Loading...
HomeMy WebLinkAbout08158ORDINANCE NO. 8158 AN ORDINANCE RECOGNIZING AND CONFIRMING THE CITY OF PUEBLO, COLORADO'S SEWER ENTERPRISE AS AN ENTERPRISE; AUTHORIZING THE ISSUANCE BY THE CITY'S SEWER ENTERPRISE OF A GOVERNMENTAL AGENCY BOND, SERIES 2010A, IN A PRINCIPAL AMOUNT NOT TO EXCEED $26,000,000, FOR THE PURPOSES OF FINANCING THE CONSTRUCTION OF FACILITIES TO REMOVE AMMONIA AT THE WATER RECLAMATION FACILITY, INSTALLING A DEWATERING SYSTEM, INSTALLING AN ULTRAVIOLET RADIATION DISINFECTION SYSTEM, INSTALLING A SOLAR PHOTOVOLTAIC ARRAY, RENOVATING AND /OR REPLACING EXISTING SANITARY SEWER LIFT STATIONS, MAKING ANY OTHER CAPITAL EXPENDITURES IN FURTHERANCE OF OR NECESSARY TO THE EXPANSION, RENOVATION AND IMPROVEMENT OF THE SEWAGE TREATMENT SYSTEM OF THE SEWER ENTERPRISE AND PAYING THE COSTS OF ISSUING THE SERIES 2010A BOND; PRESCRIBING THE FORM, TERMS AND CONDITIONS OF THE SERIES 2010A BOND; PROVIDING FOR THE SALE OF THE SERIES 2010A BOND; PROVIDING FOR THE APPLICATION OF THE NET PLEDGED REVENUES OF THE SEWER ENTERPRISE TO PAY THE PRINCIPAL OF AND INTEREST AND PREMIUM, IF ANY, ON THE SERIES 2010A BOND AND ALL PARITY LIEN BONDS; AND PRESCRIBING OTHER DETAILS IN CONNECTION THEREWITH. WHEREAS, the City of Pueblo, in the County of Pueblo and State of Colorado (the "City "), is a municipal corporation duly organized and existing as a home rule city pursuant to Article XX of the Constitution of the State of Colorado (the "State ") and the home rule charter of the City (the "Charter "); and WHEREAS, under the Charter, the City is possessed of all powers which are necessary, requisite or proper for the government and administration of its local and municipal affairs, all powers which are granted to home rule municipalities by the Colorado Constitution, and all rights and powers that now or hereafter may be granted to municipalities by the laws of the State; and WHEREAS, the City owns and operates a municipal sanitary sewer system, as more fully defined herein (the "Sewer Enterprise "); and WHEREAS, the legislative powers of the City are vested in a board of council members, also known as the city council (the "City Council "), which also operates as the governing body of the Sewer Enterprise; and WHEREAS, the City Council, sitting as the governing body of the Sewer Enterprise, has determined that it is necessary for the efficient and proper management of the Sewer Enterprise and is in the best interest of the users of the Sewer Enterprise that there be authorized and issued a bond of the Sewer Enterprise for the purposes of financing the construction and improvement of facilities to remove ammonia at the water reclamation facility, installing a dewatering system, installing an ultraviolet radiation disinfection system, installing a solar photovoltaic array, renovating and /or replacing existing sanitary sewer lift stations and making any other capital expenditures in furtherance of or necessary to the expansion, renovation and improvement of the sewage treatment system of the Sewer Enterprise (collectively, the "Project ") and for paying the costs of issuing the bond; and WHEREAS, the City Council has determined that it is in the best interest of the users of the Sewer Enterprise that the payment of such bond be secured by the Net Pledged Revenues (as defined herein) of the Sewer Enterprise; and WHEREAS, the City Council, acting by and through its Sewer Enterprise, and pursuant to Ordinance No. 6963 (the "Series 2003 Ordinance "), issued a Governmental Agency Bond, Series 2003, in the initial principal amount of $7,645,000.00, of which $5,497,500.00 remains outstanding as of March 1, 2010 (the "Series 2003 Bond "); and WHEREAS, the City Council, acting by and through its Sewer Enterprise, and pursuant to Ordinance No. 8049 (the "Series 2009 Ordinance "), issued a Governmental Agency Bond, Series 2009, in the initial principal amount of $1,500,000.00, of which $1,500,000.00 remains outstanding (the "Series 2009 Bond "); and WHEREAS, except with respect to the Series 2003 Bond, the Series 2009 Bond and bonds which have heretofore been paid in full, or for which provision for the payment in full has been made, the City Council has not pledged, nor in any way hypothecated, revenues derived and to be derived from the operation of the Sewer Enterprise to the payment of any bond(s) or for any other purpose, and the conditions for the issuance of additional Parity Lien Bonds (as defined herein) established in Section 14 of the Series 2003 Ordinance and in Section 14 of the Series 2009 Ordinance have been satisfied, with the result that the Net Pledged Revenues may now be pledged lawfully and irrevocably for payment of the Series 2010A Bond herein authorized; and WHEREAS, to finance the estimated costs of the Project, the Sewer Enterprise has made an application to the Colorado Water Resources and Power Development Authority (the "Authority "), for a loan, which the Authority has conditionally accepted, and therefore the Sewer Enterprise has determined to enter into a loan agreement (the "Loan Agreement ") with the Authority, pursuant to which the Authority shall loan the Sewer Enterprise an amount equivalent to the principal amount of the Series 2010A Bond (the "Loan "); and WHEREAS, the Sewer Enterprise's repayment obligations under the Loan Agreement shall be evidenced by a Governmental Agency Bond, Series 2010A (the "Series 2010A Bond ") to be issued by the Sewer Enterprise to the Authority, which shall be payable solely from and secured by a pledge of and an irrevocable and nonexclusive lien on the Net Pledged Revenues of the Sewer Enterprise; and WHEREAS, Article X, Section 20 of the Colorado Constitution ( "Amendment One ") requires that districts (as defined in Amendment One) not issue bonded debt without prior voter approval unless the issuer is an "Enterprise" as defined in Amendment One; and WHEREAS, the Sewer Enterprise constitutes a government -owned business authorized to issue its own revenue bonds, and it receives less than 10% of its annual revenue in grants from Colorado state and local governments, including without limitation the City, and therefore constitutes an "Enterprise" within the meaning of Amendment One; and WHEREAS, the City has the power as a home rule city under Article XX of the Colorado Constitution and the Charter to issue the Series 2010A Bond on behalf of its Sewer Enterprise; and WHEREAS, Article 57 of Title 11, Colorado Revised Statutes (the "Supplemental Public Securities Act ") provides supplemental procedures for the issuance of bonds, and the City Council has elected to have the provisions of the Supplemental Public Securities Act apply to the issuance of the Series 2010A Bond; and WHEREAS, there has been presented to the City Council at this meeting a proposed form of the Loan Agreement; now, therefore BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO: Section 1. General. Except to the extent inconsistent with this Ordinance, all action heretofore taken by the City and the Sewer Enterprise and the officials thereof directed toward accomplishing the Project and toward the execution of the Loan Agreement with, and the issuance and sale of the Series 2010A Bond to, the Authority is hereby ratified, approved and confirmed. The City Council, after reviewing all pertinent information pertaining to the municipal sanitary sewer system, hereby again recognizes and confirms the status of the municipal sanitary sewer system as an enterprise. Section 2. Definitions. The definitions in this Section 2 and in the Recitals of this Ordinance are applicable for all purposes of this Ordinance and of any supplement or amendment hereto, except where the context by clear implication requires otherwise. "Closing Date" means the date on which the Series 2010A Bond is delivered as set forth in the Sale Certificate. "Code" means the Internal Revenue Code of 1986, as amended, and all regulations promulgated thereunder. "Debt Service Account" means the Debt Service Account established pursuant to the Series 2003 Ordinance and affirmed and continued pursuant to Section 10 hereof. "Debt Service Account Payment Date" means the twentieth (20 day of each u�i� "Gross Revenues" means all income and revenues derived directly or indirectly from the operation and use of and otherwise pertaining to the Sewer Enterprise, or any part thereof, whether resulting from repairs, enlargements, extensions, betterments or other improvements to the Sewer Enterprise, or otherwise, including without limitation: (a) All fees, rates and other charges for the use of the Sewer Enterprise, or for any service rendered by the Sewer Enterprise in its operations, directly or indirectly, the availability of any such service, or the sale or other disposal of any commodities derived therefrom, but: (i) excluding any moneys borrowed and used for the acquisition of capital improvements; (ii) excluding any moneys received as grants, appropriations or gifts from the Federal government, the State or other sources, the use of which is limited or restricted by the grantor or donor to the construction of capital improvements for the Sewer Enterprise or for other purposes resulting in the general unavailability thereof, except to the extent any such moneys shall be received as payments for the use of the Sewer Enterprise, services rendered thereby, the availability of any such service, or the disposal of any commodities therefrom; (iii) excluding moneys held in any escrow or otherwise deposited by third parties for extensions, modifications or upgrading of the sanitary sewer system; (iv) excluding any money and securities, and interest and other gain from investment of such money and from such securities in any refunding fund or escrow account or similar account pledged to the payment of any bonds or other obligations therein specified; and (v) excluding connection fees deposited into the Sanitary Sewer Collection System Improvement Fund and plant investment fees deposited into the Treatment Plant Investment Fund; (b) all income or other gain from any investment (except as set forth in (a)(iv) above); (c) all income and revenues derived from the operation of any other utility or other income - producing facilities added to the Sewer Enterprise and to which the pledge and lien herein provided are extended by ordinance adopted by the City Council or the qualified electors of the City or by Charter amendment adopted by such electors; and (d) any unrestricted cash and investments in the Revenue Account. "Net Pledged Revenues" means the Gross Revenues of the Sewer Enterprise remaining after the payment of the Operation and Maintenance Expenses of the Sewer Enterprise. "Operation and Maintenance Expenses" or any phrase of similar import, means all reasonable and necessary current expenses of the Sewer Enterprise, paid or accrued, for operating and maintaining the Sewer Enterprise or any component division or other part thereof, or of any other designated facilities in connection with which such term is used; and the term includes, without limitation: (a) engineering, auditing, reporting, legal and other overhead expenses directly related and reasonably allocable to the administration, operation and maintenance of the Sewer Enterprise; (b) fidelity bond premiums and property and liability insurance premiums pertaining to the Sewer Enterprise, or a reasonably allocable share of a premium of any blanket bond or policy pertaining to the Sewer Enterprise; (c) payments to pension, retirement, health and hospitalization funds, other insurance, and to any self- insurance fund as insurance premiums not in excess of such premiums which would otherwise be required for such insurance; (d) any assessments, excise taxes or other charges which may be lawfully imposed on the City, the Sewer Enterprise, the revenues therefrom, or the City income from or operations of any properties under its control and pertaining to the Sewer Enterprise, or any privilege in connection with the Sewer Enterprise or this operation (but no payments made in lieu of taxes or any general ad valorem taxes); (e) the reasonable charges of any paying agent and any other depository bank pertaining to any Parity Lien Bonds and any other securities payable from the Net Pledged Revenues or otherwise pertaining to the Sewer Enterprise, except to the extent paid from the proceeds of any Parity Lien Bonds or other such securities; (f) contractual services, professional services, salaries, other administrative expenses, and costs of materials, supplies, repairs and labor, pertaining to the Sewer Enterprise or to the issuance of any Parity Lien Bonds or any other securities relating to the Sewer Enterprise, including, without limitation, the expenses and compensation of any trustee, receiver, or other fiduciary, except to the extent paid from the proceeds of any Parity Lien Bonds or other such securities; (g) the costs incurred by the Sewer Enterprise in the collection and any refunds of all or any part of the Gross Revenues; (h) any costs of utility services furnished to the Sewer Enterprise by the City or otherwise; and (i) all other administrative, general and commercial expenses pertaining to the Sewer Enterprise, but excluding any allowance for depreciation; (ii) excluding any costs of extensions, enlargements, betterments and other improvements (or any combination thereof); (iii) excluding any reserves for major capital replacements (other than normal repairs); (iv) excluding any reserves for operation, maintenance or repair of the Sewer Enterprise; (v) excluding any allowance for the redemption of any bond or other security evidencing a loan, or the payment of any interest thereon, or any prior redemption premium due in connection therewith, or any reserve therefor; and (vi) excluding any liabilities incurred in the acquisition or improvement of any properties comprising any project or any existing facilities (or any combination thereof) pertaining to the Sewer Enterprise. "Outstanding" means, when used with reference to bonds as of any particular date, all bonds payable from the Net Pledged Revenues of the Sewer Enterprise in any manner, theretofore or thereupon being executed and delivered: (a) except any bond canceled by the Sewer Enterprise, by the Paying Agent or otherwise on the Sewer Enterprise's behalf, at or before said date; (b) except any bond for the payment or the redemption of which moneys at least equal to the principal amount of, any prior redemption premium due in connection with, and the interest on the bond to the date of maturity or the prior redemption date, shall have theretofore been deposited with a commercial bank in escrow or in trust for that purpose, as provided in Section 13 hereof; and (c) except any bond in lieu of or in substitution for which another bond shall have been executed and delivered pursuant to this Ordinance. "Parity Lien Bonds" means the Series 2003 Bond, the Series 2009 Bond, the Series 2010A Bond and all other bonds or other obligations payable from Net Pledged Revenues on a parity with the Series 2003 Bond, the Series 2009 Bond and the Series 2010A Bond. "Pro Rata Portion" means the dollar amount derived by dividing the amount of principal or interest to come due on the next principal or interest payment date by the number of monthly deposits required to be made prior to such payment date. "Revenue Account" means the Revenue Account established pursuant to the Series 2003 Ordinance and affirmed and continued pursuant to Section 10 hereof. "Sale Certificate" means the certificate executed by the President or Vice President of the City Council, as the Sewer Enterprise's Agent, under the authority delegated pursuant to this Ordinance, including but not limited to Section 4 hereof, which Sale Certificate shall set forth, among other things, the final principal amount of the Series 2010A Bond, the price at which the Series 2010A Bond will be sold, the actual interest rate of the Series 2010A Bond, the net effective interest rate of the Series 2010A Bond, and the payment schedule for the Series 2010A Bond (including the 2010A Bond Payment Date). "Series 2003 Ordinance" means Ordinance No. 6963, adopted by the City Council on second reading on April 14, 2003. "Series 2009 Ordinance" means Ordinance No. 8049, adopted by the City Council on second reading on August 24, 2009. "Sewer Enterprise" means the City's municipal sanitary sewer system, consisting of all properties, real, personal, mixed or otherwise, now owned or hereafter acquired by the City, through purchase, construction or otherwise, and used in connection with the Sewer Enterprise of the City, and in any way pertaining thereto, whether or not located within or without or both within and without the boundaries of the City; and such defined term includes any other utility or other income - producing facilities added to the Sewer Enterprise and to which the lien and pledge herein provided or provided in the Loan Agreement are extended by ordinance adopted by the City Council or the qualified electors of the City or by Charter amendment adopted by such electors; provided that this definition is intended to mean substantially the same as the definition of "System" in the Loan Agreement. "State" means the State of Colorado. "2003 Bond Payment Date" means each March 1 and September 1, commencing September 1, 2010. "2009 Bond Payment Date" means each February 1 and August 1, commencing August 1, 2010. "2010A Bond Payment Date" means the dates on which interest and /or principal of the Series 2010A Bond shall be due and payable, as set forth in the Sale Certificate. Section 3. Issuance of Series 2010A Bond. For the purpose of providing moneys with which to finance the Project and pay the costs of issuance of the Series 2010A Bond, the Sewer Enterprise shall issue its Series 2010A Bond in an aggregate principal amount not to exceed $26,000,000. The Series 2010A Bond shall be payable as to both principal and interest solely out of Net Pledged Revenues derived from the operation and use of the Sewer Enterprise. Section 4. Series 2010A Bond Details. (a) The Series 2010A Bond shall be dated, shall be subject to repayment in the amounts and on the dates, and shall be subject to prior redemption, as set forth in the Loan Agreement and the Series 2010A Bond. The maximum net effective interest rate authorized for the Series 2010A Bond is 3.5% per annum (or in the event that a late charge is imposed pursuant to Section 3.03 of the Loan Agreement, a maximum net effective interest rate equal to the greater of 12% per annum or the prime rate plus 0.5 %, not to exceed the maximum rate permitted by law), and the actual net effective interest rates of the Series 2010A Bond shall not exceed such rates. The President or Vice President of the City Council shall execute and deliver the Series 2010A Bond to the Authority as evidence of the Loan Repayments (as defined in the Loan Agreement). The actual Loan Repayments are (or will be) attached to the Loan Agreement and shall be an integral part of this Ordinance. The Series 2010A Bond shall be substantially in the form set forth as Exhibit D to the Loan Agreement. (b) The final principal amount of the Series 2010A Bond, the price at which the Series 2010A Bond will be sold, the actual interest rate (and late charge, if any) of the Series 2010A Bond, the net effective interest rate(s) of the Series 2010A Bond, the payment schedule for the Series 2010A Bond (including the 2010A Bond Payment Date), and the Closing Date shall be set forth in the Sale Certificate to be executed on behalf of the Sewer Enterprise by the President or Vice President of the City Council, as the Sewer Enterprise's Agent, to whom the power to make such determinations, subject to the parameters set forth in this Ordinance, is hereby delegated by the City Council pursuant to the Supplemental Public Securities Act. (c) The Series 2010A Bond shall not constitute a debt or other indebtedness or multi - fiscal year direct or indirect debt or other financial obligation of the City within the meaning of any constitution, charter or statutory provision or limitation; the Series 2010A Bond shall not be payable from the proceeds of general property taxes; and the Series 2010A Bond shall not be considered or held to be general obligations of the City. The Series 2010A Bond is a special revenue obligation of the Sewer Enterprise, payable and collectible solely out of and secured by a pledge of the Net Pledged Revenues from the Sewer Enterprise. Section 5. Delivery of Series 2010A Bond. Upon the execution of the Series 2010A Bond, the Sewer Enterprise shall deliver it to the Authority against payment of the purchase price. The proceeds of the Series 2010A Bond shall be used exclusively for payment of the cost of the Project and the costs of issuing the Series 2010A Bond. Section 6. The Loan Agreement. The form of Loan Agreement presented at this meeting has been reviewed and discussed by the City Council, the Sewer Enterprise's attorney and staff members in attendance. The President or Vice President of the City Council and the City Clerk are hereby authorized and directed to execute and deliver the Loan Agreement on behalf of the Sewer Enterprise with whatever changes are approved by the Sewer Enterprise's attorney and the President or Vice President; provided, that such changes shall not violate any of the provisions or conditions of this Ordinance. The execution by the President or Vice President and City Clerk of the Loan Agreement shall be deemed to show approval of any changes. After execution of the Loan Agreement, the Sewer Enterprise shall perform its obligations under the Loan Agreement in a timely fashion. Section 7. Pledge and Application of Net Pledged Revenues (a) The Sewer Enterprise hereby irrevocably (but not exclusively) pledges the Net Pledged Revenues of the Sewer Enterprise to pay the principal of and interest on the Series 2010A Bond. The Sewer Enterprise hereby agrees to fix annually and to maintain rates and charges for wastewater services furnished by the Sewer Enterprise which, together with moneys on hand and available therefor, will be sufficient to pay Operation and Maintenance Expenses of the Sewer Enterprise and the principal of, premium, if any, and interest on all Outstanding Parity Lien Bonds, including the Series 2010A Bond, and other obligations of the Sewer Enterprise, as they respectively become due, including the requirements of the Loan Agreement. (b) The Sewer Enterprise agrees to apply the Net Pledged Revenues monthly as set forth in Section 11 hereof and in the Loan Agreement. (c) The creation, perfection, enforcement and priority of the pledge of the Net Pledged Revenues to secure and pay the Series 2010A Bond and any other Parity Lien Bonds as provided herein shall be governed by Section 11 -57- 208 of the Supplemental Public Securities Act and this Ordinance. The revenues pledged for the payment of the Series 2010A Bond and any other Parity Lien Bonds, as received by or otherwise credited to the Sewer Enterprise, shall immediately be subject to the lien of such pledge without any physical delivery, filing or further act. The lien of such pledge on the revenues pledged for payment of the Series 2010A Bond and any other Parity Lien Bonds and the obligation to perform the contractual provisions made herein shall have priority over any or all other obligations and liabilities of the Sewer Enterprise. The lien of such pledge shall be valid, binding and enforceable as against all persons having claims of any kind in tort, contract or otherwise against the Sewer Enterprise and /or the City irrespective of whether such persons have notice of such liens. Section 8. Covenants. The Sewer Enterprise hereby additionally irrevocably covenants and agrees with each and every Registered Owner of the Series 2010A Bond that so long as the Series 2010A Bond remains Outstanding: (a) The Sewer Enterprise has maintained and shall continue to maintain itself as an "enterprise" within the meaning of Article X, Section 20 of the Colorado Constitution for the Sewer Enterprise's 2010 fiscal year. Specifically, but not by way of limitation, the Sewer Enterprise covenants and agrees that it shall not receive 10% or more of its annual revenue in grants from all Colorado state and local governments combined during its 2010 fiscal year. Further, the Sewer Enterprise shall use its best efforts to maintain itself as an "enterprise" within the meaning of Article X, Section 20 of the Colorado Constitution during the term of the Series 2010A Bond. (b) The issuance of the Series 2010A Bond and the financing of the Project, and all procedures undertaken incident thereto, are in full compliance and conformity with all presently applicable requirements, provisions and limitations prescribed by the Constitution and laws of the State and the Charter. Section 9. Disposition of Proceeds from the Loan; Authorization of Project. The proceeds of the Loan shall be applied only to pay the costs and expenses of the Project which are permitted pursuant to the terms of the Loan Agreement and § 31 -35- 403(2), C.R.S., including without limitation the reimbursement of funds which may have been previously advanced for such purpose. The Project is hereby authorized and approved, and the appropriate officers and employees of the Sewer Enterprise are hereby authorized and directed to take all actions necessary for the acquisition, construction, reconstruction, improvement, betterment or extension of the Project from the proceeds of the Series 2010A Bond and, to the extent necessary, from any other legally available moneys of the Sewer Enterprise. It is hereby determined by the Sewer Enterprise that the Series 2010A Bond matures at such time not exceeding the estimated life of the Project. Section 10. Affirmation and Continuation of Revenue Account and Debt Service Account. (a) The Sewer Enterprise hereby affirms and continues the "Sewer Enterprise of Pueblo, Colorado, Sewer Revenue Account ", which was established pursuant to the Series 2003 Ordinance and which will be used for the collection of the Gross Revenues of the Sewer Enterprise, as set forth in Section 11 hereof and the Loan Agreement. (b) The Sewer Enterprise hereby affirms and continues the "Sewer Enterprise of Pueblo, Colorado, Sewer Revenue Debt Service Account ", which was established pursuant to the Series 2003 Ordinance and which will be used for the payment of the principal of, premium, if any, and interest on the Series 2010A Bond and on all other Parity Lien Bonds, as set forth in Section 11 hereof and the Loan Agreement. (c) Any investment income earned on amounts deposited in the Revenue Account or the Debt Service Account will be credited to the Revenue Account or the Debt Service Account, respectively. Section 11. Application of Gross Revenues. So long as the Series 2010A Bond shall remain Outstanding, all Gross Revenues, as they are received, shall be deposited into the Revenue Account, and the Gross Revenues are hereby appropriated for such purpose. Notwithstanding anything to the contrary in the Series 2003 Ordinance or in the Series 2009 Ordinance, moneys on deposit in the Revenue Account shall be transferred from the Revenue Account and applied to the following purposes and in the following order of priority: (a) First, there shall be maintained in the Revenue Account amounts sufficient to pay Operation and Maintenance Expenses of the Sewer Enterprise promptly as they become due and payable; (b) Second, there shall be credited to the Debt Service Account on each Debt Service Account Payment Date: (i) For the Series 2003 Bond, (A) beginning on the first Debt Service Account Payment Date that occurs after the Closing Date, an amount which, together with any moneys in the Debt Service Account which are allocated to the Series 2003 Bond and available for the payment thereof, is equal to the Pro Rata Portion of the interest and principal maturing on the next 2003 Bond Payment Date, and (B) beginning on the next Debt Service Account Payment Date that occurs after such 2003 Bond Payment Date, an amount which is equal to the Pro Rata Portion of the interest and principal maturing on the Series 2003 Bond on each succeeding 2003 Bond Payment Date, seriatim; and (ii) For the Series 2009 Bond, (A) beginning on the first Debt Service Account Payment Date that occurs after the Closing Date, an amount which, together with any moneys in the Debt Service Account which are allocated to the Series 2009 Bond and available for the payment thereof, is equal to the Pro Rata Portion of the principal maturing on the next 2009 Bond Payment Date, and (B) beginning on the next Debt Service Account Payment Date that occurs after such 2009 Bond Payment Date, an amount which is equal to the Pro Rata Portion of the principal maturing on the Series 2009 Bond on each succeeding 2009 Bond Payment Date, seriatim; and (iii) For the Series 2010A Bond, (A) beginning on the first Debt Service Account Payment Date that occurs after the Closing Date, an amount which, together with any moneys in the Debt Service Account and available for the payment thereof, is equal to the Pro Rata Portion of the interest and principal maturing on the next 2010A Bond Payment Date, and (B) beginning on the next Debt Service Account Payment Date that occurs after such 2010A Bond Payment Date, an amount which is equal to the Pro Rata Portion of the interest and principal maturing on the Series 2010A Bond on each succeeding 2010A Bond Payment Date, seriatim; and (c) Third, monthly after the described above, there shall be paid remaining in the Revenue Account, to Sewer Enterprise. use and deposits of Gross Revenue to the Sewer Enterprise the amount be used in any lawful manner by the The moneys in the Debt Service Account shall be used solely for the purpose of paying the principal of and interest on the then Outstanding Parity Lien Bonds (including the Series 2010A Bond). The Sewer Enterprise shall forward to the Authority on or prior to each 2010A Bond Payment Date, in immediately available funds, amounts sufficient to pay debt service on the Series 2010A Bond on each such date. Concurrently with (in the case of Parity Lien Bonds) or subsequent to (in the case of subordinate lien obligations) the payments required by paragraph (b) of this Section, any remaining amounts in the Revenue Account shall be used by the Sewer Enterprise for the payment of principal of and interest on any additional obligations hereafter authorized to be issued and payable from the Net Pledged Revenues, including reasonable reserves therefor, as the same accrue. Section 12. Tax Covenants of Sewer Enterprise. The Sewer Enterprise, having been fully informed of and having considered all the pertinent facts and circumstances, does hereby find, determine and declare that: (a) the Sewer Enterprise covenants that it will make no use of the proceeds of the Series 2010A Bond at any time during the term thereof which, if such use had been reasonably expected on the date the Series 2010A Bond was issued, would have caused the Series 2010A Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code; and (b) the Sewer Enterprise covenants that the gross proceeds of the Series 2010A Bond shall not be used in a manner which will cause the Series 2010A Bond to be considered a "private activity bond" within the meaning of Section 141 of the Code. Section 13. Defeasance. When the Series 2010A Bond and interest thereon have been duly paid, the pledge and lien and all obligations hereunder shall thereby be discharged as to the Series 2010A Bond, and the Series 2010A Bond shall no longer be deemed to be Outstanding within the meaning of this Ordinance. There shall be deemed to be such due payment when the Sewer Enterprise has placed in escrow and in trust with a commercial bank located within or without the State and exercising trust powers, an amount sufficient (including the known minimum yield from Federal Securities in which such amount may be initially invested) to make all payments of principal of and interest on the Series 2010A Bond as the same become due. The Federal Securities shall become due prior to the respective times on which the proceeds thereof shall be needed, in accordance with a schedule established and agreed upon between the Sewer Enterprise and the bank at the time of the creation of the escrow, or the Federal Securities shall be subject to redemption at the option of the holders thereof to assure such availability as so needed to meet such schedule. "Federal Securities" within the meaning of this Section shall include only direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the Untied States of America and which are not callable before maturity by the issuer of such obligations. Section 14. Additional Obligations. So long as the Series 2010A Bond is Outstanding: (a) Limitations Upon Issuance of Parity Lien Bonds. Nothing in this Ordinance shall be construed to prevent the issuance by the Sewer Enterprise of additional obligations (including refunding obligations) payable in whole or in part from the Net Pledged Revenues (or any designated part thereof) and constituting a lien thereon on a parity with, but not prior or superior to, the lien of the Series 2010A Bond and the other then Outstanding Parity Lien Bonds; provided, however, that before any such additional Parity Lien Bonds are authorized or actually issued: (i) The Sewer Enterprise is then current in all payments required to have been accumulated in the Debt Service Account, and has made all payments required on the Series 2010A Bond and any other Outstanding Parity Lien Bonds. (ii) The revenues derived from the entire Net Pledged Revenues for the twelve consecutive calendar months immediately preceding the month of issuance of such additional Parity Lien Bonds shall have been sufficient to pay an amount equal to (A) one hundred and ten percent (110 %) of the combined maximum annual principal and interest requirements on the then Outstanding Series 2010A Bond, any then Outstanding Parity Lien Bonds theretofore issued, and the Parity Lien Bonds then proposed to be issued, and (B) one hundred percent (100 %) of the maximum annual principal and interest requirements on all other indebtedness of the Sewer Enterprise payable from the Net Pledged Revenues. In determining the amount of such Net Pledged Revenues, the Net Pledged Revenues shall be adjusted if any new rates, fees and charges have been established for the Sewer Enterprise prior to the issuance of the Parity Lien Bonds to be issued, in which case the Net Pledged Revenues shall be adjusted by applying such new rates, fees and charges to customer billings for such twelve month period as if such rates, fees and charges had been in effect during the whole of such twelve month period. (b) Certificate of Net Pledged Revenues. A written certification by a certified public accountant who is not a regular salaried employee of the City or the Sewer Enterprise that such Net Pledged Revenues are sufficient to pay the amounts required by paragraph (a)(ii) of this Section shall be conclusively presumed to be accurate in determining the right of the Sewer Enterprise to authorize, issue, sell and deliver such additional Parity Lien Bonds. (c) Subordinate Obligations Permitted. Nothing in this Ordinance shall be construed to prevent the issuance by the Sewer Enterprise of additional obligations (including refunding obligations) payable from the Net Pledged Revenues (or any designated part thereof) and having a lien thereon subordinate or junior to the lien of the Series 2010A Bond and other Parity Lien Bonds; provided, however, that no such subordinate obligations shall be issued unless for any 12 consecutive months out of the 18 months prior to the month in which such subordinate obligations are to be issued, Net Pledged Revenues for the Sewer Enterprise were at least one hundred percent (100 %) of the maximum annual debt service on all the then Outstanding Sewer Enterprise indebtedness and the subordinate obligations proposed to be issued. (d) Superior Obligations Prohibited. Nothing in this Ordinance shall be construed to permit the Sewer Enterprise to issue additional obligations (including refunding obligations) payable from the Net Pledged Revenues (or any designated part thereof) having a lien thereon prior and superior to the lien of the Series 2010A Bond and any other Outstanding Parity Lien Bonds. Section 15. General Authorization. The President or the Vice President of the City Council and the City Clerk shall, and they are hereby authorized and directed to take all necessary or appropriate actions and to execute and deliver all agreements, certificates and documents as may be necessary or desirable to effectuate the provisions of this Ordinance and to comply with the requirements of law. Pursuant to Exhibit B of the Loan Agreement, the Wastewater Director and the Director of Finance are hereby designated as the Authorized Officers (as defined in the Loan Agreement) for the purpose of performing any act or executing any document relating to the Series 2010A Bond or the Loan Agreement. A copy of this Ordinance may be furnished to the Authority as evidence of such designation. In addition, the appropriate officers and employees of the Sewer Enterprise and the City are hereby authorized and directed to furnish and supply information concerning the Sewer Enterprise and the City to the Authority for use in the preparation of an official statement to be used to market the Authority's bonds. Section 16. Exercise of Home Rule Power. Pursuant to Article XX of the State Constitution and to the Charter, the City and the Sewer Enterprise hereby determine and declare the issuance of the Series 2010A Bond to be a local matter, and therefore all statutes of the State which might otherwise apply in connection with the issuance of the Series 2010A Bond are hereby superseded, to the extent of any conflict herewith. Section 17. Severability. If any one or more sections or parts of this Ordinance shall be adjudged unenforceable or invalid, such judgment shall not affect, impair or invalidate the remaining provisions of this Ordinance, it being the intention that the various provisions hereof are severable. Section 18. Repealer. All ordinances, resolutions or parts thereof in conflict with this Ordinance are hereby repealed to the extent of such conflict. Section 19. Ordinance Irrepealable. This Ordinance is, and shall constitute, a legislative measure of the City Council, sitting as the governing body of the Sewer Enterprise, and after the Series 2010A Bond hereby authorized is issued and sold and is Outstanding, this Ordinance shall constitute a contract between the Sewer Enterprise and the Registered Owner of the Series 2010A Bond, and shall be and remain irrepealable until the Series 2010A Bond, and the interest accruing thereon, shall have been fully paid, satisfied and discharged. Section 20. Recordation and Publication. This Ordinance, immediately on its passage, shall be recorded in the records of the City Clerk and the Sewer Enterprise kept for that purpose. Section 21. Limited Recourse. No recourse shall be had for the payment of the principal of or interest on the Series 2010A Bond or for any claim based thereon or upon any obligation, covenant or agreement contained in this Ordinance against any past, present or future officer, employee or agent of the City or the Sewer Enterprise, or of any successor public corporation, as such, either directly or through the City or the Sewer Enterprise or any successor public corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, employees or agents as such is hereby expressly waived and released as a condition of and consideration for the passage of this Ordinance, and the issuance of the Series 2010A Bond. Section 22. Effective Date. This Ordinance shall take effect on March 22, 2010, upon its final passage and approval. Section 23. Public Hearing. The City Council finds and determines that a public hearing has been duly noticed on this Ordinance and the hearing has been held on Monday, March 22, 2010, at 7:00 p.m., or as soon thereafter as the business of the City Council permitted, in the City Council Chambers, at One City Hall Place, Pueblo, Colorado. INTRODUCED: March 8, 2010 BY: Judy Weaver Councilperson A APPROVED: 1 -• • President, City Council Attest: \, �- Clerk PASSED AND APPROVED: March 22, 2010 APPROVED AS TO FORM BY CITY ATTORNEY: x..110 L) 4 Background Paper for Proposed ORDINANCE AGENDA ITEM # R -5 DATE: March 8, 2010 DEPARTMENT: WASTEWATER DEPARTMENT Gene Michael, Director TITLE AN ORDINANCE RECOGNIZING AND CONFIRMING THE CITY OF PUEBLO, COLORADO'S SEWER ENTERPRISE AS AN ENTERPRISE; AUTHORIZING THE ISSUANCE BY THE CITY'S SEWER ENTERPRISE OF A GOVERNMENTAL AGENCY BOND, SERIES 2010A, IN A PRINCIPAL AMOUNT NOT TO EXCEED $26,000,000, FOR THE PURPOSES OF FINANCING THE CONSTRUCTION OF FACILITIES TO REMOVE AMMONIA AT THE WATER RECLAMATION FACILITY, INSTALLING A DEWATERING SYSTEM, INSTALLING AN ULTRAVIOLET RADIATION DISINFECTION SYSTEM, INSTALLING A SOLAR PHOTOVOLTAIC ARRAY, RENOVATING AND /OR REPLACING EXISTING SANITARY SEWER LIFT STATIONS, MAKING ANY OTHER CAPITAL EXPENDITURES IN FURTHERANCE OF OR NECESSARY TO THE EXPANSION, RENOVATION AND IMPROVEMENT OF THE SEWAGE TREATMENT SYSTEM OF THE SEWER ENTERPRISE AND PAYING THE COSTS OF ISSUING THE SERIES 2010A BOND; PRESCRIBING THE FORM, TERMS AND CONDITIONS OF THE SERIES 2010A BOND; PROVIDING FOR THE SALE OF THE SERIES 2010A BOND; PROVIDING FOR THE APPLICATION OF THE NET PLEDGED REVENUES OF THE SEWER ENTERPRISE TO PAY THE PRINCIPAL OF AND INTEREST AND PREMIUM, IF ANY, ON THE SERIES 2010A BOND AND ALL PARITY LIEN BONDS; AND PRESCRIBING OTHER DETAILS IN CONNECTION THEREWITH ISSUE Should the City Council approve an ordinance authorizing revenue bond financing for construction of the Ammonia Removal Project for the James R. Dilorio Water Reclamation Facility and pledging the revenues of the sewer enterprise to pay the debt service associated with these financing procedures? Approval of this ordinance BACKGROUND Through its Sewer Enterprise, Pueblo operates the James R. Dilorio Water Reclamation Facility under a discharge permit issued by the State of Colorado to treat wastewater generated within the community. The discharge permit is issued for a period of five years, and contains numeric limits for maximum concentrations of specific chemicals that can be discharged in the effluent from the treatment facility. In 2005 the State of Colorado adopted a new water quality rule establishing more restrictive standards for ammonia. Pueblo's new discharge permit issued in 2010 will contain numeric limits for ammonia that the existing treatment facility cannot attain reliably. Maintaining compliance will require constructing new treatment facilities. In addition, Pueblo is considering an optional project converting the existing gaseous chlorine disinfection process to disinfection via ultraviolet radiation, to be constructed if funding is available. In November 2006, the City Council adopted a 10 -year financial plan for the wastewater enterprise that included a new rate and fee schedule. The financial plan was based on recovering operating costs and on a 10 -year capital improvement program for the wastewater system. The capital improvement program included construction of facilities to allow removal of ammonia in accordance with the requirements of the City's new discharge permit. Construction for this project must begin in 2010 to reduce overall costs by taking advantage of the current "owner- friendly" bid climate. This will also enable the City to complete construction, startup of all the new treatment processes, stabilize and optimize performance, and comply consistently with new effluent ammonia limits prior to the deadline imposed by the State in the new discharge permit. Existing funds are insufficient for the Ammonia Removal Project. In accordance with the financial plan, the Sewer Enterprise applied for a loan in the amount of $26,500,000. The Colorado Water Resources and Power Development Authority, under the State Revolving Fund (SRF) loan program authorized by the Federal Clean Water Act, is expected to provide a loan satisfying the majority of this need in 2010. This ordinance authorizes the Sewer Enterprise to incur debt for the purpose of making improvements to the James R. Dilorio Water Reclamation Facility. The Colorado Water Resources and Power Development Authority will issue pooled bonds in order to generate the approved loan funds. These bonds are referred to as the 2010 A Series bonds. The Sewer Enterprise will be required to pay in debt service for those loan funds received through the SRF program in the form of principal and interest payments on the bonds. FINANCIAL IMPACT This ordinance approving the 2010 A Series bonds will obligate the Sewer Enterprise to annual debt service payments of approximately $1,600,000 per year for 20 years. This debt service will be in addition to the debt service on the 2003 series bonds of approximately $549,650 per year, and debt service on the 2009 ARRA zero - interest loan in the amount of $75,000 per year. Barring the assumption of additional debt, the total wastewater enterprise annual debt service obligation will be approximately $2,224,650 from 2010 through 2023 when the debt from the 2003 Series bonds will be retired, falling to approximately $1,675,000 per year from 2024 through 2029 when the 2009 ARRA Loan debt service is retired, and falling to approximately $1,600,000 from 2029 to 2030 when the 2010 A Series bonds are retired.