9523-04 Authorizing the Acquistion, COnstuction and, Installation of Certain Additions

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Interest Account an amount equal to the sum of one-sixth (1/6th) of the interest on all then outstanding bonds payable during the next succeeding six calendar months and one-twelfth (1/12th) of the of the principal on all then outstanding bonds payable during the next succeeding twelve calendar months; provided that such fractional amounts shall be appropriately increased, if necessary, to provide for the first interest and principal payments. There shall be similarly credited to the account the amount necessary to pay the bank fiscal agency charges, if any, for paying principal and interest on the bonds as the same become payable. The City shall, from the sums deposited in the Sinking Fund and credited to the Bond and Interest Account, remit promptly to the bank fiscal agency sufficient moneys to pay the principal of and interest on the due dates thereof together with the amount of any bank fiscal agency charges. On the first day of each calendar month after making the credits to the Bond and Interest Account, there shall be credited from available Net Revenues to the Debt Service Reserve Account an amount not less than will produce, in equal monthly installments over a sixty (60) month period, an amount (the "Reserve Requirement") equal to the least of (i) maximum annual debt service on all bonds payable from the Net Revenues of the Sewage Works, (ii) 125°Io of the average annual principal and interest payable on all bonds payable from the Sewage Works, or (iii) 10°Io of the proceeds of all bonds payable from the Sewage Works, plus a minor portion thereof as defined in the Internal Revenue Code of 1986, as amended (the Code"). The Reserve Requirement is hereby determined to be reasonable. Said credits to the Debt Service Reserve Account shall continue until the balance therein shall equal the Reserve Requirement. The Debt Service Reserve Account shall constitute the margin for safety as a protection against default in the payment of principal of and interest on the bonds, and moneys in the Debt Service Reserve Account shall be used to pay current principal of and interest on the bonds to the extent that moneys in the Bond and Interest Account are insufficient for that purpose, In the event moneys in the Debt Service Reserve Account are transferred to the Bond and Interest Account to pay principal and interest on bonds, then such depletion of the balance in the Debt Service Reserve Account shall be made up from the next available Net Revenues after credits into the Bond and Interest Account hereinbefore provided for. Any moneys in the Debt Service Reserve Account in excess of the Reserve Requirement shall be transferred to the Sewage Works Improvement Fund referred to below. As an alternative to holding the Reserve Requirement in the Debt Service Reserve Account in cash funds, and if permitted by applicable law and under the terms of all obligations and agreements to which the City is or may become subject (including, without limitation, the obligations and agreements pertaining to the Prior Bonds and any other Parity Bonds), the City may purchase one or more Debt Service Reserve Account insurance policy(s) (the "Reserve Policy") provided by a bank, insurance company, financial institution or other entity ("Reserve Polic I~ er") with a long term debt rating at least equal to the rating category on the 2004 Bonds by the rating agency or agencies then rating the 2004 Bonds, to provide for payment of principal and interest on the 2004 Bonds in the event that funds in the Bond and Interest Account are insufficient to pay the principal and interest on the 2004 Bonds when due. The Mayor and the Controller are hereby authorized to obtain such a Reserve Policy, and are authorized to enter into an agreement ("Reserve Policy Agreement") with the Reserve Policy Issuer and to negotiate the terms of the Reserve Policy Agreement pursuant to advice of the City's financial advisor. The Mayor and the Controller are authorized to execute the Reserve Policy Agreement and any and all other documents or instruments required to obtain the Reserve Policy. -12-