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2004-108 RESOLUTION NO. 2004-108 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF UP TO $2,150,000 WATER SYSTEM REVENUE BONDS, SERIES 2004 AND PROVIDING FOR OTHER DETAILS AND COVENANTS WITH RESPECT THERETO WHEREAS, CITY OF JANESVILLE, Rock County, Wisconsin (the "Municipality") owns and operates a water system (the "System") which is operated for a public purpose as a public utility by the Municipality; and WHEREAS, certain improvements to the System are necessary to meet the needs of the Municipality and the residents thereof, consisting of the construction of a project (the "Project") assigned Safe Drinking Water Loan Program Project No. 5119-01 by the State of Wisconsin Department of Natural Resources (the "Department of Natural Resources"), and as defined in Department of Natural Resources approval letter for the plans and specifications, or portions thereof, issued under Wis. Stat. Section 281.41; dated November 21,2003, and assigned number W-2003-1194;and WHEREAS, under the prOVISIOns of Chapter 66 of the Wisconsin Statutes any municipality may, by action of its governing body, provide for purchasing, acquiring, constructing, extending, adding to, improving, operating and managing a public utility from the proceeds of bonds, which bonds are to be payable only from the revenues received from any source by such utility, including all rentals and fees; and WHEREAS, the Municipality has previously issued its Water System Revenue Bonds, Series 2003 (the "2003 Bonds"), which were authorized by a resolution adopted on November 24, 2003 (the "2003 Resolution"); and WHEREAS, the 2003 Resolution permits the issuance of additional bonds on a parity with the 2003 Bonds upon certain conditions, and those conditions have been met with respect to the issuance of bonds pursuant to this resolution; and WHEREAS, the Municipality deems it to be necessary, desirable and in its best interest to authorize and sell water system revenue bonds of the Municipality payable solely from the revenues of the System, pursuant to the provisions of Section 66.0621 of the Wisconsin Statutes, to pay the cost ofthe Project; and WHEREAS, other than "preliminary expenditures" as defined in the Treas. Reg. 26 C.F.R. 1.150-2 in an amount not exceeding 20% of the principal amount of the bonds authorized to be issued by this resolution, or other than a "de minimis" amount as defined in Treas. Reg. 26 C.F.R. 1.150-2 in an amount not exceeding the lesser of $100,000 or 5% of the principal amount of the bonds authorized to be issued by this resolution, all of the proceeds loaned to the Municipality will be used for Project costs paid by the Municipality subsequent to (i) the date which is 60 days prior to the date on which the Municipality adopted a "declaration of intent" pursuant to Treas. Reg. 26 C.F.R. 1.150-2 stating its intent to reimburse other funds of the 18-22136.1 Municipality previously used to finance the Project, or (ii) the date on which the bonds authorized herein are issued; and WHEREAS, other than the 2003 Bonds, no bonds or obligations payable from the revenues of the System are now outstanding; NOW, THEREFORE, be it resolved by the Governing Body of the Municipality that: Section 1. Definitions. The following terms shall have the following meanings in this Resolution unless the text expressly or by implication requires otherwise: "Act" means Section 66.0621 of the Wisconsin Statutes; "Bond Registrar" means the Municipal Treasurer, who shall act as Paying Agent for the Bonds; "Bonds" mean the $2,150,000 Water System Revenue Bonds, Series 2004 of the Municipality dated their date of issuance, authorized to be issued by this Resolution; "Bond Year" means the twelve-month period ending on each May 1; "Current Expenses" means the reasonable and necessary costs of operating, maintaining, administering and repairing the System, including salaries, wages, costs of materials and supplies, insurance, and audits, but shall exclude depreciation, debt service, tax equivalents and capital expenditures; "Debt Service Fund" means the Debt Service Fund of the Municipality, which shall be the "special redemption fund" as such term is defined in the Act; "Financial Assistance Agreement" means the Financial Assistance Agreement by and between the State of Wisconsin by the Department of Natural Resources and the Department of Administration and the Municipality pursuant to which the Bonds are to be issued and sold to the State, substantially in the form attached hereto and incorporated herein by reference; "Fiscal Year" means the twelve-month period ending on each December 31; "Governing Body" means the City Council, or such other body as may hereafter be the chief legislative body of the Municipality; "Municipality" means City of Janesville, Wisconsin; "Municipal Treasurer" means the Treasurer of the Municipality, who shall act as Bond Registrar and Paying Agent; "Net Revenues" means the gross earnings of the System after deduction of Current Expenses; gross earnings shall include earnings of the System derived from water charges imposed by the Municipality, all payments to the Municipality under any water service agreements between the Municipality and any contract users of the System, and any other 18-22136.1 2 monies received from any source including all rentals and fees and any special assessments levied and collected in connection with the Project; "2003 Bonds" has the meaning given it in the Recitals hereto; "2003 Resolution" has the meaning given it in the Recitals hereto; "Parity Bonds" means bonds payable from the revenues of the System other than the Bonds but issued on a parity and equality with the Bonds pursuant to the restrictive provisions of Section 11 ofthis Resolution; "Project" means the Project described in the preamble to this Resolution. All elements of the Project are to be owned and operated by the Municipality as part of the System as described in the preamble hereto; "Record Date" means the close of business on the fifteenth day of the calendar month next preceding any principal or interest payment date; and "System" means the entire water system of the Municipality, specifically including that portion of the Project owned by the Municipality and including all property of every nature now or hereafter owned by the Municipality for the collection, transmission, treatment, storage and distribution of water, including all improvements and extensions thereto made by the Municipality while any of the Bonds and Parity Bonds remain outstanding, including all real and personal property of every nature constituting part of or used or useful in connection with such sewerage system and including all appurtenances, contracts, leases, franchises, and other intangibles. Section 2. Authorization of the Bonds and the Financial Assistance Agreement. For the purpose of paying the cost of the Project (including legal, fiscal, engineering and other expenses), there shall be borrowed on the credit of the income and revenue of the System up to the sum of $2,150,000; and fully registered revenue bonds of the Municipality are authorized to be issued in evidence thereof and sold to the State of Wisconsin Safe Drinking Water Loan Program in accordance with the terms and conditions of the Financial Assistance Agreement, which is incorporated herein by this reference and the City Manager and the City Clerk of the Municipality are hereby authorized, by and on behalf of the Municipality, to execute the Financial Assistance Agreement. Section 3. Terms of the Bonds. The Bonds shall be designated "Water System Revenue Bonds, Series 2004" (the "Bonds"); shall be dated December 8, 2004; shall be numbered one and upward; shall bear interest at the rate of 2.365% per annum, calculated on the basis of a 360-day year made up of twelve 30-day months; shall be issued in denominations of $0.01 or any integral multiple thereof; and shall mature on the dates and in the amounts as set forth in Exhibit B of the Financial Assistance Agreement. Interest on the Bonds shall be payable commencing on May 1, 2005 and semiannually thereafter on May 1 and November 1 of each year. The Bonds shall not be subject to redemption prior to maturity except as provided in the Financial Assistance Agreement. 18-22136.1 3 The schedule of maturities of the Bonds is found to be such that the amount of annual debt service payments is reasonable in accordance with prudent municipal utility practices. Section 4. Form, Execution, Registration and Payment of the Bonds. The Bonds shall be issued as registered obligations in substantially the form attached hereto as Exhibit A and incorporated herein by this reference. The Bonds shall be executed in the name of the Municipality by the manual signatures of the City Manager and the City Clerk, and shall be sealed with its official or corporate seal, if any. The principal of, premium, if any, and interest on the Bonds shall be paid by the Municipal Treasurer, who is hereby appointed as the Municipality's registrar (the "Bond Registrar") . Both the principal of and interest on the Bonds shall be payable in lawful money of the United States of America by the Bond Registrar. Payment of principal of the final maturity on the Bonds will be payable upon presentation and surrender of the Bonds to the Bond Registrar. Payment of principal on the Bonds (except the final maturity) and each installment of interest shall be made to the registered owner of each Bonds who shall appear on the registration books of the Municipality, maintained by the Bond Registrar, on the Record Date and shall be paid by electronic transfer or by check or draft of the Municipality and mailed to such registered owner at his or its address as appears on such registration books or at such other address may be furnished in writing to such registered owner to the Bond Registrar. Section 5. Security for the Bonds. The Bonds, together with interest thereon, shall not constitute an indebtedness of the Municipality nor a charge against its general credit or taxing power. The Bonds, together with interest thereon, shall be payable only out of the Debt Service Fund hereinafter created and established, and shall be a valid claim of any holder thereof only against such Debt Service Fund and the revenues of the System pledged to such fund on a parity with the pledge granted to the holders of the 2003 Bonds. Sufficient revenues are hereby pledged to said Debt Service Fund, and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the 2003 Bonds and the Bonds as the same becomes due. Section 6. Funds and Accounts. In accordance with the Act, for the purpose of the application and proper allocation of the revenues of the System, and to secure the payment ofthe principal of and interest on the 2003 Bonds, the Bonds and Parity Bonds, certain funds of the System were created and established pursuant to the 2003 Resolution, which are hereby continued and shall be used solely for the following respective purposes: (a) Revenue Fund, into which shall be deposited as received the entire gross earnings of the System, which money shall then be divided among the Operation and Maintenance Fund, the Debt Service Fund and the Surplus Fund in the amounts and in the manner set forth in Section 7 hereof and used for the purposes described below. (b) Operation and Maintenance Fund, which shall be used for the payment of Current Expenses. 18-22136.1 4 (c) Debt Service Fund, which shall be used for the payment of the principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same becomes due. (d) Depreciation Fund, which may be expended for repairs, replacements, new construction, extensions or additions to the System. Any money on deposit in the Depreciation Fund not required during the current Fiscal Year for purposes of the Depreciation Fund, may be transferred to the Surplus Fund. ( e) Surplus Fund, which shall first be used whenever necessary to pay principal of, premium, if any, or interest on the Bonds and Parity Bonds when the Debt Service Fund shall be insufficient for such purpose, and thereafter shall be disbursed as follows: (i) at any time, to remedy any deficiency in any of the Funds provided in this Section 6 hereof; and (ii) money thereafter remaining in the Surplus Fund at the end of any Fiscal Year may be transferred to any of the Funds or accounts created herein or to reimburse the general fund of the Municipality for advances made by the Municipality to the System or for any other lawful purpose. Section 7. Application of Revenues. After the delivery of the Bonds, the entire gross earnings of the System shall be deposited as collected in the Revenue Fund and shall be transferred monthly to the funds listed below in the following order of priority and in the manner set forth below: (a) to the Operation and Maintenance Fund, an amount equal to the estimated Current Expenses for such month and for the following month (after giving affect to available amounts in said Fund from prior deposits); (b) to the Debt Service Fund, an amount equal to one-sixth of the next installment of interest coming due on the 2003 Bonds, the Bonds and any Parity Bonds then outstanding and an amount equal to one-twelfth of the installment of principal of the 2003 Bonds, the Bonds and any Parity Bonds coming due during such Bond Year (after giving affect to available amounts in said account from accrued interest, any premium or any other source); and (c) to the Depreciation Fund, an amount determined by the Governing Body to be sufficient to provide a proper and adequate depreciation account for the System; (d) to the Surplus Fund, any amount remaining in the Revenue Fund after the monthly transfers required above have been completed. Transfers from the Revenue Fund to the Operation and Maintenance Fund, the Debt Service Fund, the Depreciation Fund and the Surplus Fund shall be made monthly not later than the tenth day of each month, and such transfer shall be applicable to monies on deposit in the Revenue Fund as of the last day of the month preceding. Any other transfers and deposits to any Fund required or permitted by subsection (a) through (c) of this Section, except transfers or deposits which are required to be made immediately or annually, shall be made on or before the tenth day of the month. Any transfer or deposit required to be made at the end of any Fiscal Year shall be made within 60 days after the close of such Fiscal Year. If the tenth day of any 18-22136.1 5 month shall fall on a day other than a business day, such transfer or deposit shall be made on the next succeeding business day. It is the express intent and determination of the Governing Body that the amounts transferred from the Revenue Fund and deposited in the Debt Service Fund shall be sufficient in any event to pay the interest on the 2003 Bonds, the Bonds and any Parity Bonds as the same accrues and the principal thereof as the same matures. Section 8. Deposits and Investments. The Debt Service Fund shall be kept apart from moneys in the other Funds and Accounts and the same shall be used for no purpose other than the prompt payment of principal of and interest on the 2003 Bonds, the Bonds and any Parity Bonds as the same becomes due and payable. All moneys therein shall be deposited in special and segregated accounts in a public depository selected under Chapter 34 of the Wisconsin Statutes and may be temporarily invested until needed in legal investments subject to the provisions of Section 66.0603(lm) of the Wisconsin Statutes. The other funds herein created (except the Water System SDWLP Project Fund) may be combined in a single account in a public depository selected in the manner set forth above and may be temporarily invested until needed in legal investments subject to the provisions of Section 66.0603(lm) of the Wisconsin Statutes. Section 9. Service to the Municipality. The reasonable cost and value of services rendered to the Municipality by the System by furnishing water services for public purposes shall be charged against the Municipality and shall, to the extent permitted by law, be paid in monthly installments as the service accrues, out of the current revenues of the Municipality collected or in the process of collection, exclusive of the revenues derived from the System; that is to say, out of the tax levy of the Municipality made by it to raise money to meet its necessary current expenses. The reasonable cost and value of such service to the Municipality in each year shall be equal to an amount which, together with other revenues of the System, will produce in each Bond Year Net Revenues equivalent to not less than the annual principal and interest requirements on the 2003 Bonds, the Bonds, any Parity Bonds, and any other debt obligations payable from the revenues of the System then outstanding times the greater of (a) 110%, or (b) the highest debt service coverage ratio required with respect to any debt obligations payable from the revenues of the System then outstanding. However, such payment out of the tax levy shall be subject to (i) approval of the Public Service Commission, or successors to its function, if applicable, (ii) yearly appropriations therefor, and (iii) applicable levy limitations, if any; but neither this Resolution nor such payment shall be construed as constituting an obligation of the Municipality to make any such appropriation over and above the reasonable cost and value of the services rendered to the Municipality and its inhabitants or to make any subsequent payment over and above such reasonable cost and value. Section 10. Operation of System; Municipality Covenants. It is covenanted and agreed by the Municipality with the owner or owners of the Bonds, and each of them, that the Municipality will perform all of the obligations as set forth in the Financial Assistance Agreement. Section 11. Additional Bonds. The Bonds are issued on a parity with the 2003 Bonds. No bonds or obligations payable out of the revenues of the System may be issued in such manner 18-22136.1 6 as to enjoy priority over the Bonds. Additional obligations may be issued if the lien and pledge is junior and subordinate to that of the Bonds. Parity Bonds may be issued only under the following circumstances: (a) Additional Parity Bonds may be issued for the purpose of completing the Project and for the purpose of financing costs of the Project which are ineligible for payment under the State of Wisconsin Safe Drinking Water Loan Program. However, such additional Parity Bonds shall be in an aggregate amount not to exceed 20% of the face amount of the Bonds; or (b) Additional Parity Bonds may also be issued if all of the following conditions are met: (i) The Net Revenues of the System for the Fiscal Year immediately preceding the issuance of such additional bonds must have been in an amount at least equal to the maximum annual interest and principal requirements on all bonds outstanding payable from the revenues of the System, and on the bonds then to be issued, times the greater of (A) 1.10 or (B) the highest debt service coverage ratio to be required with respect to the Additional Parity Bonds then to be issued or on any debt obligations payable from the revenues of the System then outstanding. Should an increase in permanent rates and charges, including those made to the Municipality, be properly ordered and made effective during the Fiscal Year immediately prior to the issuance of such additional bonds or during that part of the Fiscal Year of issuance prior to such issuance, then Net Revenues for purposes of such computation shall include such additional revenues as an independent certified public accountant, consulting professional engineer or the Wisconsin Public Service Commission may certify would have accrued during the prior Fiscal Year had the new rates been in effect during that entire immediately prior Fiscal Year. (ii) The payments required to be made into the Funds enumerated in Section 6 of this Resolution must have been made in full. (iii) The Additional Parity Bonds must have principal maturing on May 1 of each year and interest falling due on May 1 and November 1 of each year. (iv) The proceeds of the Additional Parity Bonds must be used only for the purpose of providing extensions or improvements to the System, or to refund obligations issued for such purpose. Section 12. Sale of Bonds. The sale of the Bonds to the State of Wisconsin Safe Drinking Water Loan Program for the purchase price of up to $2,150,000, and at par, is ratified and confirmed; and the officers of the Municipality are authorized and directed to do any and all acts, including executing the Financial Assistance Agreement and the Bonds as hereinabove provided, necessary to conclude delivery of the Bonds to said purchaser, as soon after adoption 18-22136.1 7 of this Resolution as is convenient. The purchase price for the Bonds shall be paid upon requisition therefor as provided in the Financial Assistance Agreement. Section 13. Application of Bond Proceeds. The proceeds of the sale of the Bonds shall be deposited by the Municipality into a special fund designated as "Water System SDWLP Project Fund." The Water System SDWLP Project Fund shall be used solely for the purpose of paying the costs of the Project (including capitalized interest, if any, on the Bonds) as more fully described in the preamble hereof and in the Financial Assistance Agreement. Moneys in the Water System SDWLP Project Fund shall be disbursed within three business days of their receipt from the State of Wisconsin and shall not be invested in any interest-bearing account. Section 14. Amendment to Resolution. After the issuance of any of the Bonds, no change or alteration of any kind in the provisions of this Resolution may be made until all of the Bonds have been paid in full as to both principal and interest, or discharged as herein provided, except: (a) the Municipality may, from to time, amend this Resolution without the consent of any of the owners of the Bonds, but only to cure any ambiguity, administrative conflict, formal defect, or omission or procedural inconsistency of this Resolution; and (b) this Resolution may be amended, in any respect, with a written consent of the owners of not less than two-thirds of the principal amount of the Bonds then outstanding, exclusive of Bonds held by the Municipality; provided, however, that no amendment shall permit any change in the pledge of revenues derived from the System or the maturity of any Bond issued hereunder, or a reduction in the rate of interest on any Bond, or in the amount of the principal obligation thereof, or in the amount of the redemption premium payable in the case of redemption thereof, or change the terms upon which the Bonds may be redeemed or make any other modification in the terms of the payment of such principal or interest without the written consent of the owner of each such Bond to which the change is applicable. Section 15. Defeasance. When all Bonds have been discharged, all pledges, covenants and other rights granted to the owners thereof by this Resolution shall cease. The Municipality may discharge all Bonds due on any date by irrevocably depositing in escrow with a suitable bank or trust company a sum of cash and/or bonds or securities issued or guaranteed as to principal and interest by the U.S. government, or by a commission, board or other instrumentality of the U.S. government, maturing on the dates and bearing interest at the rates required to provide funds sufficient to pay when due the interest to accrue on each of said Bonds to its maturity or, at the Municipality's option, if said Bond is prepayable to any prior date upon which it may be called for redemption, and to pay and redeem the principal amount of each such Bond at maturity, or at the Municipality's option, if said Bond is prepayable, at its earliest redemption date, with the premium required for such redemption, if any, provided that notice of the redemption of all prepayable Bonds on such date has been duly given or provided for. Section 16. Rebate Fund. Unless the Bonds are exempt from the rebate requirements of the IRS of 1986, as amended, the Municipality shall establish and maintain a separate account for the Bonds to be known as the "Rebate Fund." The sole purpose of the Rebate Fund is to provide for the payment of any rebate liability with respect to the Bonds under the relevant provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder (the "Regulations"). The Rebate Fund shall be maintained 18-22136.1 8 by the Municipality until all required rebate payments with respect to the Bonds have been made in accordance with the relevant provisions of the Code and the Regulations. The Municipality hereby covenants and agrees that it shall pay to the United States from the Rebate Fund, at the times and in the amounts and manner required by the Code and the Regulations, the portion of the "rebate amount" (as defined in Section 1.148-3(b) of the Regulations) that is due as of each "computation date" (within the meaning of Section 1.148-3(e) of the Regulations). As of the date of this Resolution, the provisions of the Regulations specifying the required amounts of rebate installment payments and the time and manner of such payments are contained in Sections 1.148-3(1) and (g) of the Regulations, respectively. Amounts held in the Rebate Fund and the investment income therefrom are not pledged as security for the Bonds or any parity bonds and may only be used for the payment of any rebate liability with respect to the Bonds. The Municipality may engage the services of accountants, attorneys or other consultants necessary to assist it in determining the rebate payments, if any, owed to the Unites States with respect to the Bonds. The Municipality shall maintain or cause to be maintained records of determinations of rebate liability with respect to the Bonds for each computation date until six years after the retirement of the last of the Bonds. The Municipality shall make such records available to the State of Wisconsin upon reasonable request therefor. Section 17. Resolution a Contract. The provisions of this Resolution shall constitute a contract between the Municipality and the owner or owners of the Bonds, and after issuance of any of the Bonds no change or alteration of any kind in the provisions of this Resolution may be made, except as provided in Section 14, until all of the Bonds have been paid in full as to both principal and interest. The owner or owners of any of the Bonds shall have the right in addition to all other rights, by mandamus or other suit or action in any court of competent jurisdiction, to enforce such owner's or owners' rights against the Municipality, the Governing Body, and any and all officers and agents thereof including, but without limitation, the right to require the Municipality, its Governing Body and any other authorized body, to fix and collect rates and charges fully adequate to carry out all of the provisions and agreements contained in this Resolution. Section 18. Continuing Disclosure. The officers of the Municipality are hereby authorized and directed, if requested by the State, to provide to the State of Wisconsin Safe Drinking Water Loan Program (the "SDWLP") and to such other persons or entities as directed by the SDWLP such ongoing disclosure regarding the Municipality's financial condition and other matters, at such times and in such manner as the SDWLP may require, in order that securities issued by the Municipality and the SDWLP satisfy rules and regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended or may be amended from time to time imposed on brokers and dealers of municipal securities before the brokers and dealers may buy, sell, or recommend the purchase of such securities. Section 19. Conflicting Resolutions. All ordinances, resolutions (other than the 2003 Resolution) or orders, or parts thereof heretofore enacted, adopted or entered, in conflict with the provisions of this Resolution, are hereby repealed, and this Resolution shall be in effect from and 18-22136.1 9 after its passage. In case of any conflict between this Resolution and the 2003 Resolution, the 2003 Resolution shall control as long as the 2003 Bonds are outstanding. ADOPTED: November 22, 2004 Motion by: DeGarmo Second by: Tom Wellnitz Councilmember Aye Nay Pass Absent Wellnitz, Tim X Brien X Williams X Wellnitz, Tom X Steeber X DeGarmo X Addie X AP:&: . -~~~~ Steven E. Sheiffer, City anager APPROVED AS TO FORM: ø~~ u)+~ City Attorne Proposed by: Finance Administration Prepared by: Finance Administration ""' .~ 18-22136.1 10