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Ordinance No. 1,089ORDINANCE NO. 1089 ORDINANCE AUTHORIZING ISSUANCE OF $1,250,000 WATERWORKS AND SANITARY SEWER SYSTEM REVENUE BONDS, SERIES 1971; APPROPRIATING $13,250,000 OF PROCEEDS OF SALE THEREOF FOR VARIOUS PRCJECTS; AND CONTAINING OTHER PROVISIONS RELATING THERETO THE STATE OF TEXAS § COUNTIES OF HARRIS & CHAMBERS § CITY OF BAYTOWN § WHEREAS, the bonds hereinafter authorized were duly and favorably voted, as required by the Constitution and laws of the State of Texas, at an election held in the City on the 17th day of March, 1970; and WHEREAS, the City Council now deems it advisable to issue, sell, and deliver $1,250,000 bonds as a portion and the first installment of $2,500,000 sanitary sewer system bonds voted at said election, the remaining $1,250,000 sani- tary sewer system bonds to be issued, sold, and delivered later; and WHEREAS, the bonds hereinafter authorized are to be issued and delivered pursuant to Vernon's Articles 1111 through 1118; BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN THAT: Section 1. Said City's negotiable, serial coupon bonds to be designated CITY OF BAYTOWN, TEXAS, WATERWORKS AND SANITARY SEWER SYSTEM REVENUE BONDS, SERIES 1971 (hereinafter sometimes called the "Bonds "), are hereby authorized to be issued and delivered in the principal amount of $1,250,000 for the purpose of IMPROVING AND EXTENDING THE CITY'S SANITARY SEWER SYSTEM. Section 2. The Bonds shall be dated April 15, 1971, shall be numbered consecutively from 1 through 250, shall be in the denomination of $5,000 each, and shall mature and become due and payable serially on May 15 in each of the years, and in the amounts, respectively, as set forth in the following schedule: YEAR AMOUNT YEAR AMOUNT 1972 $ 25,000 1982 $ 25,000 1973 25,000 1983 25,OD0 1974 25,000 1984 25,000 1975 25,000 1985 25,000 1976 25,000 1986 25,000 1977 25,000 1987 150,000 1978 25,000 1988 150,000 1979 25,000 1989 175,000 1980 25,000 1990 2005000 1981 25,000 1991 200,000 Section 3. Said Bonds shall bear interest per annum at the following rates, respectively, to -wit: Bonds maturing 1972 through 19_, % Bonds maturing 19 through 19_, % Bonds maturing 19 through 19_, Bonds maturing 19 through 19_, Bonds maturing 19_ through 19_, % Bonds maturing 19 through 19_, % evidenced by interest coupons which shall appertain to said Bonds and which shall be payable on the dates indicated in the FORM OF BOND set forth in this ordinance. -2- Section 4. The Bonds, and the interest coupons apper- taining thereto, shall be payable, shall have the characteris- tics, and shall be signed and executed (and the Bonds shall be sealed) all as provided, and in the manner indicated, in the FORM OF BOND set forth in this ordinance. Section 5. The form of the Bonds, including the form of registration certificate of the Comptroller of Public Accounts of the State of Texas to be printed and endorsed on each of the Bonds, and the form of the aforesaid interest coupons which shall appertain and be attached initially to each of the Bonds, shall be, respectively, substantially as follows: NO. FORM OF BOND: UNITED STATES OF AMERICA STATE OF TEXAS COUNTIES OF HARRIS AND CHAMBERS CITY OF BAYTOWN, TEXAS WATERWORKS AND SANITARY SEWER SYSTEM REVENUE BOND SERIES 1971 ON MAY 153 , the CITY OF BAYTOWN, in the $5,000 Counties of Harris and Chambers, in the State of Texas, prom- ises to pay to bearer the principal amount of FIVE THOUSAND DOLLARS and to pay interest thereon, from the date hereof, at the rate of % per annum, evidenced by interest coupons pay- able November 15, 1971, and semiannually thereafter on each -3- May 15 and November 15 while this bond is outstanding. The principal of this bond and the interest coupons appertaining hereto shall be payable to bearer, in lawful money of the United States of America, without exchange or collection charges to the bearer, upon presentation and surrender of this bond or proper interest coupon at the FIRST CITY NATIONAL BANK OF HOUSTON, Houston, Texas, which shall be the paying agent for this series of bonds. THIS BOND is one of a series of negotiable, serial, coupon bonds, dated APRIL 15, 1971, issued in the principal amount of $1,250,000 for the purpose of IMPROVING AND EXTEND- ING THE CITY'S SANITARY SEWER SYSTEM in accordance with Articles Jill through 1118, Vernon's Texas Civil Statutes, as amended, and the home -rule charter of the City, and pursu- ant to an election held within the City on the 17th day of March, 1970, and authorized pursuant to an ordinance duly adopted by the City Council of the City entitled ORDINANCE AUTHORIZING ISSUANCE OF $1,250,000 WATERWORKS AND SANITARY SEWER SYSTEM REVENUE BONDS, SERIES 1971; APPROPRIATING $1,250,000 OF PROCEEDS OF SALE THEREOF FOR VARIOUS PROJECTS; AND CONTAINING OTHER PROVISIONS RELATING THERETO and finally passed on the 12th day of April, 1971, this bond being one of a series of bonds which constitutes a portion and the first installment of $2,500,000 revenue bonds voted at the afore- said election. IT IS HEREBY certified, recited, and covenanted that this bond has been duly and validly issued and delivered; that all acts, conditions, and things required or proper to -4- be performed, exist, and be done precedent to or in the issuance and delivery of this bond have been performed, existed, and been done in accordance with law; and that the interest on and principal of this bond and the series of which it is a part, together with other outstanding waterworks- and sanitary - sewer- system revenue bonds of said City, are secured by and payable from an irrevocable first lien on and pledge of the Net Revenues from the operation of the City's waterworks and sanitary -sewer System, as defined and provided, or adopted by reference, in the ordinance authorizing this series of bonds. THE HOLDER hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. IN WITNESS WHEREOF, this bond and the interest coupons appertaining hereto have been signed with the facsimile signa- ture of the Mayor and countersigned with the facsimile signa- ture of the City Clerk of said City, respectively, and the official seal of said City has been duly impressed, or placed in facsimile, on this bond. COUNTERSIGNED: XXXXXXXXXXXX City Clerk (SEAL) XXXXXXXXXXXX Mayor FORM OF REGISTRATION CERTIFICATE: COMPTROLLER'S REGISTRATION CERTIFICATE§ REGISTER NO. I hereby certify that this bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this bond has been registered by the Comptroller of Public Accounts of the State of Texas. (SEAL) NO. WITNESS my signature and seal this XXXXXXXXXXXX Comptroller of Public Accounts of the State of Texas FORM OF INTEREST COUPON: ON 15, 19 the CITY OF BAYTOWN, in the Counties of Harris and Chambers, State of Texas, promises to pay to bearer the amount shown on this interest coupon, in lawful money of the United States of America, without exchange or collection charges to the bearer, upon presentation and surrender of this interest coupon at the FIRST CITY NATIONAL BANK OF HOUSTON, Houston, Texas, said amount being interest due that day on the bond bearing the number hereinafter designated of that issue of CITY OF BAYTOWN, TEXAS, WATERWORKS AND SANITARY SEWER SYSTEM REVENUE BONDS, SERIES 19711 dated April 15, 1971. The holder hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxa- tion. Bond No. xxxxxxxxxxxx City Clerk xxxxxxxxxxxx Mayor Section 6. The Bonds are and shall be secured by and payable from an irrevocable first lien on and pledge of the Net Revenues from the operation of the City's waterworks and sanitary -sewer System, and said Net Revenues are further pledged irrevocably to the maintenance of the Bond Fund. Section 7. The Bonds, and interest coupons appertain- ing thereto, shall constitute special obligations of the City, payable solely from the pledged Net Revenues, and the holders of the Bonds and the interest coupons attached thereto, shall never have the right to demand payment out of funds raised or to be raised by taxation. Section 8. The term "Outstanding Bonds," as used herein, shall mean the outstanding bonds of the following issues of said City: Waterworks and Sewer System Revenue Bonds, Series 1958, dated February 15, 1958, authorized by ordinance dated February 6, 1958 Waterworks and Sanitary Sewer System Revenue Bonds, Series 1966, dated February 15, 1966, authorized by ordinance dated February 24, 1966 Waterworks and Sanitary Sewer System Revenue Bonds, Series 1967, dated May 15, 1967, author- ized by ordinance dated May 25, 1967 -7- The Bonds hereby authorized are parity "Additional Bonds," as defined and permitted in an ordinance dated May 13, 1957, whereby the City's Waterworks and Sewer System Revenue Refunding Bonds, Series 1957, dated May 15, 1957 (all of which bonds have now been retired both as to principal and interest) were authorized, and Sections 8.02 (a), (b), (c), and (e) and Sections 9 through 12 of said ordinance (a photocopy thereof being attached hereto, marked Exhibit A, and made a part hereof for all purposes) are hereby adopted by reference and shall be applicable to the Bonds for all purposes except to the extent hereinafter specifically modified and supplemented. The Bonds and the Outstanding Bonds are and shall be secured by and payable from a first lien on and pledge of the Net Revenues from the operation of the City's waterworks and sanitary -sewer System, and all of said obligations shall be on a parity and of equal dignity in all respects. Section 9. In addition to all other amounts required by the aforesaid ordinance authorizing the City's Waterworks and Sewer System Revenue Refunding Bonds, Series 1957, dated May 15, 1957, and by the ordinances authorizing the Outstanding Bonds, the City, at the same time payments are made into the Bond Fund under the provisions of the aforesaid ordinances authorizing the Series 1957 bonds and the Outstanding Bonds, from the funds in the System Fund, shall pay into the Bond Fund each year beginning with the year in which the Bonds are issued, an amount equal to 100% of the amount required to meet the interest and principal payments falling due on and before the next maturity date of the Bonds. In addition to such payments and in addition to the payments into the Bond Fund Reserve Account required by the aforesaid ordinances authoriz- ing the Series 1957 bonds and the Outstanding Bonds, the City shall pay into the Bond Fund, from the System Fund, in each year 20% of the above required amount sufficient to meet the interest and principal payments falling due on or before the next maturity date of the Bonds and the interest and principal payments on the Bonds for one year thereafter. Such additional payments shall be made into the Bond Fund Reserve Account established by the ordinance authorizing the Series 1957 bonds. The amount required to be paid into the Bond Fund in each year shall be in substantially equal monthly payments from the monies in the System Fund after deductions have been made for payment of the reasonable cost of operating and maintaining the System for such month. If the revenues of the System in any month, after deduction for operation and maintenance, are insufficient to make the required payment into the Bond Fund, including the Bond Fund Reserve Account, then the amount of any deficiency in such payment shall be added to the amount otherwise required to be paid into the Bond Fund in the next month. Insofar as the Bonds of this issue are concerned, no payments other than the payments required by the ordinance authorizing the Series 1957 bonds need be made into the Con- tingencies Fund. Except as provided herein, all of the provi- sions of the aforesaid ordinance authorizing the Series 1957 bonds relating to the payment or deposits of monies into the Bond Fund and the Bond Fund Reserve Account and to the mainte- nance of said Bond Fund, including said Bond Fund Reserve mom Account, shall apply to payments or deposits required by this ordinance and to the maintenance of said Bond Fund, including said Bond Fund Reserve Account. Section 10. There is hereby appropriated out of the proceeds of sale of the Bonds the sum of $1,250,000 for the purpose of improving and extending the City's sanitary sewer system and said proceeds of sale of the Bonds shall be used and expended for such purpose as set forth in the ordinance adopted February 26, 1970, calling the bond election which was held in the City on March 17, 1970. It is estimated that the maximum cost of the current project for improving and extending the City's sanitary sewer system will not exceed $15250,000; consequently, there is no necessity for any down payment and no such down payment is ordered to be made. It is hereby officially found and determined that the probable period of usefulness of the current project is forty years. that: Section 11. The City represents, covenants, and agrees (a) The City will promptly proceed to utilize the proceeds of sale of the Bonds for the purpose, as stated on the face of each of the Bonds, for which the Bonds are to be issued. (b) Nc portion of the Bonds is issued as a part of an issue, all or a major portion of the proceeds of which are reasonably expected to be used directly or indirectly: (1) to acquire securities (within the meaning of Section 165[9][2][A] or [B] of the Internal Revenue Code) or obligations other than the obliga- tions described in Section 103(a)(1) -10- of the Internal Revenue Code, except for a temporary period to the extent permitted by Section 103(d)(4)(A) of the Internal Revenue Code, which may be reasonably expected at the time of the issuance of the Bonds to produce a yield over the term of the issue of the Bonds which is materially higher (taking into account any discount or premium) than the yield on the issue of the Bonds or (2) to replace funds which were used directly or indirectly to acquire securities or obligations described in subparagraph (1) above. (c) The City will take such action as may be necessary in accordance with the regula- tions prescribed from time to time by the Secretary of the Treasury or his delegate to carry out the purposes of Section 103(d) of the Internal Revenue Code so that no por- tion of the issue of the Bonds shall be classified as "Arbitrage Bonds" within the meaning of Section 103(d) of the Internal Revenue Code. (d) The City will not permit to be deposited to the credit of any of the Funds herein men- tioned or applied to the payment of the princi- pal of or .interest on the Bonds any proceeds from any grant, donation, or income received from the United States Government, whether pursuant to agreement or otherwise, if such deposit or application would result in inter- est payable on said bonds being includable in whole or in part in gross income for Federal income taxes. Section 12. The Mayor of said City is hereby author- ized to have control of the Bonds and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas and their registra- tion by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds, said Comptroller of -11- Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on each of the Bonds, and the seal of said Comptroller shall be impressed, or printed, or lithographed on each of the Bonds. Section 13. Said bonds are hereby sold and shall be delivered to for the par value thereof and accrued interest thereon to date of delivery, plus a premium of $ , subject to the unqualified approving opinions, as to the legality of said bonds, of the Attorney General of the State of Texas and of Vinson, Elkins, Searls & Smith, Houston, Texas, market attorneys; and it is hereby officially found, determined, and declared that said bonds are sold on the best terms and for the best price possible. Section 14. The Mayor and all other appropriate offi- cers of the CITY OF BAYTOWN are hereby authorized and directed to do any and all things necessary or convenient to carry out the provisions of this ordinance. Section 15. This ordinance was read once by the City Council and shall take effect immediately. Section 16. It is hereby officially found and deter- mined that the need of the City for such financing creates -12- an emergency and an urgent public necessity for the holding, at the scheduled time, of the meeting of the City Council at which this ordinance is adopted and for the adoption of this ordinance; and the NOTICE OF MEETING relating to said meet- ing and heretofore posted by the City Clerk, and the posting thereof, are hereby authorized, approved, adopted, ratified, and confirmed. PASSED, AUTHENTICATED, AND APPROVED this 12th day of April, 1971. ATTEST: ct ti"_'� City Clerk CITY OF BAYTOWN, TEXAS (SEAL) Mayor CITY OF BAYTOWN, TEXAS -13- EXHIBIT A 8.02 - DEFINITIONS: That, as used in this ordinance, the follow- ing terms shall mean and include, and are defined, as follows, to -wit: (a) City - the City of Baytown, Texas, and, where appro- priate, the City Council thereof. (b) System - the Waterworks and Sanitary Sewer System of the City, including all present and future extensions, replace- ments, and improvements to said Waterworks and Sanitary Sewer System. (c) Net Revenues - the gross revenues derived from the operation of the System less the reasonable expenses of operation and maintenance of said System, Including all salaries, labor, materials, interest, and such repairs and extensions as in the judgment of the governing body of the City are necessary to keep the plant or utility in operation and render adequate service to the City and the inhabitants thereof, or such as might be neces- sary to meet some physical accident or condition which would otherwise impair the original security. - 11 - (e) Additional Bonds - the additional bonds that the City expressly reserves the right to issue in Section 9.06 of this ordinance. Section 9: PLEDGE OF NET REVENUES: That all the net revenues derived from the operation of the System, with the exception of those in ex- cess of the amounts required to establish and maintain the funds as hereinafter provided in this ordinance, are hereby irrevocably pledged to the payment of the Bonds and, when and if issued, the Additional Bonds. For the benefit of the original and all sub- sequent holders of the Bonds, coupons, or any part thereof, and In addition to all other provisions and covenants in the laws of the Mate of Texas and in this ordinance, it is expressly stipu- lated: 9.01 - RATES: The City shall fix and maintain rates and collect charges for the facilities and services afforded by the System, which will provide revenues sufficient at all times: (a) To pay all operation, maintenance, depreciation, re- placement, and betterment charges of the System; (b) To produce net revenues each year in an amount not less than one and one -half (1 -1/2) times the average annual prin- cipal and interest requirements of all bonds then outstanding pay- able from the revenues of the System; (c) To establish and maintain the Revenue Bond Fund (in- cluding the Reserve Account thereof) and the Contingencies Fund, hereinafter mentioned; (d) To pay all outstanding indebtedness against the Sys- tem, other than the Bonds and (when issued) the Additional Bonds, as and when the same becomes due. Provided also that no free - 12 - services of the System shall be allowed, and should the City or any of its agencies or instrumentalities make use of the services, payment of the reasonable value thereof shall be made by the City out of funds derived from sources other than revenues and income of the System. 2.02 - USE Or REVENUES: The City will deposit, as collected, all revenues derived from the operation of the System into a separate account (herein called the "System Fund "), which shall be kept separate and apart from all other funds of the City. The System Fund shall be administered as follows: (a) Maintenance and operation:' From the moneys in the System Fund, the City shall pay the expenses of operation and maintenance of the System, including all salaries, labor, mate- rials, interest, and such repairs and extensions as in the judg- ment of th-- governing body of the City are necessary to keep the plant or utility in operation and render adequate service to such City and the ;nhabitants or such as might be necessary to meet some physical accident or conditions which would otherwise impair the original security. (b) Revenue Bond Fund: There is hereby created and established a special fund for the payment of the interest on and principal of the Bonds, which fund is hereinafter referred to as the "Bond Fund." From the funds in the System Fund, the City shall pay into the'Bond Fund during each year beginning with the date of the Bonds, an amount equal to 100 per centum of the amount required to meet the interest and principal payments falling due on and before the next maturity date of the Bonds. In addition to such payment, the City shall pay into the Bond Fund, from the System Fund,in each year 20 per centum of the above required -13-- amount until such time as there is in the Bond Fund an amount sufficient to meet the interest and principal payments falling due on or,before the next maturity date of the Bonds and the interest and principal payments on the Bonds for one year there- after. Such additional payments shall constitute and be known as the Bond Reserve Account. The amount required to be paid into the Bond Fund in each year shnil be in substantially equal monthly payments from the moneys in the System Fund after de- ductions have been made for paying the reasonable cost of oper- ating and maintaining the System for such month. If the reven- ues of the System in any month, after deductions for operation and maintenance, are insufficient to make the required payment into the Bond Fund, including the Bond Reserve Account, then the amount of any deficiency in such payment shall be added to the amount otherwise required to be paid into the Bond Fund in the next month. It is the intent of this provision that the sums raid into the Bond Fund shall be in excess of the immediate requirements for payment of current interest and principal on the bonds, until there has been accumulated in the Bond Fund, as a reserve, an amount sufficient to service the Bonds for one year. The moneys in the Bond Fund shall be used solely for the purpose of paying interest on and principal of the Bonds until all Bonds have been retired; provided that, when the total in the Bond Fund is equal to the aggregate principal amount of all bonds outstanding and payable from said Bond Fund, plus accrued interest thereon, the moneys in the Bond Fund may be used to purchase such bonds at a price, exclusive of accrued interest, not exceeding the principal amount thereof. - 14 - The Bond Fund shall be established and maintained at The First City National Bank of Houston, Houston, Texas, and the moneys paid into said Bond Fund, as required by this ordinance, shall be deposited on or before the 20th day of each month, be- ginning May 20, 1957, at said Bank. The moneys deposited in the Bond Fund shall be continuously secured by a valid pledge to the City of direct obligations of the United states of America having an aggregate market value, exclusive of accrued interest, at all times at least equal to such Bond Fund. Moneys in the Bond Reserve Account, at the option of the City, may be invested in direct obligations of the United States of America, maturing within ten (10) years from the date of pur- chase or maturing bef cre the final maturity of the Bonds, which- ever shall first occur, which shall be deposited in escrow with said Bank under an escrow agreement. If such funds are so in- vested and deposited in escrow, the City shall have the right to have sold through the escrow agent on the open market a suffi- cient amount of said securities in order to meet its obligations of principal and interest in the event it does not have sufficient funds, uninvested, on hard for suci-, purpose. Under such circum- stances, the Mayor is hereby authorizers, ordered, and directed to give fifteen (15) days' notice to such escrow agent of the neces- sity to sell said securities on the open market. After such sale, the moneys resulting therefrom shall belong to the Bond Reserve Account of the Bond Fund, and shall be available to pay such obli- gations of principal and interest. So long as the Bond Reserve Account contains a balance of not less than an amount sufficient to service the Bonds for one year, as above provided, no further payments need be made into - 15 - r said Reserve Account; provided, that if said balance is ever reduced to an amount which is less than that specified above, payments into said Reserve Account shall be resumed, as above provided, and shall be continued until said Account contains a balance of not less than an amount sufficient to service the Bonds for one year, as above provided. (c) Contingencies Fund: There is hereby created and established a special fund, as a reserve for contingencies, which fund is hereby referred to as the "Contingencies Fund." After the payments required by Sections 9.02(a) and 9.02(b), above, have been made, the City, on or before the 20th day of each month, beginning June 20, 1957, from moneys in the System Fund, shall deposit in the Contingencies Fund a sum not less than $500.00, and such monthly payments shall be continued until such time as there is in'the Contingencies Fund a balance of not less than $50,000.00. Moneys in the Contingencies Fund shall- be used only (1) to pay unusual maintenance and operation expenses, as such expenses are defined in Section 9.O2(a) above, for which there are no other moneys available, and (2) to pre- vent a default in the payment of principal and interest in the event there are otherwise insufficient moneys for such purposes. If in any month the City shall for any reason fail to pay into said Contingencies Fund the full amount above stipu- lated, amounts equivalent to such deficiencies shall be set apart and paid into said Contingencies Fund from the first available and unallocated revenues of the following month or months and shall be in addition to the monthly deposit herein - above provided to be otherwise paid into said Contingencies Fund. Said Contingencies Fund shall be established and - 16 - mainta .neck at the Citizens, F: Tarr.'; me „ra.s, and. shad be contlnurly` ;?- fir z. vat.: ,� 71n:lr, the City of direct oblj.ga.tJ.cn: of �,he Unito.O Stato:., of Arnr?r J, havl.ng can v p;p;rC'Fnte mcnr1 -C' , Va 3 vo , of vf Plinr . P1')!1�` c Cant_.ntaenC'.E'S Lr`unC7, Of ra�ty hP J.1'..'Tn.n' -,nc! 3.n direct ob? i gat-J on , o.” AT- (n�.ca, within ten (3.0) years frcr'1 t:.e bo-- fore the final. maturity of t?�e Pond.:;, rhichever shall first occur, which shall be deposit J.n escrow with said. Lank under an escrow aCreement. Tf such funds are so invested anc� deposited In escrow, the City shall have the right to have sold., a.nr! shall sell, through the escrow agent, on the open market a sufficient amount of such securities to meet its duties and obligzations, as herein provided, in the event it does not have sufficient in- vested func?s on hand for such purpose. Under such circumstances, the Mayor is hereby authorized, ordored, and directed to (live fifteen (15) days' written notice to such escrow aront of the necessity to sell. such securities in the open marlret. After said sale, the moneys resulting therefrom shall belong to the ContYn- gencies Fund and shall be available for the purposes as herein provided. When a balance of not less than $50,000 is reached in the Contingencies Fund, no further payment need be made into said Fund; however, in the event that said balance is ever reduced to an amount less than $50,000, the monthly payments, as above pro- vided, shall be resumed and continued until said balance of $50,000 is again reached and maintained. (d) Trust Funds: Moneys in the Bond Fund (including the - 17 - Reserve Account) and in the Contingencies Fund shall constitute trust funds, and shall be used solely for the purposes herein provided until all the Bonds have been retired. When there are moneys in said Bond Fund and Contingencies Fund sufficient to make MY interest payments and principal payments clue an, to be- come due to the final maturity of ail bonds then outstanding payable from the revenuer of the Sy 0em, no further payments need be made into said Bond Fund and Contingencies Fund.. (e) Surplus: Any funds remaining in the System Fund after provision has been made for the reasonable cost of operat- ing and maintaining the System, and after paying; the amounts required to be paid into the Bond Fund. and Contingencies Fund, as above provided, and after all payments that may be required by ordinances pertaining to Additional Bonds have been made, may be used by the Cite for any lawful purpose. 9.03 - MATNTEMANCF AND OPERATION: That the City shall maintain the System in good condition and opernto the s sme in an cuff i nient manner anf at a rcasonabje eoFt . Sn V onr Pr f?n7 07 uh' r'7 "1f 2 nrn outs t arlAing, the MY Y ag;reen, to ma n.t sin i nsu nnne for t5v bRn0- fit of the hol Ver or h0l.der. s of the Fends on the t':700m. V n YAM and in an amount which would «sun l v he carried b7 nv "va.;;.r c". parries engaged in a similar type of business. Nothing; in this orAinance shall be construed as r.oquiring the City to expend any funds for this purpose which are Oerived from sources other than the operation of the System, but nothing herein shall be construed as preventing the City from doing; so. 9.04 -- ACCOUNTS AND REPORTS: That the City shall keep proper re- cords and accounts (separate and apart from all other records and accounts of the City) in which complete and correct entries shall 1 " be made of all transactions relating to the System. The City will operate the System and will keep its books of records and accounts on the basis of a fiscal year ending September 30th. Not later than sixty (60) days after the close of each fiscal year, begin- ning with the fiscal year ending September 30, 1958, the City will furnish (without cost) to Moroney, Beissner & Co., Houston, Texas, and to any holder of any of the Bonds who may so request in writ- ing, a signed or certified copy of a report by an independent firm of certified public accountants, coverning the next preceding fiscal year, showing as to such year the fallowing information relating to the System: (a) Income and expense statement; (b) Balance sheet; (c) Accountant's comment regarding the manner in which the City has complied with the requirements of this ordinance, and his recommendation for any changes or improvements in the operation of the System; (d) List of insurance policies in force at the end of such year, showing, as to each policy, the risk covered, the name of the insurer, and the expiration date; (e) The,number of properties connected with the waterworks system and the number of properties connected with the sanitary sewer system, and the total income from the System for such year; (f) The number of unmetered customers of the waterworks, system at the end of such year, if any; and (g) The number of gallons of water pumped into or taken by the waterworks system and the number of gallons of water sold during said year. 9.05 - INSPECTIONS: The original purchaser of the Bonds and any t 19 - holder of 25% or more in principal amount of the Brands then out- standing shall have the right at any reasonable time to inspect the System and all records, accounts and data of the City relat- ins thereto. R,06 -- ADDITIONAL BONDS: In addition to inferior lien bonds authorized. by Chapters 249 and 250, Acts of the 51st Lellslature of Texas, Refular Fession, y4g, ns amended (Articles 1111a and 1111b, Vernon's Teams Qvil Statutes, 1925, an amended), the C`.i_ty expressly reserves the right to i,nFun additional parity bonds in one or more installments and in one or more issues, and such Additional Don0n, when Issued, mny be secured by and payable from a First lien on and pledge of the not revenues of the System in the same manner anO to the same extent as aro the POMP, anV Puch Wi.ti_cnal Dints mom On all resP ^.f'. {",s be Of 00UN M n. OV W t.r? E,nV! Fonds. It is E'rprvFs3y p'•"'nvioes, },ny,rovcn, tW no I!00a.t.i.r,DIT F?.Oz ?Q shall be j s.su.eV un) es;; (a) Fart of the funds cr.ea.ted by this ord:i.nanco coita.i_ns the amount of money than r. eauireo to be on c?ennsi.t; thcr. ei n (b) The net revenues of the System for the Last preceding fiscal year (the fiscal_ year next preceding the month in which the ordinance authorizing any Additional. Bonds is adopted), as certi- fied by an independent public accountant or firm of independent public accountants, were equal to at least one andore -half (1 -1/2) times the requirements for the payment of principal and interest on all bonds that will be outstanding; and payable from the revenues of the System after the bonds then proposed to be issued are is- sued, sold, and delivered, for the calendar year in which said requirements are greatest; and (c) The bonds then proposed to be issued are made to mature - 20 - on May 15th in each of the years in which they are scheduled to mature. The term "net revenues" as used herein shall mean all of the net revenues of the System (excluding income received speci- fically for capital items) after deduction of the reasonable expenses of operation and maintenance of the System (excluding expenditures for capital items). Section 10: SYSTEM OF RECORDS AND ACCOCiM : That the Mayor and other proper city officials are hereby instructed and directed to do any and all things in reference to the installing and maintaini.nr; of a complete system of. records and accounts pertni.ni_nF, to ,he Sz7, -,' m and to make t1ae moneys available for the payment of th^ T'nnc -';; -z the manner provided by I.ar -►. Section J 3.: SPECIAL COVENANTS: That the City covenants, by and throuf -;h L•h:i- ordinance, as follows: 11.01 -.POWER TO PLEDGE REVENUES: That it has lawful power to pledge the revenues supporting this issue of Bonds and has law- fully exercised its power under the Constitution and laws of the State of Texas, including said power existing under Articles 1111 to 1118, both inclusive, and Article 1182c -1, Vernon's Texas Civil Statutes, 1925, as amended; that the Bonds shall be ratably secured under said pledge of income, and in such manner that one Bond shall have no preference over any other Bond. 11.02 -- REVENUES NOT ENCUMBERED: That the City covenants and represents that other than for the outstanding; bonds of the fol- lowing issues: (a) City of Goose Creek Waterworks and Sewer System Revenue Bonds, dated August 1, 1945; - 21 - (b) City of Pelly Waterworks and Sewer System Revenue Bonds, dated December 7., 19+5; (c) Harris County Water Control and Improvement District No. 7 Waterworks and Sewer System Revenue Bonds, .Series 1945, dated March 1, 1945 (d) Harris County Water Control and Imnr ovement District No. 7 Waterworks and Sewer System Revenue Bonds, Series 1945A, dated September 1, 1945. (e) Harris County Water Control and Improvement District Yo. 7 1.1aterworks and Sewer System Revenue Bonds, Series 1046, dated December 11 1946; and (f) Harris County Water Control and Improvement District No. 30 Waterworks and Sewer System Combination Tax and Revenue Bonds, 1952, dated April 1, 1952, the rents, revenues, properties,,and income of the System are not in any manner pledged to the payment of any other debt or obliga- tion of the City, nor of the System. That all outstanding bonds of the issues described above in (a), (b), (c), (d), and (e) are to be retired or refunded by the issuance of the Bonds hereby authorized; and that all outstanding bonds of the issue described above in (f) are to be refunded by the $230,000 City of Baytown Waterworks and Sewer System Refunding Bonds, Series 1957, dated May 15, 1957, now in process of issuance. 11.03 - SALE OR ENCUMBRANCE OF SYSTEM OF REVENUES: That, so lone; as any of the Bonepn remain outstanding, the City will not sell or emumber the System, or any substantial part thereof, and that, with the exception of the Additional Bonds mentioned in Section 9.06 of this ordinance, when issued in accordance with the terms and conditions of this ordinance, it will not encumber the reven- ues of the System unless such encumbrance is made junior and sub- ordinate to the Bonds and to all the provisions of this ordinance. - 22 - 11.04 - NO COMPETING SYSTEM: That the City further covenants and agrees, to the extent that it legally may, that so long, as any of the Bonds or interest thereon are outstanding, no franchise :hall be granted for the installation or operation of any comnoti -ng system, that the City will prohibit the operation of a?117 s;rstem other than the System owned by the City, and that the onlY?ation of any such system her anyone otho— ',:1a.n the City is hereby Pro- hibi.t•eci. Section 3.2: ORDINANCE IS CONTRACT: 'i,ha` the Dnovisions of this or nan(,e n •i?onn t'_?� Ci.' �r 4 n� :;,A, �, . ,.,,, holders from ti.mo tO t me Of thO ?'once, a =1 c' a: °te'_' of any of said Ponds, no change, vr.ri.nt,ion,. or 31t= t4 .c'1 0.., any kind i.n the provi-sions of this orc'i.nance may be rinrle all the Bonds have been paid in full as to both p:r inc7.T?,?1 interest. END OF EXHIBIT "A" - 23 -