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1906 - Ordinance - Contracting IndebtednessORDINANCE NO. 1906 AN ORDINANCE OF THE CITY OF PORT ORCHARD, WASHINGTON, RELATING TO CONTRACTING INDEBTEDNESS; PROVIDING FOR THE ISSUANCE OF $3,000,000 PAR VALUE OF LIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, 2003, OF THE CITY FOR GENERAL CITY PURPOSES TO PROVIDE FUNDS WITH WHICH TO PAY THE COST OF REFUNDING THE CITY'S OUTSTANDING LIMITED TAX GENERAL OBLIGATION BOND, 1999, IN A CURRENT REFUNDING, AND PAYING THE ADMINISTRATIVE COSTS OF THAT REFUNDING AND THE COSTS OF ISSUANCE AND SALE OF THE BONDS; FIXING THE DATE, FORM, MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE BONDS; ESTABLISHING A BOND REDEMPTION FUND; PROVIDING FOR BOND INSURANCE; AND APPROVING THE SALE AND PROVIDING FOR THE DELIVERY OF THE BONDS TO BANC OF AMERICA SECURITIES LLC OF SEATTLE, WASHINGTON. WHEREAS, pursuant to Ordinance No. 1787, the City heretofore issued its $3,300,000 par value Limited Tax General Obligation Bond, 1999 (the "1999 Bond"), for the purpose of repaying the City's outstanding Limited Tax General Obligation Bond Anticipation Note, 1998 (Line of Credit) issued to pay the cost of constructing a new municipal facility to serve the police, municipal court, administration and public works; and WHEREAS, pursuant to Ordinance No. 1787, the City reserved the right to prepay the entire unpaid principal or such lesser portion of the unpaid principal amount, of the 1999 Bond prior to its maturity; and WHEREAS, the City expects to receive from the United States of America, Acting through the United State Department of Agriculture (the "USDA"), a waiver of the 30-day notice to prepay the 1999 Bond; and WHEREAS, there is presently outstanding $2,984,803.29 principal amount of the 1999 Bond bearing interest at the rate of 5%; and WHEREAS, after due consideration, it appears to the City Council that the 1999 Bond may be refunded by the issuance and sale of the limited tax general obligation refunding bonds authorized herein (the "Bonds") so that a substantial savings will be effected by the difference between the principal and interest cost over the life of the Bonds and the principal and interest cost over the life of the 1999 Bond; and WHEREAS, the City Council deems it to be in the best interests of the City to issue and sell the Bond to pay the cost of refunding the 1999 Bond and to pay the administrative costs of such refunding and the costs of issuance and sale of the Bond; and Ordinance No. 1906 Page 2 of 13 WHEREAS, the MBIA Insurance Corporation of Armonk, New York ("Bond Insurer'), has made a commitment to issue an insurance policy (the "Financial Guaranty Insurance Policy") insuring the payment when due of the principal of and interest on the Bonds as provided therein, and the City Council deems that the purchase of the Financial Guaranty Insurance Policy is in the best interest of the City; and WHEREAS, Banc of America Securities LLC has offered to purchase the Bonds under the terms and conditions hereinafter set forth, now, therefore, THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Debt Capacity. The assessed valuation of the taxable property within the City as ascertained by the last preceding assessment for City purposes for the calendar year 2003 is $426,339,282, and the City has outstanding general indebtedness evidenced by limited tax general obligation bonds in the principal amount of $2,984,803.29 incurred within the limit of up to 1-1/2% of the value of the taxable property within the City permitted for general municipal purposes without a vote of the qualified voters therein, no unlimited tax general obligation bonds within the limit of up to 2-1/2% of the value of the taxable property within the City for capital purposes only, issued pursuant to a vote of the qualified voters of the City, and the amount of indebtedness for which bonds are authorized herein to be issued is $3,000,000. SECTION 2. Authorization of Bonds. The City shall borrow money on the credit of the City and issue negotiable limited tax general obligation refunding bonds evidencing that indebtedness in the amount of $3,000,000 for general City purposes to provide the funds to pay costs of repaying all of the outstanding principal of and interest on the 1999 Bond and to pay the costs of issuance and sale of the bonds (the "costs of issuance"). The general indebtedness to be incurred shall be within the limit of up to 1-1/2% of the value of the taxable property within the City permitted for general municipal purposes without a vote of the qualified voters therein. SECTION 3. Description of Bonds. The bonds shall be called Limited Tax General Obligation Refunding Bonds, 2003, of the City (the "Bonds"); shall be in the aggregate principal amount of $3,000,000; shall be dated June 15, 2003; shall be in the denomination of $5,000 or any integral multiple thereof within a single maturity; shall be numbered separately in the manner and with any additional designation as the Bond Registrar (collectively, the fiscal agent and co -fiscal agent of the State of Washington) deems necessary for purposes of identification; shall bear interest (computed on the basis of a 360-day year of twelve 30-day months) payable semiannually on each June 1 and December 1, commencing December 1, 2003, to the maturity or earlier redemption of the Bonds; and shall mature on December 1 in years and amounts and bear interest at the rates per annum as follows: Maturity Years Amounts Interest Rates Maturity Years Amounts Interest Rates 2003 $ 205,000 2.000 % 2012 $ 175,000 3.000 % 2004 140,000 2.500 2013 180,000 3.125 2005 145,000 2.500 2014 185,000 3.250 2006 150,000 2.500 2015 190,000 3.400 2007 155,000 2.500 2016 195,000 3.500 2008 155,000 2.500 2017 205,000 3.600 2009 160,000 2.500 2018 210,000 3.700 2010 165,000 3.000 2019 215,000 3.800 2011 170,000 3.000 Ordinance No. 1906 Page 3 of 13 SECTION 4. Registration and Transfer of Bonds. The Bonds shall be issued only in registered form as to both principal and interest and shall be recorded on books or records maintained by the Bond Registrar (the "Bond Register"). The Bond Register shall contain the name and mailing address of the owner of each Bond and the principal amount and number of each of the Bonds held by each owner. Bonds surrendered to the Bond Registrar may be exchanged for Bonds in any authorized denomination of an equal aggregate principal amount and of the same interest rate and maturity. Bonds may be transferred only if endorsed in the manner provided thereon and surrendered to the Bond Registrar. Any exchange or transfer shall be without cost to the owner or transferee. The Bond Registrar shall not be obligated to exchange or transfer any Bond during the 15 days preceding any principal payment or redemption date. The Bonds initially shall be registered in the name of Cede & Co., as the nominee of The Depository Trust Company, New York, New York ("DTC"). The Bonds so registered shall be held in fully immobilized form by DTC as depository in accordance with the provisions of a Blanket Issuer Letter of Representations with DTC substantially in the form on file with the City Clerk and by this reference made a part hereof (as it may be amended from time to time, the "Letter of Representations"). To induce DTC to accept the Bonds as eligible for deposit at DTC, the City approves the Letter of Representations. The Mayor or City Treasurer of the City is authorized and directed to execute and deliver the Letter of Representations, on behalf of the City, to DTC on or before the date of delivery of the Bonds to the purchaser thereof and the payment therefor, with such changes as the Mayor or City Treasurer of the City deems to be in the best interest of the City, and the execution and delivery of the Letter of Representations shall evidence irrevocably the approval of the Letter of Representations by the City. Neither the City nor the Bond Registrar shall have any responsibility or obligation to DTC participants or the persons for whom they act as nominees with respect to the Bonds regarding accuracy of any records maintained by DTC or DTC participants of any amount in respect of principal of or interest on the Bonds, or any notice which is permitted or required to be given to registered owners hereunder (except such notice as is required to be given by the Bond Registrar to DTC). For as long as any Bonds are held in fully immobilized form, DTC, its nominee or its successor depository shall be deemed to be the registered owner for all purposes hereunder and all references to registered owners, bondowners, bondholders or the like shall mean DTC or its nominee and shall not mean the owners of any beneficial interests in the Bonds. Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (i) to any successor of DTC or its nominee, if that successor shall be qualified under any applicable laws to provide the services proposed to be provided by it; (ii) to any substitute depository appointed by the City or such substitute depository's successor; or (III) to any person if the Bonds are no longer held in immobilized form. Upon the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or a determination by the City that it no longer wishes to continue the system of book entry transfers through DTC or its successor (or any substitute depository or its successor), the City may appoint a substitute depository. Any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it. If (i) DTC or its successor (or substitute depository or its successor) resigns from its functions as depository, and no substitute depository can be obtained, or (ii) the City determines that the Bonds are to be in certificated form, the ownership of Bonds may be transferred to any person as provided herein and the Bonds no longer shall be held in fully immobilized form. SECTION 5. Payment of Bonds. Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America. Interest on the Bonds shall be paid by checks or drafts of the Bond Registrar mailed on the interest payment date to the registered owners at the addresses appearing on the Bond Register on the 15`h day of the month preceding the interest payment Ordinance No. 1906 Page 4 of 13 date or, if requested in writing by a registered owner of $1,000,000 or more in principal amount of Bonds prior to the applicable record date, by wire transfer on the interest payment date. Principal of the Bonds shall be payable upon presentation and surrender of the Bonds by the registered owners at either of the principal offices of the Bond Registrar at the option of the owners. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, payment of principal of and interest on the Bonds shall be made in the manner set forth in the Letter of Representations. SECTION 6. Redemption Provisions and Open Market Purchase of Bonds. Bonds maturing in the years 2003 through 2013, inclusive, shall be issued without the right or option of the City to redeem those Bonds prior to their stated maturity dates. The City reserves the right and option to redeem the Bonds maturing on or after December 1, 2014, prior to their stated maturity dates at any time on or after December 1, 2013, as a whole or in part (within one or more maturities selected by the City and randomly within a maturity in such manner as the Bond Registrar shall determine), at per plus accrued interest to the date fixed for redemption. Portions of the principal amount of any Bond, in installments of $5,000 or any integral multiple thereof, may be redeemed. If less than all of the principal amount of any Bond is redeemed, upon surrender of that Bond at either of the principal offices of the Bond Registrar, there shall be issued to the registered owner, without charge therefor, a new Bond (or Bonds, at the option of the registered owner) of the same maturity and interest rate in any of the denominations authorized by this ordinance in the aggregate principal amount remaining unredeemed. The City further reserves the right and option to purchase any or all of the Bonds in the open market at any time at any price acceptable to the City plus accrued interest to the date of purchase. All Bonds purchased or redeemed under this section shall be canceled. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, selection of Bonds for redemption shall be in accordance with the Letter of Representations. SECTION 7. Notice of Redemption. The City shall cause notice of any intended redemption of Bonds to be given not less than 30 nor more than 60 days prior to the date fixed for redemption by first-class mail, postage prepaid, to the registered owner of any Bond to be redeemed at the address appearing on the Bond Register at the time the Bond Registrar prepares the notice, and the requirements of this sentence shall be deemed to have been fulfilled when notice has been mailed as so provided, whether or not it is actually received by the owner of any Bond. Interest on Bonds called for redemption shall cease to accrue on the date fixed for redemption unless the Bond or Bonds called are not redeemed when presented pursuant to the call. In addition, the redemption notice shall be mailed within the same period, postage prepaid, to Moody's Investors Service, Inc., and Standard & Poor's at their offices in New York, New York, or their successors, to the Bond Insurer, at its principal office in Armonk, New York, or its successor, to Banc of America Securities LLC, at its principal office in Seattle, Washington, or its successor, to each NRMSIR or the MSRB and to such other persons, including registered securities depositories, and with such additional information as the City Treasurer shall determine, but these additional mailings shall not be a condition precedent to the redemption of Bonds. Notwithstanding the foregoing, for as long as the Bonds are registered in the name of DTC or its nominee, notice of redemption shall be given in accordance with the Letter of Representations. SECTION 8. Failure To Redeem Bonds. If any Bond is not redeemed when properly presented at its maturity or call date, the City shall be obligated to pay interest on that Bond at the same rate provided in the Bond from and after its maturity or call date until that Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the bond redemption fund hereinafter created and the Bond has been called for payment by giving notice of that call to the registered owner of each of those unpaid Bonds. Ordinance No. 1906 Page 5 of 13 SECTION 9. Pledge of Taxes. For as long as any of the Bonds are outstanding, the City irrevocably pledges to include in its budget and levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the City on all of the taxable property within the City in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith, credit and resources of the City are pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal and interest. SECTION 10. Form and Execution of Bonds. The Bonds shall be printed or lithographed on good bond paper in a form consistent with the provisions of this ordinance and state law and shall be signed by the Mayor and City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. Only Bonds bearing a Certificate of Authentication in the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: CERTIFICATE OF AUTHENTICATION This Bond is one of the fully registered City of Port Orchard, Washington, Limited Tax General Obligation Refunding Bonds, 2003, described in the Bond Ordinance. WASHINGTON STATE FISCAL AGENT Bond Registrar By Authorized Signer The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered and are entitled to the benefits of this ordinance. If any officer whose facsimile signature appears on the Bonds ceases to be an officer of the City authorized to sign bonds before the Bonds bearing his or her facsimile signature are authenticated or delivered by the Bond Registrar or issued by the City, those Bonds nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. Any Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on the date of issuance of the Bonds. SECTION 11. Bond Registrar. The Bond Registrar 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 be open to inspection by the City at all times.. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver Bonds transferred or exchanged in accordance with the provisions of the Bonds and this ordinance, to serve as the City's paying agent for the Bonds and to carry out all of the Bond Registrar's powers and duties under this ordinance and City Ordinance No. 1732 establishing a system of registration for the City's bonds and obligations. Ordinance No. 1906 Page 6 of 13 The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificate of Authentication on the Bonds. The Bond Registrar may become the owner of Bonds with the same rights it would have if it were not the Bond Registrar and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as members of, or in any other capacity with respect to, any committee formed to protect the rights of Bond owners. SECTION 12. Preservation of Tax Exemption for Interest on Bonds. The City covenants that it will take all actions necessary to prevent interest on the Bonds from being included in gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Bonds or other funds of the City treated as proceeds of the Bonds at any time during the term of the Bonds which will cause interest on the Bonds to be included in gross income for federal income tax purposes. The City certifies that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. SECTION 13. Small Governmental Issuer Arbitrage Rebate Exception and Designation of Bonds as "Qualified Tax -Exempt Obligations." The City finds and declares that (a) it is a duly organized and existing governmental unit of the State of Washington and has general taxing power; (b) no Bond which is part of this issue of Bonds is a "private activity bond" within the meaning of Section 141 of the United States Internal Revenue Code of 1986, as amended (the "Code"); (c) at least 95% of the net proceeds of the Bonds will be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City); (d) the aggregate face amount of all tax-exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) issued by the City and all entities subordinate to the City (including any entity that the City controls, that derives its authority to issue tax-exempt obligations from the City, or that issues tax-exempt obligations on behalf of the City) during the calendar year in which the Bonds are issued is not reasonably expected to exceed $5,000,000; and (a) the amount of tax-exempt obligations, including the Bonds, designated by the City as `qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Code during the calendar year in which the Bonds are issued does not exceed $10,000,000. The City therefore certifies that the Bonds are eligible for the arbitrage rebate exception under Section 148(f)(4)(D) of the Code and designates the Bonds as "qualified tax-exempt obligations" for the purposes of Section 265(b)(3) of the Code. SECTION 14. Refunding or Defeasance of the Bonds. The City may issue refunding bonds pursuant to the laws of the State of Washington or use money available from any other lawful source to pay when due the principal of and interest on the Bonds, or any portion thereof included in a refunding or defeasance plan, and to redeem and retire, refund or defease all such then -outstanding Bonds (hereinafter collectively called the "defeased Bonds") and to pay the costs of the refunding or defeasance. If money and/or Permitted Investments maturing at a time or times and bearing interest in amounts (together with money, if necessary) sufficient to redeem and retire, refund or defease the defeased Bonds in accordance with their terms are set aside in a special trust fund or escrow account irrevocably pledged to that redemption, retirement or defeasance of defeased Bonds (hereinafter called the "trust account'), then all right and interest of the owners of the defeased Bonds in the covenants of this ordinance and in the funds and accounts obligated to the payment of the defeased Bonds shall cease and become void. The owners of defeased Bonds shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account. The City shall include in the refunding or defeasance plan such provisions as the City deems necessary for the random selection of any defeased Bonds that constitute less than all of a particular maturity of the Bonds, for notice of the defeasance to be given to the owners of the defeased Bonds and to such other persons as the City shall determine, and for any required replacement of Bond certificates for defeased Bonds. The defeased Bonds shall be deemed no longer outstanding, and the City may apply any money in any other fund or account established for the payment or redemption of the defeased Bonds to any lawful purposes as it shall determine. Ordinance No. 1906 Page 7 of 13 For as long as the Financial Guaranty Insurance Policy is in effect, in connection with any refunding or defeasance of the Bonds, the Bond Insurer shall be provided with an opinion of counsel acceptable to the Bond Insurer that the Bonds have been legally defeased and that the escrow agreement establishing such defeasance operates to legally defease the Bonds within the meaning of this Ordinance and any refunding ordinance relating to the Bonds. In addition, the Bond Insurer will be entitled to receive (i) 15 business days notice of any advance refunding of the Bonds and (ii) an accountant's report with respect to the sufficiency of the amounts deposited in escrow to defease the Bonds. "Permitted Investments" means "government obligations" (as defined in chapter 39.53 RCW, as now or hereafter amended), except that so long as the Financial Guaranty Insurance Policy is in effect, Permitted Investments shall be limited to those listed in Exhibit A. Notwithstanding anything in this section to the contrary, if the principal of and/or interest due on the Bonds is paid by the Bond Insurer pursuant to the Financial Guaranty Insurance Policy, the Bonds shall be treated as remaining outstanding for all purposes, not defeased or otherwise satisfied and shall not be considered paid by the City, and the covenants, agreements and other obligations of the City to the registered owners of the Bonds shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of those registered owners. If the Bonds are registered in the name of DTC or its nominee, notice of any defeasance of Bonds shall be given to DTC in the manner prescribed in the Letter of Representations for notices of redemption of Bonds. SECTION 15. Bond Fund and Deposit of Bond Proceeds. There is created and established in the office of the City Treasurer a special fund designated as the Limited Tax General Obligation Refunding Bond Fund, 2003 (the "Bond Fund"), for the purpose of paying principal of and interest on the Bonds. Accrued interest on the Bonds, if any, received from the sale and delivery of the Bonds shall be paid into the Bond Fund. All taxes collected for and allocated to the payment of the principal of and interest on the Bonds shall be deposited in the Bond Fund. The Treasurer is authorized and directed to create within the City's Limited Tax General Obligation Bond Fund, 1999 (the "1999 Bond Fund") previously created and established in the office of the Treasurer a special account to be known as the "Limited Tax General Obligation Bond, 1999, Refunding Account (the "Refunding Account"). All of the proceeds of the Bond shall be deposited immediately upon the receipt thereof with the Treasurer in the Refunding Account and used for the purposes specified in Section 2 herein and in accordance with the provisions of Sections 16 and 17 herein. SECTION 16. Use of Bond Proceeds. The money deposited in the Refunding Account and any income therefrom shall be held by the Treasurer in trust, separate and apart from all other money of the City, and shall be irrevocably set aside for and pledged to the payment and redemption of the 1999 Bond. The Treasurer is authorized and directed to make the payments required to be made from the money deposited with the Treasurer in the Refunding Account pursuant to this ordinance, together with other money on deposit in the 1999 Bond Fund collected to pay debt service on the 1999 Bond. All money deposited in the Refunding Account and any income therefrom shall be held irrevocably, invested and applied in accordance with the provisions of Ordinance No. 1787, this ordinance, chapter 39.53 RCW and other applicable statutes of the State. All necessary and proper fees, compensation and expenses of the Treasurer and all other costs incidental to the setting up of the Refunding Account to accomplish the prepayment of the 1999 Bond and costs related to the issuance and delivery of the Bonds, including any bond printing, rating service fees, bond counsel's fees, bond insurance premium, and other related expenses, shall be paid out of the proceeds of the Bonds. Any Ordinance No. 1906 Page 8 of 13 money remaining in the Refunding Account after the prepayment of the 1999 Bond has been accomplished and costs of issuance paid shall be transferred to the Bond Fund. SECTION 17. Call for Redemption of the 1999 Bond. The City calls for redemption on July 24, 2003, or such earlier date as may be agreed upon by the USDA and the City, all of the 1999 Bond at a price of par plus accrued interest. Such call for redemption shall be irrevocable after the delivery of the Bonds to the initial purchasers thereof. The date on which the 1999 Bond is called for redemption is the earliest possible date on which the 1999 Bond may be called and prepaid. The proper City officials are authorized and directed to give or cause to be given such notices as required, at the times and in the manner required, pursuant to Ordinance No. 1787 in order to effect the prepayment of the 1999 Bond at the earliest possible date. SECTION 18. City Findings with Respect to Refunding. The City Council finds and determines that the issuance and sale of the Bond at this time will effect a savings to the City and is in the best interest of the City and its taxpayers and in the public interest. In making such finding and determination, the City Council has given consideration to the fixed maturities of the Bonds and the 1999 Bond, the costs of issuance of the Bonds and the known earned income from the investment of the proceeds of the issuance and sale of the Bonds and other money of the City used in the pending the prepayment and redemption of the 1999 Bond. SECTION 19. Approval of Bond Purchase Agreement. Banc of America Securities LLC of Seattle, Washington, has presented a purchase agreement (the "Bond Purchase Agreement') to the City offering to purchase the Bonds under the terms and conditions provided in the Bond Purchase Agreement, which written Bond Purchase Agreement is on file with the City Clerk and is incorporated herein by this reference. The City Council finds that entering into the Bond Purchase Agreement is in the City's best interest and therefore accepts the offer contained therein and authorizes its execution by City officials. The Bonds will be printed at City expense and will be delivered to the purchaser in accordance with the Bond Purchase Agreement, with the approving legal opinion of Foster Pepper & Shefelman PLLC, municipal bond counsel of Seattle, Washington, regarding the Bonds. The proper City officials are authorized and directed to do everything necessary for the prompt delivery of the Bonds to the purchaser and for the proper application and use of the proceeds of the sale thereof. SECTION 20. Preliminary Official Statement Deemed Final. The City Council has been provided with copies of a preliminary official statement dated May 28, 2003 (the "Preliminary Official Statement"), prepared in connection with the sale of the Bonds. For the sole purpose of the Bond purchaser's compliance with Securities and Exchange Commission Rule 15c2-12(b)(1), the City "deems final" that Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, options of redemption, delivery dates, ratings and other terms of the Bonds dependent on such matters. SECTION 21. Undertaking to Provide Continuing Disclosure. To meet the conditions of paragraph (d)(2) of United States Securities and Exchange Commission ("SEC") Rule 15c2- 12 (the "Rule") as required to qualify for the limited exemption from paragraph (b)(5) of the Rule, as applicable to a participating underwriter for the Bonds, the City makes the following undertaking (the "Undertaking") for the benefit of holders of the Bonds: Ordinance No. 1906 Page 9 of 13 (a) Undertaking to Provide Annual Financial Information and Notice of Material Events. The City undertakes to provide or cause to be provided, either directly or through a designated agent: (i) To any person upon request, or annually to a state information depository, if any, established in the state of Washington (the "SID"), annual financial information and operating data of the type included in the final official statement for the Bonds that is customarily prepared by the City and is otherwise publicly available ("annual financial information"); and (ii) To each nationally recognized municipal securities information repository designated by the SEC in accordance with the Rule ("NRMSIR") or the Municipal Securities Rulemaking Board ("MSRB"), and to the SID, timely notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of 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 holders of the Bonds; (8) Bond calls (other than scheduled mandatory redemptions of Term Bonds); (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. The annual financial information that the City undertakes to provide shall be available from the Treasurer of the City, whose current address and telephone number are identified in the final official statement for the Bonds. (b) Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR, the SID or the MSRB, under the circumstances and in the manner permitted by the Rule. The City will give notice to each NRMSIR or the MSRB, and the SID, of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of the reasons for the amendment. If the amendment changes the type of annual financial information to be provided, the annual financial information containing the amended financial information will include a narrative explanation of the effect of that change on the type of information to be provided. (c) Beneficiaries. The Undertaking evidenced by this section shall inure to the benefit of the City and any holder of Bonds, and shall not inure to the benefit of or create any rights in any other person. (d) Termination of Undertaking. The City's obligations under this Undertaking shall terminate upon the legal defeasance of all of the Bonds. In addition, the City's obligations under this Undertaking shall terminate if those provisions of the Rule which require the City to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of nationally recognized bond counsel or other counsel familiar with federal securities laws delivered to the City, and the City provides timely notice of such termination to each NRMSIR or the MSRB and the SID. Ordinance No. 1906 Page 10 of 13 (e) Remedy for Failure to Comply with Undertaking. As soon as practicable after the City learns of any failure to comply with the Undertaking, the City will proceed with due diligence to cause such noncompliance to be corrected. No failure by the City or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any holder of a Bond shall be to take such actions as that holder deems necessary, including seeking an order of specific performance from an appropriate court, to compel the City or other obligated person to comply with the Undertaking. (f) Designation of Official Responsible to Administer Undertaking. The Treasurer of the City (or such other officer of the City who may in the future perform the duties of that office) or his or her designee is authorized and directed in his or her discretion to take such further actions as may be necessary, appropriate or convenient to carry out the Undertaking of the City in respect of the Bonds set forth in this section and in accordance with the Rule. SECTION 22. Bond Insurance. The City Council finds that it is in the City's best interest to purchase, and that a savings will result from purchasing, the Financial Guaranty Insurance Policy for the Bonds. The City shall purchase from the Bond Insurer the Financial Guaranty Insurance Policy insuring the prompt payment of the principal of and interest on the Bonds and agrees to the conditions for obtaining that policy, including the payment of the premium therefor and the following provisions entitled "Payments under the Policy' required by the Bond Insurer to be included in this ordinance: "A. In the event that, on the second Business Day, and again on the Business Day, prior to the payment date on the Obligations, the Paying Agent [the Bond Registrar] has not received sufficient moneys to pay all principal of and interest on the Obligations due on the second following or following, as the case may be, Business Day, the Paying Agent shall immediately notify the Insurer or its designee on the same Business Day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. "B. If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent shall so notify the Insurer or its designee. "C. In addition, if the Paying Agent has notice that any Bondholder has been required to disgorge payments of principal or interest on the Obligation to a trustee in Bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agent shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. "D. The Paying Agent is hereby irrevocably designated, appointed, directed and authorized to act as attorney -in -fact for Holders of the Obligations as follows: 1.1. If and to the extent there is a deficiency in amounts required to pay interest on the Obligations, the Paying Agent shall (a) execute and deliver to U.S. Bank Trust National Association, or its successors under the Policy (the "Insurance Paying Agent'), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Holders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are Ordinance No. 1906 Page 11 of 13 paid by the Insurer, (b) receive as designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Holders; and "2. If and to the extent of a deficiency in amounts required to pay principal of the Obligations, the Paying Agent shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Holder in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Obligation surrendered to the Insurance Paying agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Paying Agent and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Holders. "E. Payments with respect to claims for interest on and principal of Obligations disbursed by the Paying Agent from proceeds of the Policy shall not be considered to discharge the obligation of the Issuer with respect to such Obligations, and the Insurer shall become the owner of such unpaid Obligations and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. 7. Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent hereby agree for the benefit of the Insurer that: 111. They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Paying Agent), on account of principal of or interest on the Obligations, the Insurer will be subrogated to the rights of such Holders to receive the amount of such principal and interest from the Issuer, with interest thereon as provided and solely from the sources stated in this Indenture and the Obligations; and 7. They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Indenture and the Obligations, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Obligations to Holders, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest. "G. In connection with the issuance of additional Obligations, the Issuer shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such additional Obligations. "H. Copies of any amendments made to the documents executed in connection with the issuance of the Obligations which are consented to by the Insurer shall be sent to Standard & Poor's Corporation. Ordinance No. 1906 Page 12 of 13 "I. The Insurer shall receive notice of the resignation or removal of the Paying Agent and the appointment of a successor thereto. "J. The Insurer shall receive copies of all notices required to be delivered to Bondholders and, on an annual basis, copies of the Issuer's audited financial statements and Annual Budget. "Notices: Any notice that is required to be given to a holder of the Obligation or to the Paying Agent pursuant to the Indenture shall also be provided to the Insurer. All notices required to be given to the Insurer under the Indenture shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504 Attention: Surveillance:" 'K. The Issuer/Obligor agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including attorneys' fees and expenses, incurred by the Insurer in connection with (i) the enforcement by the Insurer of the Issuer's/Obligor's obligations, or the preservation or defense of any rights of the Insurer, under this Resolution/Indenture and any other document executed in connection with the issuance of the Obligations, and (ii) any consent, amendment, waiver or other action with respect to the Resolution/Indenture or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Insurer reserves the right to charge a fee in connection with its review of any such consent, amendment or waiver, whether or not granted or approved. -L. The Issuer/Obligor agrees not to use MBIA's name in any public document including, without limitation, a press release or presentation, announcement or forum without MBIA's prior consent. In the event that the Issuer/Obligor is advised by counsel that it has a legal obligation to disclose MBIA's name in any press release, public announcement or other public document, the Issuer/Obligaor shall provide MBIA with at least three (3) business days' prior written notice of its intent to use MBIA's name together with a copy of the proposed use of MBIA's name and of any description of a transaction with MBIA and shall obtain MBIA's prior consent as to the form and substance of the proposed use of MBIA's name and any such description. "M. The Issuer/Obligor shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such Bonds without the prior written consent of MBIA." Any notices required to be given to the bondholders under the terms of this resolution shall also be given to the Bond Insurer, Attn.: Insured Portfolio Management. Ordinance No. 1906 Page 13 of 13 SECTION 23. Effective Date of Ordinance. This ordinance shall take effect and be in force from and after its passage and five days following its publication as required by law. PASSED by the City Council of the City of Port Orchard, Washington, signed by the Mayor and attested to by the Deputy City Clerk in authentication of such passage this 9`h day of June, 2003. Leslie J. Weatherill, Mayor ATTEST: Deputy City Clerk APPROVED AS TO FORM: A Foster Pepper She PI Ro ert G 'ger, Coun man EXHIBIT A Ordinance No. 1906 MBIA INSURANCE CORPORATION requires, for a Defeasance, the deposit of: (1) Cash. (2) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series - -SLGS"). (3) Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities. (4) The interest component only of obligations of the Resolution Funding Corporation (REFCORP) that have been stripped by request to the Federal Reserve Bank of New York in book entry form. (5) Pre -refunded municipal bonds rated "Aaa" by Moody's and "AAA" by S&P. If however, the issue is only rated by S&P (i.e., there is no Moody's rating), then the pre -refunded bonds must have been pre -refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre -refunded municipal obligations. (6) Obligations of any of the following agencies which are backed by the full faith and credit of the United States of America: • U.S. Export -Import Bank (Eximbank) - Direct obligations or fully guaranteed certificates of beneficial ownership only. • Farmers Home Administration (FMHA) - Certificates of beneficial ownership only. Federal Financing Bank • General Services Administration - Participation Certificates. • U.S. Maritime Administration - Guaranteed Title XI Financing. • U.S. Department of Housing & Urban Development (HUD) - Project Notes; Local Authority Bonds (New Communities Debentures - U.S. government guaranteed debentures; U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds) City of Port Orchard PORT ORCHARD, WASHINGTON 98366 NOTICE OF CITY OF PORT ORCHARD ORDINANCE The following is a summary of an Ordinance approved by the Port Orchard City Council at their regular Council meeting held June 9, 2003. ORDINANCE NO. 1906 AN ORDINANCE OF THE CITY PORT ORCHARD, WASHINGTON, RELATING TO CONTRACTING INDEBTEDNESS; PROVIDING FOR THE ISSUANCE OF $3,000,000 PAR VALUE OF LIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, 2003, OF THE CITY FOR GENERAL CITY PURPOSES TO PROVIDE FUNDS WITH WHICH TO PAY THE COST OF REFUNDING THE CITY'S OUTSTANDING LIMITED TAX GENERAL OBLIGATION BOND, 1999, IN A CURRENT REFUNDING, AND PAYING THE ADMINISTRATIVE COSTS OF THAT REFUNDING AND THE COSTS OF ISSUANCE AND SALE OF THE BONDS; FIXING THE DATE FROM MATURITIES, INTEREST RATES, TERMS AND COVENANTS OF THE BONDS; ESTABLISHING A BOND REDEMPTION FUND; PROVIDING FOR BOND INSURANCE; AND APPROVING THE SALE AND PROVIDING FOR THE DELIVERY OF THE BONDS TO BANC OF AMERICA SECURITIES LLC OF SEATTLE, WASHINGTON. Copies of Ordinance No. 1906 are available for review at the office of the City Clerk of the City of Port Orchard. Upon written request a statement of the full text of the Ordinance will be mailed to any interested person without charge. Thirty days after publication, copies of Ordinance No. 1906 will be provided at a nominal charge. City of Port Orchard Michelle Merlino Deputy Clerk Publish: Port Orchard Independent June 18, 2003 Kitsaoleeals asoundnublishine:com CITY HALL MUNICIPAL COURT POLICE DEPARTMENT PUBLIC WORKS DEPARTMENT 216 Prospect 216 Prospect 546 Bay Street 216 Prospect Street Administration (360) 876-4407 (360) 876-1701 (360) 876-1700 (360) 8764991 FAX (360) 895-9029 FAX (360) 89S-3071 FAX (360) 876-5546 FAX (360) 876-4930