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HomeMy WebLinkAboutOrdinances - O-86-390 - 07/30/1986 - AUTHORIZE ISSUE $5.5M W/S REV BONDS SERIES 1986AORDINANCE NO. 0-86-390 AN ORDINANCE authorizing and providing for the issue of $5,500,000 Waterworks and Sewerage Revenue Bonds, Series 1986A, of the City of McHenry, McHenry County, Illinois, for the purpose of refunding outstanding waterworks and sewerage revenue bonds of said City and defraying the cost of improving the combined waterworks and sewerage system of said City, prescribing all the details of said bonds, and providing for the collection, segregation and distribution of the revenues of the combined waterworks and sewerage system of said City. WHEREAS, the City of McHenry, McHenry County, Illinois (the "City") has provided by ordinance for the combination of its municipally -owned waterworks system and its municipally -owned sanitary sewerage system and for the operation thereof as a sin- gle utility (the "System"), in accordance with the provisions of Division 139 of Article 11 of the Illinois Municipal Code, as supplemented and amended; and WHEREAS, the City Council of the City (the "City Council") has determined that it is advisable, necessary and in the best interests of public health, safety and welfare to improve and extend the System, including a new south sewage treatment plant of an oxidation ditch extended aeration system design with a capacity of 0.5 MGD to a.ccomodate a population of 5,000 PE; the construction of the southeast trunk sewer; the replacement of the Riverside Drive interceptor sewer; the construction of a gravity sewer collection system to serve parts of the City presently without sewer service; and all electrical, mechanical and other services necessary, useful or advisable to the construction program and bond discount, legal, financing, refunding and administrative expense (the "Project") all in ac- cordance with the preliminary plans and estimates of cost there- for prepared by Baxter & Woodman, Crystal Lake, Illinois, Consulting Engineers, which have been approved by the City Council and are now on file in the office of the City Clerk for public inspection; and WHEREAS, the estimated costs of the Project, as de- fined, including engineering, legal, financial, bond discount, printing and publication costs, and other expenses are $ 5,925,000 ; and WHEREAS, there are insufficient funds on hand and law- fully available to pay costs of the Project, and such costs are expected to be defrayed by cash on hand or expected to be on hand and lawfully available for the purpose, interest earnings, and up to $ 5,500,000 proceeds of bonds payable from the revenues of the System and issued at this time pursuant to the Illinois Municipal Code; and WHEREAS, the City has heretofore issued the following described bonds which are payable from the revenues of the System: (a) $179,000 original issue Waterworks and Sewerage Revenue Bonds, dated May 1, 1956, of which $10,000 remain outstanding (the "Series 1956 Bonds"); (b) $1,150,000 original issue Waterworks and Sewerage Revenue Bonds, Series of 1979, dated September 1, 1979, -2- of which $545,000 remain outstanding (the "Series 1979 Bonds"); and (c) $500,000 original issue Waterworks and Sewerage Revenue Bonds, Series 1984, dated December 1, 1984, of which $455,000 remain outstanding (the "Series 1984 Bonds"); all outstanding bonds of the three series, collectively, the "Prior Bonds"; and WHEREAS, under the proceedings of the City authorizing the Prior Bonds, the City cannot sell or in any manner dispose of or encumber the System until provision has been made for the payment of the Prior Bonds; and WHEREAS, the City Council has and does hereby determine it to be advisable and in the best interests of the City that all the Prior Bonds be refunded in advance of maturity in order to eliminate the effect of certain covenants contained in the ordinances providing for their issuance and to thereby allow the advantageous financing of the Project; and WHEREAS, the estimated cost of refunding the Prior Bonds, including necessary expenses, is not in excess of $1 , 000, 000; and WHEREAS, the City does not have sufficient funds on hand and lawfully available for the purpose to provide for the refunding of the Prior Bonds; and WHEREAS, the total estimated costs of the Project and refunding the Prior Bonds, as aforesaid, are $5,925,000 , and the Qic10 I City has insufficient funds to pay the same and, therefore, must borrow money and issue bonds at this time in evidence thereof in the total amount of $5,500,000 for such purposes; and WHEREAS, pursuant to and in accordance with the provi- sions of Division 139 of Article 11 and Division 4 of Article 8 of the Illinois Municipal Code, as supplemented and amended, the City is authorized to issue waterworks and sewerage revenue bonds in the aggregate principal amount of $5,500,000 for the purpose of paying a part of the costs of refunding the Prior Bonds and the Project: NOW, THEREFORE, Be It Ordained by the City Council of • the City of McHenry, McHenry County, Illinois, as follows: Section 1. Definitions. The following words and terms used in this ordinance shall have the following meanings unless the context or use clearly indicates another or different meaning is intended: "Act" means the Illinois Municipal Code, as supple- mented and amended (Ill. Rev. Stat. Ch. 24, 11 1-1-2 et seq.) and in particular, Division 4 of Article 8 and Division 139 of Arti- cle 11 thereof. "Bond" or "Bonds" means one or more, as applicable, of the $5,500,000 Waterworks and Sewerage Revenue Bonds, Series 1986A, authorized to be issued by this Ordinance. "Bond Register" means the Books of the City kept by the Bond Registrar to evidence the registration and transfer of the Bonds. Q= "Bond Registrar" means LaSalle National Bank, a national banking association with principal corporate trust offices located in Chicago, Illinois, or successor thereto or designated hereunder. "City" means the City of McHenry, McHenry County, Illinois. "Code" means the Internal Revenue Code of 1954, as amended. "Fiscal Year" means a twelve-month period beginning May 1 of the calendar year and ending on the next succeeding April 30. "Maximum Annual Debt Service" means an amount of money equal to the highest future principal and interest requirement of all Outstanding Bonds required to be deposited into the Bond and Interest Account created by this ordinance in any Fiscal Year, including and subsequent to the Fiscal Year in which the computa- tion is made. Any Outstanding Bonds required to be redeemed pur- suant to mandatory redemption from said Bond and Interest Account shall be treated as falling due on the date required to be redeemed (except in the case of failure to make any such manda- tory redemption) and not on the stated maturity date of such Out- standing Bonds. "Net Revenues" means Revenues minus Operation and Main- tenance Costs. -5- "Operation and Maintenance Costs" means all costs of operating, maintaining and routine repair of the System, includ- ing wages, salaries, costs of materials and supplies, power, fuel, insurance, purchase of water or sewage treatment services (including all payments by the City pursuant to long term con- tracts for such services); but excluding debt service, deprecia- tion, or any reserve requirements; and otherwise determined in accordance with generally accepted accounting principles for municipal enterprise funds. "Outstanding Bonds" means Bonds and Parity Bonds which are outstanding and unpaid; provided, however, such term shall not include Bonds or Parity Bonds (i) which have matured and for which moneys are on deposit with proper paying agents, or are otherwise properly available, sufficient to pay all principal thereof and interest thereon, or (ii) the provision for payment of which has been made by the City by the deposit in an irre- vocable trust or escrow of funds or direct, full faith and credit obligations of the United States of America, the principal of and interest on which will be sufficient to pay at maturity or as called for redemption all the principal of and interest on such Bonds or Parity Bonds. "Parity Bonds" means bonds or any other obligation to be issued subsequent in time to the Bonds and which will share ratably and equally in the earnings of the System with the Bonds. cm "Project" means the improvements and extensions to the System as set forth in the preambles to this Ordinance. "Prior Bonds" means the outstanding bonds of the City payable from the revenues of the System as more particularly described in the preambles to this Ordinance. "Revenues" means all income from whatever source de- rived from the System, including (i) investment income; (ii) con- nection, permit and inspection fees and the like; (iii) penalties and delinquency charges; (iv) capital development, reimbursement, or recovery charges and the like; (v) annexation or pre - annexation charges insofar as designated by the City Council as paid for System connection or service; but excluding expressly (a) non -recurring income from the sale of property of the System; (b) governmental or other grants; (c) advances or grants made from the City; and as otherwise determined in accordance with generally accepted accounting principles for municipal enterprise funds. "System" refers to all property, real, personal or otherwise owned or to be owned by the City or under the control of the City, and used for waterworks and sewerage purposes, including the Project and any and all further extensions, improvements and additions to the System or the Project. "Waterworks and Sewerage Fund" means the Waterworks and Sewerage Fund of the City created and established by this Ordinance. -7- r Section 2. Incorporation of Preambles. The City Council hereby finds that all of the recitals contained in the preambles to this Ordinance are full, true and correct and do incorporate them into this Ordinance by this reference. Section 3. Determination To Issue Bonds. It is necessary and in the best interests of the City to refund the Prior Bonds and to provide for the Project for the public health, safety and welfare, in accordance with the plans and specifications, as described, and that the System continue to be operated as a single utility in accordance with the provisions of the Act. Section 4. Determination of Useful Life. The City Council does hereby determine the period of usefulness of the System and the Project to be 40 years from the date of the Bonds. Section 5. Bond Details. For the purpose of refunding the Prior Bonds and pro- viding for the Project, there shall be issued and sold the Bonds in the principal amount of $5,500,000. The Bonds shall each be designated "Waterworks and Sewerage Revenue Bond, Series 1986A" and be dated August 1, 1986; and shall also bear the date of authentication thereof. The Bonds shall be in fully registered form, shall be in denominations of $5,000 and authorized integral multiples thereof (but no single Bond shall represent principal CM maturing on more than one date), shall be numbered 1 and upward, shall bear interest at a rate or rates not to exceed the maximum interest rate provided by law at the time of the sale of Bonds, which rate or rates shall be determined and specified in a resolution of the City Council to be adopted at the time of sale of the Bonds, and shall mature serially on May 1 of each of the years and in the amounts as follows (subject to the right of prior redemption hereinafter stated): Year Amount($) 1988 125,000 1989 125,000 1990 150,000 1991 150,000 1992 150,000 1993 150,000 1994 200,000 1995 200,000 1996 200,000 1997 250,000 1998 250,000 1999 300,000 2000 300,000 2001 350,000 2002 350,000 2003 400,000 2004 400,000 2005 450,000 2006 500,000 2007 500,000 The Bonds shall bear interest from their dated date until the principal amount of the Bonds is paid, such interest (computed upon the basis of a 360-day year of twelve 30-day months) being payable on May 1, 1987, and semiannually thereafter on November 1 and May 1 of each year until the principal amount is paid. Interest on each Bond shall be paid by check or draft of the Bond Registrar, payable upon presentation in lawful money of the United States of America, to the person in whose name such Bond is registered at the close of business on the 15th day of the month next preceding the interest payment date. The prin- cipal of and premium (if any) on the Bonds shall be payable upon presentation in lawful money of the United States of America at the principal corporate trust office of the Bond Registrar. Section 6. Redemption. Those of the Bonds due on or after May 1, 1998, are subject to redemption and payment prior to their maturity, at the option of the City, in whole or in part, from any available funds, on May 1, 1997, or on any interest payment date there- after, and if in part, in an amount which is equal to at least $5,000 or is an integral multiple thereof, in inverse order of maturity and within any maturity by lot, at a redemption price of par and accrued interest to the date fixed for redemption. Unless waived by the Bond Registrar, the City shall notify the Bond Registrar of the redemption of Bonds (by maturity and amount per maturity, if less than all Bonds of a maturity are to be redeemed) not less than 45 days prior to the date of redemption. In the event of a partial redemption of Bonds of a given maturity, the particular Bonds or portions thereof to be redeemed shall be selected by lot not more than 60 days prior to the redemption date by the Bond Registrar. With respect to partial redemptions, the Bond Registrar shall assign to each Bond -10- a distinctive number for each $5,000 principal amount of such Bond and shall select by lot from the numbers so assigned as many numbers as, allocating $5,000 to each number, shall equal the principal amount of such Bonds required to be redeemed on the applicable redemption date. The Bonds or portions of Bonds to be redeemed shall be the Bonds or portions of Bonds to which were assigned numbers so selected; provided that only such portion of the principal amount of each Bond shall be redeemed as shall equal $5,000 for each number assigned to it and so selected. The Bond Registrar shall promptly notify the City in writing of the Bonds or portions of Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed. Unless waived by the registered owner of Bonds to be redeemed, notice of any such redemption shall be given by the Bond Registrar on behalf of the City by mailing the redemption notice by registered or certified mail not less than thirty days and not more than sixty days prior to the date fixed for redemp- tion to each registered owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owners to the Bond Registrar. All notices of redemption shall include at least the information as follows: (1) the redemption date; Doc (2) the redemption price; (3) if less than all of the Bonds of a single maturity are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (4) a statement that on the redemption date the redemp- tion price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after said date; and (5) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the principal corporate trust office of the Bond Regis- trar. Prior to any redemption date, the City shall deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Bond Registrar at the -12- redemption price. Interest due on or prior to the redemption date shall be payable as herein provided for payment of inter- est. Upon surrender for any partial redemption of any Bond, there shall be prepared for the registered owner a new Bond or Bonds of the same maturity and rate of interest in the amount of the unpaid principal. If any Bond or portion of Bond called for redemption shall not be so paid upon surrender thereof for redemption, the principal, and premium, if any, shall, until paid, bear interest from the redemption date at the rate borne by the Bond or portion of Bond so called for redemption. All Bonds which have been redeemed shall be cancelled and destroyed by the Bond Registrar and shall not be reissued. Parity Bonds hereinafter issued pursuant to the terms hereof may be redeemable at such times and upon such terms as may be determined at the time of authorization thereof. Section 7. Amendment. The rights and obligations of the City and of the owners of Outstanding Bonds may from time to time be modified or amended by a supplemental ordinance adopted by the City Council with the written consent of the owners of not less than two- thirds (2/3rds) of the principal amount of all Outstanding Bonds (excluding any of said bonds owned by or under the control of the City); provided, however, that no such modification or amendment shall extend or change the maturity of or date of redemption -13- prior to maturity, or reduce the interest rate on, or permit the creation of a preference or priority of any Outstanding Bond or Outstanding Bonds over any other Outstanding Bond or Outstanding Bonds, or otherwise alter or impair the obligation of the City to pay the principal of and interest on any of the Outstanding Bonds at the time, place, rate, and in the currency provided therein, or alter or impair the obligations of the City with respect to registration, transfer, exchange or notice of redemption of Bonds, without the express consent of the owners of all the Outstanding Bonds affected; nor shall any such modification or amendment reduce the percentage of the owners of Outstanding Bonds required for the written consent of such modification or amendment without the consent of the owners of all of the Out- standing Bonds. Section 8. Execution; Authentication. The Bonds shall be executed on behalf of the City with the manual or facsimile signature of the Mayor and attested with the manual or facsimile signature of the City Clerk, as they may determine, and shall have impressed or imprinted thereon the corporate seal or facsimile thereof of the City. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery. All Bonds shall have thereon a certificate of authenti- -14- cation substantially in the form hereinafter set forth duly exe- cuted by the Bond Registrar as authenticating agent of the City and showing the date of authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Ordinance unless and until such certificate of authentication shall have been duly executed by the Bond Registrar by manual signature, and such certificate of auth- entication upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Ordin- ance. The certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized officer of the Bond Registrar, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds issued hereunder. Section 9. Registration of Bonds; Persons Treated as Owners. The City shall cause books (the "Bond Register") for the registration and for the transfer of the Bonds as provided in this Ordinance to be kept at the principal corporate trust office of the Bond Registrar, which is hereby constituted and appointed the registrar of the City. The City is authorized to prepare, and the Bond Registrar or such other agent as the City may designate shall keep custody of, multiple Bond blanks executed by the City for use in the transfer and exchange of Bonds. Upon surrender for transfer of any Bond at the prin- -15- cipal corporate trust office of the Bond Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Bond Registrar and duly executed by, the registered owner or an attorney duly authorized in writing, the City shall execute and the Bond Registrar shall authenticate, date and deliver in the name of the transferee or transferees a new fully registered Bond or Bonds of the same maturity and rate of interest of authorized denominations, for a like aggregate principal amount. Any fully registered Bond or Bonds may be exchanged at said office of the Bond Registrar for a like aggregate principal amount of Bond or Bonds of the same maturity and _rate of interest of other authorized denomina- tions. The execution by the City of any fully registered Bond shall constitute full and due authorization of such Bond; and the Bond Registrar shall thereby be authorized to authenticate, date and deliver such Bond; provided, however, the principal amount of Outstanding Bonds of each maturity authenticated by the Bond Registrar shall not at any one time exceed the authorized prin- cipal amount of Bonds for such maturity less the amount of such Bonds which have been paid. The Bond Registrar shall not be required to transfer or exchange any Bond during the period from the fifteenth day of the month next preceding an interest payment date to such interest payment date, or to transfer or exchange any Bond after notice calling such Bond for redemption has been mailed, or to transfer -16- or exchange any Bond during a period of fifteen days next pre- ceding mailing of a notice of redemption of any Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of or interest on any Bond shall be made only to or upon the order of the registered owner thereof or his legal representative. All such payments shall be valid and effectual to satisfy and discharge the liabil- ity upon such Bond to the extent of the sum or sums so paid. No service charge shall be made for any transfer or exchange of Bonds, but the City or the Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds except in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond sur- rendered for redemption. Section 10. Form of Bond. The Bonds shall be prepared in compliance with the National Standard Specifications for Fully Registered Municipal Securities prepared by the American National Standards Institute and shall be in substantially the form hereinafter set forth; provided, however, that if the text of the Bond is to be printed in its entirety on the front side of the Bond, then paragraph [2] and the legend, "See Reverse Side for Additional Provisions", shall be omitted and paragraphs (6] through (14] shall be in- -17- serted immediately after paragraph (1]. REGISTERED NO. (Form of Bond - Front Side) UNITED STATES OF AMERICA STATE OF ILLINOIS COUNTY OF MCHENRY CITY OF McHENRY WATERWORKS AND SEWERAGE REVENUE BOND SERIES 1986A .See Reverse Side .for Additional .Provisions REGISTERED Interest Maturity Dated Rate: Date: Date: August 1, 1986 CUSIP Registered Owner: Principal Amount: [1] KNOW ALL PERSONS BY THESE PRESENTS, that the City of McHenry, McHenry County Illinois, a municipality and political subdivision of the State of Illinois (the "City"), hereby acknowledges itself to owe and for value received promises to pay to the Registered Owner identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on such principal amount from the dated date of this Bond or from the most recent interest payment date to which interest has been paid at the Interest Rate per annum identified above, such inter- est to be payable on May 1, 1987, and semiannually thereafter on November 1 and May 1 of each year until the principal amount is paid, except as the provisions hereinafter set forth with respect to redemption prior to maturity may be and become applicable hereto. Principal of this Bond is payable in lawful money of the United States of America upon presentation at the principal cor- -18- porate trust office of LaSalle National Bank in Chicago, Illinois, as bond registrar and paying agent (the "Bond Registrar"). Payment of interest shall be made to the Registered Owner hereof as appearing on the registration books of the City maintained by the Bond Registrar at the close of business on the 15th day of the month next preceding the interest payment date and shall be paid by check or draft of the Bond Registrar, payable upon presentation in lawful money of the United States of America, mailed to the address of such Registered Owner as it appears on such registration books or at such other address furnished in writing by such Registered Owner to the Bond Regis- trar. [2] Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof, and such further provisions shall for all purposes have the same effect as if set forth at this place. [3] It is hereby certified and recited that all acts, conditions and things required to be done precedent to and in the issuance of this Bond have been done and have happened and have been performed in regular and due form of law and that provision has been made for depositing into the Waterworks and Sewerage Fund the entire Revenues received from the operation of the Sys- tem to be applied in the manner as hereinabove set forth; and the City hereby covenants and agrees that it will fix and maintain rates for the use and service of the System and collect and ac- count for the Revenues derived therefrom sufficient at all time to pay Operation and Maintenance Costs, to promptly pay principal of and interest on all bonds issued by the City which are payable solely from the Revenues of the System, to provide an adequate depreciation fund, and to comply with all the covenants of and to maintain the accounts created by the Bond Ordinance. [4] This Bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Bond Registrar. [5] IN WITNESS WHEREOF, the City of McHenry, McHenry County, Illinois, by its City Council has caused this Bond to be executed with the duly authorized manual or facsimile signature of its Mayor and attested by the duly authorized manual or facsimile signature of its City Clerk and its corporate seal or a facsimile thereof to be impressed or reproduced hereon, all as appearing hereon and as of the Dated Date identified above. -19- Attest: City Clerk, City of McHenry, McHenry County, Illinois (SEAL) Date of Authentication: CERTIFICATE OF AUTHENTICATION Mayor, City of McHenry, McHenry County, Illinois Bond Registrar and Paying Agent: LaSalle National Bank Chicago, Illinois This Bond is one of the Bonds described in the within mentioned Ordinance and is one of the Waterworks and Sewerage Revenue Bonds, Series 1986A, of the City of McHenry, McHenry, County, Illinois. LASALLE NATIONAL BANK as Bond Registrar By Authorized Officer [Form of Bond - Reverse Side] City of McHenry, McHenry County, Illinois Waterworks and Sewerage Revenue Bond, Series 1986A [6] This bond and the bonds of the series of which it forms a part ("Bond" and "Bonds" respectively) are of an author- ized issue of Five Million Five Hundred Thousand Dollars ($5,500,000) of like dated date and tenor except as to maturity, rate of interest and privilege of redemption. The Bonds are pay- able solely from the Revenues derived from the operation of the waterworks and sewerage system of the City (the "System") after payment of Operation and Maintenance Costs, and not otherwise, and are issued under authority of the provisions of Division 139 of Article 11 and Division 4 of Article 8 of the Illinois =Dc Municipal Code, as supplemented and amended (the "Act"), for the purpose of paying a part of the costs of refunding all of the outstanding and unpaid bonds of the City payable from the revenues of the System (the "Prior Bonds") and of a Project re- lating to construction of improvements to the System. The Bonds are issued pursuant to Ordinance Number 0-86-390 , passed by the City Council of the City on the 30th day of July, 1986 (the "Ordinance"), to which reference is hereby expressly made for further definitions and terms and to all the provisions of which the holder by the acceptance of this Bond assents. This Bond does not constitute an indebtedness of the City within the meaning of any constitutional or statutory provision or limita- tion. [7] Under the Act and the Ordinance, the Revenues from the operation of the System shall be deposited into the Water- works and Sewerage Fund, which shall be used only and is hereby pledged for paying Operation and Maintenance Costs, paying the principal of and interest on all bonds of the City that are payable by their terms only from the Revenues of the System, providing an adequate depreciation fund, and in making all pay- ments required to maintain the accounts established under the terms of the Ordinance. Parity Bonds may be issued pursuant to the terms of the Ordinance. (8] Outstanding Bonds issued and authenticated pursu- ant to the Ordinance are co -equal as to the lien on the Revenues of the System for their payment and share ratably, without any preference, priority, or distinction, the one over the other, as to the source or method of payment and security of the outstand- ing Bonds, but are subject and subordinate to the rights of the holders of the Prior Bonds to a prior claim on the Revenues of the System pending the final payment of the principal of and interest on the Prior Bonds. Cash and investments have previ- ously been deposited into an irrevocable escrow account in an amount adequate for that purpose. (9] The rights and obligations of the City and of the owners of the Bonds may from time to time be modified or amended by a supplemental ordinance adopted by the City Council with the written consent of the owners of not less than two-thirds (2/3rds) of the principal amount of all Outstanding Bonds (excluding any of said bonds owned by or under the control of the City); provided, however, that no such modification or amendment shall extend or change the maturity of or date of redemption prior to maturity, or reduce the interest rate or premium on, or permit the creation of a preference or priority of any Outstanding Bond or Outstanding Bonds over any other Outstanding Bond or Outstanding Bonds, or otherwise alter or impair the obligation of the City to pay the principal of or interest on any -21- of the Outstanding Bonds at the time, place, rate and in the currency provided therein or alter or impair the obligations of the City with respect to registration, transfer, exchange or notice of redemption of Bonds, without the express consent of the owners of all the Outstanding Bonds affected; nor shall any such modification or amendment reduce the percentage of the owners of Outstanding Bonds required for the written consent to such modification or amendment without the consent of the owners of all of the Outstanding Bonds. [10] Those of the Bonds due on or after May 1, 1998, are subject to redemption at the option of the City, in whole or in part, on May 1, 1997, or on any interest payment date thereafter, in integral multiples of $5,000, in inverse order of maturity and within any maturity by lot, at a price of par and accrued interest to the date fixed for redemption. [11] Notice of any such redemption shall be sent by registered or certified mail not less than thirty days nor more than sixty days prior to the date fixed for redemption to the Registered Owner of each Bond to be redeemed at the address shown on the registered books of the City maintained by the Bond Registrar or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. When so called for redemption, this Bond will cease to bear interest on the speci- fied redemption date, provided funds for redemption are on de- posit at the place of payment at that time. [12] This Bond is transferable by the Registered Owner hereof in person or by an attorney duly authorized in writing at the principal corporate trust office of the Bond Registrar in Chicago, Illinois, but only in the manner, subject to the limita- tions and upon payment of the charges provided in the Ordinance, and upon surrender and cancellation of this Bond. Upon such transfer a new Bond or Bonds of authorized denominations of the same maturity and rate of interest and for the same aggregate principal amount will be issued to the transferee in exchange therefor. [13] The Bonds are issued in fully registered form in the denomination of $5,000 or authorized integral multiples thereof. This Bond may be exchanged at the principal corporate trust office of the Bond Registrar for a like aggregate principal amount of Bonds of the same maturity and rate of interest of other authorized denominations upon the terms set forth in the Ordinance. [14] The City and the Bond Registrar may deem and treat the Registered Owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal -22- hereof, premium, if any, hereon and interest due hereon and for all other purposes, and neither the City nor the Bond Registrar shall be affected by any notice to the contrary. ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto (Name and Address of Assignee) the within Bond and does hereby irrevocably constitute and appoint as attorney to transfer the said Bond on the books kept for reg- istration thereof with full power of substitution in the prem- ises. Dated: Signature Guaranteed: NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. Section 11. Bonds Limited Obligations. The Bonds shall be payable solely from the Net Revenues as derived from the operation of the System, and shall not con- stitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. Section 12. Creation of Waterworks and Sewerage Fund and Accounts Thereof. Upon the issuance of any of the Bonds, the System shall be operated on a Fiscal Year basis. All of the Revenues shall be set aside as collected and be deposited into a separate fund and -23- in an account in a bank to be designated by the City Council, which fund is hereby created and is designated as the "Waterworks and Sewerage Fund" (the "Waterworks and Sewerage Fund") of the City, which shall constitute a trust fund for the sole purpose of carrying out the covenants, terms, and conditions of this Ordinance, and shall be used only in paying Operation and Maintenance Costs, providing an adequate depreciation fund, paying the principal of and interest on all revenue bonds of the City which by their terms are payable solely from the Revenues derived from the System, and providing for the establishment of and expenditure from the respective accounts as hereinafter described. Section 13. Flow of Funds. There shall be and there are hereby created separate accounts in the Waterworks and Sewerage Fund to be known as the "Operation and Maintenance Account," the "Bond and Interest Ac- count," the "Bond Reserve Account," the "Depreciation Account," and the "Surplus Account," to which there shall be credited on or before the first day of each month by the financial officer of the City, without any further official action or direction, in the order in which said accounts are hereinafter mentioned, all moneys held in the Waterworks and Sewerage Fund, in accordance with the following provisions: -24- (a) Operation and Maintenance Account There shall be credited to the Operation and Maintenance Account an amount sufficient, when added to the amount then on deposit in said Account, to establish a balance to an amount not less than the amount necessary to pay Operation and Maintenance Costs for the then current month. Amounts in said Account shall be used to pay Operation and Maintenance Costs. (b) Bond and Interest Account After making any payments required for the benefit of the Prior Bonds, there next shall be credited to the Bond and Interest Account and held, in cash and invest- ments, a fractional amount of the interest becoming due on the next succeeding interest payment date on all Outstanding Bonds and also a fractional amount of the principal becoming due or subject to mandatory redemp- tion of the next succeeding principal maturity or manda- tory redemption date of all of the Outstanding Bonds until there shall have been accumulated and held, in cash and investments, in the Bond and Interest Account on or before the month preceding such maturity date of interest or maturity or mandatory redemption date of principal, an amount sufficient to pay such principal or interest, or both. In computing the fractional amount to be set aside each month in the Bond and Interest Account, the fraction shall be so computed that a sufficient amount will be set aside in said Account and will be available for the prompt payment of such principal of and interest on all Outstanding Bonds and shall be not less than one -fifth of the interest becoming due on the next succeeding interest payment date and not less than one -tenth of the principal becoming due or subject to mandatory redemp- tion on the next succeeding principal payment or manda- tory redemption date on all Outstanding Bonds until there is sufficient money in said Account to pay such principal or interest, or both. Credits to the Bond and Interest Account may be sus- pended in any Fiscal Year at such time as there shall be a sufficient sum, held in cash and investments, in said Account to meet principal and interest requirements in said Account for the balance of such Fiscal Year, but :W*_z such credits shall again be resumed at the beginning of the next Fiscal Year. All moneys in said Account shall be used only for the purpose of paying interest on and principal of Outstand- ing Bonds. (c) Depreciation Account: At the time of delivery of the Bonds, the sum of not less than $100,000 shall be credited to the Depreciation Account from funds on hand and remaining in the existing Waterworks and Sewerage Fund and thereafter there shall be credited and held, in cash and investments, the sum of $2,000 each month until the credit balance of said Account aggregates the sum of $200,000. No additional funds shall be credited to said Account, except that whenever for any reason the amount on deposit to the credit of said Account is less than $200,000, credits into said Account shall be resumed in the amount of $2,000 each month and continued until the amount on deposit to the credit of said Account is once again equal to $200,000. Amounts to the credit of said Depreciation Account shall be used for (i) the payment of the cost of extraordinary maintenance, necessary repairs and replacements, or contingencies, the payment for which no other funds are available, in order that the System may at all times be able to render efficient service and (ii) the payment of principal of or interest on any Outstanding Bonds at any time when there are no other funds available for that purpose in order to prevent a default and shall be tran- sferred to the Bond and Interest Account for such pur- pose. Whenever an amount is withdrawn from such Account for the purpose stated in clause (ii) of the preceding para- graph, the amount so transferred shall be added to the amount to be next and thereafter credited to said Depre- ciation Account until full reimbursement to said Account has been made. (d) Bond Reserve Account: At the time of delivery of the Bonds, the sum of not less than $100,000 shall be credited to the Bond Reserve Account from funds on hand and remaining in the existing Waterworks and Sewerage Fund and thereafter there shall be credited to the Bond Reserve Account and held, in CV'VC cash and investments, the sum of $6,000 each month until the credit balance of said Account aggregates the amount of $600,000. In the event of a withdrawal from the Bond Reserve Account, the City covenants to replenish the Bond Reserve Account at the rate of 1/12 the amount withdrawn per month, or $6,000 per month, whichever is greater. Amounts to the credit of the Bond Reserve Account shall be used to pay principal of or interest on the Outstand- ing Bonds at any time when there are insufficient funds available in the Bond and Interest Account to pay the same. (e) Surplus Account: All moneys remaining in the Waterworks and Sewerage Fund, after crediting the required amounts to the re- spective accounts hereinabove provided for, and after making up any deficiency in the accounts described in subsections (a) to (d), inclusive, shall be credited each month to the Surplus Account. Funds in the Surplus Account shall first be used to make up any subsequent deficiencies in any of the accounts hereinabove named and then, at the discretion of the City Council, shall be used for one or more of the following purposes with- out any priority among them: (1) For the purpose of constructing or acquiring re- pairs, replacements, or improvements to the System; or (2) For the purpose of calling and redeeming Outstand- ing Bonds which are callable at the time; or (3) For the purpose of purchasing Outstanding Bonds at the time at a price of not to exceed par and ac- crued interest to the date of purchase; or (4) For the purpose of paying principal of and interest on any subordinate bonds or obligations issued for the purpose of acquiring or constructing repairs, replacements, or improvements to the System; or (5) For any other lawful City purpose. (f) Money to the credit of the Waterworks and Sewerage Fund prior to the monthly accounting and to the credit of the Operation and Maintenance Account may be invested pur- suant to any authorization granted to municipal corpora- tions by Illinois statute or court decision. -27- Moneys to the credit of the Bond and Interest Account, Bond Reserve Account, Depreciation Account and Surplus Account may be invested from time to time by the Treas- urer of the City in (i) interest bearing bonds, notes, or other direct full faith and credit obligations of the United States of America, (ii) obligations un- conditionally guaranteed as to both principal and inter- est by the United States of America, or (iii) certifi- cates of deposit or time deposits of any bank, as de- fined by the Illinois Banking Act, provided such bank is insured by the Federal Deposit Insurance Corporation or a successor corporation to the Federal Deposit Insurance Corporation, and provided further that the principal of such deposits in excess of the insured amount is secured by a pledge of obligations as described in clauses (f)(i) and (f)(ii) above in the full principal amount of such excess. Such investments may be sold from time to time by the Treasurer of the City as funds may be needed for the purpose for which said respective accounts have been created. To the extent moneys in said Accounts as described in this paragraph are held uninvested and on deposit in demand accounts, such amounts shall be added to the amount invested pursuant to clause (iii) above and the sum so derived subject to the limitations as set forth therein. Investments in the Accounts shall mature or be subject to redemption at the option of the holder thereof prior to the time when needed, and, in any event, within the times as follows: Account Time Operation and Maintenance 90 days Bond and Interest 1 year Bond Reserve 3 years Depreciation 5 years Surplus 5 years All interest on any funds so invested shall be credited to the Waterworks and Sewerage Fund and is hereby deemed and allocated as expended with the next expenditure(s) of money from the Waterworks and Sewerage Fund. Moneys in any of said accounts shall be invested by the Treasurer, if necessary, in investments restricted as to yield, which investments may be in United States Treas- ury Obligations -State and Local Government Series, if available, and to such end the Treasurer shall refer to -28- any investment restrictions covenanted by the City or any officer thereof as part of the transcript of pro- ceedings for the issuance of the Bonds, and to appro- priate opinions of counsel. (g) Any amounts to the credit of the Accounts in excess of the then current requirement therefor may be transferred by the City Council to such other Account or Accounts of the Waterworks and Sewerage Fund as they may in their sole discretion designate. (h) Upon the refunding of the Prior Bonds, all the moneys remaining in the special accounts established and main- tained by the ordinances authorizing the Prior Bonds (the "Prior Accounts") shall be transferred as follows: (i) From the Prior Operation and Maintenance Accounts, all amounts on deposit to the Operation and Mainte- nance Account hereunder. (ii) From the remaining Prior Accounts: (A) So much of the remainder as may be necessary to the escrow account for the purpose of re- funding the Prior Bonds; (B) The sums necessary to make the required begin- ning credits to the accounts hereinabove cre- ated; and. (C) The balance to the Construction Fund (1986) hereunder. Section 14. General Covenants. The City covenants and agrees with the holders of the Outstanding Bonds, so long as there are any Outstanding Bonds (as defined herein), as follows: (a) The City will maintain the System in good repair and working order, will operate the same efficiently and faithfully, will promptly proceed with the Project, and will punctually perform all duties with respect thereto required by the Constitution and laws of the State of Illinois. (b) The City will establish and maintain at all times reasonable fees, charges, and rates for the use and -29- service of the System and will provide for the collec- tion thereof and the segregation and application of the Revenues in the manner provided by this ordinance, suf- ficient at all times to pay Operation and Maintenance Costs, to provide an adequate depreciation fund, to pay the principal of and interest on all revenue bonds of the City which by their terms are payable solely from the Revenues, and to provide for the creation and main- tenance of the respective accounts as provided in Sec- tion 13 of this Ordinance. There shall be charged against all users of the System, including the City, such rates and amounts for water and sewer services as shall be adequate to meet the requirements of this subsection. Charges for services rendered the City shall be made against the City, and payment for the same shall be made monthly from the corporate funds into the Waterworks and Sewerage Fund as revenues derived from the operation of the System; pro- vided however, that the City need not charge itself for such services if in the previous Fiscal Year Revenues not including any payments made by the City shall have met the requirements of this ordinance. Whenever money in the Bond Reserve Account is used to pay principal of or interest on Outstanding Bonds, the City covenants to promptly have prepared a rate study for the System by an independent consultant employed for that purpose, and further, to send a copy of such study, when completed, to the original purchaser 'of the Bonds along with a letter indicating what action the City has taken responsive to such study. (c) The City from time to time will make all needful and proper repairs, replacements, additions, and betterments to the System so that it may at all times be operated properly and advantageously; and when any necessary equipment or facility shall have been worn out, des- troyed, or otherwise is insufficient for proper use, it shall be promptly replaced so that the value and effic- iency of the System shall be at all times fully main- tained. (d) The City will establish such rules and regulations for the control and operation of the System necessary for the safe, lawful, efficient and economical operation thereof. (e) The City will make and keep proper books and accounts (separate and apart from all other records and accounts -30- of said City), in which complete entries shall be made of all transactions relating to the System, and hereby covenants that within 90 days following the close of each Fiscal Year, it will cause the books and accounts of the System to be audited by independent certified public accountants. Said audit will be available for inspection by the holders of any of the Bonds. Each such audit, in addition to whatever matters may be thought proper by the accountants to be included therein, shall, without limiting the generality of the foregoing, include the following: (i) A statement in detail of income and expenditures of the System for such Fiscal Year. (ii) A balance sheet as of the end of such Fiscal Year, including a statement of the amount held in each of the accounts of the Waterworks and Sewerage Fund. (iii) A list of all insurance policies in force at the end of the Fiscal Year, setting out as to each policy the amount of the policy, the risks cov- ered, the name of the insurer, and the expiration date of the policy. (iv) The number of sewer customers served by the System at the end of the year and the quantity of sewage treated, the number of metered water customers and the number of unmetered water customers at the end of the year, the quantity of water pumped and the quantity of water billed. (v) Changes in the cost of purchased water or sewer services during such Fiscal Year. (vi) A summary of rates in effect at the end of such Fiscal Year for services of the System and any changes in such rates effective during such Fiscal Year. (vii) The amount and details of all Outstanding Bonds. (viii) The accountant's comment regarding the manner in which the City has carried out the requirements of this Ordinance, and the accountant's recom- mendations for any changes or improvements in the operation of the System. -31- All expenses of the audit required by this section shall be regarded and paid as Operation and Maintenance Costs. It is further covenanted and agreed that a copy of each such audit shall be furnished upon completion to the original purchaser of the Bonds, and a summary thereof shall be furnished to any bondholder upon request. (f) The City will keep the books and accounts for the System in accordance with generally accepted fund reporting practices for municipal enterprise funds; provided, however, that the monthly credits to the Bond and Interest Account, the Bond Reserve Account and the De- preciation Account shall be in cash and said funds shall be held separate and apart in cash and investments. For the purpose of determining whether sufficient cash and investments are on deposit in such accounts under the terms and requirements of this Ordinance, investments shall be valued at amortized cost. (g) The City will not sell, lease, loan, mortgage or in any manner dispose of or encumber the System (subject to the right of the City to issue Parity Bonds as provided in this Ordinance, to issue bonds subordinate to Outstanding Bonds, and to dispose of real or personal property which is no longer useful or necessary to the operation of the System), and the City will take no action in relation to the System which would unfavorably affect the security of the Outstanding Bonds or the prompt payment of the principal thereof and interest thereon. Any amounts received from the sale of property of the System shall be deposited to the credit of the Depreciation Account. (h) Any holder of a Bond may proceed by civil action to compel performance of all duties required by law and this Ordinance, including the making and collecting of sufficient charges and rates for the service supplied by the System and the application of the income and revenue therefrom. (i) The City will carry insurance on the System of the kinds and in the amounts which are usually carried by private parties operating similar properties, covering such risks as shall be recommended by a competent consulting engineer or insurance consultant employed by the City for the purpose of making such recommendations. All moneys received for loss under such insurance policies shall be deposited to the credit of the Depreciation Account and used in making good the loss or damage in -32- respect of which they were paid, either by repairing the property damaged or making replacement of the property destroyed, and provision for making good such loss or damage shall be made within 90 days from the date of the loss. The payment of premiums for all insurance policies required under the provisions of this covenant shall be considered an Operation and Maintenance Cost. The proceeds derived from any and all policies for workers' compensation or public liability shall be paid into the Operation and Maintenance Account and used in paying the claims on account of which they were received. (j) Except as hereinabove expressly provided for services to the City, the City covenants not to provide any free service of the System, and, to the extent permitted by law, the City will not grant a franchise for the operation of any competing waterworks system, sewerage system, or combined waterworks and sewerage system within the City. (k) The City covenants to redeem Bonds pursuant to the mandatory redemption provisions hereof at the times and in the amounts provided herein. (1) The City will adopt a budget for the Waterworks and Sewerage Fund prior to the beginning of each Fiscal Year, subject to applicable state law, providing for payment of all sums to be due in the Fiscal Year so as to comply with the terms of this Ordinance and of long term water supply agreements. The budget may include in its estimate of income, the use of available surplus moneys or other funds of the City appropriated for the purpose. If during the Fiscal Year there are extra- ordinary receipts or payments of unusual cost, the City will adopt an amended budget for the remainder of the Fiscal Year, providing for receipts or payments pursuant to this Ordinance. Section 15. Issuance of Parity Bonds. As long as there are any Outstanding Bonds, no obliga- tions or bonds of any kind shall be issued which are payable from the Revenues except upon compliance with one of the options (a) through (d) set out below: -33- (a) Parity Bonds may be issued for the purpose of paying the cost of repairs, replacements, renewals, improvements and extensions to the System or for refunding Outstand- ing Bonds upon compliance with the following conditions: (i) The amounts required to be credited monthly to the respective accounts described in subsections (a) through (d), inclusive, of Section 13 of this Ordinance must have been credited in full up to the date of the delivery of such Parity Bonds. (ii) The Net Revenues of the System for the last com- pleted Fiscal Year prior to the issuance of the Parity Bonds (as shown by the audit of an inde- pendent certified public accountant), or the ad- justed Net Revenues of the System for such year (as defined herein) must equal at least 120% of Maximum Annual Debt Service computed immediately after the issuance of the proposed Parity Bonds, but only for those Fiscal Years in which the Out- standing Bonds immediately prior to such issuance will continue to be Outstanding Bonds as provided herein. (iii) Net Revenues of the System may be adjusted as follows: In the event there shall have been an increase in the rates of the System from the rates in effect for the preceding Fiscal Year, which increase is in effect at the time of the issuance of any such Parity Bonds, the Net Revenues as -de- scribed hereinabove may be adjusted to reflect the Net Revenues of the System for the immediately preceding Fiscal Year as they would have been had said then existing rates been in effect during all of said Fiscal Year. Any such adjustment shall be evidenced by the certificate of an independent consulting engineer or an independent certified public accountant employed for that purpose, which certificate shall be filed with and approved by the City Council prior to the issuance of the proposed Parity Bonds. (b) Parity Bonds may be issued to refund Outstanding Bonds if the Parity Bonds so issued (i) do not exceed the principal amount of the Outstanding Bonds to be re- funded, (ii) do not bear interest at a rate in excess of the Outstanding Bonds to be refunded, and (iii) do not mature earlier than any Outstanding Bonds not to be refunded. -34- (c) Parity Bonds may be issued to refund Outstanding Bonds in order to avoid default in the payment of principal of or interest on Outstanding Bonds; provided, they are issued to avoid such default within three months of the date thereof. (d) Bonds or other obligations may be issued payable from the Revenues subordinate to the Outstanding Bonds. Such subordinate bonds shall be payable from the Surplus Account created in Section 13 of this Ordinance. All bonds issued under this Section shall mature as to principal on May 1 and as to interest on May 1 and/or November 1. Contracts or agreements, including long-term and take or pay contracts or agreements, for the supply of water or the treatment of sewage which by their terms require payment by the City as an Operation and Maintenance Cost or from the Operation and Maintenance Account are expressly excluded from the provisions of this Ordinance pertaining to Parity Bonds. Such contracts or agreements may be made by the City notwithstanding any of the provisions herein. Section 16. Sale of Bonds. As soon as may be after this Ordinance becomes effec- tive, the Bonds shall be executed and delivered to the Treasurer of the City and be by him delivered to the purchaser thereof, upon receipt of the purchase price therefor, same to be deter- mined and specified in a resolution of the City Council to be adopted at the time of sale of said Bonds to said purchaser, the same being not less than 98% of the par value of the Bonds then being sold plus accrued interest to date of delivery. If the City Council by such proceedings sells less than all of the Bonds -35- herein authorized, the City Council shall at its discretion in such resolution select and establish from the maximum amounts of Bonds due or subject to mandatory redemption in any year as set forth herein, such lesser amounts to be due and so subject as shall be necessary in consideration of the lesser amount of Bonds to be issued. Section 17. Use of Proceeds, Expense Fund, Construc- tion Fund (1986). The proceeds derived from the sale of the Bonds shall be used as follows: (a) Accrued interest shall be credited to the Bond and In- terest Account. (b) $100,000 of the proceeds of the Bonds shall be deposited into a separate fund, hereby created, designated the "Expense Fund" to be used to pay expenses of issuance. Disbursements from such fund shall be made from time to time upon the direction of the City Council. Any excess in said fund shall be paid into the Construction Fund (1986) hereinafter created in this Section after six months from the date of issuance of the Bonds. (c) The sum necessary shall be used to provide for the re- funding of all the Prior Bonds, and for the payment of such expenses as may be designated, pursuant to the provisions of an Escrow Agreement with such Escrow Agent as may be designated, all in accordance with the pro- visions of an ordinance to be hereafter adopted by the City Council. Said ordinance will set forth the terms and conditions of the Escrow Agreement and will approve the form of such Escrow Agreement to be executed and delivered at or prior to the delivery of the Bonds. (d) The remaining funds shall be set aside in a separate fund hereby created and designated as the "Construction Fund (1986)," which shall be deposited in a bank or banks to be hereafter designated by the City Council pursuant to a depository agreement. Such Agreement shall provide that money in said fund shall be withdrawn from time to time as needed for the payment of costs of -36- the Project and paying the fees and expenses incidental thereto not paid out of the Expense Fund and that said money shall be withdrawn from the depository from time to time by the Treasurer of the City only upon submission by him to said depository of the following: (i) If such withdrawal of funds by the Treasurer is for payment to a supplier, materialman, or con- tractor for work done in connection with the Proj- ect, a certificate executed by the engineer in charge of the construction of the Project stating the amount of materials supplied or the nature of the work completed, that such materials have been properly accepted or such work approved by him, the amount due and payable thereon, and the amount remaining to be paid in connection with the Proj- ect; and (ii) A duplicate copy of the order signed by the Mayor and City Clerk, or such other officer(s) as may from time to time be by law authorized to sign and countersign orders of the Treasurer of the City, stating specifically the purpose for which the order is issued and indicating that the payment for which the order is issued has been approved by the City Council. Within 60 days after full depletion of the Construction Fund .(1986) or payment of all costs of the Project, as herein referred to, and as heretofore approved by the City Council, the Treasurer shall certify to the City Council the fact of such depletion or the engineer in responsible charge of the Project shall certify to the City Council the fact that the work has been completed according to approved plans and specifications, as applicable, and upon approval of such certification by the City Council, funds (if any) remaining in the Construction Fund (1986) shall be transmitted by said depository to the Treasurer of the City, and said Treasurer shall credit said funds to the Bond Reserve Account, or, if such account is fully funded, to the -37- Depreciation Account; and the Construction Fund (1986) shall be closed. Funds on deposit in the Construction Fund (1986) may be invested by the Depositary at the direction of the Treasurer in the same manner as provided in Section 13(f) of this Ordinance for money in the Bond and Interest Account. Section 18. Provisions a Contract. The provisions of this Ordinance shall constitute a contract between the City and the holders of the Outstanding Bonds and no changes, additions, or alterations of any kind shall be made hereto, except as herein provided, so long as there are any Outstanding Bonds. Section 19. Arbitrage. The proceeds of the Bonds shall be devoted to and used with due diligence for the refunding of the Prior Bonds and paying the costs of the Project. The City Council represent and certify as follows: (a) The City has heretofore incurred, or within six months after delivery of the Bonds expects to incur, a substantial binding obligation with respect to the Pro- ject to be paid for with money received from the sale of the Bonds, said binding obligation comprising a contract or contracts for components of the Project in the amount of not less than $100,000. (b) All of proceeds of the Bonds to be applied to payment of costs of the Project will be expended on or before August 1, 1989, for the purpose of paying such costs. (c) All of the principal proceeds and investment earnings thereon of the Bonds will be used, needed and expended for the purpose of paying the costs of the Project, including expenses incidental thereto. -38- (d) Work on the Project is expected to proceed with due diligence to completion. (e) No part of the System or the Project has been or ex- pected to be sold or otherwise disposed of in whole or in material part prior to the last maturity of the Bonds. "Material part" means (i) land, or (ii) any building, or (iii) personal property or fixtures in excess of this which is expected to be sold, traded in or discarded upon wearing out or becoming obsolete. (f) Except for the Bond and Interest Account and for the Bond Reserve Account established hereunder, the City has not created or established and does not expect to create or establish any debt service fund, reserve fund, sinking fund or other similar fund for the Bonds. (g) Amounts deposited in the Bond and Interest Account will be expended within a 12-month period beginning on the date of deposit; said account will be depleted to an amount not greater than 1/12 annual principal and in- terest requirements payable therefrom at least once yearly; and any amounts received from investment of money in the Bond and Interest Account will be expended within a one year period beginning on the date of re- ceipt. (h) The Bond Reserve Account is to be established and accum- ulated from funds other than Bond proceeds. The total amount of the Bond Reserve Account to be accumulated is $600,000. (i) Credits are required by this Ordinance to be made from the Revenues into the Depreciation Account. Moneys in such account are to be used to pay the cost of repairs or replacements to the System as may be necessary from time to time for the continued efficient operation of the System. Although amounts in said account are re- quired to be used to pay principal of and interest on the Bonds to prevent or remedy a default, such amounts are not expected to be so used, and there is no assur- ance (due to the necessity of making reasonable repairs or replacements to the System, from time to time, as discussed above) that such amounts will be available to pay principal of and interest on the Bonds even if all other sources of payment are exhausted. (j) The foregoing statements of expectation are based upon the following facts and estimates: -39- (i) Amounts expected to be received are estimated. (ii) Amounts paid or to be paid into various funds and accounts have been directed to be paid into said funds and accounts by authority of this Ordinance. (iii) The anticipated dates of the obligation and expend- iture of money derived from the sale of Bonds and to be deposited into the various funds and accounts for the Project and the amounts to be spent on or before such dates are based upon consultation with the engineers employed by the City to supervise the Project. (k) The City has not been notified of any disqualification or proposed disqualification of it by the Commissioner of the Internal Revenue Service as a bond issuer which may not certify bond issues under Treas. Reg. Section 1.103-13(a)(2)(ii)(1979). (1) To the best of the knowledge and belief of the City Council, there are no facts, estimates or circumstances that would materially change the conclusions and representations set out in the section, and the expecta- tions hereinabove set out are reasonable. The City Council also certifies and further covenants with the purchasers and holders and registered owners of the Bonds from time to time outstanding that so long as any of the Bonds remain unpaid, moneys on deposit in any fund or account in connection with the Bonds, whether or not such moneys were derived from,the proceeds of the sale of the Bonds or from any other source, will not be used in a manner which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 103(c) of the Code, and any lawful regulations promulgated there- under, including Treas. Reg. Sections 1.103-13, 1.103-14 and 1.103-15 (1979) as the same presently exist, or may from time to time hereafter be amended, supplemented or revised. The City MIDIM 0 Council reserves the right, however, to make any investment of moneys on deposit in any fund or account in connection with the Bonds permitted by state law, if, when and to the extent that said Section 103(c) or regulations promulgated thereunder shall be repealed or relaxed or shall be held void by final decision of a court of competent jurisdiction, but only if any investment made by virtue of such repeal, relaxation or decision would not, in the opinion of an attorney at law or a firm of attorneys of nationally recognized standing in matters pertaining to tax- exempt bonds, result in the inclusion of interest on the Bonds in gross income for federal income tax purposes. The officers of the City are hereby authorized and directed to make such further covenants, estimates, representa- tions, or assurances as may be necessary or advisable to the end that the Bonds not be "arbitrage bonds" as aforesaid. Section 20. Registered Form. The City recognizes that Section 103(j) of the Code required the Bonds to be issued and to remain in fully registered form in order that interest thereon is exempt from federal income taxation under laws in force at the time the Bonds are deliv- ered. In this connection, the City agrees that it will not take any action to permit the Bonds to be issued in, or converted into, bearer or coupon form. -41- Section 21. Further Tax Covenants. The City acknowledges that on December 17, 1985, the United States House of Representatives adopted H.R. 3838 (in the form so adopted, the "Tax Bill"). The City further acknowledges that on March 14, 1986, the Chairman of the House Ways and Means Committee, the Chairman of the Senate Finance Committee, the Secretary of the Treasury, and the ranking minority members of said committees issued a joint statement (the "Joint Statement") endorsing the postponement, until the earlier of September 1, 1986, or the date of enactment of tax reform legislation, of the application of certain provisions of the Tax Bill to certain types of bonds, including the Bonds. If the City issues the Bonds prior to the effective date referred to in the Joint State- ment, it will make compliance with those provisions of the Tax Bill proposed to be postponed pursuant to the Joint Statement unnecessary if such postponement is enacted. In such event, the City does not intend to comply with the provisions of the Tax Bill proposed to be postponed, but hereby covenants to comply with the provisions of the Tax Bill which are unaffected by the Joint Statement. The City covenants to comply with the requirements and restrictions of any federal legislation enacted into law prior to issuance of the Bonds and applicable to the interest on the Bonds. -42- Section 22. Rights and Duties of Bond Registrar. If requested by the Bond Registrar, the Mayor and City Clerk of the City are authorized to execute the Bond Registrar's standard form of agreement between the City and the Bond Registrar with respect to the obligations and duties of the Bond Registrar hereunder. Subject to modification by the express terms of any such agreement, such duties shall include the following: (a) to act as bond registrar, authenticating agent, paying agent and transfer agent as provided herein; (b) to maintain a list of Bondholders as set forth herein and to furnish such list to the City upon request, but otherwise to keep such list confidential to the extent permitted by law; (c) to give notice of redemption of Bonds as provided herein; (d) to cancel and/or destroy Bonds which have been paid at maturity or upon earlier redemption or submitted for exchange or transfer; (e) to furnish the City at least annually a certificate with respect to Bonds cancelled and/or destroyed; and (f) to furnish the City at least annually an audit con- firmation of Bonds paid, Bonds outstanding and payments made with respect to interest on the Bonds. The City Clerk of the City is hereby directed to file a certified copy of this ordinance and of the sale proceedings as referred to in Section 16 hereof with the Bond Registrar. Section 23. Publication. This ordinance, together with a notice in the form set forth in Section 24 hereof, shall be published once within 10 -43- days of passage hereof by the City Council in The Northwest Herald, being a newspaper published in and having a general circulation in the City, and if no petition, signed by electors numbering 15% of the number of electors voting for Mayor at the last preceding Municipal election at which a Mayor for the City was elected (such 15% being 535 electors) and asking that the question of proceeding with the Project, as provided in this Ordinance, and the issuance of revenue bonds therefor, be submitted to the electors of the City, is filed with the City Clerk of the City within 21 days after the date of the publica- tion of this Ordinance and said notice, then this Ordinance shall be in full force and effect. A petition form as set out in Section 24 hereof shall be provided by the City Clerk to any individual requesting one. Section 24. Forms of Notice and Petition. The notice to be published pursuant to Section 23 hereof and the petition form referred to therein shall be in sub- stantially the following forms: -44- (Form of Notice) NOTICE OF INTENT TO ISSUE BONDS AND RIGHT TO FILE PETITION Notice is hereby given that pursuant to Ordinance Num- ber 0-86-39p adopted July 30, 1986, the City of McHenry, McHenry County, Illinois (the "City"), intends to issue its Waterworks and Sewerage Revenue Bonds, Series 1986A (the "Bonds") in the amount of not to exceed $5,500,000 and bearing interest per annum at not to exceed the maximum rate authorized by law at the time the Bonds are sold, for the purpose of refunding certain out- standing waterworks and sewerage revenue bonds and of paying the costs of certain improvements and extensions to the waterworks and sewerage system of the City. In addition, notice is hereby given that if a petition signed by 535 or more electors of the City requesting that the question of improving the waterworks and sewerage system and the issuance of said Bonds therefor be submitted to the City Clerk within 21 days of the date of publication hereof, the question of improving the waterworks and sewerage system of the City as provided in said Ordinance and the issuance of said Bonds therefor shall be submitted to the electors of the City at the general election to be held on November 4, 1986. A form of peti- tion for such purpose is available from the office of the City Clerk. /s/ (insert name) City Clerk City of McHenry McHenry County, Illinois -45- (Form of Petition) PETITION To the City Clerk of the City of McHenry, McHenry County, Illinois: We, the undersigned, being electors of the City of McHenry, McHenry County, Illinois, do hereby petition you to cause the question of improving the waterworks and sewerage system of said City, as provided in Ordinance Number of said City, and the issuance of Waterworks and Sewerage Revenue Bonds, Series 1986A, as provided in said Ordinance to be certified to the County Clerk of The County of McHenry, Illinois, and submitted to the electors of said City at the general election to be held on November 4, 1986. Name Address , McHenry, Illinois , McHenry, Illinois , McHenry, Illinois (additional signature lines shall be provided) I, , of (insert residence address), McHenry, Illinois, do hereby certify that I am a registered voter of the City of McHenry, and in The County of McHenry, Illinois, and that the signatures on this petition were signed in my presence within the City of McHenry, Illinois, and in The County of McHenry, Illinois, and are genuine, and, to the best of my knowledge and belief, the persons so signing were at the time of signing this petition registered voters of said City of McHenry and that their addresses are correctly stated herein. (SEAL) s Subscribed and sworn to before me this day of 1986. -46- Notary Public Section 25. Severability. 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. Section 26. Repealer. All ordinances, resolutions or orders, or parts there- of, in conflict with the provisions of this ordinance are to the extent of such conflict hereby repealed. PASSED by the City Council on July 30, 1986. APPROVED: July 30, 1986. M yor AYES: Bolger, Nolan, Teta, Smith, Serritella, Snell NAYS: None ABSENT: Lieder, McClatchey PUBLISHED in Northwest Herald Newspaper on August 7 , 1986. RECORDED in the Municipal Records on July 30, 1986. Attest: �i2s . i y Clerk (SEAL) -47- Alderman William J . Bolger moved and Alderman Elizabeth Nolan seconded the motion that said ordinance as presented and read by the City Clerk be adopted. After a full and complete discussion thereof, the Mayor directed that the roll be called for a vote upon the motion to adopt the ordinance as read. Upon the roll being called, the following Aldermen voted AYE: William J. Bolger, Elizabeth Nolan, Michael R. Teta, Raymond Smith, Cecilia Serritella and Gary E. Snell NAY: None ABSENT; Gary W. Lieder, Frank McClatchey Wtiereupon the Mayordeclared tne motion carried an e ordinance adopted, and henceforth did approve and sign the same in open meeting and did direct the City Clerk to record the same in full in the records of the City Council of the City. Other business not pertinent to the adoption of said ordinance was duly transacted at said meeting. Upon motion duly made and seconded, the meeting was adjourned. City Clerk -2-