010/12 Bond and the Series 2000B Bond as described in the NDEQ Contract and the contract with NDEQ for the Series 2000B Bond. (c) To provide funds sufficient to make the credits into the Accounts and at the times and in the amounts required by Section 4 of this Ordinance. (d) To maintain Net Revenues in each fiscal year adopted by the City for the Water System in an amount not less than 1.25 times the total amount of principal paid or payable (exclusive of any principal redeemed prior to maturity other than principal redeemed pursuant to a schedule of mandatory redemptions) and interest falling due during such fiscal year on the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds issued pursuant to this Ordinance. Section 6. To provide funds for any purpose related to the Water System, the City may issue Additional Bonds (other than such Additional Bonds issued for refunding purposes as may be governed by Section 7 of this Ordinance) payable from the revenues of the Water System having equal priority and on a parity with the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds then outstanding, only upon compliance with the following conditions: 11 (a) Such Additional Bonds shall be issued only pursuant to an ordinance which shall provide for an increase in the monthly credits into the Bond Payment Account in amounts sufficient to pay, when due, the principal of and interest on the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds then outstanding and the proposed Additional Bonds. (b) The City shall have complied with one or the other of, the two following requirements: 1) The Net Revenues derived by the City from its Water System for the fiscal year next preceding the issuance of the Additional Bonds shall have been at least equal to 1.30 times the Average Annual Debt Service Requirements of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds, all as then outstanding, and of the proposed Additional Bonds; or 2) The City shall have received a projection made by a consulting engineer or firm of consulting engineers, or by a certified public accountant or firm of certified public accountants (either one of which shall be recognized as having experience and expertise in municipal utility systems) projecting that the Net Revenues of the Water System in each of the three full fiscal years after the issuance of such Additional Bonds will be at least equal to 1.35 times the Average Annual Debt Service Requirements of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds, all as then outstanding, and of the proposed Additional Bonds. In making such projection, the consulting engineer or accountant shall use as a basis the Net Revenues of the Water System during the last fiscal year for which an independent audit has been prepared and shall adjust such Net Revenues as follows: (A) to reflect changes in rates which have gone into effect since the beginning of the fiscal year for which the audit was made, (B) to reflect such engineer's or accountant's estimate of the net increase over or net decrease under the Net Revenues of the Water System for the fiscal year for which the audit was made by reason of: (i) changes of amounts payable under existing contracts for services; (ii) additional general income from sales to customers under existing rate schedules for various classes of customers or as such schedules may be revised 12 under a program of changes which has been adopted by the Mayor and Council of the City; (iii) projected revisions in costs for labor, wages, salaries, machinery, equipment, supplies and other operational items; (iv) changes in the amount of service to be supplied and any related administrative or other costs associated with such changes due - to increased supply from the acquisition of any new facility; (v) anticipated receipts from service to any additional customer or customers for the Water System; and (vi) such other factors affecting the projections of revenues and expenses as the consulting engineer or accountant deems reasonable and proper. Annual debt service on any proposed Additional Bonds to be issued may be estimated by the consulting engineer or certified public accountant in projecting Average Annual Debt Service Requirements, but no Additional Bonds shall be issued requiring any annual debt service payment in excess of the amount so estimated by the consulting engineer or certified public accountant in any final projections furnished to the City. If the City shall find it desirable it shall also have the right when issuing Additional Bonds to combine with its Water System any other utilities of the City authorized to be combined under Sections 19 -1305 through 19 -1308 or 18 -1803 through 18 -1805 R.R.S. Neb. 2007, and to cause all of the revenues of such combined utilities systems to be paid into the Blair Water System Fund, which fund may be appropriately redesignated, and to provide that all of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds previously issued, all as then outstanding, and the proposed issue of Additional Bonds shall be payable from the revenues of such combined utilities and shall stand on a parity and in equality as to security and payment, provided, however, no utility shall be combined with the Water System as contemplated in this paragraph unless the conditions of subsection 6(a) shall have been satisfied and the Net Revenues of the combined utilities systems shall satisfy one or the other of the requirements for Additional Bonds provided in subsection 6(b) above. For purposes of meeting such requirements, the definition of Net Revenues shall be altered to include the gross revenues of the additional utility or utilities and to take into consideration ordinary expenses of operating and maintaining the additional utility or utilities. In making any projections, the consulting engineer or certified 13 public accountant shall take into consideration the factors described in 6(b)(2) above with respect to such additional utility or utilities. Net Revenues of the additional utility or utilities shall be based upon the report or reports of independent certified public accountants in the same manner as is required under subsection 6(b) above. Section 7. The City may issue refunding bonds, which shall qualify as Additional Bonds under this Section 7, to refund any of the Series 2010/12 Bond, the Outstanding Bonds or Additional Bonds without compliance with the provisions of subsection 6(b) above, provided that, if any such Series 2010/12 Bond, Outstanding Bonds or Additional Bonds are to remain outstanding after the issuance of such refunding bonds, the principal payments due in any calendar year in which those bonds which are to remain outstanding mature, or in any calendar year prior thereto, shall not be increased over the amount of such principal payments due in such calendar years immediately prior to such refunding. The City may also issue refunding bonds which shall qualify as Additional Bonds of equal lien to refund any of the Series 2010/12 Bond, the Outstanding Bonds or Additional Bonds then outstanding, provided, that if any such Series .2010/12 Bond, Outstanding Bonds or Additional Bonds then outstanding are to remain outstanding after the application of the proceeds of the refunding bonds to the payment of the bonds which are to be refunded, such issuance must comply with the Net Revenues test set forth in Subsection 6(b)(1) of this ordinance and, if the proceeds of such refunding bonds are not to be applied immediately to the satisfaction of the bonds which are to be refunded, then such refunding bonds must provide by their terms that they shall be junior in lien to all of the Series 2010/12 Bond, Outstanding Bonds and any Additional Bonds outstanding at the time of issuance of such refunding bonds until the time of application of their proceeds to the satisfaction of the bonds which are to be refunded. In computing Average Annual Debt Service Requirements to show compliance with said Net Revenues test for such refunding bonds, all payments of principal and interest due on such refunding bonds from the time of their issuance to the time of application of the proceeds of such refunding bonds to the satisfaction of the bonds which are to be refunded shall be excluded from such computation to the extent that such principal and interest are payable from sources other than the revenues of the Water System, such as bond proceeds or investment earnings on bond 14 proceeds, or from monies in the Retained Revenues Account, and all payments of principal and interest due on the bonds which are to be refunded from and after the time of such application shall also be excluded. For purposes of this paragraph of this Section 7, the time of application of the proceeds of the refunding bonds to the satisfaction of the bonds which are to be refunded shall be the time of deposit with the paying agent for such bonds which are to be refunded pursuant to Section 10 -126 R.R.S. Neb. 2007 (or any successor statutory provision thereto) or the time when such bonds which are to be refounded under the terms of their authorizing ordinance or ordinances are no longer deemed to be outstanding, whichever occurs sooner. Section 8. The City hereby covenants and agrees that so long as any of the Series 2010/12 Bond, the Outstanding Bonds and any Additional Bonds are outstanding, it will not issue any bonds or notes payable from the revenues of the Water System except in accordance with the provisions of this Ordinance, provided, however, the City reserves the right to issue bonds or notes which are junior in lien to the Series 2010/12 Bond, the Outstanding Bonds and any such Additional Bonds with the principal and interest of such bonds or notes to be payable from monies credited to the Retained Revenues Account as provided in Subsection 4(e). The term "Additional Bonds" as used in this ordinance refers only to such bonds as are payable from the revenues of the Water System on a parity with the Series 2010/12 Bond and the Outstanding Bonds, all as outstanding from time to time, and are issued in accordance with the terms of said Sections 6 and 7. Section 9. So long as any of the Series 2010/12 Bond, the Outstanding Bonds or any Additional Bonds are outstanding, the City hereby covenants and agrees as follows: (a) The City will maintain the Water System in good condition and will continuously operate the same in a reasonable and efficient manner, and the City will punctually perform all the duties with reference to said . system required by the Constitution and statutes of the State of Nebraska, but this covenant shall not prevent the City from discontinuing the use and operation of all or any portion of the Water System so long as the revenues derived from the City's ownership of the properties constituting the Water System shall be sufficient to fulfill this City's obligations under Section 5 of this Ordinance. (b) The City will not grant any franchise or right to any person, _firm or corporation to own or operate a water system in competition with that owned by the City. w (c) The City will maintain insurance on the property constituting the Water System (other than such portions of the system, as are not normally insured against loss by casualty) in the amounts and against the risks customarily carried by similar utilities, but including fire and extended coverage insurance in an amount which would enable the City to repair, restore or replace the property damaged to the extent necessary to make the Water, System operable in an efficient and proper manner to carry out the City's obligations under this Ordinance. The Mayor and Council shall annually, within one month after the end of each fiscal year adopted by the City for the Water System examine the amount of insurance carried with respect to the Water System and shall evidence approval of such insurance by resolution. The proceeds of any such insurance received by the City shall be used to repair, replace or restore the property damaged or destroyed to the extent necessary to make the Water System operable in an efficient and proper manner, and any amount of insurance proceeds not so used shall be credited to the Retained Revenues Account. In the event of any such insured casualty loss, the City may advance funds to make temporary repairs or provide for an advance on costs of the permanent repair, restoration or replacement from the Operation and Maintenance Account and any such advances shall be repaid from insurance proceeds received. (d) The City will keep proper books, records and accounts separate from all other records 'and accounts in which complete and correct entries will be made of all transactions relating to the Water System. The City will have its operating and financial statements relating to the Water System audited annually by a certified public accountant or firm of certified public accountants. The City will furnish to the original purchaser of the Series 2010/12 Bond and the original purchasers of the Outstanding Bonds and to the original purchaser or purchasers of each series of Additional Bonds issued hereunder, within six months after the end of each fiscal year of the Water System, a copy of the financial statements of the Water System and the report thereon of the certified public accountants. (e) The City shall cause each person handling any of the monies in the Blair Water System Fund to be bonded by an insurance company licensed to do business in Nebraska in an amount or amounts deemed sufficient to cover at all - times the maximum amount of money belonging to the Water System in the possession or control of any such person. The amount of such bond or bonds shall be fixed by the Mayor and Council and the costs thereof shall be paid as an operating and maintenance expense from the Operation and Maintenance Account. 16 (f) So long as the City is current with all payments or credits required to be made under Section 4 hereof and is also in compliance with the covenants of Section 5 hereof, the City may pay for water service used by it at such rate or rates as shall be determined by the Mayor and Council. In the event that the City is not in compliance with the provisions of said Sections 4 and 5 hereof, the City shall be required to pay for water service used by it at the rate or rates applicable to such usage as fixed by the City's water rate ordinances then in effect. (g) The City agrees that so long as the Series . 2010/12 Bond and /or the Outstanding Bonds are outstanding and unpaid it will keep in force and effect the Cargill Contract, during the stated term thereof, and will not amend the provisions thereof in any manner which reduces amounts payable thereunder to any level which would cause the City to be in violation of the provisions of Section 5 of this Ordinance. Section 9. The City's obligations under this Ordinance and the liens, pledges, covenants and agreements of the City herein made or provided for, shall be fully discharged and satisfied as to the Series 2010/12 Bond or any Additional Bonds issued pursuant to this ordinance and any such bonds shall no longer be deemed outstanding hereunder if such bonds shall be been purchased and canceled by the City, or when payment of the principal of and interest thereon to the respective date of maturity or redemption (a) shall have been made or caused to be made in accordance with the terms thereof; or (b) shall have been provided for by depositing with a national or state bank having trust powers or trust company, in trust solely for such payment (1) sufficient money to make such payment and/or (2) Deposit Securities in such amount and bearing interest at such rates and payable at such time or times and maturing or redeemable at stated fixed prices at the option of the holder as to principal at such time or times as will ensure the availability of sufficient money to make such payment; provided, however, that with respect to any bond to be paid prior to maturity, the City shall have duly given notice of redemption of such bond as required by this Ordinance or given irrevocable instructions for the giving of such notice. Any such money so deposited with such Paying Agent and Registrar or bank or trust company in excess of the amount required to pay principal of and interest on the bonds for which such monies were deposited, shall be paid over to the City as and when collected. For purposes 17 of this Section 9, any Deposit Securities shall be non- callable or callable only at the option of the holder. With respect to any deposit made for purposes of satisfying the Series 2010/12 Bond under this Section 9, there shall be furnished to NDEQ and the Nebraska Investment Finance Authority C'NIFA ") an opinion of nationally recognized bond counsel that such deposit for payment of the Series 2010/12 Bond will not adversely affect the exclusion for interest from gross income for federal tax purposes on any bonds issued by NIFA to provide funds for deposit into the Nebraska Drinking Water Facilities Loan Fund and the furnishing of such opinion shall be a condition required to be satisfied prior to the making of any such deposit in trust for payment and satisfaction with respect to the Series 2010/12 Bond unless the Series 2010/12 Bond is to be prepaid and redeemed within 60 days from the time of such deposit. Section 10. The terms and provisions of this Ordinance do and shall constitute a contract between the City of Blair and the holder of the Series 2010/12 Bond and no changes, variations or alterations of any kind, except for changes necessary to cure any ambiguity, formal defect or omission, shall be made to this Ordinance without the written consent of the holder of the Series 2010/12 Bond. The holder of the Series 2010/12 Bond may, either in law or in equity, by suit, action, mandamus or other proceeding, enforce or compel performance of any and all of the acts and duties required by this Ordinance, and any court of competent jurisdiction may, after default in payment of principal or interest or performance of any other obligations under this Ordinance, on application of any such holder, appoint a receiver to take charge of the Water System and operate the same and apply the earnings thereof to the payment of the principal of and interest on bonds issued pursuant to this Ordinance in accordance with the provisions hereof, the provisions of the Outstanding Parity Bond Ordinances and any ordinance authorizing Additional Bonds. Section 11. The Mayor and City Clerk of the City are hereby authorized to do all things and execute all such documents as may by them be deemed necessary and proper to complete the issuance and sale of the Series 2010/12 Bond as contemplated by this Ordinance. Section 12. If any section, paragraph, clause or provision of this Ordinance shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Ordinance. 18 Section 13. The Mayor and Council hereby expressly declare the intent and understanding that interest on the Series 2010/12 Bond shall not be excludable from gross income under the terms of Section 103 of the Internal Revenue Code of 1986, as amended, and the City as issuer shall not file any information report with respect to the issuance of the Series 2010/12 Bond pursuant to Section 149(e) of said Code. Section 14. All ordinances, resolutions or orders or parts thereof in conflict with the provisions of this Ordinance are to the extent of such conflict hereby repealed. Section 15. This Ordinance shall be published in pamphlet form and take effect as provided by law. PASSED AND APPROVED this 27TH day of NOVEMBER, 2012. CITY OF BLAIR, NEBRASKA '-'r &--\ J . REALPH, MAYOR ATTEST: Y—W BRENDA R. WHEELER, CITV CLERK (SEAL) STATE OF NEBRASKA ) ) :ss: WASHINGTON COUNTY ) BRENDA R. WHEELER hereby certifies that she is the duly appointed, qualified and acting City Clerk of the City of Blair, Nebraska, and that the above and foregoing ordinance was passed at a regular meeting of the Mayor and City Council of said City held on the 27th day of November, 2012. d BR1NDA R. WHEELER, CITY CLERK W