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8546 W&S Bonds 1977(PUBLISHED IN THE SALINA JOURNAL myth /4-, 19 77) ORDINANCE NO. 8546 AN ORDINANCE AUTHORIZING AND DIRECTING THE ISSUANCE OF $3,000,000 PRINCIPAL AMOUNT OF COMBINED WATER AND SETIAGE SYSTEM REVENUE BONDS, SERIES OF 1977, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF PROVIDING FUNDS FOR REPAIRING, ALTERING, EXTENDING, RECONSTRUCTING, ENLARGING AND IMPROVING THE COMBINED WATER AND SEWAGE SYSTEM OF SAID CITY, PRESCRIBING THE FORM AND DETAILS OF SAID COMBINED WATER AND SEWAGE SYSTEM REVENUE BONDS, PROVIDING FOR THE COLLECTION, SEGREGA- TION AND APPLICATION OF THE REVENUES OF SAID COMBINED WATER AND SEWAGE SYSTEM FOR THE PURPOSES AUTHORIZED BY LAW, AND MAKING CERTAIN COVENANTS AND AGREEMENTS WITH RESPECT THERETO. WHEREAS, pursuant to the provisions of K.S.A. 12-856 to 12-868, inclusive, 1959 Supplement to the General Statutes of Kansas, 1949, the governing body of the City, by Ordinance No. 6544, passed June 27, 1961, has heretofore combined the waterworks system and the sewage disposal system of said City, as said systems are defined and referred to in said Sections 12-856 to 12-868, inclusive, and said combined water and sewage system has thenceforth been operated and financed in accordance with the provisions of said statutes, and WHEREAS, pursuant to the provisions of K.S.A. 12-856 to 12-868, inclusive, and all amendments thereto, the governing body of the City of Salina, Kansas (hereinafter sometimes called the "City"), heretofore caused to be published in the official City newspaper a notice of the intention of the City to repair, alter, extend, reconstruct, enlarge and improve the combined water and sewage system of said City, at a total cost not exceeding $3,972,900, to be paid for by the use of $972,900 of available Federal funds and the issuance of $3,000,000 principal amount of Combined Water and Sewage System Revenue Bonds of the City, and WHEREAS, within fifteen (15) days after the publication of the notice aforesaid, no written protest was filed with the City Clerk .of the City against such proposed repairs, alterations, ex- tensions, reconstruction, enlargements and improvements or against the issuance of said revenue bonds, and the City is now authorized to make said repairs, alterations, extensions, reconstruction, en- largements and improvements and to issue its revenue bonds to pay part of the cost thereof, and WHEREAS, the governing body of said City has caused a report covering said repairs, alterations, extensions, reconstruction, enlargements and improvements of the City's combined water and sewage system, and an estimate of the cost thereof, to be made by the City's engineers, and said report and estimate have been and hereby are accepted and approved and are now on file in the office of the City Clerk, and WHEREAS, it appears from the report and estimate of the City's engineers, and the governing body of the City hereby finds and determines that the cost of said repairs, alterations, extensions, reconstruction, enlargements and improvements of the City's combined water and sewage system will be $3,972,900, and that it is now necessary that the City proceed forthwith to authorize and issue its Combined Water and Sewage System Revenue Bonds in the amount of $3,000,000 for the purpose of paying part of the cost of said repairs, alterations, extensions, reconstruction, enlargements and improvements, NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS, AS FOLLOWS: Section 1. That the governing body of the City of Salina, Kansas, hereby finds and determines that the cost of repairing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system of said City pursuant to the notice of intention heretofore given by said governing body and published in the official City newspaper, as shown by the report and estimate made by the City's engineers and on file in the office of the City Clerk, is in the amount of $3,972,900; that said repairs, altera- tions, extensions, reconstruction, enlargements and improvements shall be made in accordance with said report and estimate as the same may be amended and supplemented and approved by the governing body of the City; and that it is now necessary that $3,000,000 prin- cipal amount of Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City, herein authorized, be issued to pay part of the cost of said repairs, alterations, extensions, reconstruction, enlargements and improvements, the remainder of said cost to be paid with available Federal funds. Section 2. That for the purpose of providing funds to pay part of the cost of repairing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system of said City, there shall be issued and there are hereby authorized and directed to be issued a series of Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City of Salina, Kansas, in the principal amount of $3,000,000, said bonds being sometimes herein referred to as the "bonds" or the "revenue bonds". Section 3. Said series of Combined Water and Sewage System Revenue Bonds shall be designated "Series of 1977", and shall consist of 600 bonds, numbered from 1 to 600, inclusive, each in the denomination of $5,000. All of said bonds shall be dated April 1, 1977, and said bonds shall be numbered and shall become due serially on April 1 in each year as follows: -2- Bonds becoming due on or prior to April 1, 1987, shall become due without option of prior payment. At the option of the City, bonds becoming due on or after April 1, 1988, and each of them, may be called for redemption and payment prior to maturity as a whole or in part in inverse numerical order on April 1, 1987, or on any interest payment date thereafter at the principal amount thereof plus accrued interest to date of redemption, together with a premium of three percent (3%) of the principal amount of each such bond so redeemed and paid. If the City shall elect to call for redemption and payment any of said bonds so subject to redemption and payment prior to the maturity thereof, the City shall publish once in the official State paper of the State of Kansas and once in a financial journal published in the City of New York, New York, a notice of the intention of the City to call and pay said bonds, the same being described by number, said notice to be published in each of said papers not less than thirty (30) days prior to the date on which said bonds are called for payment. The City shall also give written notice of its inten- tion to redeem and pay said bonds by mailing a copy thereof by United States registered mail addressed to the manager of the underwriting group purchasing said bonds, said notice to be mailed not less than thirty (30) days prior to the date fixed for redemption. If any bond be called for redemption and payment as aforesaid, all interest on such bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price here- inbefore specified. Said bonds shall bear interest from date at the rates hereinbefore specified payable on April 1, 1978, and thereafter semiannually on October 1 and April 1 in each year. -3- BOND PRINCIPAL MATURITY ANNUAL RATE NUMBERS AMOUNT APRIL 1 OF INTEREST 1 - 2 $ 10,000 1982 5.800 3 - 5 - 4 6 10,000 10,000 1983 1984 5.90% 6% 7 - 8 10,000 1985 6% 9 - 10 10,000 1986 6% 11 - 34 120,000 1987 5 1/2% 35 - 60 130,000 1988 5 1/2a 61 - 87 135,000 1989 5 1/2% 88 - 116 145,000 1990 5 1/20 117 - 147 155,000 1991 5 1/20 148 - 180 165,000 1992 5 1/2$ 181 - 216 180,000 1993 5 1 217 - 254 190,000 1994 5 1/2% 255 - 294 200,000 1995 5.60% 295 - 337 215,000 1996 5.80% 338 - 383 230,000 1997 5.80% 384 - 432 245,000 1998 5.800 433 - 484 260,000 1999 5.90% 485 - 540 280,000 2000 60 541 - 600 300,000 2001 6% Bonds becoming due on or prior to April 1, 1987, shall become due without option of prior payment. At the option of the City, bonds becoming due on or after April 1, 1988, and each of them, may be called for redemption and payment prior to maturity as a whole or in part in inverse numerical order on April 1, 1987, or on any interest payment date thereafter at the principal amount thereof plus accrued interest to date of redemption, together with a premium of three percent (3%) of the principal amount of each such bond so redeemed and paid. If the City shall elect to call for redemption and payment any of said bonds so subject to redemption and payment prior to the maturity thereof, the City shall publish once in the official State paper of the State of Kansas and once in a financial journal published in the City of New York, New York, a notice of the intention of the City to call and pay said bonds, the same being described by number, said notice to be published in each of said papers not less than thirty (30) days prior to the date on which said bonds are called for payment. The City shall also give written notice of its inten- tion to redeem and pay said bonds by mailing a copy thereof by United States registered mail addressed to the manager of the underwriting group purchasing said bonds, said notice to be mailed not less than thirty (30) days prior to the date fixed for redemption. If any bond be called for redemption and payment as aforesaid, all interest on such bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price here- inbefore specified. Said bonds shall bear interest from date at the rates hereinbefore specified payable on April 1, 1978, and thereafter semiannually on October 1 and April 1 in each year. -3- Said bonds and interest coupons to be attached thereto as hereinafter provided shall be payable in lawful money of the United States of America at the office of the State Treasurer of the State of Kansas, in the City of Topeka, Kansas. Section 4. Said bonds and each of them shall be executed for and on behalf of the City by the facsimile signature of the Mayor and the facsimile signature of the City Clerk, with the seal of the City affixed or imprinted thereon. Interest coupons shall be attached to said bonds representing the interest to mature thereon, and said interest coupons shall bear the facsimile signatures of the Mayor and City Clerk of said City. Section 5. Each of said bonds and interest coupons and the certificates attached thereto shall be in substantially the following form: No. UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA COMBINED WATER AND SEWAGE SYSTEM REVENUE BOND, SERIES OF 1977 $5,000 KNOW ALL MEN BY THESE PRESENTS: That the City of Salina, in the County of Saline, State of Kansas, for value received, hereby promises to pay, out of the revenues hereinafter specified, to the bearer, the sum of FIVE THOUSAND DOLLARS in lawful money of the United States of America, on the First day of April, 19 and to pay interest thereon from the date hereof at the rate of percent ( %) per annum, payable April 1, 1978, and thereafter semiannually on October 1 and April 1 in each year after the date hereof until the said principal sum shall have been paid, upon presentation and surrender of the inter- est coupons hereto attached, bearing the facsimile signatures of the Mayor and City Clerk of said City, as said coupons severally become due, both principal of and interest on this bond being payable at the office of the State Treasurer in the City of Topeka, Kansas. At the option of the City of Salina, Kansas, bonds of the series of which this bond is a part becoming due on or after April 1, 1988, may be redeemed and paid prior to maturity as a whole or in part in inverse numerical order on April 1, 1987, or on any interest payment date thereafter, at the principal amount thereof plus accrued interest to date of redemption, together with a premium of three percent (3%) of the principal amount of each such bond so redeemed and paid. In the event of any such redemption and payment prior to maturity, the City will publish once in the official State paper of the State of Kansas and once in a financial journal published ZM in the City of New York, New York, not less than thirty (30) days prior to the date of redemption, a notice of the intention of the City to call and pay such bonds on a specified date, the same being described by number. If any bond be called for re- demption and payment as aforesaid, all interest on such bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price herein- before specified. THIS BOND is one of an authorized series of 600 bonds of like date and tenor, except as to number, rate of interest, privilege of redemption and maturity, aggregating the principal amount of $3,000,000, numbered from 1 to 600, inclusive, each in the denomina- tion of $5,000, issued for the purpose of providing funds to pay part of the cost of repairing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system of said City, and is issued by said City by the authority of and in full conformity with the provisions, restrictions and limitations of the Constitution and statutes of the State of Kansas, including K.S.A. 12-856 to 12-868, inclusive, and all amendments thereto, and all other provisions of the laws of said State applicable thereto, and this bond and the interest hereon are to be paid by the City of Salina, Kansas, solely from the revenues derived from the rates, fees or charges collected by said City from the operation of its combined water and sewage system and not from any other fund or source. This bond and the series of which it is a part have been authorized and issued under the provisions of Ordinance No. of the City, passed and adopted on , 1977, to which ordinance reference is made for a description of the covenants made by the City with respect to the collection, segregation and application of the revenues of the City's combined water and sewage system, the nature and extent of the security of such bonds, the rights, duties and obligations of the City with respect thereto, and the rights of the holders thereof. THIS BOND and the series of which it is a part constitute a lien on the revenues produced from the combined water and sewage system of the City, and the City covenants with the holder of this bond to keep and perform all covenants and agreements contained in said ordinance of the City authorizing the issuance of the series of bonds of which this bond is a part, and the governing body of the City will fix rates, fees or charges for the use of or services rendered by its said combined water and sewage system, which rates, fees or charges will be sufficient to pay the cost of operation, improvement and maintenance of said system and pay the principal of and the interest upon said bonds when due. This bond and the series of which it is a part are junior and subordinate with respect to the payment of principal and interest with a series of Combined Water and Sewage System Revenue Bonds, Series of 1961, of the City, dated July 1, 1961, of which series bonds in the principal amount of $1,820,000 remain outstanding. Under the terms of such ordinance authorizing this bond and the series of which it is a part, the City has the right to issue additional parity bonds payable from the same source and secured by the same revenues as this bond and ME the series of which it is a part, provided, however, such additional bonds may be so issued only in accordance with and subject to the covenants, conditions and restrictions relating thereto set forth in said ordinance. THIS BOND has been duly registered in the office of the City Clerk of the City of Salina, Kansas, and in the office of the State Treasurer of Kansas, and this bond and the coupons attached hereto are negotiable. AND IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions and things required to be done and to exist precedent to and in the issuance of this bond have been properly done and per- formed and do exist in due and regular form and manner as required by the Constitution and laws of the State of Kansas. IN WITNESS WHEREOF, the City of Salina, in the State of Kansas, by its governing body, has caused this bond to be signed by the facsimile signature of its Mayor and attested by the facsimile signature of its City Clerk, and its corporate seal to be affixed or imprinted hereon and the interest coupons hereto attached to be signed by the facsimile signatures of said officers, and this bond to be dated this First day of April, 1977. (facsimile) Mayor ATTEST: (facsimile) City Clerk STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) I, the undersigned, City Clerk of the City of Salina, Kansas, hereby certify that the within Combined Water and Sewage System Revenue Bond, Series of 1977, of the City of Salina, Kansas, has been duly registered in my office according to law. WITNESS my hand and official seal this day of 1977. City Clerk �7_ OFFICE OF THE STATE TREASURER OF KANSAS I, Joan Finney, State Treasurer of Kansas, hereby certify that a full and complete transcript of the proceedings leading up to the issuance of this bond has been filed in my office, and that this bond and the coupons attached hereto were registered in my office according to law this WITNESS my hand and official seal. Treasurer of the State of Kansas By Assistant State Treasurer (COUPON) (First interest coupon due April 1, 1978 - 12 months) Coupon No. April, ) On the First day of October, 19 the ) City of Salina, Kansas, will pay bearer, ) April 1, solely from the revenues derived by said City from ) October 1, 19 the rates, fees or charges collected by said City ) from the operation of its combined water and sewage )------------------ system and not from any other fund or source, ) Dollars and Cents, ) City of Salina, in lawful money of the United States of America, ) Kansas. at the office of the State Treasurer, Topeka, ) Kansas, being months' interest on its )------------------ Combined Water and Sewage System Revenue Bond, ) dated April 1, 1977. ) $ Series of 1977, No. ) ( facsimile) ) Mayor ) ATTEST: ) (facsimile) ) City Clerk ) -------------------------------------------------------------------- -7- Section 6. The Mayor and City Clerk are hereby authorized and directed to prepare and execute in the manner hereinbefore specified the Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City herein authorized, and to cause said bonds to be registered as provided by law, and, when duly executed and regis- tered, to deliver said bonds to the purchasers thereof on payment of the purchase price. The purchase price of the bonds herein authorized, exclusive of the accrued interest or premium thereon, shall be deposited in a separate fund hereby established to be known as the "Combined Water and Sewage System Construction Fund of 1977" and shall be used by said City for the sole purpose of paying part of the cost of repair- ing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system of said City as hereinbefore provided. Withdrawals from said fund shall be made on duly author- ized and executed warrant therefor accompanied by a certificate executed by the City's consulting engineers that such payment is being made for a purpose within the scope of this ordinance and that the amount of such payment represents only the contract price or reasonable value of the property, labor, materials, service or obliga- tion being paid for, or, if such payment is not being made pursuant to an express contract, that such payment is not in excess of the reasonable value thereof. Nothing hereinbefore contained shall prevent the payment of all costs and expenses incident to the issu- ance of the bonds herein authorized without a certificate from the City's consulting engineers. Any surplus in said "Construction Fund" not required to make said repairs, alterations, extensions, reconstruction, enlargements and improvements shall be deposited in the "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", hereinafter created and ordered to be established by Section 9 of this ordinance. Any amount received by the City on account of accrued interest or premium on such bonds shall be deposited in said "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977". Section 7. The principal of and the interest on the $3,000,000 principal amount of Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City, herein authorized, shall be payable solely from the rates, fees or charges collected by the City from the operation of its combined water and sewage system, including improvements, extensions and enlargements thereto hereafter constructed or acquired by said City, and not from any other fund or source. Said bonds shall not be or constitute general obligations of the City, and no taxes shall be levied or collected to pay either the principal of or the interest on said bonds. Said bonds shall constitute a lien on the revenues produced from the combined water and sewage system of the City, including improvements, extensions or enlargements of said combined water and sewage system hereafter constructed or acquired, and said bonds shall be negotiable. Said bonds shall be junior and subordinate with respect to the payment of principal and interest from the revenues derived by the City from the operation of its combined water and sewage system with a series of Combined Water and Sewage System Revenue Bonds, Series of 1961, of the City dated July 1, 1961, of which series bonds in the principal amount of $1,820,000 remain outstanding. Section 8. The City has heretofore created and ordered to be established, by Ordinance No. 6546 of the City, passed on July 11, 1961, being the ordinance which authorized the Combined Water and Sewage System Revenue Bonds, Series of 1961, a separate fund designated as the "Water and Sewage Fund". The City covenants and agrees that so long as any of the Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City herein authorized remain outstanding and unpaid, all of the revenues derived by the City from the operation of its combined water and sewage system, including all revenues from improvements, extensions and enlarge- ments in and to said combined water and sewage system hereafter constructed or acquired by the City, will be paid and deposited in said "Water and Sewage Fund" and that the moneys in said "[dater and Sewage Fund" will be administered and used solely as hereinafter in this ordinance provided. Section 9. The creation and establishment, by Ordinance No. 6546 hereinbefore referred to, of four separate accounts in the Water and Sewage Department of the City known respectively as the: (a) "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1961", hereinafter referred to as the "1961 Bond and Interest Account", (b) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961", hereinafter referred to as the "1961 Bond Reserve Account", (c) "Combined Water and Sewage System Depreciation and Emergency Replacement Account", herein- after referred to as the "Depreciation and Emergency Account", and (d) "Combined Water and Sewage System Extension and Bond Retirement Account", hereinafter referred to as the "Extension and Bond Retire- ment Account", be, and the same is, hereby ratified and confirmed, and in addition to the accounts aforesaid there are hereby created and ordered to be established in the treasury of the City two separate accounts to be known respectively as the (e) "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", hereinafter referred to as the "1977 Bond and Interest Account", and (f) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", here- inafter referred to as the "1977 Bond Reserve Account". The accounts referred to in paragraphs (a) and (b) afore- said shall be maintained and administered by the City in accordance with the provisions of said Ordinance No. 6546 of the City so long as any of the Combined Water and Sewage System Revenue Bonds, Series of 1961, of the City remain outstanding. The accounts referred to in paragraphs (c) , (d) , (e) and (f) aforesaid shall be maintained and administered by the City as hereinafter provided so long as any of the Combined Water and Sewage System Revenue Bonds, Series of 1977, of the City herein authorized remain outstanding. Section 10. Moneys paid and deposited in the "Water and Sewage Fund" hereinbefore established shall be administered and disposed of as follows: (a) The City, each month, shall pay or make provision for the payment of the reasonable and proper expenses of operating and maintaining the City's combined water and sewage system for the current month and keeping the same in good repair and working order, including, without limiting the generality of the foregoing, salaries, wages, costs of materials and supplies, insurance, and cost of power. No moneys in the "Water and Sewage Fund" shall be used for the pur- pose of improving, extending or enlarging the City's combined water and sewage system except after the transfer of such moneys to the "Extension and Bond Retirement Account" as hereinafter pro- vided. (b) After paying or making provision for the payment, each month, of the reasonable and proper expenses of operating and maintaining the City's combined water and sewage system for the current month, the City shall next pay and credit monthly from the "Water and Sewage Fund" to the "1961 Bond and Interest Account" and the "1961 Bond Reserve Account" any amounts at the time required to be so paid and credited by the provisions of Ordinance No. 6546 of the City. (c) The City shall next pay out of the "Water and Sewage Fund" into the "1977 Bond and Interest Account" to the extent neces- sary to meet at the maturity thereof all interest on and principal of the bonds herein authorized the following sums: (i) On the first day of October, 1977, and con- tinuing on the first day of each month there- after so long as any of said bonds remain outstanding and unpaid, an amount not less than one-sixth of the amount of interest that will become due on said bonds on the next succeeding interest payment date; and (ii) On the first day of each month beginning on April 1, 1981, and continuing on the first day of each month thereafter so long as any of said bonds remain outstanding and unpaid, an amount not less than one -twelfth of the principal amount of said bonds that will become due on the next succeeding bond maturity date. -10- It 1 All amounts paid into said "1977 Bond and Interest Account" shall be used and expended by the City for the sole purpose of paying the principal of and interest on the bonds herein authorized, Series of 1977, as and when the same become due. (d) There shall next be paid out of the "Water and Sewage Fund" into the "1977 Bond Reserve Account on April 1, 1977, the sum of $260,000, said sum to be obtained from funds held in the "1961 Bond Reserve Account" which are in excess of the amount required to be held in said account by the provisions of Ordinance No. 6546 of the City and which excess funds in the amount of $260,000 are hereby directed to be transferred from said "1961 Bond Reserve Account" and paid into the "Water and Sewage Fund" pursuant to the authorization contained in Section 14 of said Ordinance No. 6546. The City shall next pay out of the "Water and Sewage Fund" into the "1977 Bond Reserve Account" the sum of $2,000 each month, beginning on April 1, 1978, and continuing on the first day of each month thereafter until there shall have accumu- lated in said "1977 Bond Reserve Account" the sum of $320,000. All amounts paid into said "1977 Bond Reserve Account" shall be used and expended by the City solely to prevent any default in the payment of the principal of or interest on the bonds herein authorized, Series of 1977, if the moneys in the "1977 Bond and Interest Account" are insufficient to pay the principal of or interest on said bonds as they become due and if no other funds are available to pay said principal and interest. No part of said "1977 Bond Reserve Account" shall ever be used or expended by the City to call any of said bonds for payment prior to their ultimate maturity unless there shall remain in said "1977 Bond Reserve Account" after such call and payment, the sum of $320,000, unless all of the bonds herein author- ized be otherwise paid. When and after the money and investments in said "1977 Bond Reserve Account" shall aggregate not less than $320,000, no further payments into said "1977 Bond Reserve Account" shall be required, but if at any time or from time to time the City shall be compelled to use and expend any part of said "1977 Bond Reserve Account" for the purpose of paying the interest on or principal of the bonds herein authorized and such use shall reduce the amount of said "1977 Bond Reserve Account" below the sum of $320,000, then the City will continue or resume said monthly payments of $2,000 each from the "Water and Sewage Fund" into the "1977 Bond Reserve Account" until said "1977 Bond Reserve Account" aggregates the sum of $320,000. The obligation of the City to make said payments into said "1977 Bond Reserve Account" shall be subordinate to the obliga- tion of the City to pay from the "Water and Sewage Fund" the prin- cipal of and interest on any combined water and sewage system reve- nue bonds of the City hereafter issued by the City in conformity with the provisions hereinafter contained and standing on a parity with the Combined Water and Sewage System Revenue Bonds, Series of 1977, herein authorized. Moneys in the "1977 Bond Reserve Fund" shall be used to pay and retire the last outstanding bonds herein authorized unless such bonds and all interest thereon be otherwise paid. -11- (e) There shall next be paid out of the "Water and Sewage Fund" into the "Depreciation and Emergency Account" created by Ordinance No. 6546 of the City the monthly payments of $2,500 each required to be so paid by the provisions of Section 11(d) of said Ordinance No. 6546, until there shall have accumulated in said "Depreciation and Emergency Account" not less than the sum of $125,000, and said "Depreciation and Emergency Account" shall be maintained at said amount so long as any of the bonds herein author- ized remain outstanding. Except as hereinafter provided, all amounts credited to said account shall be used by the City, if no other funds are available therefor, for the purpose of making replacements in the combined water and sewage system of the City and keeping the same in good repair and working order so that said system may con- tinue in effective and efficient operation. If no other funds are available therefor, moneys in said account may be used to pay the cost of operating and maintaining said system. Moneys in said -account shall not be used for the purpose of extending or enlarging said system. So long as said "Depreciation and Emergency Account" shall aggregate not less than $125,000, no further payments into said "Depreciation and Emergency Account" shall be required, but if the City shall ever be compelled to use and expend any part of said account for the purposes specified in the last preceding paragraph hereof, and such use shall reduce the amount of said account below the sum of $125,000, then the City covenants and agrees that it will thereafter continue or resume said monthly payments of $2,500 each from the "Water and Sewage Fund" into the "Depreciation and Emergency Account" until said "Depreciation and Emergency Account" aggregates $125,000. (f) When and after there shall be in the "Water and Sewage Fund" an amount sufficient to pay the reasonable and proper expenses of operating and maintaining the City's combined water and sewage system for the current month as provided in paragraph (a) of this Section, and when and after the City shall have made from the "Water and Sewage Fund" all payments, allocations and credits at the time required to be made under the provisions of paragraphs (b), (c), (d) and (e) of this Section, all moneys remaining in the "Water and Sewage Fund" shall be credited monthly to the "Extension and Bond Retirement Account". Except as hereinafter provided, moneys in said "Extension and Bond Retirement Account" shall be used solely for the following purposes as determined from time to time by the governing body of the City: (i) Paying the cost of operation, maintenance and repair of the City's combined water and sewage system to the extent that may be necessary after the application of the moneys held in the "Water and Sewage Fund" under the provisions of para- graph (a) of this Section. (ii) Anticipating payments into or increasing the amounts of the "Bond and Interest Accounts" the "Bond Reserve Accounts", or the "Deprecia- tion and Emergency Account", referred to in para- graphs (b), (c), (d) and (e) of this Section, -12- or any of them, or establishing or increas- ing the amount of any bond and interest account or bond reserve account created by the City for the payment of any combined water and sewage system revenue bonds of the City hereafter issued under the conditions hereinafter specified and standing on a parity with the bonds herein authorized. (iii) Paying the cost of improving, extending or enlarging the City's combined water and sewage system as hereinafter in this Sec- tion 11(f) provided. (iv) Redeeming or paying prior to maturity combined water and sewage system revenue bonds of the City but only as hereinafter in this Section 11(f) provided. The City covenants and agrees that it will not expend or permit the expenditure of any moneys in said "Extension and Bond Retirement Account" for any extensions, improvements or enlarge- ments of the City's combined water and sewage system which are not economically sound or which will not properly and advantageously contribute to the efficient and economical conduct of the operation and business of said system as evidenced by a written report and recommendation of the Superintendent or Manager of said system, nor will it make any such extension, improvement or enlargement costing in excess of $100,000 for any single purchase or improve- ment without securing from the City's consulting engineer or engineers a report and recommendation with respect thereto, nor will it make such purchase or improvement except in accordance with such report and recommendation. At least once in every two years the City's consulting engineers hereinafter referred to in Section 14(d) of this ordinance, after making their examination and report on the condition, opera- tion, and needs of the City's combined water and sewage system as provided in said Section 14(d), shall, by written instrument filed in the office of the City Clerk and sent by such engineers by United States registered mail to the First Securities Company of Kansas, Inc., and to the manager of the underwriting group purchasing the bonds herein authorized, certify whether or not in their opinion the moneys in the "Extension and Bond Retirement Account" are in excess of the amount reasonably required to be maintained in such account for extending, improving or enlarging the City's combined water and sewage system, and, if so, the amount of such excess. If such engineers shall certify that in their opinion there is an excess in said account, such excess moneys in the "Extension and Bond Retirement Account" shall be used by the City from time to time for the purpose of redeeming and paying prior to maturity, or pur- chasing in the open market, any of the Combined Water and Sewage System Revenue Bonds, Series of 1961, as provided in Section 11(e) of Ordinance No. 6546, or after such bonds have been paid, for redeeming and paying prior to maturity any of the bonds of the City herein authorized if any of such bonds be subject to redemption, -13- or, at the option of the City, for purchasing any of the bonds herein authorized in the open market at the lowest price at which such bonds may be purchased not exceeding the call price, or, if none of the bonds herein authorized is at the time subject to redemption, then for the purpose of purchasing such bonds in the open market at the lowest price at which such bonds may be purchased; provided, however, that if the City in conformity with the provisions hereinafter contained shall hereafter issue one or more series of its combined water and sewage system revenue bonds which stand on a parity with the bonds herein authorized, moneys in the "Extension and Bond Retirement Account" available for the redemption or pur- chase of bonds shall be divided among and applied to the redemption or purchase of bonds of the respective series of combined water and sewage system revenue bonds at the time outstanding in proportion to the total principal amount of bonds of said respective series then outstanding, whether or not the bonds of any series are at the time subject to redemption. Bonds so redeemed or purchased shall be canceled. Section 11. If at any time the revenues derived by the City from the operation of its combined water and sewage system shall be insufficient to make any payment or credit on the date or dates hereinbefore specified, the City shall make good the amount of such deficiency by making payments or credits out of the first available revenues thereafter received by the City from the operation of its combined water and sewage system, such payments and credits being made and applied in the order hereinbefore speci- fied in Section 10 hereof. Section 12. If at any time the moneys in the "1977 Bond and Interest Account" and in the "1977 Bond Reserve Account" are not sufficient to pay the principal of or interest on the bonds herein authorized as and when the same become due, then the amount of such deficiency shall be made up by transfer .of moneys from the other funds and accounts hereinbefore created in the following order: First, from the "Extension and Bond Retirement Account"; secondly, from the "Depreciation and Emergency Account"; and, thirdly, from moneys held in the "Water and Sewage Fund"; provided, however, that there shall always remain in the "Water and Sewage Fund" and in the "Extension and Bond Retirement Account" amounts which in the aggregate are sufficient to pay the reasonable and proper expenses of operating and maintaining the City's combined water and sewage system during the next succeeding period of thirty days. Section 13. Any surplus moneys held in the "Water and Sewage Fund", the "1977 Bond and Interest Account", the "Deprecia- tion and Emergency Account", and the "Extension and Bond Retirement Account" may be invested by the City in direct obligations of the United States Government, provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which such fund or account was created, and in no event in obligations maturing longer than two years from date of purchase. Moneys held in the "1977 Bond Reserve Account" may be invested by the City in bonds or other direct obligations of the United States Government or -14- unconditionally guaranteed as to the payment of principal and interest by the United States Government having a fixed redemption value or becoming due within ten years from the date of purchase. Cash moneys in each of the funds and accounts herein created or established shall be deposited in a bank or banks in the City of Salina, Kansas, which are members of the Federal Deposit Insurance Corporation and all such bank deposits shall be adequately secured by the banks holding such deposits. All interest on any investments held in any fund or account created by or referred to in this ordi- nance shall accrue to and become a part of such fund or account. In determining the amount held in any fund or account under any of the provisions of this ordinance, obligations of the United States Government shall be valued at the market value thereof. If and when the amount held in any fund or account shall be in excess of the amount required by the provisions of this ordinance, the City may direct that such excess be paid into the "Water and Sewage Fund" or into the "Extension and Bond Retirement Account", as the City may determine. Section 14. The City of Salina, Kansas, covenants with each of the purchasers and owners of any of the Combined Water and Sewage System Revenue Bonds of the City, Series of 1977, herein authorized, that so long as any of said bonds remain outstanding and unpaid: (a) The City will fix, establish, maintain and collect such rates, fees and charges for the use of or services rendered by the combined water and sewage system of said City, including improvements, extensions and enlargements thereof, which rates, fees or charges shall be sufficient to pay the cost of operation, improvement and maintenance of said system and pay the principal of and the interest on all combined water and sewage system revenue bonds issued by the City against said system and to create and maintain reasonable reserve funds and accounts as hereinbefore specified. The City covenants and agrees that it will at all times maintain and collect rates, fees and charges for the use of or services rendered by its combined water and sewage system which will be sufficient to enable the City to have in each fiscal year a net operating income from such system in an amount that will be at least one hundred twenty-five percent (125%) of the amount required to be paid by the City in such year on account of both principal of and in- terest on all combined water and sewage system revenue bonds of the City at the time outstanding. (b) None of the facilities or services afforded by the combined water and sewage system of the City will be furnished to any user without a reasonable charge being made therefor. The City will pay monthly into the "Water and Sewage Fund" for all water and sewage service furnished by the City's combined water and sewage system to the City or any of its departments at fair and reasonable rates. (c) The City will maintain in good repair and working order its combined water and sewage system and will operate the same in an efficient manner and at reasonable cost. In such operation the City will require the prompt payment of accounts and will discontinue service to any customer delinquent in the payment of his account for a period which shall not exceed sixty (60) days. -15- (d) At least once in every two years the City will employ an independent consulting engineer or firm of consulting engineers having a reputation for knowledge, skill and experience in the construction and operation of municipal water and sewage systems and will cause such consulting engineer or engineers to make an examination and report on the condition and operation of the City's combined water and sewage system, such report to include recommendations as to any changes in such operation deemed desirable. Such report shall also make reference to any unusual or extraordinary items of maintenance and repair and any improvements or extensions that may be needed in the ensuing two-year period. A copy of each such report will be filed in the office of the City Clerk and duplicate copies thereof shall be mailed promptly by the consulting engineer or engineers to the First Securities Company of Kansas, Inc. and to the manager of the underwriting group purchasing the bonds herein authorized. (e) The City will not mortgage, pledge or otherwise encumber its combined water and sewage system or any part thereof or any improvement, extension or enlargement thereof, nor will it sell, lease or otherwise dispose of said system or any material part thereof, provided, however, the City may dispose of any property which has become obsolete, nonproductive, or otherwise unusable to the advantage of the City. Any cash proceeds derived from the sale of such property shall become a part of the "Extension and Bond Retirement Account". (f) The City will carry and maintain a reasonable amount of all-risk insurance upon the properties forming a part of its combined water and sewage system in so far as they are of an in- surable nature, the amount of such insurance being such amount as would normally be insured by a private corporation engaged in a similar type of business. In the event of loss or damage, the City, with all reasonable dispatch, will use the proceeds of such insurance in reconstructing and replacing the property damaged or destroyed, or, if such reconstruction or replacement be unneces- sary, then in redeeming or purchasing outstanding combined water and sewage system revenue bonds of the City including only the Combined Water and Sewage System Revenue Bonds, Series of 1961, or after all of said bonds have been paid, the bonds herein author- ized or other combined water and sewage system revenue bonds of the City hereinafter issued in accordance with the conditions contained in this ordinance and standing on a parity with the bonds herein authorized, such redemption or purchase being made in accordance with the provisions hereinbefore contained in Section 10(f) of this ordinance relating to the redemption or purchase of bonds. The City in operating its combined water and sewage system will carry and maintain public liability and workmen's compensation insurance in such amounts as would normally be maintained by a private corporation engaged in a similar type of business and the proceeds derived from any such policies shall be used in paying the claims on account of which such proceeds were received. The cost of all insurance referred to in this paragraph (f) shall be paid as an operating cost out of the revenues of the City's combined water and sewage system. -16- (g) The City will install and maintain proper books, records and accounts (entirely separate from all other records and accounts of the City) in which complete and correct entries will be made of all dealings and transactions of or in relation to the properties, business and affairs of the City's combined water and sewage system. Such accounts shall show the amount of revenue received from said system, the application of such revenue, and all financial transactions in connection therewith. Said books shall be kept by the City according to standard accounting practices as applicable to the operation of municipal water and sewage systems. The City will operate its combined water and sewage system on the basis of a fiscal year beginning on January 1 and ending on December 31. Annually, as soon as possible following the close of each fiscal year, the City will cause an audit to be made by a competent firm of certified public accountants experienced in public utility accounting of the accounts of its combined water and sewage system for the preceding fiscal year. Each such audit, in addition to such matters as may be thought proper by said accountants shall, without limiting the generality of the foregoing, include the following: (i) A classified statement of the gross revenues, of the operating and maintenance expenses, excluding capital expenditures, if any, and of the net operating revenues of the City's combined water and sewage system for the preceding fiscal year; (ii) A balance sheet as of the end of such fiscal year, showing the amount on hand at the end of such year in each of the funds and accounts created by and referred to in Sections 6, 8 and 9 of this ordinance; (iii) A statement showing the cost of additions to the system during such fiscal year; (iv) A statement of all combined water and sewage system revenue bonds called, purchased, matured or paid during such fiscal year, and a state- ment of all interest paid during such year on all such revenue bonds of the City; (v) A statement of the number of customers served by the combined water and sewage system at the beginning and also at the end of such fiscal year; (vi) A statement showing the amount and character of the insurance carried by the City on the property constituting its combined water and sewage system and showing the names of the insurers, the expiration dates of the policies, and the premiums thereon; and -17- (vii) Comments relative to the manner in which the system has been operated, and as to the ful- fillment of the covenants and provisions contained in this ordinance, and as to the City's accounting practices, and such other comments as said accountants may deem appro- priate. Within thirty (30) days after the completion of each such audit, said accountants shall file a copy thereof in the office of the City Clerk and shall forward copies of such audit to the First Securities Company of Kansas, Inc. and to the manager of the underwriting group purchasing the bonds herein authorized. If such audit shall disclose that proper provision has not been made for all of the requirements of the law under which the bonds herein authorized are issued, and of this ordinance, the City covenants and agrees that it will promptly proceed to cause to be charged for the services rendered by the City's combined water and sewage system rates which will adequately provide for such requirements. (h) The holder of any of the bonds of the City herein authorized shall have the right at all reasonable times to inspect the combined water and sewage system of the City, and all records, accounts and data relating thereto, and any such holder shall be furnished by the City with all such information concerning said system and the operation thereof which he may reasonably request. (i) The City will punctually perform all duties and obligations with respect to the operation and maintenance of its combined water and sewage system, including all improvements, extensions and enlargements thereof, now or hereafter imposed upon the City by the Constitution and laws of the State of Kansas and by the provisions of this ordinance. Section 15. The City of Salina, Kansas, herebv covenants and agrees that so long as any of the bonds herein authorized re- main outstanding and unpaid, said City will not issue any additional bonds or other obligations payable out of the revenues of its com- bined water and sewage system which are superior in security or lien to the bonds herein authorized. The City further covenants and agrees that it will not issue any such additional bonds or other obligations which stand on a parity or equality with the bonds herein authorized unless both of the following conditions are met: (a) The average annual net income derived by the City from the operation of its combined water and sewage system, such net income being defined as the gross income less only the reason- able expenses of operation, maintenance and repair of such system but before any other payments or charges, for the two fiscal years next preceding the issuance of additional bonds, shall have been equal to at least one hundred twenty five per cent (125%) of the maximum amount required to be paid out of said income in any succeeding fiscal year on account of both principal and interest OV -19 becoming due with respect to all combined water and sewage system revenue obligations of the City, including the additional revenue bonds proposed to be issued; PROVIDED, HOWEVER, that if the City shall have made any increase in its charges for water or sewage service and such increased charges shall not have been in effect during all of the two fiscal years next preceding the issuance of additional bonds, the City may retain an independent consulting engineer or firm of consulting engineers having a reputation for skill and experience in the construction and operation of public utilities to make an investigation and report as to the amount of the average annual net income which the City would have received during said last two fiscal years if said increased rates had been in effect during all of said two years and said amount as determined and reported by said engineer or firm of engineers shall govern in determining the right of the City to issue additional parity bonds under the provisions aforesaid. (b) The City shall not be in default in making any pay- ments at the time required to be made by it into the respective funds and accounts created by or referred to in this ordinance. Additional combined water and sewage system revenue bonds of the City issued under the conditions hereinbefore in this Section set forth shall stand on a parity with the bonds herein authorized and shall enjoy complete equality of lien on and claim against the revenues of the City's combined water and sewage system with the bonds herein authorized and the City may make equal provision for paying said bonds and the interest thereon out of the "[Tater and Sewage Fund" and may likewise provide for the creation of a reason- able "Bond and Interest Account" and a reasonable "Bond Reserve Account" for the payment of such additional bonds and the interest thereon out of moneys in said "Water and Sewage Fund". Section 16. Nothing in this Section contained shall prohibit or restrict the right of the City to issue additional combined water and sewage system revenue bonds or other revenue obligations for the purpose of reconstructing, altering, repairing, improving, extending or enlarging the City's combined water and sewage system and to provide that the principal of and interest on said revenue bonds or obligations shall be payable out of the revenues of the City's combined water and sewage system, provided at the time of the issuance of such additional revenue bonds or obligations the City shall not be in default in the performance of any covenant or agreement contained in this ordinance, and provided further that such additional revenue bonds or obligations shall be junior and subordinate to the bonds herein authorized so that if at any time the City shall be in default in paying either interest on or principal of the bonds herein authorized, or if the City shall be in default in making any payments required to be made by it under the provisions of this ordinance, the City shall make no payments of either principal of or interest on said junior and subordinate revenue bonds or obligations until said default or de- faults be cured and no default shall exist on the part of the City under the covenants, agreements and conditions contained in this ordinance. In the event of the issuance of any such junior and subordinate revenue bonds or obligations, the City, subject to the -19- provisions aforesaid, may make provision for paying the same out of any available moneys in the "Water and Sewage Fund". Section 17. The provisions of the bonds authorized by this ordinance and the provisions of this ordinance may be modified or amended at any time by the City with the written consent of the holders of not less than seventy-five percent (75%) in aggregate principal amount of the bonds herein authorized at the time outstand- ing; provided, however, that no such modification or amendment shall permit or be construed as permitting (a) the extension of the matur- ity of the principal of any of the bonds issued hereunder, or the extension of the maturity of any interest on any bonds issued here- under, or (b) a reduction in the principal amount of any bonds or the rate of interest thereon, or (c) a reduction in the aggregate principal amount of bonds the consent of the holders of which is required for any such amendment or modification. Any provision of the bonds or of this ordinance may, however, be modified or amended in any respect with the written consent of the holders of all of the bonds then outstanding. Every amendment or modification of a provision of the bonds or of this ordinance to which the written consent of the bondholders is given as above provided shall be ex- pressed in an ordinance of the City amending or supplementing the provisions of this ordinance and shall be deemed to be a part of this ordinance. It shall not be necessary to note on any of the outstanding bonds any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental ordinance, if any, and a certified copy of this ordinance shall always be kept on file in the office of the City Clerk and shall be made available for inspection by the holder of any bond or prospective purchaser or holder of any bond authorized by this ordinance, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental ordi- nance or of this ordinance will be sent by the City Clerk to any such bondholder or prospective bondholder. Section 18:. The City agrees that if it shall default in the payment of the principal of or interest on any of its bonds herein authorized as the same shall become due and such default shall continue for a period of thirty (30) days, or if the City or its governing body or any of the officers, agents, or employees thereof shall fail or refuse to comply with any of the provisions of this ordinance or of the statutes of the State of Kansas, then, at any time thereafter and while such default shall continue, the holders of twenty-five percent (25%) in amount of the bonds herein authorized then outstanding may, by written notice to the City filed in the office of the City Clerk or delivered in person to said Citv Clerk, declare the principal of all bonds herein authorized then outstanding to be due and payable immediately, and upon any such declaration given as aforesaid, all of said bonds shall become and be immediately due and payable, anything in this ordinance or in said bonds contained to the contrary notwithstanding. This provision, however, is subject to the condition that if at any time after the principal of said bonds shall have been so declared to be due and payable, all arrears of interest upon all of said outstanding bonds, except interest accrued but not yet due on such bonds, and all arrears of principal upon all of said bonds shall have been paid in full, and all other defaults, if any, by the City under the provisions of this ordinance -20- and under the provisions of the statutes of the State of Kansas shall have been cured, then and in every such case, the holders of a majority in amount of the bonds herein authorized then out- standing, by written notice to the City given as hereinbefore specified, may rescind and annul such declaration and its con- sequences, but no such rescission or annulment shall extend to or affect any subsequent default or impair any rights consequent thereon. Section 19. The provisions of this ordinance, including the covenants and agreements hereinbefore contained, shall consti- tute a contract between the City and the holders of the bonds herein authorized and the holder or holders of not less than ten percent (10%) of the bonds at the time outstanding shall have the right, for the equal benefit and protection of all holders of bonds similarly situated: (a) By mandamus or other suit, action or proceeding at law or in equity to enforce his or their rights against the City and its officers, agents and employees, and to require and compel the City and its officers, agents and employees, to perform all duties and obligations required by the provisions of said ordinance or by the Constitution and laws of the State of Kansas. (b) By suit, action or other proceeding in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust. (c) By suit, action or other proceeding in equity or at law to enjoin any acts or things which may be unlawful or in viola- tion of the rights of the holders of the bonds. Nothing contained in this ordinance, however, shall be construed as imposing on the City any duty or obligation to levy any taxes either to meet any obligation incurred herein or to pay the principal of or interest on the bonds herein authorized. No remedy conferred hereby upon any holder of the bonds herein authorized is intended to be exclusive of any other remedy, but each such remedy is cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred hereby. No waiver of any default or breach of duty or contract by the holder of any bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of the holder to exercise any right or power accruing upon any de- fault shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the holders of the bonds may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and then discontinued or abandaned, or shall be determined adversely to the holders of the bonds, then, and in every such case, the City and the holders of the bonds shall be restored to their former positions and rights and remedies as if no suit, action or other proceeding had been brought or taken. -21- Section 20. This ordinance shall take effect and be in full force from and after its passage and publication once in the official City newspaper. this ATTEST: 1 PASSED by the Commission of the City of Salina, Kansas, 7th day of March , 1977. City Clerk 5wz