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ORD 17-839ORDINANCE NO. 17 -839 AN ORDINANCE of the City of Federal Way, Washington, providing for the issuance and sale of a limited tax general obligation bond in the principal amount of not to exceed $6,400,000 to be used to repay the City's Limited Tax General Obligation Bond Anticipation Note, 2014; fixing or setting parameters with respect to certain terms and covenants of the bond; appointing the City's designated representative to approve the final terms of the sale of the bond; and providing for other related matters. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY, WASHINGTON, DO ORDAIN AS FOLLOWS: Section 1. Definitions. As used in this ordinance, the following capitalized terms shall have the following meanings: (a) `Bond" means the "City of Federal Way, Washington Limited Tax General Obligation Bond, 2017" authorized by this ordinance. (b) "Bond Fund" means the debt service fund of the City created for the payment of the principal of and interest on the Bond. (c) "Bond Register" means the registration records for the Bond maintained by the Bond Registrar. (d) "Bond Registrar" means the City Finance Director, whose duties include registering and authenticating the Bond, maintaining the Bond Register, transferring ownership of the Bond, and paying the principal of and interest on the Bond. (e) "City" means the City of Federal Way, Washington, a municipal corporation duly organized and existing under the laws of the State of Washington. (f) "City Council" means the legislative authority of the City, as duly and regularly constituted from time to time. Ordinance No. 17 -839 Page 1 of 13 (g) "Code" means the United States Internal Revenue Code of 1986, as amended, and applicable rules and regulations promulgated thereunder. (h) "Default Rate" means the rate of interest that is 3.0% in excess of the interest rate. (i) "Designated Representative" means the officer of the City appointed in Section 4 of this ordinance to serve as the City's designated representative in accordance with RCW 39.46.040(2). (j) "Issue Date" means the date of the delivery of the Bond to the Purchaser. (k) "Note" means the "City of Federal Way, Washington Limited Tax General Obligation Bond Anticipation Note, 2014" authorized by Ordinance No. 14 -777. (1) "Proposal" means a proposal to purchase the Bond, setting forth certain terms and conditions of the issuance, sale and delivery of the Bond. (m) "Purchaser" means Key Government Finance, Inc., or its permitted assigns. Section 2. Findings and Determinations. The City takes note of the following facts and makes the following findings and determinations: (a) Prepayment of Note. Pursuant to Ordinance No. 14 -777, the City issued its $8,209,960 principal amount Limited Tax General Obligation Bond Anticipation Note, 2017 (the "Note "), for the purpose of financing the costs of purchasing land for City purposes, and by that ordinance reserved the right to prepay the Note prior to its November 26, 2017 maturity date with no prepayment penalty. (b) Debt Capacity. The maximum amount of indebtedness authorized by this ordinance is $6,400,000. Based on the following facts, this amount is to be issued within the amount permitted to be issued by the City for general municipal purposes without a vote: Ordinance No. 17 -839 Page 2 of 13 (1) The assessed valuation of the taxable property within the City as ascertained by the last preceding assessment for City purposes for collection in the calendar year 2017 is $9,420,224,291. (2) As of September 30, 2017, the City had limited tax general obligation indebtedness, consisting of bonds, note, leases and conditional sales contracts outstanding in the principal amount of $35,758,801, which is incurred within the limit of up to 1.50% of the value of the taxable property within the City permitted for general municipal purposes without a vote. (3) As of September 30, 2017, the City had no unlimited tax general obligation indebtedness outstanding. Section 3. Authorization of the Bond. The City is authorized to borrow money on the credit of the City and issue a limited tax general obligation bond evidencing indebtedness in the aggregate principal amount not to exceed $6,400,000 to provide funds necessary to prepay the Note and to pay the costs of issuance and sale of the Bond. Section 4. Description of the Bond; Appointment of Designated Representative. The Finance Director, or the Mayor in the absence of the Finance Director, is appointed as the Designated Representative of the City and is authorized and directed to approve the final terms of the Bond, with such additional terms and covenants as the Designated Representative deems advisable, within the following parameters. (a) Principal Amount. The Bond shall not exceed the aggregate principal amount of $6,400,000. (b) Date or Dates. The Bond shall be dated as of its date of delivery to the Purchaser, which date may not be later than November 26, 2017. Ordinance No. 17 -839 Page 3 of 13 (c) Interest Rate(s). The Bond shall bear interest at a fixed interest rate, calculated on a 360 -day year consisting of 12 30 -day months, through the fifth anniversary of the Issue Date (the "Initial Tender Date "), which rate shall not exceed 2.50 %, other than an adjustment that may occur upon an event of default as described in Section 15. After the Initial Tender Date, and assuming the Purchaser waives the mandatory tender in writing as set forth in Section 9, the interest rate will be subject to adjustment. For every one basis point change in the KeyCorp Cost of Funds Index for 57 months (the "Index "), the interest rate will be adjusted (upward or downward) by 0.65 basis points. Such formula may be changed if agreed to by the Designated Representative and the Purchaser. To the extent that the Index is less than zero, the Index shall be zero. (d) Payment Dates. Interest will be payable semiannually at the rates and on such dates as are acceptable to the Designated Representative. Principal payments will be payable semiannually and shall commence on such payment date acceptable to the Designated Representative. (e) Final Maturity. The Bond shall mature no later than 15 years from the Issue Date. (f) Price. The purchase price for the Bond may be in an amount as is acceptable to the Designated Representative. (g) Other Terms and Conditions. (1) The Bond may not be issued if it would cause the indebtedness of the City to exceed the City's legal debt capacity on the Issue Date. (2) The Bond may be sold in accordance with Section 13 of this ordinance. (3) The Designated Representative may accept such additional terms, conditions and covenants as he or she may determine are in the best interests of the City, consistent with this ordinance. Ordinance No. 17 -839 Page 4 of 13 Section 5. Bond Registrar; Registration and Transfer of the Bond. Pursuant to RCW 39.46.030(4) the City's Finance Director shall serve as initial fiscal agent for the City (the "Bond Registrar ") with respect to the Bond and is authorized, on behalf of the City, to authenticate and deliver the Bond in accordance with the provisions of the Bond and this ordinance. The Bond shall be issued only in registered form as to both principal and interest and shall be recorded on books or records maintained by the Bond Registrar (the "Bond Register "). The Bond Register shall contain the name and mailing address of the owner of the Bond. Upon a determination by the Finance Director that maintenance of the duties of the Bond Registrar is no longer convenient, the fiscal agent of the State of Washington shall act as Bond Registrar. The Bond Registrar shall keep, or cause to be kept, at its office, sufficient books for the registration, assignment or transfer of the Bond, which books shall be open to inspection by the City at all times. The Bond Registrar is authorized, on behalf of the City, to authenticate and deliver the Bond transferred or exchanged in accordance with the provisions of the Bond and this ordinance, to serve as the City's paying agent for the Bond and to carry out all of the Bond Registrar's powers and duties under this ordinance. The Bond Registrar shall be responsible for its representations contained in the Bond Registrar's Certificate of Authentication on the Bond. The Bond may be assigned or transferred only in whole by the Purchaser to a single investor that is a financial institution or an entity reasonably believed to be a qualified institutional buyer within the meaning of the applicable federal securities laws. Any transfer shall be without cost to the owner or transferee, except for governmental charges imposed on any such transfer or exchange. The Bond Registrar shall not be obligated to exchange or transfer the Bond during the 15 days Ordinance No. 17 -839 Page 5 of 13 preceding any payment or prepayment date. When the Bond has been paid in full, both principal and interest, the Bond shall be surrendered to the Bond Registrar, who shall cancel the Bond. Section 6. Form and Execution of the Bond. (a) Form of the Bond; Signatures and Seal. The Bond shall be prepared in a form consistent with the provisions of this ordinance and Washington law. The Bond shall be signed by the Mayor and the City Clerk, either or both of whose signatures may be manual or in facsimile, and the seal of the City or a facsimile reproduction thereof shall be impressed or printed thereon. If any officer whose manual or facsimile signature appears on the Bond ceases to be an officer of the City authorized to sign bonds before the Bond bearing his or her manual or facsimile signature is authenticated by the Bond Registrar, or issued or delivered by the City, the Bond nevertheless may be authenticated, issued and delivered and, when authenticated, issued and delivered, shall be as binding on the City as though that person had continued to be an officer of the City authorized to sign bonds. The Bond also may be signed on behalf of the City by any person who, on the actual date of signing of the Bond, is an officer of the City authorized to sign bonds, although he or she did not hold the required office on its Issue Date. (b) Authentication. Only the Bond bearing a Certificate of Authentication in substantially the following form, manually signed by the Bond Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this ordinance: "Certificate of Authentication. This Bond is the fully registered City of Federal Way, Washington, Limited Tax General Obligation Bond, 2017." The authorized signing of a Certificate of Authentication shall be conclusive evidence that the Bond so authenticated has been duly executed, authenticated and delivered and is entitled to the benefits of this ordinance. Ordinance No. 17 -839 Page 6 of 13 Section 7. Payment of the Bond. Principal of and interest on the Bond shall be payable in lawful money of the United States of America. Principal of and interest on the Bond is payable by electronic transfer on the payment date, or by check or draft of the Bond Registrar mailed on the payment date to the Purchaser at the address appearing on the Bond Register on the record date. The Bond is not subject to acceleration under any circumstances. Section 8. Bond Fund. The debt service fund (the "Bond Fund ") of the City is created for the sole purpose of paying principal of and interest on the Bond. All amounts allocated to the payment of the principal of and interest on the Bond shall be accounted for separately and shall be deposited in the Bond Fund as necessary for the timely payment of amounts due with respect to the Bond. The principal of and interest on the Bond shall be paid out of the Bond Fund. Until needed for that purpose, the City may invest money in the Bond Fund temporarily in any legal investment, and the investment earnings shall be retained in the Bond Fund and used for the purposes of that fund. Section 9. Mandatory Tender. The Bond will be subject to mandatory tender on the Initial Tender Date. The Purchaser, in its sole discretion, may elect to waive in writing the mandatory tender on the Initial Tender Date and continue to hold the Bond for an additional five year period to a subsequent mandatory tender date (the "Second Tender Date "), or upon waiver of the Second Tender Date, to its maturity date (15 years from the Issue Date) at the interest rate set forth in Section 4(c). If the City and the Purchaser do not enter into such a written agreement prior to the Initial Tender Date or Second Tender Date, the Bond will be tendered by the purchaser and the City shall repay the Bond on such date at the purchase price equal to the outstanding principal balance of the Bond plus accrued and unpaid interest to the Initial Tender Date, or if applicable, the Second Tender Date. If necessary, the City shall provide to the Purchaser of the Bond an opinion of bond Ordinance No. 17 -839 Page 7 of 13 counsel to the City that the exemption of interest on the Bond from federal income taxation shall not be materially adversely affected by the change to the interest rate on the Bond. Section 10. Prepayment. The City reserves the right to prepay in whole, but not in part, all of the principal of the Bond outstanding at par plus accrued interest to the date of prepayment at the following prepayment fees: Months from Issue Date Prepayment Fee 1 —12 months 2.0% 13 — 24 months 1.0 25 — to maturity None In the event the City sells property that was financed with a portion of the Note within the first 24 months of the term of the Bond, the City may prepay that portion of the Bond without penalty to the extent that bond counsel to the City confirms that such prepayment is required to maintain the tax - exempt status of the Bond. If the City exercises this prepayment option described in the previous sentence, the City shall use proceeds from the sale of the property or other City funds and shall not use proceeds from a debt issuance for such payment. The City shall provide the Purchaser with written notice of any intended prepayment prior to such prepayment date. Interest on the principal amount of the Bond called for prepayment shall cease to accrue on the date fixed for prepayment unless the principal amount called for prepayment is not paid on the prepayment date. At any time there is a partial prepayment, the remaining installment payments will continue to be made as set forth in the Bond, until the Bond has been repaid in full, unless the Purchaser agrees otherwise. Section 11. Failure to Pay the Bond. If the principal of the Bond is not paid when the Bond is properly presented at its maturity or date fixed for prepayment, the City shall be obligated to Ordinance No. 17 -839 Page 8 of 13 pay interest on the Bond at the same rate provided in the Bond from and after its maturity or date fixed for prepayment until the Bond, both principal and interest, is paid in full or until sufficient money for its payment in full is on deposit in the Bond Fund, or in a trust account established to refund or defease the Bond, and the Bond has been called for payment by giving notice of that call to the Purchaser. Section 12. Pledge of Taxes. The Bond constitutes a general indebtedness of the City and is payable from tax revenues of the City and such other money as is lawfully available and pledged by the City for the payment of principal of and interest on the Bond. For as long as the Bond is outstanding, the City irrevocably pledges that it shall, in the manner provided by law within the constitutional and statutory limitations provided by law without the assent of the voters, include in its annual property tax levy amounts sufficient, together with other money that is lawfully available, to pay principal of and interest on the Bond as the same become due. The full faith, credit and resources of the City are pledged irrevocably for the prompt payment of the principal of and interest on the Bond and such pledge shall be enforceable in mandamus against the City. Section 13. Tax Covenants. (a) Tax Certificate. The City hereby covenants that it will not make any use of the proceeds of sale of the Bond or any other funds of the City that may be deemed to be proceeds of such Bond pursuant to Section 148 of the Code and the applicable regulations thereunder that will cause the Bond to be an "arbitrage bond" within the meaning of such section and such regulations. The City will comply with the requirements of Section 148 of the Code (or any successor provision thereof applicable to the Bond) and the applicable regulations thereunder through the term of the Bond. The City further covenants that it will not take any action or permit any action to be taken that would cause the Bond to constitute a "private activity bond" under Section 141 of the Code. Ordinance No. 17 -839 Page 9 of 13 (b) Post- Issuance Compliance. The Finance Director is authorized and directed to review and update the City's written procedures to facilitate compliance by the City with the covenants in this ordinance and the applicable requirements of the Code that must be satisfied after the issue date to prevent interest on the Bond from being included in gross income for federal tax purposes. (c) Designation of the Bond as a "Qualified Tax - Exempt Obligation." The City designates the Bond as a "qualified tax - exempt obligation" for the purposes of Section 265(b)(3) of the Code, and makes the following findings and determinations: (1) the Bond does not constitute a "private activity bond" within the meaning of Section 141 of the Code; (2) the reasonably anticipated amount of tax - exempt obligations (other than private activity bonds and other obligations not required to be included in such calculation) that the City and any entity subordinate to the City (including any entity that the City controls, that derives its authority to issue tax- exempt obligations from the City, or that issues tax - exempt obligations on behalf of the City) will issue during the calendar year in which the Bond is issued will not exceed $10,000,000; and (3) the amount of tax - exempt obligations, including the Bond, designated by the City as "qualified tax- exempt obligations" for the purposes of Section 265(b)(3) of the Code during the calendar year in which the Bond is issued does not exceed $10,000,000. Section 14. Sale of the Bond. The sale of the Bond to the Purchaser, under or within the terms of this ordinance and the Proposal to purchase the Bond, is hereby approved. A pricing certificate shall set forth the final terms of the Bond. The Designated Representative is authorized to execute the pricing certificate on behalf of the City, so long as the terms provided therein are consistent with the terms of this ordinance. Upon delivery of the Bond, the City shall reimburse the Ordinance No. 17 -839 Page 10 of 13 Purchaser's counsel fee in an amount not to exceed $6,000. The City agrees and understands that the Purchaser is making a loan by purchasing the Bond under the following additional conditions: (i) the Bond is not being registered under the Securities Act of 1933 and is not being registered or otherwise qualified for sale under the "Blue Sky" laws and regulations of any state; (ii) the Purchaser will hold the Bond as one single debt instrument; (iii) no CUSIP numbers will be obtained for the Bond; (iv) no final official Statement has been prepared in connection with the private placement of the Bond; (v) the Bond will not close through the DTC or any similar repository and will not be in book entry form; and (vi) the Bond is not listed on any stock or other securities exchange. Section 15. Reporting Requirements. While the Bond is outstanding, the City shall submit to the Purchaser (a) its annual financial reports within 30 days after receipt of such annual financial report from the Washington State Auditor, (b) its budget for each fiscal year promptly after it is adopted by the City Council and (c) such additional information as the Purchaser may reasonably request. Submission by the City by posting items (a) and (b) on the City's website is acceptable. Section 16. Default. The following events shall constitute a default under the Bond: (a) a failure to pay principal or interest on the Bond when due or upon a mandatory tender, (b) a failure by the City to comply with any of its obligations, or to perform any of its duties, under this ordinance, which failure continues and is not cured for a period of more than 60 days after the Purchaser has made written demand on the City to cure such failure, or (c) a material misrepresentation to the Purchaser by the City in the purchase of the Bond, as reasonably concluded by the Purchaser after investigation and discussion with the City. If any default occurs as delineated in this section, the interest rate may be increased to the Ordinance No. 17 -839 Page 11 of 13 Default Rate and the Purchaser may pursue any other remedies to which it is entitled under the Bond and this ordinance, at law or in equity. Section 17. Governing Law; Waiver of Jury Trial. The Bond shall be governed and interpreted according to the laws of Washington. The City hereby irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any legal proceeding relating to this ordinance. Section 18. Ratification. Any act consistent with the authority and prior to the effective date of this ordinance is hereby ratified and affirmed. Section 19. Severability. Should any section, subsection, paragraph, sentence, clause, or phrase of this chapter, or its application to any person or situation, be declared unconstitutional or invalid for any reason, such decision shall not affect the validity of the remaining portions of this chapter or its application to any other person or situation. The City Council of the City of Federal Way hereby declares that it would have adopted this chapter and each section, subsection, sentence, clauses, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 20. Effective Date. This ordinance shall take effect and be in force thirty (30) days from and after its passage and publication, as provided by law. Section _21. Corrections. The City Clerk and the codifiers of this ordinance are authorized to make necessary corrections to this ordinance including, but not limited to, the correction of scrivener /clerical errors, references, ordinance numbering, section/subsection numbers and any references thereto. Ordinance No. 17 -839 Page 12 of 13 PASSED by the City Council of the City of Federal Way this 7th day of November, 2017. ATTEST: /?�J�lbW H S NIE CITY OF FEDERAL WAY: COURTNEY, C , CITY CLERK APPROVED AS TO FORM: J. RYAN CALL, CITY ATTORNEY FILED WITH THE CITY CLERK: 10/13/2017 PASSED BY THE CITY COUNCIL: 11/07/2017 PUBLISHED: 11/10/2017 EFFECTIVE DATE: 11/15/2017 ORDINANCE NO.: 17 -839 Ordinance No. 17 -839 Page 13 of 13