§ 23-130. Covenants.

(a)

General. The city covenants and agrees with the purchasers and the holders from time to time of all bonds that the recitals contained in section 23-126 are correct, and that until all such bonds are fully paid or the city's liability with reference thereto is fully discharged, as provided in this division, it will continue to hold, maintain and operate the system as a public utility and convenience, free from all liens thereon or on the income therefrom other than the liens granted in this division or provided for, and will maintain, expend and account for its fund and the several accounts therein, as provided in section 23-128, and will not incur a further lien or charge on the income or revenues of the system except upon the conditions and in the manner prescribed in section 23-129, and will perform and cause all other officers and employees of the city to perform and enforce each and all of the additional covenants and agreements set forth in this section. The city will cause the project to be constructed in accordance with the plan and specifications therefor as promptly as practicable and will fulfill and satisfy all conditions of the federal grants for the project.

(b)

Competing service. The city will not establish or authorize the establishment of any other system for the public supply of service or services in competition with any or all of the services supplied by the facilities of the system.

(c)

Property insurance. The city will cause all buildings, properties, fixtures and equipment constituting a part of the system to be kept insured with a reputable insurance carrier or carriers, qualified under the laws of the state, in such amounts as are ordinarily carried, and against loss or damage by fire, explosion and such other hazards and risks as are ordinarily insured against by public utilities owning and operating properties of a similar character and size; provided that if at any time the city is unable to obtain such insurance it will obtain insurance in such amounts and against such risks as are reasonably obtainable. The proceeds of all such insurance shall be available for the repair, replacement or reconstruction of damaged or destroyed property, and until paid out in making good such loss or damage, are pledged as security for the outstanding bonds issued pursuant to this division. All insurance proceeds received in excess of the amount required for restoration of the loss or damage compensated thereby shall be and become part of the revenues appropriated to the fund. If for any reason insurance proceeds are insufficient for the repair, replacement and reconstruction of the insured property, the city shall supply the deficiency from revenues on hand in the replacement and depreciation account and surplus account.

(d)

Liability insurance and surety bonds. The city will carry insurance against liability of the city and its employees for damage to persons and property resulting from the operation of the system in such amounts as the city determines from time to time to be necessary or advisable by reason of the character and extent of such operation. It will also cause all persons handling money and other assets of the fund to be adequately bonded for the faithful performance of their duties and to account for and pay over such money to the city. All amounts received under such insurance and bonds shall be applied to the payment of the loss or damage covered thereby. The premiums for all insurance and bonds required by this subsection and subsection (c) of this section constitute part of the operating expenses of the system, but no insurance liabilities of the city in excess of amounts received under such insurance and bonds shall constitute a lien or charge on revenues of any other assets pledged in this division or otherwise to the water system fund.

(e)

Disposition of property. The city will not mortgage, lease, sell or otherwise dispose of any real or personal properties of the system unless:

(1)

Prior to or simultaneous with such mortgage, lease, sale or other disposition, all of the bonds then outstanding shall be discharged as provided in section 23-132; or

(2)

The properties to be mortgaged, leased, sold or otherwise disposed of are unserviceable, inadequate, obsolete or no longer required for use in connection with the system; or

(3)

The mortgage lease, sale or other disposition will not prevent the city from complying with the provisions of this division; and

(4)

In any event referred to in subsections (e)(2) or (3) of this section, all proceeds of the mortgage, lease, sale or other disposition of such properties are deposited into the fund.

(f)

Books and records. The city will cause proper and adequate books of record and account to be kept showing complete and correct entries of all receipts, disbursements and other transactions relating to the system, the monthly gross revenues derived from its operation, and the segregation and application of the gross revenues in accordance with this division, in such reasonable detail as may be determined by the city in accordance with generally accepted accounting principles. It will cause such books to be maintained on the basis of the same fiscal year as that utilized by the city. The city shall, within 120 days after the close of each fiscal year, cause to be prepared and supply to the original purchaser or purchasers of bonds and the bank or banks designated as agent for the payment of principal of and interest thereon a financial report with respect to the system for such fiscal year. The report shall be prepared at the direction of the city clerk by the state department of community affairs or its successor or, if the city elects, by an independent public accountant. The report shall be prepared in accordance with applicable generally accepted accounting principles and, in addition to whatever matters may be though proper by the city clerk/treasurer to be included therein, shall include the following:

(1)

A statement in detail of the income and expenditures of the system for the fiscal year, identifying capital expenditures and separating them from operating expenditures;

(2)

A balance sheet as of the end of the fiscal year;

(3)

The number of premises connected to the system at the end of the fiscal year;

(4)

The amount on hand in each account of the fund at the end of the fiscal year;

(5)

A list of the insurance policies and fidelity bonds in force at the end of the fiscal year, setting out as to each the amount thereof, the risks covered thereby, the name of the insurer or surety and the expiration date of the policy bond; and

(6)

A determination that the report shows full compliance by the city with the provisions of this division during the fiscal year covered thereby, including proper segregation of the capital expenditures from operating expenses, maintenance of the required balance of the revenue bond account, and receipt of the net revenues during each fiscal year at least equal to 125 percent of the maximum amount of principal and interest payable from the revenue bond account in any subsequent fiscal year, or, if the report should reveal that the revenues have been insufficient for compliance with this division or that the methods used in accounting for such revenues were contrary to any provision of this division, the report of audit shall include a full explanation thereof together with the accountant's recommendation for such change in rates or accounting practices or in the operation of the system as may be required.

(g)

Cost of insurance and accounting. The insurance and fidelity bond premiums and the cost of the bookkeeping and audits provided for in this division and of the billing and collection of the sewer rates, charges and rentals shall constitute part of the operating expenses of the system and shall be payable from the operating account.

(h)

Handling of funds. The employees of the city, under the direction and control of the city treasurer, shall keep books of account, issue statements and collect bills for the rates, charges and rentals for the services and facilities provided by the system and for other money currently receivable on account thereof and shall, to the extent required by subsection (j) of this section, provide for the discontinuance of service in case of nonpayment for services or noncompliance with regulations. All money collected with respect to the system shall be deposited daily with the city treasurer. The city treasurer shall be bonded at all times with a surety company authorized to do business in the state, in the amount of at least $5,000.00, to ensure the faithful carrying out of such duties. Any failure on the part of the city treasurer to comply and to enforce compliance on the part of all officers and employees concerned with the provisions of this division and with the city's other regulations respecting the system shall constitute malfeasance, for which the city treasurer and the surety on his bond shall be personally liable. In the event of default on the part of the city in the payment of principal of or interest on any bond promptly as each falls due, or in the keeping of any covenants contained in this section, and if such default shall continue for a period of 60 days, the council will appoint a special superintendent for the system, with the power and responsibility to operate the system for the city and to recommend to the council such revisions of the rates and charges and operating policies as may be necessary to comply with this division, and to ensure that the net revenues will be sufficient to pay all bond principal and interest, and he shall in all things so operate the system as to fully comply with all the requirements and provisions of this division. The right of the holders of the bonds to require employment of such a superintendent shall not be exclusive, and, in the event of default as outlined in this division, such holder or holders shall have the right to proceed at law or in equity to require the performance of the covenants contained in this section, in any form of action which shall to them seem appropriate.

(i)

Rules and regulations. The rules and regulations for operation of the system and the use of sewer service from the system shall be as provided in the existing ordinances of the city, and any ordinance subsequently adopted amendatory thereof or supplemental thereto.

(j)

Billing. The charges for municipal sewer services will be billed at least monthly, and if the bill is not paid within 60 days of the date of billing or if the customer fails to comply with all rules and regulations established for the system within 30 days after notice of any such violation, the water services to the premises involved shall be discontinued and shall not be resumed until payment of all past due bills for sewer service and compliance with all such rules and regulations. The city shall take appropriate legal action to collect the unpaid charges, including, to the extent now or hereafter authorized by law, making the charge a lien against the real property served by the water connection for which the charge remains unpaid and causing charges with respect to such properties to be collected in the same manner as taxes levied against property within the city.

(k)

Remedies. The holders of not less than 25 percent in principal amount of the bonds outstanding at any time shall have the right, either at law or in equity, by suit, action or other proceedings, to protect and enforce the rights of all holders of such bonds and to compel the performance of any and all of the covenants required in this section to be performed by the city and its officers and employees including but not limited to the fixing and maintaining of rates, fees and charges and the collection and proper segregation of gross revenues and the application and use thereof. The holders of a majority in principal amount of such outstanding bonds shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the bondholders or the exercise of any power conferred on them, and the right to waive a default in the performance of any such covenant and its consequences, except a default in the payment of the principal of or interest on any bond when due. However, nothing in this section shall impair the absolute and unconditional right of the holder of each such bond to receive payment of the principal of and interest on such bond as such principal and interest respectively become due and to institute suit for any such payment. Any court having jurisdiction of the action may appoint a receiver to administer the system on behalf of the city with power to charge and collect rates, fees and charges sufficient to provide for the payment of the operating expenses and for the payment of any bonds or obligations outstanding against the system, and to apply the gross revenues in conformity with this division and the laws of the state.

(l)

Rate covenant. While any bonds are outstanding and unpaid, the rates, charges and rentals for all services and facilities furnished and made available by the system to the city and its inhabitants, and to all customers within or without the boundaries of the city, shall be reasonable and just, taking into consideration the cost and value of the system and the cost of maintaining and operating it, and the amounts necessary for the payment of all bonds and the accruing interest thereon, and the proper and necessary allowances for the depreciation of the system, and no free service shall be provided to any person or corporation. It is covenanted and agreed that the rates, charges and rentals to be charged to all recipients of sewer service shall be maintained, and shall be revised, subject to any required approval by the public service commission of the state, whenever and as often as may be necessary, according to schedules such that the revenues of the fiscal year ending June 30, 1980, and in each fiscal year thereafter, will be at least sufficient to pay the current expense of operation and maintenance as defined in this division, to maintain the operating reserve required in this division to be established in the operating account, and to produce net revenues fulfilling each of the following conditions:

(1)

The net revenues received during each fiscal year commencing with the fiscal year ending July 30, 1980, shall not be less than 125 percent of the maximum annual principal of and interest on bonds payable from the revenue bond account on any future fiscal year during the original term of such bonds; and

(2)

If at the close of any fiscal year the net revenues actually received during such year have been less than required in subsection (l)(1) of this section, the city will forthwith prepare a schedule of altered rates, charges and rentals which are just and equitable and sufficient to produce net rentals in such amount, and will submit the same to the public service commission and do all other things necessary to the end that such schedule will be placed in effect at the earliest possible date.

The establishment of this ratio of net revenues available for the revenue bond account to the sum of the amount of principal and interest to become due on the series 1979 bonds has been deemed necessary in order to sell the series 1979 bonds upon terms most advantageous to the city. The excess of the net revenues over the annual principal and interest and reserve requirements of the series 1979 bonds may be used as authorized in section 23-128. The series 1979 bonds may be prepaid according to their terms on and after December 1, 1989, and in the estimation of the council any excess, prior to that date, of net revenues over principal and interest payments actually due, and the reserve required to be maintained therefor, will be needed to pay or to provide reserves for payment of replacements, renewals and improvement costs, in order to provide adequate service for the present population and the increase thereof reasonably to be expected; and after that date any excess not required for such purposes in the judgment of the council may be used to prepay series 1979 bonds and thereby reduce the interest cost thereon to the city and to the persons served by the system.

(Code 1981, § 3.08.050; Ord. No. 1219, §§ 49, 50, 4-26-11)