1733 - Ordinance - Relating to Contracting IndebtednessAmended by Ordinance 1 7r M
Section(s) Amended '-
Date: I I-2?-(��
ORDINANCE NO. 1733
AN ORDINANCE OF THE CITY OF PORT ORCHARD,
WASHINGTON, RELATING TO CONTRACTING INDEBTEDNESS;
AUTHORIZING THE ISSUANCE OF LIMITED TAX GENERAL
OBLIGATION BONDS; AUTHORIZING THE ISSUANCE OF A
LIMITED TAX GENERAL OBLIGATION BOND ANTICIPATION
NOTE, 1998 (LINE OF CREDIT), IN THE AGGREGATE
PRINCIPAL AMOUNT OF NOT TO EXCEED $3,300,000, TO
PROVIDE FUNDS NECESSARY TO PAY PART OF THE COST
OF CONSTRUCTING A NEW MUNICIPAL FACILITY OF THE
CITY TO SERVE THE POLICE, MUNICIPAL COURT,
ADMINISTRATION AND PUBLIC WORKS PENDING THE
ISSUANCE OF BONDS OR THE AVAILABILITY OF OTHER
SOURCES OF REPAYMENT; FIXING THE DATE, INTEREST
RATE, FORM, MATURITY, TERMS, COVENANTS AND USES OF
THE PROCEEDS OF THE NOTE; CREATING A NOTE
REDEMPTION FUND; AND APPROVING THE SALE AND
PROVIDING FOR THE DELIVERY OF THE NOTE TO BANK OF
AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, DOING
BUSINESS AS SEAFIRST BANK, OF SEATTLE, WASHINGTON.
WHEREAS, the City of Port Orchard, Washington (the "City"), is in need of
constructing a new municipal facility to serve the police, municipal court, administration and public
works (the "Project"), the estimated cost of which is $6,101,000, and the City does not have
available sufficient funds to pay the cost; and
WHEREAS, the City Council deems it to be in the best interests of the City to
borrow money by the issuance of bonds and, pending the issuance of those bonds or the
availability of other sources of repayment, issue short-term obligations in accordance with the
provisions of chapter 39.50 RCW for the purpose of providing the funds with which to pay the costs
of the Project; and
WHEREAS, Bank of America National Trust & Savings Association, doing business
as Seafrst Bank, has offered to extend a line of credit to the City evidenced by a line of credit note
under the terms and conditions set forth herein; now, therefore,
THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON DOES
HEREBY ORDAIN:
SECTION 1. Definitions. As used in this ordinance, the following words shall
have the following meanings:
"Bank" means Bank of America National Trust & Savings Association, doing
business as Seafirst Bank, of Seattle, Washington.
"City" means the City of Port Orchard, Washington.
Ordinance No. 1733
Page 2 of 6
"City Treasurer" means the City Treasurer of the City or the successor thereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Note" means the Limited Tax General Obligation Bond Anticipation Note (Line of
Credit), authorized to be issued by this ordinance.
"Note Register' means the registration books of the Note Registrar on which is
recorded the name and address of the owner of the Note.
"Note Registrar" means the City Treasurer of the City.
"Offer" means the offer, made by the Bank to purchase the Note under the terms of
its proposal letter dated January 29, 1998.
"Project" means the construction of a new municipal facility to serve the police,
municipal court, administration and public works.
SECTION 2. Debt Capacity. The assessed valuation of the taxable property of
the City as ascertained by the last preceding assessment for City purposes for the calendar year
1998 is $303,058,348. The City has no outstanding general indebtedness evidenced by limited tax
general obligation bonds or notes incurred within the limit of up to 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 and has no outstanding general indebtedness evidenced by unlimited tax general
obligation bonds incurred within the limit of up to 2'/2% of the value of the taxable property within
the City for capital purposes only. The amount of indebtedness for which obligations are
authorized herein to be issued is $3,300,000.
SECTION 3. Authorization of Bonds. For the purpose of providing the funds to
pay the cost of the Project, the City shall issue limited tax general obligation bonds in the amount
not to exceed $3,300,000. Such bonds shall be issued in one or more series at such time as the
City shall deem advisable; shall be in such denominations and form, shall be dated, shall bear such
interest rate or rates, shall be payable at such time and times, shall have such option of payment
prior to maturity; shall provide for additional funds and accounts and shall contain and be subject to
such provisions and covenants as hereafter shall be provided by ordinance.
SECTION 4. Authorization and Description of Note. Pending the issuance of
the limited tax general obligation bonds authorized by Section 3, for the purpose of providing the
funds with which to pay part of the costs of carrying out the Project, paying the costs of issuance
and sale of the Note and paying interest on the Note, the City may borrow money from time to time
pursuant to the line of credit extended by the Bank under the terms of its Offer and shall issue the
Note in an aggregate principal amount of not to exceed $3,300,000.
The Note shall be designated the Limited Tax General Obligation Bond Anticipation
Note, 1998 (Line of Credit), of the City; shall be dated as of its date of delivery to the Bank; shall be
issued only in registered form; shall be numbered R-1 with any additional designation as the Note
Registrar deems necessary for purpose of identification; and shall mature on December 1, 1999.
Ordinance No. 1733
Page 3 of 6
The City may make incremental draws upon the Note (the "Loan Draws") on any
business day during the term of the Note. No Loan Draw may exceed the total amount of the costs
to be paid from such draw, and the proceeds of each Loan Draw shall be used immediately to pay
those costs. Loan Draws on the Note shall be recorded on the Loan Draw Record attached to the
Note, or in such other form as the City and the Bank may agree. Loan Draws shall be limited to an
aggregate principal amount of $3,300,000. Loan Draws are not subject to approval by the Bank.
SECTION 5. Computation of Interest on the Note. Each Loan Draw shall bear
interest at the rate of 55% (calculated on an actual 365/day basis) of the rate of interest designated
and published by the Bank as its reference rate, as such reference rate may change from time to
time (the "Reference Rate"). The interest rate to be paid on any Loan Draw shall be adjusted as of
the effective date of any adjustment in the Reference Rate.
The City Treasurer is authorized on behalf of the City, at any time that the Note is
outstanding to convert the Note, or any portion thereof, to a fixed interest rate, provided the
expiration of any fixed rate is no later than the final maturity date of the Note. Any amount
converted to a fixed interest rate shall bear interest at a fixed rate of interest determined by Bank in
its sole discretion and quoted to the City, and accepted by the City prior to any expiration time to
which such quote is made subject. Any such fixed rate of interest shall accrue on the basis of 30
days over a 360-day year. If any principal bearing interest at a fixed rate is repaid prior to the
expiration of such fixed rate, such prepayment shall be subject to a prepayment fee determined in
accordance with Exhibit 1 attached to this ordinance.
Interest on each Loan Draw shall accrue from the date of that Loan Draw and shall
be computed on the principal amount of the Loan Draw outstanding for the actual number of days
the principal amount of the Loan Draw is outstanding. If the Note is not redeemed when properly
presented at its maturity or call date, the City shall be obligated to pay interest on the Note at the
rate specified above until the Note, both principal and interest, is paid in full or until sufficient money
for that payment in full is on deposit in the Note Fund.
The City Council finds that the fixing of the above interest rates and rate indices is in
the best interest of the City.
SECTION 6. Designation of Officers to Make Loan Draws. The City Council
has determined it to be in the best interest of the City that the City Treasurer or such other person
as the City Treasurer may designate, is authorized to make Loan Draws against the Note in the
amounts and at the times as the City Treasurer may determine, those Loan Draws to be made in
accordance with the terms and provisions set forth herein.
SECTION 7. Creation of Note Fund; Payment of the Note. The Note Fund is
created in the office of the City Treasurer as a special fund to be known as the Limited Tax General
Obligation Bond Anticipation Note Fund, 1998 (Line of Credit).
Both principal of and interest on the Note shall be payable in lawful money of the
United States of America solely out of the Note Fund from the proceeds of bonds or of other short-
term obligations to be deposited in such fund or from other money legally available and to be used
therefor, and the city irrevocably pledges to redeem the Note on its maturity or prepayment date
from the proceeds of such bonds, additional short-term obligations or other money of the City
Ordinance No. 1733
Page 4 of 6
available for that purpose.
The final installment of principal, plus any accrued interest, on the Note at maturity
or prior repayment is payable at the office of the City Treasurer, who is appointed Note Registrar
for the Note, in Port Orchard, Washington, upon presentation and surrender of the Note.
SECTION 8. Pledge to Redeem the Note. The City irrevocably pledges to pay
and redeem the Note from the proceeds of a sufficient amount of bonds or additional short-term
obligations, or from other money of the City legally available for such purpose.
SECTION 9. Prepayment and Redemption Provisions. The City reserves the
right and option to prepay and redeem at any time prior to the stated maturity date any or all of the
principal amount of the Note outstanding at par plus accrued interest to the date of prepayment
and redemption. Written notice to the Bank of any intended prepayment or redemption of the Note
shall not be required. Interest on the Note or the prepaid portion thereof shall cease to accrue on
the date of such prepayment. Amounts converted to fixed interest rates may be subject to a
prepayment penalty calculated in accordance with the terms of the Offer.
SECTION 10. Pledge of Taxes. For as long as any the Note is 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 Note, 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 11. Form and Execution. The Note shall be printed, lithographed,
typed or multicopied on good bond paper in a form consistent with the provisions of this ordinance,
shall be signed by the Mayor and City Clerk, which signatures may be manual or in facsimile, and
shall have the seal of the City or a facsimile reproduction thereof impressed or printed thereon.
The Note shall bear thereon a Certificate of Authentication substantially in the following
form, manually signed by the Note Registrar, and only if so executed shall the Note be valid or
obligatory for any purpose or entitled to the benefits of this ordinance:
CERTIFICATE OF AUTHENTICATION
This Note is the fully registered City of Port Orchard, Washington, Limited
Tax General Obligation Bond Anticipation Note, 1998 (Line of Credit), described in
the Note Ordinance.
CITY OF PORT ORCHARD, WASHINGTON
City Treasurer, Note Registrar
The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Note
so authenticated has been duly executed, authenticated and delivered and is entitled to the
benefits of this ordinance.
Ordinance No. 1733
Page 5 of 6
SECTION 12. Registration and Transfer of Note; Note Registrar. The Note
shall be issued to the Bank only in registered form as to both principal and interest and recorded on
the books or records maintained by the Note Registrar (the "Note Register'). The Note Register
shall contain the name and mailing address of the owner of the Note. The Note may not be
assigned or transferred by the Bank, except that the Bank may assign or transfer the Note to any
successor to the business and assets of the Bank. When the Note has been paid in full, both
principal and interest, the Note shall be surrendered by the Bank to the Note Registrar, who shall
cancel the Note.
The Note Registrar shall keep, or cause to be kept, at her office, sufficient books for
the registration of the Note. The Note Registrar shall serve as the City's authenticating trustee,
transfer agent, registrar and paying agent for the Note and shall comply fully with all applicable
federal and state laws and regulations respecting the carrying out of those duties. The Note
Registrar is authorized, on behalf of the City, to authenticate and deliver the Note in accordance
with the provisions of the Note and this ordinance, to serve as the City's paying agent for the Note
and to carry out all of the Note Registrar's powers and duties under this ordinance and Ordinance
No. 1732. No assignment or transfer of the Note shall be effective until the name of the new
owner and the new owner's mailing address, together with such other information deemed
appropriate by the Note Registrar, shall be recorded on the Note Register.
The Note shall state on its face that the principal of and interest on the Note shall be
paid only to the owner thereof registered as such on the Note Register as of the record date set
forth therein and to no other person or entity, and that the Note may not be assigned except on the
Note Register.
SECTION 13. Designation of Note 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) the Note is not 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 Note 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 which the City
controls, which derives its authority to issue tax-exempt obligations from the City or which issues
tax-exempt obligations on behalf of the City) during the calendar year in which the Note is issued is
not reasonably expected to exceed $5,000,000; and (e) the amount of tax-exempt obligations,
including the Note, 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 Note is issued does not
exceed $10,000,000. The City therefore certifies that the Note is eligible for the arbitrage rebate
exception under Section 148(f)(4)(D) of the Code and designates the Note as "qualified tax-exempt
obligation" for the purposes of Section 265(b)(3) of the Code.
SECTION 14 . Sale and Delivery of the Note. The Bank has submitted an offer
to purchase the Note under the terms and conditions of its Offer, which Offer is on file with the City
Treasurer. The City Council finds that it is in the City's best interest that such Offer be accepted
and accepts the same.
Ordinance No. 1733
Page 6 of 6
The Note will be prepared at City expense and will be delivered to the Bank in
accordance with the Offer, with the approving legal opinion of Foster Pepper & Shefelman PLLC,
municipal bond counsel of Seattle, Washington, regarding the Note. Bond counsel shall not be
required to review and shall express no opinion concerning the completeness or accuracy of any
official statement, offering circular or other sales or disclosure material issued or used in
connection with the Note, and bond counsel's opinion shall so state.
The proper City officials are authorized and directed to do everything necessary for
the prompt delivery of the Note to the Bank and for the proper application and use of the Loan
Draws thereon.
SECTION 15. Representation Concerning the Year 2000. The City has
conducted a review and assessment of the City's computer applications and made inquiry of the
City's key suppliers, vendors, and customers with respect to the "year 2000 problem" (that is, the
risk that computer applications may not be able to properly perform date -sensitive functions after
December 31, 1999) and, based on that review and inquiry, the City does not believe the year
2000 problem will result in a material adverse change in the City's business conditions (financial or
otherwise), operations, properties or prospects, or ability to repay the credit.
SECTION 16. Effective Date. 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, signed by the Mayor and
attested to by the City Clerk in authentication of such passage this 24'h day of August, 1998.
ATTEST:
Patricia Parks, City Cferrk
APPROVED AS TO FORM:
ZAt"6�;�
LESLIE J. WEATHERILL, MAYOR
Sponsored by:
Foster Pepper & Shefel an PLLC Councilman Geiger
Special Counsel and Bond Counsel to the City
Exhibit 1 — PREPAYMENT FL�S
If the principal balance of the Note is prepaid in whole or in part, whether by voluntary
prepayment, operation of law, acceleration or otherwise, a prepayment fee, in addition to any interest
earned, will be immediately payable to the holder of the Note.
The amount of the prepayment fee depends on the following:
(1) The amount by which interest reference rates as defined below have changed between
the time the loan is prepaid and either a) the time the loan was made for fixed rate loans,
or b) the time the interest rate last changed (repriced) for variable rate loans.
(2) A prepayment fee factor (see "Prepayment Fee Factor Schedule" following),
(3) The amount of principal prepaid.
Definition of Prepayment Reference Rate for Variable Rate Loans
The 'Prepayment Reference Rate" used to represent interest rate levels for variable rate loans shall be
the index rate used to determine the rate on this loan having maturities equivalent to the remaining
period to interest rate change date (repricing) of this loan rounded upward to the nearest month. The
"Initial Prepayment Reference Rate" shall be the Prepayment Reference Rate at the time of last
repricing and a new Initial Prepayment Reference Rate shall be assigned at each subsequent repricing.
The "Final Prepayment Reference Rate' shall be the Prepayment Reference Rate at the time of
prepayment.
Definition of Prepayment Reference Rate for Fixed Rate Loans
The 'Prepayment Reference Rate" used to represent interest rate levels on fixed rate loans shall be the
bond equivalent yield of the average U.S. Treasury rate having maturities equivalent to the remaining
period to maturity of this loan rounded upward to the nearest month. The "Initial Prepayment
Reference Rate" shall be the Prepayment Reference Rate at the time the loan was made. The "Final
Prepayment Reference Rate" shall be the Prepayment Reference Rate at time of prepayment.
The Prepayment Reference Rate shall be interpolated from the yields as displayed on Page 119 of the
Dow JonesTelerate Service (or such other page or service as may replace that page or service for the
purpose of displaying rates comparable to said U.S. Treasury rates) on the day the loan was made
(Initial Prepayment Reference Rate) or the day of prepayment (Final Prepayment Reference Rate).
Calculation Of Prepayment Fee
If the Initial Prepayment Reference Rate is less than or equal to the Final Prepayment Reference Rate,
there is no prepayment fee.
If the Initial Prepayment Reference Rate is greater than the Final Prepayment Reference Rate, the
prepayment fee shall be equal to the difference between the Initial and Final Prepayment Reference
Rates (expressed as a decimal), multiplied by the appropriate factor from the Prepayment Fee Factor
Schedule, multiplied by the principal amount of the loan being prepaid.
Example of Prepayment Fee Calculation
Variable Rate Loan: A non -amortizing 6-month LIBOR based loan with principal of $250,000 is fully
prepaid with 3 months remaining until next interest rate change date (repricing). An Initial Prepayment
Reference Rate of 7.0% was assigned to the loan at last repricing. The Final Prepayment Reference
Rate (as determined by the 3-month LIBOR index) is 6.5%. Rates therefore have dropped 0.5% since
last repricing and a prepayment fee applies. A prepayment fee factor of 0.31 is determined from Table
3 below and the prepayment fee is computed as follows:
Prepayment Fee = (0.07 - 0.065) x (0.31) x ($250,000) = $387.50
Fixed Rate Loan: An amortizing loan with remaining principal of $250,000 is fully prepaid with 24
month remaining until maturity. An Initial Prepayment Reference Rate is 9.0% was assigned to the
loan when the loan was made. The Final Prepayment Reference Rate (as determined by the current
24-month U.S. Treasury rate on Page 119 of Telerate) is 7.5%. Rates therefore have dropped 1.5%
since the loan was made and a prepayment fee applies. A prepayment fee factor of 1.3 is determined
from Table 1 below and the prepayment foe is computed as follows:
Prepayment Fee = (0.09 - 0.075) x (1.3) x ($250,000) = $4,875.
PREPAYMENT FEE FACTOR SCHEDULE
TABLE I: FULLY AMORTIZING LOANS
Proportion of
90-100%
0
.21
.36
.52
.67
1.3
1.9
2.5
3.1
4.3
5.9
10.3
13.1
60-89%
0
.24
.44
.63
.83
1.6
2.4
3.1
3.9
5.4
7.5
13.2
17.0
30-59%
0
.28
.53
.78
1.02
2.0
3.0
4.0
5.0
7.0
9.9
18.5
24.4
0-29%
0
.31
.63
.92
1.22
2.4
3.7
5.0
6.3
9.0
13.4
28.3
41.8
TABLE II: PARTIALLY AMORTIZING (BALLOON) LOANS
Proportion of Remaining Principal
Amount Being Prepaid
Months
Remaining
To Maturity/Repricing'
0 3 6
9
12
24
36
48
60
84
120
240
360
90-100% 0 .26 .49
.71
.94
1.8
2.7
3.4
4.2
5.6
7.4
11.6
14.0
60-89% 0 .30 .59
.86
1.15
2.2
3.3
4.3
5.3
7.1
9.4
15.0
18.1
30-59% 0 .31 .63
.95
1.27
2.6
3.9
5.3
6.6
9.1
12.6
21.2
26.2
0-29% 0 .31 .63
.95
L27
26
4.0
5.4
7.0
10.2
15.7
33.4
46.0
TABLE III: NONAMORTIZING (INTEREST ONLY) LOANS
Proportion of Remaining Principal
Amount Being Pre�laid Months Remaining to Maturity/Repricing'
0 6 9 12 24 36 48 fi0 84 120 240 360
0-100% 0 .31 .61 .91 1.21 2.3 3.4 4.4 5.3 6.9 8.9 13.0 14.8
' For the remaining period to maturity/repricing between any two maturities/repricings shown in the above
schedules, interpolate between the corresponding factors to the closest month.
The holder of the Note is not required to actually reinvest the prepaid principal in any U.S. Government Treasury
Obligations, or otherwise prove its actual loss, as a condition to receiving a prepayment fee as calculated above.
/ '4
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 August 24, 1998.
ORDINANCE NO. 1733
AN ORDINANCE OF THE CITY OF PORT ORCHARD,
WASHINGTON RELATING TO CONTRACTING
INDEBTEDNESS; AUTHORIZING THE ISSUANCE OF LIMITED
TAX GENERAL OBLIGATION BONDS; AUTHORIZING THE
ISSUANCE OF A LIMITED TAX GENERAL OBLIGATION BOND
ANTICIPATION NOTE, 1998 (LINE OF CREDIT), IN THE
AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED
$3,300,000, TO PROVIDE FUNDS NECESSARY TO PAY PART
OF THE COST OF CONSTRUCTING A NEW MUNICIPAL
FACILITY OF THE CITY TO SERVE THE POLICE, MUNICIPAL
COURT, ADMINISTRATION AND PUBLIC WORKS PENDING
THE ISSUANCE OF BONDS OR THE AVAILABILITY OF OTHER
SOURCES OF REPAYMENT; FIXING THE DATE, INTEREST
RATE, FORM, MATURITY, TERMS, COVENANTS AND USES
OF THE PROCEEDS OF THE NOTE; CREATING A NOTE
REDEMPTION FUND; AND APPROVING THE SALE AND
PROVIDING FOR THE DELIVERY OF THE NOTE TO BANK OF
AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
DOING BUSINESS AS SEAFIRST BANK, OF SEATTLE,
WASHINGTON.
Copies of Ordinance No. 1733 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. 1733 will be provided at a nominal
charge.
City of Port Orchard
YL l cJURQ�ed-'— r
Michelle Merlino
Deputy Clerk
Publish: Port Orchard Independent
September 3, 1998