NEW ISSUE – BOOK-ENTRY ONLY Ratings: Insured: S&P: AA (Stable Outlook) Underlying: S&P: A Moody’s: A1 In the opinion of Bond Counsel, under existing law and assuming compliance by the Board with certain covenants set forth in the Indenture herein referred to with respect to certain conditions imposed by Section 103 of the Internal Revenue Code of 1986, as amended ("the Code"), the interest income on the Series 2020-A Bonds (a) will be excludable from gross income of the recipients thereof for Federal income tax purposes, and (b) will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the alternative minimum tax on individuals and corporations under the Code. However, see "TAX EXEMPTION" herein for certain other federal tax consequences to the recipients of the interest income on the Series 2020-A Bonds. In the opinion of Bond Counsel, under existing law, interest on the Series 2020 Bonds will be exempt from Alabama income taxation. THE UTILITIES BOARD OF THE CITY OF OPELIKA $10,725,000 Utility Revenue Bonds Series 2020-A $15,770,000 Taxable Utility Revenue Bonds Series 2020-B Dated: Date of Delivery Due: June 1 as shown on the inside cover and following page The Series 2020 Bonds are issuable as fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Series 2020 Bonds, when issued, will be registered in the name of CEDE & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Purchases of beneficial interests in the Series 2020 Bonds will be made in book-entry form only and purchasers of a beneficial interest in the Series 2020 Bonds ("Beneficial Owners") will not receive physical delivery of the certificates representing their interests in the Series 2020 Bonds. The principal of and interest on the Series 2020 Bonds will be paid directly to DTC, so long as DTC or its nominee is the registered owner of the Series 2020 Bonds. The final disbursements of such payments to the Beneficial Owners of the Series 2020 Bonds will be the responsibility of the DTC Participants and the Indirect Participants, all as defined and more fully described in this Official Statement under the caption "THE SERIES 2020 BONDS—Book-Entry Only System." The Series 2020-A Bonds are being issued to acquire, construct and install certain capital improvements to the Board’s water works plant and distribution system ("the Water System") and the other properties of the Board ("the 2020-A Capital Improvements"), and to pay the costs of issuance of the Series 2020-A Bonds. The Series 2020-B Bonds are being issued to refund the Board’s outstanding Utility Revenue Bonds, Series 2011-B ("the Series 2011-B Bonds"), to acquire, construct and install certain capital improvements to the Water System and the other properties of the Board ("the 2020-B Capital Improvements"), and to pay the costs of issuance of the Series 2020-B Bonds. The Series 2020 Bonds, which will be issued under a Trust Indenture dated as of September 1, 2020 ("the Indenture"), from the Board to Regions Bank ("the Trustee"), will constitute limited obligations of the Board, payable out of the revenues derived from the operation of the Systems defined herein after payment of the costs of operating and maintaining the Systems and after compliance with the provisions of the Trust Indenture, dated as of June 1, 2001 ("the 2001 Indenture") between the Board and The Bank of the New York Mellon Trust Company, National Association ("the 2001 Trustee") pursuant to which the Series 2011-B Bonds and the Outstanding 2001 Indenture Bonds hereinafter defined were issued. Neither the full faith and credit of the Board nor that of the City of Opelika are pledged for payment of the principal of and the interest on the Series 2020 Bonds. The Series 2020 Bonds are subject to redemption prior to their respective maturities as described herein. The scheduled payment of principal and interest on the Series 2020 Bonds when due will be guaranteed under two municipal bond insurance policies to be issued concurrently with the delivery of the Series 2020 Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. The Series 2020 Bonds are offered when, as and if issued, subject to the approval of the validity thereof by Hand Arendall Harrison Sale LLC, Birmingham, Alabama, Bond Counsel. It is expected that the Series 2020 Bonds in definitive form will be available for delivery in New York, New York, on or about September 16, 2020. Dated: August 26, 2020 For an explanation of Ratings, see "Ratings"
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NEW ISSUE – BOOK-ENTRY ONLY Ratings:
Insured: S&P: AA (Stable Outlook)
Underlying: S&P: A
Moody’s: A1
In the opinion of Bond Counsel, under existing law and assuming compliance by the Board with certain covenants set forth in the Indenture
herein referred to with respect to certain conditions imposed by Section 103 of the Internal Revenue Code of 1986, as amended ("the Code"),
the interest income on the Series 2020-A Bonds (a) will be excludable from gross income of the recipients thereof for Federal income tax
purposes, and (b) will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the
alternative minimum tax on individuals and corporations under the Code. However, see "TAX EXEMPTION" herein for certain other federal
tax consequences to the recipients of the interest income on the Series 2020-A Bonds.
In the opinion of Bond Counsel, under existing law, interest on the Series 2020 Bonds will be exempt from Alabama income taxation.
THE UTILITIES BOARD OF THE
CITY OF OPELIKA
$10,725,000
Utility Revenue Bonds
Series 2020-A
$15,770,000
Taxable Utility Revenue Bonds
Series 2020-B
Dated: Date of Delivery Due: June 1
as shown on the inside cover
and following page
The Series 2020 Bonds are issuable as fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Series 2020
Bonds, when issued, will be registered in the name of CEDE & Co., as nominee of The Depository Trust Company, New York, New York
("DTC"). Purchases of beneficial interests in the Series 2020 Bonds will be made in book-entry form only and purchasers of a beneficial interest
in the Series 2020 Bonds ("Beneficial Owners") will not receive physical delivery of the certificates representing their interests in the Series
2020 Bonds. The principal of and interest on the Series 2020 Bonds will be paid directly to DTC, so long as DTC or its nominee is the registered
owner of the Series 2020 Bonds. The final disbursements of such payments to the Beneficial Owners of the Series 2020 Bonds will be the
responsibility of the DTC Participants and the Indirect Participants, all as defined and more fully described in this Official Statement under the
caption "THE SERIES 2020 BONDS—Book-Entry Only System."
The Series 2020-A Bonds are being issued to acquire, construct and install certain capital improvements to the Board’s water works plant and
distribution system ("the Water System") and the other properties of the Board ("the 2020-A Capital Improvements"), and to pay the costs of
issuance of the Series 2020-A Bonds. The Series 2020-B Bonds are being issued to refund the Board’s outstanding Utility Revenue Bonds,
Series 2011-B ("the Series 2011-B Bonds"), to acquire, construct and install certain capital improvements to the Water System and the other
properties of the Board ("the 2020-B Capital Improvements"), and to pay the costs of issuance of the Series 2020-B Bonds.
The Series 2020 Bonds, which will be issued under a Trust Indenture dated as of September 1, 2020 ("the Indenture"), from the Board to
Regions Bank ("the Trustee"), will constitute limited obligations of the Board, payable out of the revenues derived from the operation of the
Systems defined herein after payment of the costs of operating and maintaining the Systems and after compliance with the provisions of the
Trust Indenture, dated as of June 1, 2001 ("the 2001 Indenture") between the Board and The Bank of the New York Mellon Trust Company,
National Association ("the 2001 Trustee") pursuant to which the Series 2011-B Bonds and the Outstanding 2001 Indenture Bonds hereinafter
defined were issued. Neither the full faith and credit of the Board nor that of the City of Opelika are pledged for payment of the principal of
and the interest on the Series 2020 Bonds.
The Series 2020 Bonds are subject to redemption prior to their respective maturities as described herein.
The scheduled payment of principal and interest on the Series 2020 Bonds when due will be guaranteed under two municipal bond insurance
policies to be issued concurrently with the delivery of the Series 2020 Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY.
The Series 2020 Bonds are offered when, as and if issued, subject to the approval of the validity thereof by Hand Arendall Harrison Sale LLC,
Birmingham, Alabama, Bond Counsel. It is expected that the Series 2020 Bonds in definitive form will be available for delivery in New York,
New York, on or about September 16, 2020.
Dated: August 26, 2020
For an explanation of Ratings, see "Ratings"
Amounts, Maturities, Interest Rates, Prices or Yields and CUSIPS
$10,725,000
Utility Revenue Bonds
Series 2020-A
Maturity
June 1
Principal
Amount
Interest
Rate Yield Cusip
2021 $440,000 3.000% 0.400% 683548DW8
2022 575,000 3.000 0.500 683548DX6
2023 600,000 3.000 0.560 683548DY4
2024 610,000 4.000 0.640 683548DZ1
2025 635,000 4.000 0.720 683548EA5
2026 665,000 4.000 0.850 683548EB3
2027 690,000 4.000 0.970 683548EC1
2028 715,000 4.000 1.120 683548ED9
2029 750,000 4.000 1.230 683548EE7
2030 775,000 4.000 1.340 683548EF4
2031 805,000 3.000 1.530* 683548EG2
2032 830,000 3.000 1.640* 683548EH0
2033 850,000 3.000 1.700* 683548EJ6
2034 880,000 3.000 1.750* 683548EK3
2035 905,000 3.000 1.800* 683548EL1
* Yield computed to June 1, 2030, call date.
Amounts, Maturities, Interest Rates, Prices or Yields and CUSIPS
$15,770,000
Taxable Utility Revenue Bonds
Series 2020-B
Maturity
June 1
Principal
Amount
Interest
Rate Yield Cusip
2021 $ 1,040,000 0.310% 0.310% 683548EM9
2022 1,415,000 0.380 0.380 683548EN7
2023 1,420,000 0.550 0.550 683548EP2
2024 1,430,000 0.800 0.800 683548EQ0
2025 1,445,000 0.950 0.950 683548ER8
2026 1,455,000 1.200 1.200 683548ES6
2027 1,470,000 1.270 1.270 683548ET4
2028 1,490,000 1.470 1.470 683548EU1
2029 1,510,000 1.570 1.570 683548EV9
2030 1,535,000 1.670 1.670 683548EW7
2031 1,560,000 1.770 1.770 683548EX5
THE UTILITIES BOARD OF THE
CITY OF OPELIKA
Opelika, Alabama
Members of the
Board of Directors
Jeffery A. Hilyer, Chairman
Patricia A. Jones, Vice Chairman
Herbert Slaughter, Secretary-Treasurer
William Brown
Eric L. Canada
Assistant-Treasurer
Ira Silverman
General Manager
Dan H. Hilyer, P.E.
Consulting Engineers
Krebs Architecture & Engineering, Inc.
Birmingham, Alabama
Counsel to the Board
Guy F. Gunter, III
Opelika, Alabama
Bond Counsel
Hand Arendall Harrison Sale LLC
Birmingham, Alabama
No dealer, broker, salesman or other person has been authorized by The Utilities Board of the City of Opelika,
or the Underwriter to give any information or to make any representations, other than those contained in this Official
Statement and, if given or made, such other information or representations must not be relied upon as having been
authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of the Series 2020 Bonds by any person in any jurisdiction in which it is
unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained
from The Utilities Board of the City of Opelika, and other sources which are believed to be reliable, but it is not
guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriter. The
delivery of this Official Statement at any time does not imply that any information herein is correct as of any time
THE SERIES 2020 BONDS .......................................................................................................................................... 2
SECURITY FOR THE SERIES 2020 BONDS............................................................................................................. 5
ADVANCE REFUNDING OF THE SERIES 2011-B BONDS .................................................................................. 6
PURPOSE AND PLAN OF FINANCING .................................................................................................................... 6
BOND INSURANCE .................................................................................................................................................... 7
VERIFICATION OF MATHEMATICAL COMPUTATIONS .................................................................................... 9
THE BOARD .............................................................................................................................................................. 10
THE WATER SYSTEM ............................................................................................................................................. 10
FINANCIAL INFORMATION ................................................................................................................................... 16
DEBT SERVICE REQUIREMENTS FOR THE OUTSTANDING 2001 INDENTURE BONDS
AND THE SERIES 2020 BONDS ........................................................................................................................ 17
EMPLOYEE RETIREMENT PROGRAM ................................................................................................................. 17
DESCRIPTION OF THE SERVICE AREA AND THE CITY................................................................................... 18
(1) The Series 2017 Bonds and the Series 2017-B Bonds.
Coverage. Based upon the Board's audited revenues and expenses (excluding depreciation and interest) for
the fiscal year that ended September 30, 2019, the Net Income Available for Debt Service for that fiscal year
($6,668,564) would have been 1.24 times the maximum Annual Debt Service Requirement for the Outstanding 2001
Indenture Bonds and the Series 2020 Bonds ($5,381,008, occurring in the fiscal year ending on September 30, 2023).
Based upon the Board's audited revenues and expenses (excluding depreciation and interest) for the fiscal year that
ended September 30, 2019, the Net Income Available for Debt Service for that fiscal year assuming the schedule rates
as of April 1, 2020 had been in effect during such fiscal year ($8,568,564) would have been 1.59 times the maximum
Annual Debt Service Requirement for the Outstanding 2001 Indenture Bonds and the Series 2020 Bonds ($5,381,008,
occurring in the fiscal year ending on September 30, 2023).
EMPLOYEE RETIREMENT PROGRAM
Prior to 1963, the Board had no retirement plan for its employees. Effective October 1, 1963, the City of
Opelika elected to participate in the Alabama Employees' Retirement System (herein called "the State System") which
is operated by the State of Alabama for certain of its employees and for employees of participating local governments.
At that time, coverage under the State System was also extended to employees (other than janitors and laborers) of
the Board. Forty-three (43) Board employees were covered under the Board's State System plan at September 30,
2019.
18
In general, employees of local governments electing to participate in the State System are entitled to receive
the same benefits provided for State employees having comparable years of covered service. Upon such election, the
State System administers the local plan, but the cost of providing benefits is borne by the participating local
government and its covered employees and no part of such cost is paid by the State System. The rates of contributions
required to be made by a local government and its covered employees under a local plan participating in the State
System are determined by the actuary for the State System.
For a discussion of the Board's accounting for employee retirement and other post-retirement benefits, see
Note 7 to the Audited Financial Statements of the Board for Fiscal Years 2018 and 2019 included in this Official
Statement as Appendix B hereto
The following chart shows the amount of the Board's contributions under its State System plan for the last
five fiscal years:
Fiscal Year Ending
September 30
Board
Contribution
2015 $244,846
2016 284,292
2017 285,476
2018 287,966
2019 283,123
In the event any participating local government elected to withdraw from the State System by mutual
agreement with its employees, the statute provides that the rights and privileges of existing beneficiaries shall not, as
the result of withdrawal, be diminished or impaired. Upon any such withdrawal, the statute requires the State System
Actuary to certify to the local government the actuarial determination of the reserve necessary to provide existing
benefits and provides that the local government shall agree to appropriate such amounts as may be necessary to
maintain existing benefits.
DESCRIPTION OF THE SERVICE AREA AND THE CITY
General
The City of Opelika is located in East Central Alabama for which it serves as an industrial and commercial
center. Records indicate that in 1832 settlers located in the area and signed a treaty with the Creek Indians. The City
was chartered and incorporated in 1854 and has grown to a population in excess of 31,082. The City today has a well-
balanced economy of industry, agriculture, commerce and trade. Together with the neighboring City of Auburn, the
site of Auburn University, the City benefits in its residential and trade areas from having a major university located
nearby.
Opelika is the county seat of Lee County. The City is approximately sixty (60) miles east of Montgomery,
one hundred twenty (120) miles southeast of Birmingham and one hundred ten (110) miles southwest of Atlanta,
Georgia. The Chattahoochee River, a navigable waterway, is located approximately fifteen (15) miles east of Opelika
and serves as the eastern border of Lee County, dividing Alabama from Georgia.
The City form of government is a Mayor-Council form with a full-time Mayor and a five-member City
Council, none of whom devotes full time to the City's affairs. The Mayor and Councilmembers are each elected for
four-year terms and the present council will serve until the first Monday in November, 2020.
Agricultural products from the surrounding area include beef, cotton, dairy products, forestry, poultry,
fertilizer and seed. Opelika's industries are highly diversified. These industries include three automotive parts
manufacturers, two national distribution centers, a national inbound call center gray iron and aluminum foundries,
cardboard box plants, fabricating plants, cast stone and precast concrete products manufacturers, a blind and awning
manufacturer, fertilizer and see plants, bakeries, publishing plants, upholsterers and custom seat cover makers,
janitorial supply manufacturers, an asphalt plant and a concrete plant.
19
Utilities
Telephone and natural gas service are provided to the City by Point Broadband, AT&T, Spectrum
Communications and Spire, Inc., respectively. The City provides electrical service, sewer service, and through the
Board, water service. The City purchases electrical power from The Alabama Municipal Electric Authority and the
Southeastern Power Supply Administration, an agency of the U.S. Government.
Population
The historical population growth of the City, according to the United States Bureau of the Census, is as
follows:
Year Population
1950 12,295
1960 15,678
1970 19,027
1980 21,896
1990 22,122
2000 23,498
2010 26,744
2019* 30,908
*Estimated. Census Bureau, Population Division. Annual Estimates of the Resident Population; Release date May
2020.
Transportation
Opelika is the transportation center for East Alabama, linked to major cities by U.S. Highways 29, 431, 280
and Interstate 85. Two rail lines intersect, one running from New York to New Orleans, and the other from Chicago
to Miami. The Chattahoochee River, which forms the Alabama-Georgia boundary, is fifteen miles east of the City
and is navigable to the Gulf of Mexico.
Education
The City is noted for its excellent educational facilities ranging from pre-school to technical colleges, with
Auburn University located only seven miles away. The City of Opelika Board of Education operates three primary
schools, three intermediate schools, one middle school, one senior high school, and one full day alternative school
which together had a combined enrollment of 4,505 students as of September 30, 2019.
Higher education is served in the Opelika area by Auburn University and Southern Union State Community
College. Southern Union has a present enrollment of 4,531 students in Opelika.
Auburn University ("the University"), the largest public university in the State, is located on a 1,871-Acre
campus in the City of Auburn in Lee County; a secondary campus is maintained in the City of Montgomery.
Enrollment at the main campus during the 2019 academic year was 30,460. The University is a fully accredited land-
grant institution organized in three divisions (Instruction, Research and Extension); the Division of Instruction
comprises ten undergraduate schools and one graduate school. Degrees awarded by the University include Bachelor
of Arts, Bachelor of Science, Master of Arts, Master of Science, Doctor of Philosophy and Doctor of Veterinary
Medicine.
20
Major Employers - Lee County
The cities of Opelika and Auburn are contiguous, and their economies are interdependent. The largest
employers in the City and in the City of Auburn, their product or service, and approximate number of employees (as
estimated by the Opelika Chamber of Commerce) are as follows:
Employer Product or Service
Approximate Number
Employees
Auburn University Higher Education 7,100
East Alabama Medical Center Hospital 3,200
Lee County School System Education 1,260
Auburn City Schools Education 1010
Wal-Mart (3) Retail Products 825
City of Auburn City Government 725
Mando Automotive-Brake, Steering 605
Opelika City Schools Education 590
Hanwha Automotive Parts 550
AFNI In Bound Call Center 540
Baxgter Medical Manufacturer 500
Pharmavite Vitamin Manufacturer 333
Unemployment
The following table shows the unemployment rate for Lee County, the State of Alabama and the United
States for the period 2006 through 2019:
Unemployment Rate
(Annual Average)
Year Lee County State of Alabama United States
2006 3.0 3.5 4.6
2007 3.2 3.5 4.1
2008 4.6 5.0 5.8
2009 8.6 10.6 9.5
2010 7.7 9.1 9.6
2011 8.5 9.0 8.9
2012 7.3 8.0 8.1
2013 6.1 7.2 7.4
2014 6.1 6.8 6.2
2015 5.6 6.1 5.3
2016 4.9 5.4 4.9
2017 4.0 4.4 4.3
2018 3.6 3.9 3.9
2019 2.7 3.0 3.7
Source: Alabama Department of Industrial Relations and U.S. Department of Labor Bureau of Labor Statistics.
Health Facilities
The City's medical needs are served by East Alabama Medical center, a 314-Bed facility located in the City.
East Alabama Medical Center has 171 physicians on its staff.
21
Building Permits
Building permits issued in the City for each of the last five fiscal years and the estimated aggregation
construction cost for all permits in each such fiscal year were as follows:
Fiscal Year
Number of
Building Permits
Aggregate
Construction Cost
2019 607 $111,553,698
2018 578 127,620,355
2017 708 163,292,435
2016 498 127,079,852
2015 530 192,080,600
TAX EXEMPTION
Series 2020-A Bonds
Pursuant to the provisions of the Internal Revenue Code of 1986, as amended ("the Code"), the exclusion of
the interest income on the Series 2020-A Bonds from gross income of the recipients thereof for Federal income tax
purposes is dependent upon the continued compliance by the Board with certain provisions of the Code subsequent to
the issuance of the Series 2020-A Bonds, including certain requirements relating to the use and expenditure of the
proceeds of the Series 2020-A Bonds, restrictions on the investment of proceeds earned prior to expenditure, and the
requirement that certain earnings be rebated to the United States of America. In the Indenture, the Board has made
certain covenants ("the Compliance Covenants") to the effect that it will comply with all conditions to and
requirements imposed by the Code for the exclusion from gross income of the recipients thereof for Federal income
tax purposes of the interest income on the Series 2020-A Bonds. Failure to comply with the Compliance Covenants
may result in the interest income on the Series 2020-A Bonds being included in the gross income of the recipients
thereof for Federal income tax purposes from the date of issuance of the Series 2020-A Bonds.
Hand Arendall Harrison Sale LLC, bond counsel, is of the opinion that, under the Code, as presently
construed and administered, and assuming compliance by the Board with the Compliance Covenants the interest
income on the Series 2020-A Bonds will be excludable from gross income of the recipients thereof for federal income
tax purposes pursuant to the provisions of Section 103 of the Code and will not constitute an item of tax preference
for the purpose of computing the liability of individuals and corporations for the alternative minimum tax imposed by
Section 55 of the Code. Bond Counsel will express no opinion with respect to the Federal tax consequences to the
recipients of the interest income on the Series 2020-A Bonds under any provision of the Code not referred to above.
Bond Counsel is of the opinion that the interest income on the Series 2020-A Bonds is exempt from present
Alabama income taxation.
Certain Collateral Federal Tax
Consequences
Prospective owners of the Series 2020-A Bonds should be aware that the ownership of such obligations may
result in collateral Federal income tax consequences to various categories of persons, such as corporations (including
S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies,
individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned
income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations
the interest on which is not included in gross income for Federal income tax purposes. Interest on the Series 2020A
Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits
tax imposed by Section 884 of the Code. Prospective investors, particularly those who may be subject to special rules,
are advised to consult their own tax advisors regarding the Federal tax consequences of owning and disposing of the
Series 2020 Bonds.
22
Series 2020-B Bonds
Bond Counsel is of the opinion that the interest income on the Series 2020-B Bonds will not be excludable
from gross income of the recipients thereof for federal income tax purposes.
Bond Counsel is of the opinion that the interest income on the Series 2020-B Bonds is exempt from present
Alabama income taxation.
Original Issue Premium
The initial public offering price to be paid for certain of the Series 2020-A Bonds ("the Original Issue
Premium Bonds") is greater than the principal amount thereof. Under existing law, any owner who has purchased an
Original Issue Premium Bond in the initial public offering of the Series 2020-A Bonds is required to reduce his basis
in such Original Issue Premium Bond by the amount of premium allocable to periods during which he holds such
Original Issue Premium Bond, and the amount of premium allocable to each accrual period will be applied to reduce
the amount of interest received by the owner during each such period. All owners of Original Issue Premium Bonds
should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes
of interest accrued upon redemption, sale or other disposition of such Original Issue Premium Bond and with respect
to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale, gift or other
disposition of such Original Issue Premium Bond.
CYBERSECURITY
The information systems of public utilities may be vulnerable to breaches, hacker and ransomware attacks,
computer viruses, physical or electronic break-ins, and other similar events or issues. The foregoing events or issues
could lead to the inadvertent disclosure of confidential information, ransomware attacks holding critical information
and operations hostage or could have an adverse effect on a utility’s ability to provide a continuity of services. Any
breach or cyberattack that compromises data could also result in negative press and substantial fines or penalties for
violation of privacy laws.
In an effort to provide a defense against cyberattacks, the Board has contracted with NXTsoft, a leading
cybersecurity solutions company. NXTsoft provides data security, network intrusion monitoring, virus and
ransomware protection, cybersecurity training for employees along with complete network hosting and support. The
Board also provides periodic security training for its staff. The Board also maintains cyber risk insurance to help
mitigate its exposure to security attacks. Coverage under the cyber risk insurance policy is currently $1,500,000.
Notwithstanding the efforts of the Board, no assurances can be given that the Board’s measures will prevent or mitigate
cyberattacks, and no assurances can be given that any cybersecurity attacks, if successful, will not have a material
adverse effect on the operations or financial condition of the Board.
PUBLIC HEALTH EPIDEMICS AND COVID-19 PANDEMIC
Public health epidemics or outbreaks could adversely impact the world economy and economies of the United
States, the State of Alabama and local economies. In December of 2019, a novel strain of coronavirus (“COVID-19”)
emerged in Wuhan, China. The virus has since spread to other countries, including the United States. COVID-19,
along with governmental measures taken to protect public health in light of the COVID-19 pandemic, has had an
adverse impact on travel, commerce, financial markets and economies in the United States, State of Alabama and local
economies.
The State of Alabama and local governments, including the City of Opelika, have issued “stay at home”,
“safer at home” or similar orders designed to restrict movement outside the home and limit business and commercial
activities. Such orders have not impacted essential services such as water, sewer, electric or gas services.
To provide relief for its customers, the Board has placed a moratorium on disconnections for nonpayment
until August 1, 2020. The estimated impact of COVID-19 pandemic on the operations and the finances of the Board
23
for fiscal year ending September 30, 2020, is expected to be less than $100,000. The actual impact will depend on the
duration of the pandemic.
The Board cannot predict (i) the duration or extent of the COVID-19 outbreak; (ii) to what extent the
COVID-19 outbreak may affect its operations and Net Income Available for Debt Service, (iii) to what extent
COVID-19 may disrupt the local, State, national or global economy, manufacturing or supply chain, or whether such
disruption may adversely impact System-related construction projects, the cost, schedule or implementation of such
capital projects or operations, (iv) to what extent the Board may collect from its customers; or (v) whether any of the
foregoing may have a material adverse effect on the finances on the Board and operations of the Systems.
RATINGS
S&P Global Ratings ("S&P"), a business unit of Standard & Poor’s Financial Services LLC is expected to
assign a rating to the Series 2020 Bonds of "AA" (Stable Outlook) based upon the understanding that upon delivery
of the Series 2020 Bonds, the Policy insuring payment when due of the principal of and interest on the Series 2020
Bond will be issued by BAM. S&P and Moody’s Investors Service, Inc. ("Moody’s") (each a "Rating Agency"), have
also given the Series 2020 Bonds underlying ratings of "A" and "A1", respectively. Any definitive explanation of the
significance of any such rating may be obtained only from the appropriate Rating Agency. There is no assurance that
any such rating will remain in effect for any given period of time or that any such rating will not be lowered or
withdrawn entirely if, in the judgment of the appropriate Rating Agency, circumstances should warrant such action.
Any such downward revision or withdrawal of any rating assigned to the Series 2020 Bonds could have an adverse
effect on their market price.
FINANCIAL STATEMENTS
The financial statements and selected financial data of the Board included in this Official Statement as
Appendix B have been examined by Himmelwright Huguley & Boles, LLC independent certified public accountants,
as set forth in their report appearing in Appendix B, and are included in reliance upon such report and upon the
authority of such independent certified public accountant as an expert in auditing and accounting.
UNDERWRITING
The Series 2020-A Bonds are being purchased by Raymond James & Associates, Inc. ("the Underwriter") at
a price equal to $12,127,696.95 (reflecting an underwriting discount of $101,887.50 and a net original issue premium
of $1,504,584.45). The Series 2020-B Bonds are being purchased by the Underwriter at a price equal to
$15,620,185.00 (reflecting an underwriting discount of $149,815.00). The Underwriter intends to offer the Series
2020 Bonds to the public at the prices or yields stated on the inside of the cover page hereof and the following page.
Such initial offering prices may be changed from time to time by the Underwriter. The Board has been advised that
the Underwriter may offer the Series 2020 Bonds to certain dealers and others at prices lower than the public offering
prices.
LITIGATION AND CONTINGENT LIABILITIES
There is no litigation pending against the Board, nor to the knowledge of its officers or counsel, threatened,
which in any way questions or affects the validity of the Series 2020 Bonds, or any proceedings or transactions relating
to their issuance, sale and delivery.
While the Board is a defendant in several lawsuits and while it is involved in other pending litigation, it does
not believe that such pending lawsuits and litigation (taken as a whole) will have a materially adverse effect upon its
financial condition.
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CONTINUING DISCLOSURE AGREEMENT
The Board has entered into a Continuing Disclosure Agreement for the benefit of holders of the Series 2020
Bonds wherein the Board has agreed to provide annually certain financial information and operating data relating to
the Board ("the Annual Report"), and to provide notices of the occurrence of certain enumerated events. The Annual
Report will be filed by the Board with the Municipal Securities Rulemaking Board ("NRMSIR") through its Electronic
Municipal Market Access ("EMMA") website at http://emma.msrb.org. and with any other Nationally Recognized
Municipal Securities Information Repository designated by the United States Securities and Exchange Commission
for the purposes of Rule 15c2-12(b)(5) of the Securities and Exchange Commission ("the Rule"). The specific nature
of the information to be contained in the Annual Report or the notices of material events and other provisions of the
Continuing Disclosure Agreement are summarized in "Appendix D - Summary of Continuing Disclosure Agreement."
The Continuing Disclosure Agreement has been entered into in order to assist the Underwriter in complying with
Rule.
The Board has previously entered into continuing disclosure agreements ("the Prior Agreements") for the
benefit of the holders of the Board's Utility Revenue Bonds, Series 2009, dated December 1, 2009 ("the Series 2009
Bonds, its Utility Revenue Bonds, Series 2011, dated March 22, 2011 ("the Series 2011 Bonds"), the Series 2011-B
Bonds, the Series 2017 Bonds and the Series 2017-B Bonds, which are similar to the Continuing Disclosure Agreement
for the benefit of the holders of the Series 2020 Bonds. For the Fiscal Years ending September 30, 2015 and
September 30, 2016, the Board failed to timely file the operating data under the heading "The Water System" in the
Official Statements with respect to the Series 2009 Bonds, the Series 2011 Bonds and the Series 2011-B Bonds, as
required by the Prior Agreements, and did not timely file a material event notice of its failure to comply with the Prior
Agreements. For Fiscal Year ending September 30, 2018, the Board filed the operating data under the heading "The
Water System" one business day late. The Board also failed to timely file material event notices for various rating
changes as a result of changes in the ratings for bond insurer.
Other than as set out above, the Board has been in material compliance with the Prior Agreements within the
last five years.
THE FEDERAL BANKRUPTCY ACT
The rights and remedies of the holders of the Series 2020 Bonds are subject to the provisions of Chapter 9 of
Title 11 of the United States Code ("the Bankruptcy Act"), which was enacted on November 6, 1978, and took effect
on October 1, 1979. Chapter 9 permits, under certain specified circumstances (but only after authorization by the
legislature or by a governmental officer or organization empowered by state law to give such authorization), a political
subdivision of a state -- such as the Board -- to file a petition for relief in the Federal Bankruptcy Court if it is insolvent
or unable to meet its debts as they mature and desires to effect a plan to adjust its debts. Under the statute, the filing
of such a petition operates, with certain limited exceptions, as an "automatic" stay of the commencement or the
continuation of any judicial or other proceedings against the petitioner, its property, or any officer or inhabitant thereof
and as an "automatic" stay of any act or proceeding which seeks to enforce a lien on the property of the petitioner or
a lien on any taxes or assessments due to the petitioner. Chapter 9 also permits a political subdivision that files a
petition under the Bankruptcy Act to issue, with the approval of the Court, certificates of indebtedness having priority
of payment over pre-existing obligations.
Any political subdivision filing a petition for relief under Chapter 9 must in due course file a plan for the
adjustment of its debts, and such plan may include provisions modifying or altering the rights of creditors generally,
or any class of them, secured or unsecured. Such plan, when confirmed by the Court, binds all creditors who had
notice or knowledge of the plan and discharges all claims against the petitioning political subdivision provided for in
the plan when (a) the petitioning subdivision has deposited, with a duly appointed disbursing agent, all money,
securities or other consideration required by the plan to be distributed, and (b) the Court is satisfied that any securities
to be so distributed are valid obligations of the petitioning political subdivision and that any provision to pay or secure
such obligations is also valid. No plan may, however, be confirmed by the Court unless certain conditions occur,
among which are (1) that the plan has been accepted in writing by two-thirds (2/3) in amount and fifty per cent (50%)
in number of the allowed claims of each class which are affected by the plan, and (2) that the plan is fair, equitable
and feasible and does not discriminate unfairly in favor of any creditor or class of creditors.
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While the matter is not entirely free from doubt, prospective purchasers of the Series 2020 Bonds should
assume that existing Alabama statutes presently authorize the Board to file a petition for relief under Chapter 9.
LEGAL MATTERS
Legal matters incident to the authorization and issuance of the Series 2020 Bonds by the Board are subject
to the approval of Hand Arendall Harrison Sale LLC, Birmingham, Alabama, Bond Counsel. Such opinions are
expected to be in substantially the forms attached hereto as Appendix C.
MISCELLANEOUS
All references to or summaries of contracts or official acts are qualified by the exact terms of such contracts,
documents or acts, each being an item of public record. So far as any statements are made in this Official Statement
involving matters of opinion or estimates, whether or not expressly so stated, they are set forth as such and not as
representations of fact, and no representation is made that any such estimates will be realized.
The distribution of this Official Statement has been approved by the Board of Directors of the Board.
THE UTILITIES BOARD OF THE
CITY OF OPELIKA
By /s/ Jeffery A. Hilyer
Chairman of the Board of Directors
Dated: August 26, 2020
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APPENDIX A
SUMMARY OF INDENTURE
The following constitutes a summary of certain portions of the Indenture. This summary should be qualified
by reference to other provisions of the Indenture referred to elsewhere in this Official Statement, and all references
and summaries pertaining to the Indenture in this Official Statement are, separately and in whole, qualified by
reference to the exact terms of the Indenture, a copy of which may be obtained from the Board.
Definitions
For purposes of this Summary of the Indenture, words and phrases used but not otherwise defined herein
shall have the meanings respectively ascribed to them elsewhere in the Official Statement, and the following words
and phrases shall be given the following respective interpretations herein (notwithstanding that they may be defined
and used otherwise in other portions of the Official Statement):
"Additional Bonds" means those authorized to be issued under the Indenture.
"Additional System" means any Additional Water System, Electric System, Sewer System
or Gas System hereafter acquired by the Board and subjected to the lien of the Indenture.
"Additional Water System" means any water distribution system hereafter acquired by
the Board and subjected to the lien of the Indenture, as said system may then exist and as it may
thereafter be extended and improved.
"Annual Debt Service Requirement" means, as of any time, the amount of principal and
interest maturing or Maturity Amount due with respect to the Outstanding 2001 Indenture Bonds
and the then outstanding Bonds in a Fiscal Year; provided, however,
(a) the annual debt service requirements with respect to the Outstanding
2001 Indenture Bonds shall be calculated pursuant to the provisions of this
Indenture as though such bonds had been issued hereunder;
(b) the interest payable on any Bonds incurred to finance the acquisition
or construction of Capital Improvements shall be excluded until such Capital
Improvements are placed in service, if and to the extent that funds dedicated to
the payment of such interest are held by or under the control of a person other
than the Board;
(c) that the Outstanding Amount of any Bonds subject to a Mandatory
Redemption Requirement during such Fiscal Year shall, for purposes of this
definition, be considered as maturing in the Fiscal Year during which such
redemption is required and not in the Fiscal Year in which their stated maturity
occurs;
(d) that, for purposes of this definition, Bonds that are deemed paid
under the provisions of the Indenture shall not be deemed to be Outstanding;
(e) that, except as hereinafter provided in this subparagraph, the rate of
interest on Variable Rate Bonds outstanding at the time of such calculation shall
be deemed to be the greater of either of the following on any date selected by the
Board that is not more than 60 days prior to the date of calculation:
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the average per annum rate of interest borne by such Variable Rate Bonds
during the then immediately preceding twelve-month period; provided,
however, that for any period during which more than 20% of the
aggregate of the Bonds then Outstanding bear interest at a variable rate,
the rate of interest on such Variable Rate Bonds, shall be the greater of
either of the following on any date selected by the Board that is not more
than 60 days prior to the date of calculation:
(i) the then current rate of interest borne by such Variable
Rate Bonds, and
(ii) 125% of the average variable rate borne by such
Variable Rate Bonds during the then immediately preceding
twelve-month period;
(f) that, except as hereinafter provided in this subparagraph, the rate of
interest on Variable Rate Bonds then proposed to be issued shall be deemed to be
the average on any date selected by the Board that is not more than 60 days prior
to the date of calculation for the then immediately preceding five years of the
Kenny Index, plus 20 basis points; provided, however, that if, after the issuance
of the Variable Rate Bonds then proposed to be issued, more than 20% of the
aggregate of the Bonds Outstanding will bear interest at a variable rate, the rate
of interest on Variable Rate Bonds then proposed to be issued shall be deemed to
be the greater of either of the following on any date selected by the Board that is
not more than 60 days prior to the date of calculation:
(i) the average of the SIFMA Index for the most recent
twelve months, and
(ii) the then current rate of interest borne by any
Outstanding Variable rate Bonds.
"Appropriate Portion" means
(a) with respect to the principal of any series of Bonds, the principal
maturing, or subject to redemption pursuant to a Mandatory Redemption
Requirement, on the then next succeeding Principal Payment Date (if such
Principal Payment Date is not more than twelve months in the future) divided by
the number of Months intervening between such Principal Payment Date and the
then preceding Principal Payment Date,
(b) with respect to the interest on any series of Bonds other than Variable
Rate Bonds, the interest maturing on the then next succeeding Interest Payment
Date divided by the number of Months intervening between such Interest Payment
Date and the then next preceding Interest Payment Date, and
(c) with respect to the interest on any Variable Rate Bond, the actual
interest accrued on such Bond from the first day of the Month in question to the
first day of the then next succeeding Month. With respect to the Series 2017-B
Bonds, the Appropriate Portion is, in the case of interest, one-sixth (1/6) of the
interest maturing on the then next succeeding Interest Payment Date and, in the
case of principal, one-twelfth (1/12) of the principal maturing, or subject to
redemption pursuant to a Mandatory Redemption Requirement, on the then next
succeeding Principal Payment Date.
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"Assumed Indebtedness" means any indebtedness assumed by the Board in connection
with the acquisition of an Additional System.
"Authorized Collateral" means any of the following that are in bearer form or are
registered in the name of a Bank (or its nominee) with whom deposited and pledged:
(a) Federal Securities and
(b) obligations or securities of the type described in clauses (c)(iii),
(c)(iv), (c)(v) or (c)(vi) of the definition of the term "Eligible Investments."
"Authorized Denominations" means,
(a) in the case of the Series 2020 Bonds, the principal sum of $5,000 or
any integral multiple thereof and
(b) in the case of any series of Additional Bonds, the principal amount
or Maturity Amount specified in the Supplemental Indenture pursuant to which
such Additional Bonds are authorized to be issued as Authorized Denominations
with respect to such series of Additional Bonds.
"Balloon Bonds" means Current Interest Paying Bonds of a series, twenty-five percent
(25%) or more of the original principal of which matures during any one Fiscal Year, if such
maturing principal amount is not required to be amortized below such percentage by a Mandatory
Redemption Requirement prior to such Fiscal Year. Tender Option Bonds shall not be treated as
Balloon Bonds solely by virtue of the option on the part of the Holders thereof to have such Bonds
purchased prior to their respective maturities.
"BAM" means Build America Mutual Assurance Company, or any successor thereto.
"Bank" means a banking institution with combined capital, surplus and undivided profits
of not less than $75,000,000.
"Base Rate" means the per annum rate of interest established from time to time by the
Trustee as its Base Rate, such rate of interest to change with each change in the Base Rate.
"Bond Counsel" means Independent Counsel whose opinions respecting the legality or
validity of securities issued by or on behalf of states or political subdivisions thereof are nationally
recognized.
"Bond Fund" means the Bond Principal and Interest Fund created in the Indenture.
"Bond Insurer" means any insurance company insuring payment of municipal bonds and
other similar obligations.
"Bonds" means the Series 2020 Bonds and any Additional Bonds issued under the
Indenture.
"Business Day" means any day other than a Saturday, a Sunday, a day on which the
principal corporate trust office of the Trustee is authorized by law to remain closed and is closed or
a day on which the wire transfer system of the Federal Reserve System is not operational.
"Callable Bonds" means those of the Bonds which under the terms thereof may be
redeemed by the Board prior to their respective maturities.
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"Capital Appreciation Bonds" means any of the Bonds that provide for the addition to
the principal due thereon of all or any part of the accrued and unpaid interest thereon.
"Capital Improvements" means improvements, extensions and additions to the Systems
that are properly chargeable to capital account by generally accepted accounting practice and
includes, without limitation, equipment and rolling stock so chargeable and real estate (and
easements and other interests therein) on, under or over which any such improvements, extensions
or additions are, or are proposed to be, located.
"City" means the City of Opelika, Alabama, a municipal corporation under the laws of the
State of Alabama.
"City Franchise Payments" means any payments made by the Board to the City.
"Code" means the Internal Revenue Code of 1986, as amended, or any successor code
thereto.
"Compounded Amount" means, for any date with respect to a Capital Appreciation Bond,
the amount set forth in the Supplemental Indenture pursuant to which such Capital Appreciation
Bond is issued as the Compounded Amount for such Bond on such date.
"Counsel" means an attorney who is duly licensed to practice before the Supreme Court of
Alabama.
"Credit Facility" means a Standby Bond Purchase Agreement, a Letter of Credit or
Municipal Bond Insurance Policy guaranteeing or providing
(a) or the payment of all or any portion of the principal of or the interest
on any Bonds,
(b) for the payment of all or any portion of the Redemption Price of any
Bonds or
(c) for the purchase price of any Tender Option Bonds or a portion
thereof.
"Credit Facility Fees" means the initial, annual, semi-Annual or quarterly fees and
expenses charged to the Board by a Credit Facility Obligor for issuing and maintaining in effect a
Credit Facility; provided, however, that the term "Credit Facility Fees" shall not include any fees or
expenses paid out of the proceeds from the issuance of any of the Bonds.
"Credit Facility Obligor" means a Bank or a Bond Insurer issuing a Credit Facility. Any
Bank having less than $75,000,000 in combined capital, surplus and undivided profits may serve as
a Credit Facility Obligor, provided that the credit facility has a confirming letter of credit from a
Bank meeting such capital requirements or a confirming letter of credit from the US Government or
one of its Agencies.
"Current Interest Paying Bonds" means those of the Bonds that are not Capital
Appreciation Bonds.
"Directors" means the Board of Directors of the Board.
"Electric System" means any electrical plant or distribution system that may hereinafter
be acquired by the Board and subjected to the lien of the Indenture, as said system may then exist
and as it may thereafter be extended and improved.
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"Eligible Certificates" means unsecured certificates of deposit having maturities of not
more than thirty (30) days that are issued by any bank or trust company organized under the laws of
the United States of America or any state thereof the short-term obligations of which are rated
"A-1+" or better by S&P.
"Eligible Deposits" means deposits fully insured by the Federal Deposit Insurance
Corporation in any bank which is organized under the laws of the United States of America or any
state thereof, which has capital and surplus of at least $15,000,000.
"Eligible Investments" means
(a) Federal Securities;
(b) Obligations issued or guaranteed by the Federal National Mortgage
Association (FNMA), the Federal Home Loan Mortgage corporation (FHLLMC),
or the Federal Home Loan Bank (FHLB); and
(c) to the extent to which they are at the time legal investments for the
Board, any of the following:
(i) Eligible Certificates;
(ii) Eligible Deposits;
(iii) direct general obligations of any state of the United
States of America or any subdivision or agency thereof to which
is pledged the full faith and credit of a state the unsecured
general obligation debt of which is rated "A3" by Moody’s and
"A" by S&P, or better, or any obligation fully and
unconditionally guaranteed by any state, subdivision or agency
whose unsecured general obligation debt is so rated;
(iv) direct general short-term obligations of any state
agency or subdivision or agency thereof described in (iii) above
and rated "A-1+" by S&P and "MIG-1" by Moody’s;
(v) commercial paper (having original maturities of not
more than 270 days) of a corporation incorporated under the
laws of any state of the United States of America, but if and
only if, at the time of the acquisition thereof such commercial
paper is rated "A-1+" or better by S&P and "Prime-1" by
Moody’s; and
(vi) investments in a money market fund or other similar
fund that is rated "AAm" or "AAm-G" (or better) by S&P and
if rated by Moody's, rated "Aa2" or better.
"Escrow Agreement" means that certain Escrow Trust Agreement dated as of
September 1, 2020, between the Board and the 2001 Trustee wherein provision is made for the
payment of the Series 2011-B Bonds.
"Federal Securities" means
(a) direct obligations (other than an obligation subject to variation in
principal repayment) of the United States of America, and
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(b) obligations fully and unconditionally guaranteed as to timely
payment of principal and interest by the United States of America.
"Fiscal Year" means the period beginning on October 1 of one calendar year and ending
on September 30 of the next succeeding calendar year.
"Fitch" means Fitch IBCA, Inc.
"Fixed Rate Bonds" means Bonds that bear interest at a fixed rate or rates until maturity;
provided, however, that a Bond which is initially issued as a Variable Rate Bond, but the interest
rate on which has been converted to a fixed rate (whether or not the rate of interest on such Bond is
subject to conversion back to a variable rate of interest) shall be considered a "Fixed Rate Bond" for
so long as such Bond bears interest at a fixed rate.
"Gas System" means any natural gas distribution System hereafter acquired by the Board,
and subjected to the lien of the Indenture, as said system then exists and as it may thereafter be
extended and improved.
"Holder" means the person in whose name a Bond is registered on the books of the Trustee
pertaining to the Bonds.
"Independent Auditor" means a certified public accountant, or firm thereof, not employed
full time by the Board and regularly engaged in the auditing of financial records.
"Independent Counsel" means an attorney, or firm thereof, duly licensed to practice
before the Supreme Court of Alabama and not employed full time by the Board.
"Independent Engineer" means an engineer, or firm thereof, duly registered and qualified
to practice the profession of engineering under the laws of Alabama and not employed full time by
the Board.
"Insured Obligations" means the Series 2020 Bonds.
"Interest Payment Date" means
(a) with respect to the Series 2020 Bonds, each June 1 and December 1,
commencing December 1, 2020, and
(b) with respect to any series of Additional Bonds, any date specified in
the Supplemental Indenture pursuant to which such series of Additional Bonds is
issued as a date on which interest is to be paid on such series of Additional Bonds.
"Letter of Credit" means an irrevocable letter of credit issued by a Bank with respect to
the payment of principal, interest or premium on any series of Bonds.
"Mandatory Redemption Requirement" means
(a) the provisions of the Indenture with respect to the mandatory
redemption of the Series 2020 Bonds, and
(b) any similar provisions that may be set forth in a Supplemental
Indenture for mandatory redemption of any Additional Bonds at a Redemption
Price equal to the principal amount or Compounded Amount thereof.
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"Maturity Amount" means the aggregate principal and interest due and payable at
maturity with respect to a Capital Appreciation Bond.
"Month" means a calendar month.
"Moody's" means Moody's Investors Service, Inc.
"Municipal Bond Insurance Policy" means a policy of municipal bond insurance issued
by a Bond Insurer with respect to the payment of principal, interest or premium on any series of
Bonds.
"Net Investment Income" means the income derived from the investment of moneys in
the Special Fund or account in question, and the gain and income from the sale or other conversion
into cash of any investments forming a part of the special fund or account in question.
"Net Revenues" means, for the period in question, Pledged Revenues less Operating
Expenses; provided, however, that the following items shall be excluded from the computation of
"Net Revenues":
(a) extraordinary items of income or loss,
(b) unrealized gains and losses on investments and
(c) non-cash items of loss.
"Operating Expenses" means, for the applicable period or periods
(a) the reasonable and necessary expenses of efficiently and
economically administering and operating the Systems, including, without
limiting the generality of the foregoing, the cost of water, electricity and gas
purchased or produced, the cost of all items of labor, materials, supplies and
equipment (other than equipment which, by generally accepted accounting
principles, is properly chargeable to fixed capital account), premiums on
insurance and fidelity bonds, fees for engineers, attorneys and accountants for
services rendered (except in cases where such fees are properly chargeable, by
generally accepted accounting principles, to fixed capital account), reasonable
compensation to the Trustee for its expenses incurred and services performed
under the Indenture, all franchise payments made to any governmental unit (other
than the City) in connection with any franchises granted by such governmental
unit to the Board with respect to any of the Systems, all Credit Facility Fees, all
items herein specifically stated to constitute an Operating Expense, and all other
items except depreciation, interest and any City Franchise Payments that by
generally accepted accounting principles are properly chargeable to expenses of
administration and operation, and
(b) the expenses of maintaining the Systems in good repair and in good
operating condition, but not including items that by generally accepted accounting
principles are properly chargeable to fixed capital account.
"Outstanding" or "outstanding" shall mean, as of any particular time, all Bonds
authenticated and delivered under this Indenture, except
(a) Bonds cancelled at or prior to the particular time;
(b) Bonds deemed paid as provided in the Indenture; and
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(c) Bonds in lieu of, or in substitution for, which other Bonds shall have
been authenticated and delivered.
"Outstanding Amount" means the principal amount or Compounded Amount of the
Bonds then Outstanding.
"Outstanding 2001 Indenture Bonds" means the Series 2017 Bonds and the Series
2017-B Bonds outstanding and not deemed paid under the 2001 Indenture.
"Permitted Encumbrances" means as of any particular time
(a) the lien of the 2001 Indenture,
(b) the lien of the Indenture,
(c) liens for ad valorem taxes, public improvement assessments or other
governmental changes not then due,
(d) with respect to any Additional System, any lien to which such
Additional System was subject when it was acquired by the Board,
(e) easements, restrictions and exceptions that an Independent Engineer
certifies will not interfere with or impair the operation of the Systems and
(f) minor clouds, encumbrances, defects and restrictions of the type that
customarily exist with respect to properties of a size and character similar to those
comprising the Systems and that do not, in the opinion of Counsel, in the
aggregate materially impair the use of such properties in the operation of the
Systems.
"Pledged Revenues" means the entire revenues derived by the Board from the operation
of the Systems, plus any Net Investment Income from the investment of any of the moneys on
deposit in any of the Special Funds.
"Policy" means the Municipal Bond Insurance Policy issued by BAM that guarantees the
scheduled payment of principal of and interest on the Insured Obligations when due.
"Principal Payment Date" means
(a) with respect to the Series 2020 Bonds, any date specified in the
Indenture for the payment of principal on such Bonds, and
(b) with respect to any series of Additional Bonds, any date specified in
the Supplemental Indenture pertaining to such Additional Bonds as a date for
payment of principal of such Additional Bonds.
"Quinquennial Series 2020-A Bond Year" means the fifth Series 2020-A Bond Year and
each succeeding fifth Series 2020-A Bond Year occurring thereafter until and including the Series
2020-A Bond Year during which the Series 2020-A Bonds are fully retired.
"Record Date" means
(a) with respect to the Series 2020 Bonds, the May 15 and
November 15, as the case may be, next preceding an Interest Payment Date and
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(b) with respect to any series of Additional Bonds; the date specified or
determined in accordance with the Supplemental Indenture, pursuant to which
such Additional Bonds are issued.
"Redemption Date" means the date fixed for redemption of Callable Bonds in any
published notice of redemption.
"Redemption Price" means the price at which the Callable Bonds called for redemption
may be redeemed on the Redemption Date.
"Reimbursement Obligation" means an obligation on the part of the Board to reimburse
a Credit Facility Obligor for amounts paid by such Credit Facility Obligor with respect to the
principal of or the interest or premium, if any, on the Bonds under the terms of a Credit Facility,
together with interest thereon; provided, however, that Credit Facility Fees shall not be included in
calculating the amount of a Reimbursement Obligation.
"Resolution" means a resolution duly adopted by the Directors.
"Revenue Fund" means the Utility Systems Gross Revenue Fund created in the Indenture.
"S&P" means Standard & Poor's Global Ratings.
"Series 2011-B Bonds" means the Board's Utility Revenue Bonds, Series 2011-B, dated
September 27, 2011, which were originally issued in the aggregate principal amount of $19,425,000.
"Series 2017 Bonds" means the Boards Utility Revenue Bonds, Series 2017, dated June 6,
2017, which were originally issued in the aggregate principal amount of $27,265,000.
"Series 2017-B Bonds" means the Board's Utility Revenue Bonds, Series 2017-B, dated
August 30, 2017, in the original principal amount of $23,380,000.
"Series 2020 Bonds" means the Series 2020-A Bonds and the Series 2020-B Bonds.
"Series 2020-A Bond Year" means
(a) the period of one year (or less) beginning on the date the Series
2020-A Bonds are initially authenticated and delivered and ending on the day in
the calendar year that is selected by the Board in accordance with Treasury
Regulations § 1.148-3(e)(1) or other applicable regulations, and
(b) each period of one year beginning on the day after the expiration of
the preceding such bond year.
"Series 2020-A Bonds Required Rebate" means any amount that is required by the
provisions of Section 148(f) of the Code an any applicable regulations, to be paid by the Board to
the United States of America in order that the Series 2020-A Bonds shall not be treated as "arbitrage
bonds" within the meaning of Sections 103(b)(2) and 148 of the Code and any applicable regulations
promulgated thereunder.
"Sewer System" means any sanitary sewer system hereafter acquired by the Board and
subjected to the lien of the Indenture, as said system then exists and as it may thereafter be extended
and improved.
"SIFMA Municipal Index" or "SIFMA Index" means The SIFMA Municipal Swap
Index, a 7-day high-grade market index comprised of tax-exempt Variable Rate Demand
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Obligations reset rates that are reported to the Municipal Securities Rule Making Board’s SHORT
reporting system.
"Special Funds" means the Revenue Fund and the Bond Fund.
"Supplemental Indenture" means an agreement supplemental to the Indenture.
"Systems" means
(a) on the date of the execution and delivery hereof, the Water System,
and
(b) from and after the acquisition of one or more Additional Systems,
the Water System and such other Additional Systems acquired by the Board.
"Tax-Exempt Bonds" means any Bonds issued by the Board the interest on which is
excludable, in the opinion of Bond Counsel at the time such Bonds are issued, from gross income
of the recipients thereof for Federal income tax purposes.
"Tender Option Bonds" means Bonds that are required to be purchased on behalf of the
Board, at the option of the Holders thereof, prior to their respective maturities; provided, however,
that if no such option is thereafter exercisable, such Bond shall no longer be considered a "Tender
Option Bond".
"Variable Rate Bonds" means Bonds that bear interest at a rate per annum which is subject
to adjustment so that the actual rate of interest is not ascertainable at the time such Bonds are issued;
provided, however, that upon the conversion of the rate of interest on a Variable Rate Bond to a
fixed rate of interest (whether or not the interest rate on such Bond is subject to conversion back to
a variable rate of interest), such Bond shall be considered a "Fixed Rate Bond" for so long as such
Bond bears interest at a fixed rate.
"Water System" means the Board's entire water works plant and distribution system, as
said system now exits and as it may hereafter be extended and improved.
"2001 Indenture" means that certain Trust Indenture dated as of June 1, 2001, between
the Board and the 2001 Trustee, as heretofore supplemented and amended, pursuant to which the
Outstanding 2001 Indenture Bonds were issued.
"2001 Trustee" means The Bank of New York Mellon Trust Company, National
Association, as trustee under the 2001 Indenture.
"2020-A Improvements" means the Capital Improvements to the Water System being
acquired and constructed, in part, out of the proceeds of the Series 2020-A Bonds.
"2020-B Improvements" means the Capital Improvements to the Water System being
acquired and constructed, in part, out of the proceeds of the Series 2020-B Bonds.
Security Provided
In the Indenture the Board has pledged for payment of all Bonds issued thereunder
(a) the Pledged Revenues, and
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(b) the Special Funds and the income, gain and profit resulting from the investment
thereof, saving and excepting, however, from the aforesaid pledge all the following (whether or not
owned by the Board or hereafter acquired by it):
(i) choses in action and
(ii) customers' security deposits.
THE INDENTURE DOES NOT CONSTITUTE A MORTGAGE ON THE SYSTEMS AND IS NOT SUBJECT TO
FORECLOSURE.
Application of Revenues and Creation of
Funds
General. The Indenture creates two (2) special funds: the Revenue Fund and the Bond Fund. In addition,
the Indenture creates the 2020-A Construction Fund to provide for the payment of (a) a portion of the costs of acquiring
and installing the 2020-A Improvements and (b) the expenses of issuing the Series 2020-A Bonds and the 2020-B
Construction Fund to provide for the payments of (i) a portion of the costs of acquiring and installing the 2020-B
Improvements and (ii) the expenses of issuing the Series 2020-B Bonds. The Trustee is irrevocably designated as the
depository, custodian, and disbursing agent for the Bond Fund and the Construction Funds. The Board of Directors
of the Board may at any time and from time to time designate any banking institution or institutions as depository or
depositories for the Revenue Fund.
The Revenue Fund. The Board is required to deposit in the Revenue Fund, daily as received by it, all of the
revenues derived from the operation of the Systems remaining after the payment of all amounts required to be paid
out of the revenue fund created in the 2001 Indenture. On or prior to the last day of each month and after payment of
all Operating Expenses, the Board is required to transfer moneys on deposit in the Revenue Fund to the Bond Fund in
accordance with the provisions of the Indenture and as summarized below.
The Bond Fund. On or prior to the last day of each month the Board is required to transfer from the Revenue
Fund to the Bond Fund the following:
(a) Contemporaneously with the issuance and sale of any of the Bonds and out of the
proceeds derived from such sale, the Board (or the Trustee on behalf of the Board) will pay into the
Bond Fund such part of the proceeds from said sale as is allocable to accrued interest (if any).
(b) On or before the last day of each successive Month, the Board will pay into the Bond
Fund, out of the moneys in the Revenue Fund, an amount equal to the sum of
(i) the Appropriate Portion of the interest that will mature on the Bonds on
the then next succeeding Interest Payment Date, plus
(ii) the Appropriate Portion of the sum of
(1) the principal that will mature on the Bonds on the then next
succeeding Principal Payment Date, plus
(2) the principal amount, if any, of Bonds required to be
redeemed on the then next succeeding Principal Payment Date pursuant
to any Mandatory Redemption Requirement; provided, however, that
there shall be credited on the payments due under the preceding clause
(ii) (1) all amounts paid into the Bond Fund with respect to such Month
pursuant to the provisions of the preceding clause (ii)(1) and this clause
(ii)(2) all amounts deposited into the Bond Fund from the principal
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proceeds from the sale of Bonds that have not theretofore been credited
on previous payments due into the Bond Fund.
(c) Contemporaneously with the issuance of any of the Additional Bonds, the Board will
pay into the Bond Fund such additional sum as, when added to
(i) the sum that will be on deposit in the Bond Fund immediately following
such issuance, and
(ii) the subsequent payments that are required to be made into the Bond Fund
between the time of such issuance and the then next succeeding Principal Payment
Date, will make available on the then next succeeding Principal Payment Date an
amount equal to the principal and interest maturing or subject to a Mandatory
Redemption Requirement on that date with respect to the Bonds that will then be
outstanding under the Indenture, and on the Interest Payment Date or Dates, if
any, occurring between the date of the issuance of such Additional Bonds and said
next succeeding Principal Payment Date, an amount equal to the interest maturing
on such Interest Payment Date or Dates with respect to the Bonds that will then
be outstanding under the Indenture.
The sums provided in this subparagraph (c) to be paid into the Bond Fund shall be paid therein out
of moneys in the Revenue Fund, except to the extent that such sums are provided to be paid out of
the proceeds derived from the sale of such Additional Bonds.
(d) In the event that the moneys paid or transferred into the Bond Fund with respect to any
Month shall be less than the amount required to be paid therein with respect to such Month, then on
or before the last day of the next succeeding Month and on or before the last day of each Month
thereafter until such time as the payments into the Bond Fund are current, the Board will pay into
the Bond Fund, in addition to the monthly payments provided for in subparagraph (b) above and
any payment provided for in subparagraph (c) above, all moneys remaining in the Revenue Fund on
such date.
There shall also be credited on the payments due to be made into the Bond Fund all earnings on investments
made with moneys on deposit in the Bond Fund to the end that all moneys held in the Bond Fund exclusive of amounts
held therein for the payment of principal of and interest on the Bonds shall be paid out for purposes for which the
Bond Fund was created within thirteen (13) Months from the date such moneys first become available for such
purposes.
All moneys paid into the Bond Fund shall be used only for payment of the principal of and the interest on the
Bonds upon or after the respective maturities of such principal and interest and to redeem Bonds subject to a
Mandatory Redemption Requirement; provided, however,
(a) in the event that the principal, interest or premium due on any of the Bonds (whether
at maturity, by redemption or otherwise) is paid to the Trustee on behalf of the Holders of such
Bonds or directly to such Holders, out of the proceeds of a Credit Facility, and funds for the payment
of all or a portion of such principal, interest or premium shall have been deposited into the Bond
Fund the Trustee shall pay the amount so deposited, to the extent of any such payment pursuant to
a Credit Facility, to the Credit Facility Obligor issuing such Credit Facility in satisfaction of any
Reimbursement Obligation with respect thereto; and
(b) if at the final maturity of the Bonds, however the same may mature, there shall be in
the Bond Fund moneys in excess of what shall be required to pay in full the principal of and the
interest on the Bonds, then any such excess shall thereupon be returned to the Board. When the
amount of moneys on deposit in the Bond Fund equals or exceeds the aggregate of the principal and
interest then remaining unpaid with respect to the Bonds, no further payments need be made into
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the Bond Fund except to make good moneys paid therein which may have become lost or which
may not be immediately available for withdrawal.
Investment of Moneys in Bond Fund.
So long as the Board shall not be in default under the Indenture, it may from time to time at its option cause
any or all of the moneys in the Bond Fund to be invested in any Eligible Investments
(a) which have a stated maturity prior to the date when it is anticipated by the Board that
such moneys will be needed for the purpose for which the Bond Fund is created, or
(b) which are redeemable at the option of the holder thereof at a stated price and time not
later than the date when it is anticipated by the Board that such moneys will be needed for such
purpose. In the event of any such investment, the Eligible Investments in which such investment
shall be made, together with all income therefrom, shall become a part of the Bond Fund and shall
be held by the Trustee to the same extent as if they were moneys on deposit therein. The Board may
from time to time cause any such investments to be sold or otherwise converted into cash; and the
Trustee may cause any such investments to be sold or otherwise converted into cash if in its sole
discretion it deems such sale or conversion necessary to obtain funds to prevent a default in the
payment of the principal of or interest on the Bonds. In the event of any such sale or conversion of
all or part of the said investments, the net proceeds derived therefrom shall become a part of the
Bond Fund. The Trustee shall be fully protected in making any such investment or sale or
conversion into cash of any Eligible Investment upon direction given in a Resolution; and the
Trustee shall be fully protected in making any such sale or conversion into cash of any such
investment if in the sole discretion of the Trustee it deems such sale or conversion necessary to
obtain funds to prevent a default in the payment of the principal of or interest on the Bonds. In the
event any moneys shall be invested in Eligible Investments, it shall not be necessary for the Trustee
to secure any such investment so long as such moneys shall remain so invested. In any determination
of the amount at any time on deposit in the Bond Fund, any Eligible Investment shall be counted as
if it were an amount of cash equal to whichever is then the lesser of (i) the then market value of such
investment or (ii) the face value thereof.
Additional Bonds
Privilege of Issuing Additional Bonds. While the Board is not in default under the Indenture, the Board
may at its option issue Additional Bonds at any time and from time to time for any purpose or purposes that may at
the time be permitted by law and by the Board’s certificate of incorporation as it may then exist. The Additional Bonds
may be issued in one or more series, and each of the Additional Bonds shall contain an appropriate series designation.
The Additional Bonds may be issued as Fixed Rate Bonds, Variable Rate Bonds, Current Interest Paying Bonds,
Capital Appreciation Bonds, Tender Option Bonds or any combination thereof (all as shall be specified in the
Supplemental Indenture providing therefor), shall be in such denomination or denominations, shall bear such date or
dates, may bear interest at such rate or rates, shall mature in such year or years, and may contain such provisions for
redemption prior to maturity, all as may be provided in the Supplemental Indenture under which they are respectively
issued.
Prerequisites to Issuance of Additional Bonds. Prior to the issuance of any of the Additional Bonds, the
Board shall deliver to the Trustee those of the Additional Bonds proposed to be issued, duly executed and sealed, and
accompanied by the following:
(a) Supplemental Indenture. A form of Supplemental Indenture duly executed, sealed
and acknowledged in behalf of the Board and containing the following:
(i) a description of the Additional Bonds proposed to be issued, including
the date, the aggregate principal amount, the series designation, the interest rate
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or rates, and the maturities of such Additional Bonds, and any provisions for
redemption thereof prior to maturity;
(ii) a statement of the purpose or purposes for which the Additional Bonds
are proposed to be issued;
(iii) if any of the Additional Bonds proposed to be issued are Capital
Appreciation Bonds, a table of Compounded Amounts with respect to such
Additional Bonds; and
(iv) any other provisions applicable to such Additional Bonds that do not
conflict with the provisions of the Indenture or of any other Supplemental
Indenture theretofore executed and delivered;
(b) Proceedings. A certified copy of the proceedings taken by the Directors authorizing
the issuance of the Additional Bonds proposed to be issued and the execution and delivery of the
Supplemental Indenture with respect to such Additional Bonds;
(c) Resolution. A Resolution or Resolutions requesting the Trustee to authenticate and
deliver the Additional Bonds proposed to be issued and reciting the following:
(i) that the Board is not at the time in default under the Indenture and no
such default is imminent;
(ii) the sale price of any of the said Additional Bonds that are to be issued
by sale and the terms of the exchange of any that are to be issued by exchange;
(iii) the name of the person or persons, if any, to whom said Additional Bonds
have been sold and are to be delivered;
(iv) a list of all Additional Bonds previously issued by the Board and at the
time outstanding, and of the Supplemental Indentures under which they were
issued; and
(v) if any of such Additional Bonds are to be issued for the purpose of
acquiring, by construction or otherwise, Capital Improvements, a brief description
of such Capital Improvements.
(d) Certificate or Certificates as to Revenues. The item or items required by any one of
the following paragraphs (i), (ii) or (iii):
(i) A certificate by an Independent Auditor certifying that the amount of the
Net Revenues during the Fiscal Year next preceding the date of the issuance of
the Additional Bonds then proposed to be issued was not less than one hundred
twenty percent (120%) of the maximum Annual Debt Service Requirement with
respect to the Assumed Indebtedness (if the revenues from a related Additional
System are included in such certificate), the Outstanding 2001 Indenture Bonds
and the Bonds that will be outstanding immediately following the issuance of the
then proposed Additional Bonds;
(ii) A Resolution or Resolutions adopted after the commencement of the
Fiscal Year next preceding the issuance of the then proposed Additional Bonds,
establishing
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(1) a revised schedule of rates for water furnished from
the Water System,
(2) a revised schedule of rates for gas furnished from the
Gas System,
(3) a revised schedule of rates for electricity furnished
from the Electric System,
(4) a revised schedule of rates from sewer service
furnished from the Sewer System, or
(5) revised schedules of rates for Water, Gas, Electric or
Sewer Service, or any two or more of them, accompanied by a
certificate by an Independent Engineer stating that if the revised
schedule or schedules of rates set forth in the said Resolution or
Resolutions had been in effect throughout the Fiscal Year next
preceding the date of issuance of the Additional Bonds then
proposed to be issued, the amount of the Net Revenues during
the said Fiscal Year would have been not less than one hundred
twenty percent (120%) of the maximum Annual Debt Service
Requirement with respect to the Assumed Indebtedness (if the
revenues from any related Additional System are included in
such certificate), the Outstanding 2001 Indenture Bonds and the
Bonds that will be outstanding immediately following the
issuance of the then proposed Additional Bonds; provided
however, that such certificate by an Independent Engineer shall
be accompanied by and shall recite that it is based, inter alia,
upon an examination by the said Independent Engineer of a
certificate by an Independent Auditor certifying the amount of
the Net Revenues during the Fiscal Year next preceding the date
of issuance of the then proposed Additional Bonds; or
(iii) In the event that any of the Additional Bonds proposed to be issued are
to be issued for the purpose of acquiring or constructing Capital Improvements, a
certificate by an Independent Auditor certifying the Net Revenues during the
Fiscal Year next preceding the date of issuance of the Additional Bonds proposed
to be issued, together with a certificate of an Independent Engineer estimating the
date of completion of the Capital Improvements and the additional Net Revenues
to be received during each of the three Fiscal Years immediately following the
said estimated date of completion as a result of the acquisition or construction of
the Capital Improvements and stating that the amount of the Net Revenues as
certified plus the additional Net Revenues as estimated by the said Independent
Engineer in each of such three Fiscal Years is not less than one hundred thirty-
five percent (135%) of the maximum Annual Debt Service Requirement with
respect to the Assumed Indebtedness (if the revenues from any related Additional
System are included in such certificate), the Outstanding 2001 Indenture Bonds
and the Bonds that will be outstanding immediately following the issuance of the
then proposed Additional Bonds.
The item or items required by the foregoing provisions of this subsection (d) shall not be
required in the case of the issuance of Additional Bonds for the purpose of refunding any Bonds
outstanding under the Indenture if there is delivered to the Trustee a certificate of the Chairman of
the Directors certifying that the maximum Annual Debt Service Requirement with respect to the
Bonds that will be outstanding immediately following the issuance of the then proposed Additional
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Bonds will be no higher than the maximum Annual Debt Service Requirement with respect to the
Bonds then outstanding.
(e) Opinion of Independent Counsel. An opinion of Independent Counsel, dated on the
date of the issuance of the Additional Bonds with respect to which such opinion is rendered,
approving the form of all documents required in the preceding subsections of this section to be
delivered to the Trustee and expressing the opinion that the said documents comply with the
applicable requirements of the Indenture.
Credit Facility for Additional Bonds. The Board may, in connection with the issuance of any series of
Additional Bonds,
(a) provide a Credit Facility therefor,
(b) enter into such agreements as are necessary and appropriate with a Credit Facility
Obligor providing, inter alia, for
(i) the payment of the fees and expenses of such Credit Facility Obligor,
which fees and expenses shall be payable out of the proceeds from the sale of such
Additional Bonds or as an Operating Expense, as appropriate and
(ii) the terms and conditions of such Credit Facility and any security to be
provided for such Credit Facility and for the payment of the obligations of the
Board with respect thereto,
(c) secure any of its obligations with respect to such Credit Facility by an agreement
providing for the purchase of any Bonds secured thereby, with such adjustments as to interest rates,
methods of determination of interest, maturities or redemption provisions as shall be specified by
the Board in the applicable Supplemental Indenture,
(d) incur a Reimbursement Obligation which may be secured by a lien or charge on
Pledged Revenues subordinate to the lien or charge on Pledged Revenues created hereby for the
benefit of the Bonds,
(e) provide, in any such agreement and in the appropriate Supplemental Indenture, that for
the purpose of giving consents, receiving notices and certain specified other purposes, such Credit
Facility Obligor shall be deemed to be the Holder of all Bonds secured by such Credit Facility, and
(f) provide in any such agreement and in the appropriate Supplemental Indenture that the
maturity of the Bonds secured by such Credit Facility may not be accelerated without the consent
of the Credit Facility Obligor issuing such Credit Facility.
Acquisition of Additional Systems and
Assumption of Indebtedness
Associated Therewith
Acquisition of Additional Systems. The Board shall have the right to acquire and subject to the lien of the
Indenture, at any time and from time to time one or more Additional Systems, provided that, prior to any such
acquisition, there shall be delivered to the Trustee the following:
(a) a Supplemental Indenture, duly executed, sealed and acknowledged on behalf of the
Board, subjecting the revenues from such Additional System to the lien of the Indenture;
(b) a certified copy of an ordinance adopted by the governing body of any municipality in
which all or any part of such Additional System is located granting a franchise to the Board to use
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the streets, avenues, alleys or public places of such municipality to operate such Additional System
and construct improvements thereto;
(c) a Certificate of an Independent Engineer to the effect that any liens to which such
Additional System is subject at the time it is to be acquired by the Board will not, in the aggregate,
materially impair the use of such Additional System by the Board;
(d) an opinion of Counsel acceptable to the Trustee to the effect that no lien to which such
Additional System is subject at the time it is to be acquired by the Board is subject to foreclosure;
and
(e) a report of an Independent Auditor stating that if such Additional System or Systems
had been a part of the Systems during each of the two Fiscal Years next preceding the Fiscal Year
during which such Additional System or Systems are to be subjected to the lien of the Indenture, the
rate covenant set forth in the Indenture would have been satisfied.
Assumption of Indebtedness. In connection with the acquisition of an Additional System, the Board may
enter into an agreement with the person from whom such Additional System is acquired assuming any outstanding
indebtedness of such person associated with such Additional System and may pledge the Pledged Revenues as security
for the obligation of the Board under such agreement provided that any such pledge shall be made expressly
subordinate to
(a) the pledge of the Pledged Revenues for the benefit of the holders of the Outstanding
2001 Indenture Bonds under the 2001 Indenture,
(b) the pledge of the Pledged Revenues for the benefit of the Holders of the Bonds under
the Indenture, and
(c) any pledge theretofore or thereafter made of the Pledged Revenues to secure any
Reimbursement Obligation.
Particular Covenants of the Board
The Indenture will contain the following covenants of the Board, among others:
Maintenance of Books and Records. The Board will maintain, in accordance with accepted accounting
principles, complete books, records and accounts pertaining to the Systems.
To Adopt Annual Budget. Not less than five (5) days prior to the beginning of each Fiscal Year, the Board
will adopt and file with the Trustee and an annual budget for the Systems (which may be included in the Board's
general annual budget) for the ensuing Fiscal Year. Such budget shall set forth in reasonable detail the following, in
addition to such other items as the Board shall deem appropriate to be included therein:
(a) the estimated Pledged Revenues and Operating Expenses for such Fiscal Year;
(b) the estimated amounts to be deposited during such Fiscal Year in the Bond Fund; and
(c) the estimated expenditures during such Fiscal Year for the replacement of capital assets
or other Capital Improvements.
If for any reason the Board shall not have adopted the annual budget for a Fiscal Year before the first day of such
Fiscal Year, the annual budget for the preceding year shall be deemed to have been adopted and be in effect for such
Fiscal Year until the annual budget for such Fiscal Year is adopted and a copy thereof filed with the Trustee.
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Annual Audits.
(a) The Board will within one hundred eighty (180) days following the close of each Fiscal
Year cause an audit of its books for such Fiscal Year to be made by an Independent Auditor. Each
such audit, in addition to whatever matters may be thought proper by the Independent Auditor to be
included therein, shall include the following matters with respect to the Systems:
(i) a statement in reasonable detail of revenues and expenditures during
such Fiscal Year;
(ii) a balance sheet as of the end of such Fiscal Year;
(iii) a statement that the Board is in compliance with the rate covenant set
forth below;
(iv) a list of the insurance policies and fidelity bonds in force at the end of
the Fiscal Year, setting out with respect to each such policy the amount thereof,
the risk covered, the name of the insurer, and the expiration date of the policy;
(v) the Independent Auditor’s comments regarding the manner in which the
Board has carried out the requirements of the Indenture and the Independent
Auditor’s recommendations for any changes or improvements in the operation of
the Systems, including any recommendations for changes in or additions to the
insurance carried thereon; and
(vi) the number of properties connected with and served by the Systems, as
disclosed by the records of the Board without requirement of any physical
verification thereof.
All expenses incurred in the making of such audits shall constitute and be paid as an Operating
Expense. Each such annual audit shall, at all reasonable times during usual business hours, be open
for examination, including the copying thereof, by any Holders of the Bonds, or anyone acting for
or on behalf of any of them. Within ten (10) days following the receipt of each audit, the Board will
furnish a copy thereof to the Trustee, the original purchaser or purchasers from the Board of each
series of the Bonds, and to the Holder of any of the Bonds who may request the same in writing and
each of them is hereby granted and shall have the right to discuss the contents of the audit with the
Independent Auditor making the same and to secure from the Independent Auditor such additional
information respecting the matters therein set out as may be reasonably required.
(b) In the event that the audit required by the provisions of the preceding subparagraph
(a) has not been furnished to the Trustee within two hundred ten (210) days following the close of
any Fiscal Year, the Trustee may, at the expiration of said period, employ an Independent Auditor
to make an audit for such Fiscal Year, and the Board covenants and agrees to permit any Independent
Auditor so employed to inspect any and every part of the Systems and the books and records of the
Board pertaining thereto and to assist in furnishing facilities for such inspection. The Board agrees
to pay, as an Operating Expense, the compensation of any Independent Auditor so employed by the
Trustee for such purpose. The Trustee may at its option advance to the Board the amount of such
compensation by paying directly to the Independent Auditor so employed by the Trustee a
reasonable amount as compensation for his services. Any amount so advanced by the Trustee,
together with interest thereon at a per annum rate of interest equal to the Base Rate plus two percent
(2%) from the date of such advancement, shall be tacked to the indebtedness secured by the
Indenture and shall be entitled to the benefit of the lien of the Indenture; and the Board agrees to
repay the same upon demand with interest at the said rate.
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No Free Service. To Maintain Uniform Rates. The Board will not furnish or permit to be furnished by or
from the Systems any free water, electric, gas, sewer service or free service of any kind to the City or to any county
or incorporated municipality or to any agency, instrumentality, person, firm or corporation whatsoever. All water,
electric, gas, sewer service and other services furnished from the Systems shall be uniform with respect to each class
of customers, with the exception of
(a) raw, untreated water sold by the Board to West Point Stevens, pursuant to an agreement
dated September 17, 1982, or any successor agreement,
(b) raw, untreated water sold by the Board to Sunbelt Gulf Corporation of
Auburn/Opelika, pursuant to a Water Supply Agreement dated as of February 25, 1991, or any
successor agreement thereto and
(c) any similar agreement with any other purchaser of raw, untreated water.
Maintenance of Rates. The Board will make and maintain such rates and charges for the water, electric,
gas, sewer service services supplied from the Systems and make collections from the users thereof in such manner as
shall produce amounts sufficient at all times to produce Net Revenues during each Fiscal Year at least equal to one
hundred twenty percent (120%) of the amount required to be paid into the Bond Fund during each Fiscal Year. The
Board will make from time to time such increases and other changes in such rates and charges as may be necessary to
produce said amounts. Each schedule of rates shall provide that all charges for service supplied from the Systems shall
become due not less often than once during each calendar month.
Discontinuance of Service on Non-Payment of Charges. If the account of any user of water, electric, gas,
sewer service or other service supplied from the Systems shall remain unpaid for a period of sixty (60) days after such
account shall become due, the Board thereupon will promptly discontinue furnishing water, electric, gas, sewer service
and all other service of any kind from the Systems to such user whose account shall remain unpaid, but upon
subsequent payment of all then due charges for water and other service from the Systems, including any penalties
which may be provided for in any then applicable schedule of rates of the Board, the Board may thereafter furnish
water, electric, gas, sewer service or other service from the Systems to such user until such time as his account for
water, electric, gas, sewer service or other service from the Systems shall again remain unpaid for a period of sixty
(60) days after such account shall become due, whereupon the furnishing of water, electric, gas, sewer service and
other service from the Systems shall again be discontinued. The provisions of this section shall not be construed to
prevent the Board from causing any connection with the Systems to be discontinued for non-payment of service
charges on a date earlier than that period herein specified.
To Require Metered Service. No water, electric, gas, or sewer service shall be furnished from the Systems
to any customer of the Board unless there is installed with respect to such customer a meter or other measuring device
capable of accurately measuring the amount of water, electric, gas or sewer service delivered to such customer,
provided, however, that sewer service may be measured by or based upon water consumption.
Priority of Pledge of Revenues Herein Made. The pledge of Pledged Revenues made for the benefit of the
Holders of the Bonds shall be prior and superior to any pledge thereof hereafter made for the benefit of any securities
hereafter issued or any contract hereafter made by the Board other than any of the Additional Bonds, and the Board
agrees that in the event it should hereafter issue any securities or make any contract payable out of the revenues from
the operation of the Systems, or any part of any thereof, other than any of the Additional Bonds, or for which any part
of the Pledged Revenues may be pledged, the Board will recognize in the proceedings under which any such securities
or contract are hereafter authorized the priority of the pledge of the Pledged Revenues made in the Indenture for the
benefit of the Bonds.
Sale or Lease of Systems Prohibited Except Under Certain Circumstances; Agreement for Continued
Operation and Repair. Except as otherwise provided in the Indenture, the Board agrees that, so long as any of the
Bonds remains outstanding,
(a) it will not sell or lease the whole or any integral part of the Systems,
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(b) it will continuously operate the Systems, or cause the same to be operated, in an
economical and efficient manner and as an enterprise whose property and income shall be exempt
from taxation, and
(c) it will keep the Systems in good repair and in efficient operating condition, making
from time to time all needful repairs and replacements thereto and thereof.
The Board may, however, sell portions of the Systems which, in the opinion of an Independent Engineer as evidenced
by a certificate filed with the Trustee, as no longer necessary for the continued efficient and economical operation of
the Systems. If the laws of Alabama at the time shall permit such action to be taken, nothing contained in this section
shall prevent the consolidation of the Board with, or merger of the Board into, any other public corporation, or the
transfer by the Board of the Systems as an entirety to the City or to another public corporation; provided:
(i) the property and income of such other public corporation are not subject
to taxation;
(ii) such other public corporation shall have corporate authority to carry on
the business of operating the Systems;
(iii) upon any such consolidation, merger or transfer the due and punctual
payment of the principal of and interest on the Bonds according to their tenor and
the due and punctual performance and observance of all the agreements and
conditions of the indenture to be kept and performed by the Board shall be
expressly assumed in writing by the corporation formed by such consolidation or
into which such merger shall be made or to which the Systems shall be transferred
as an entirety;
(iv) such consolidation, merger or transfer shall not cause or result in any
mortgages or other lien being affixed to or imposed on or becoming a lien on the
Systems or the revenues therefrom that will be prior to or on a parity with the lien
of the Indenture and of the pledge therein made for the benefit of the Bonds; and
(v) such consolidation, merger or transfer will not otherwise impair the
operation of the Systems.
Freedom of Systems from Prior Liens. The Board will keep the Systems free from all liens and
encumbrances prior to the lien of the Indenture (other than Permitted Encumbrances) but the Board may defer
payments pending the bona fide contest of any claim unless the Trustee shall be of the opinion that such deferment of
payment pending contest will cause the lien of the Indenture as to any of the Systems to be materially endangered or
will cause the Systems or any part thereof to be subject to loss or forfeiture, in which event any such payment then
due shall not be deferred. Nothing contained in the Indenture shall be construed to prevent the Board from hereafter
purchasing additional property on conditional or lease sale contract or subject to vendor’s lien or purchase money
mortgage, and as to all property so purchased the Indenture shall be subject and subordinate to such conditional or
lease sale contract, vendor’s lien, or purchase money mortgage.
Payment of Charges and Expenses of, and Advances by, the Trustee. The Board will discharge, pay or
satisfactorily provide to the Trustee all liabilities, expenses and advances reasonably incurred, disbursed or made by
the Trustee in the execution of the trusts created by the Indenture, and it will from time to time pay to the Trustee
reasonable compensation for the Trustee’s services hereunder, including extra compensation for unusual or
extraordinary services. All such liabilities, expenses, advances and compensation shall be secured by the Indenture,
shall bear interest until paid at a per annum rate of interest equal to the Basic Rate plus 2% from the respective dates
on which such liabilities, expenses and advances are incurred, disbursed or made, and on which such compensation
shall be earned, and shall be paid as Operating Expenses of the Systems.
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Inspection of Systems by Trustee. The Board will permit the Trustee to inspect, at any reasonable time, any
and every part of the Systems and the books and records of the Board, and will assist in furnishing facilities for such
inspection.
Warranty of Title. The Board warrants its title to each and any part of the Systems presently in existence
to be free and clear of every lien, encumbrance, trust or charge prior hereto, other than Permitted Encumbrances;
warrants that it has power and authority to subject the Systems and the revenues therefrom to the lien of the Indenture
and that it has done so.
Further Assurances. The Board will, upon reasonable request, execute and deliver such further instruments
and do such further acts as may be necessary or proper to carry out more effectually the purpose of the Indenture, and
in particular (without in any way limiting the generality of the foregoing) to make subject to the lien of the Indenture
any property hereafter acquired by it for use as a part of the Systems, and to transfer to any successor trustee or trustees
the assets, powers, instruments and funds held in trust hereunder and to confirm the lien of the Indenture with respect
to any Bonds issued hereunder. No failure to request such further instruments or further acts shall be deemed a waiver
of any right to the execution and delivery of such instrument or the doing of such acts or be deemed to affect the
interpretation of any provision of the Indenture.
Special Covenants of the Board Relating to Exemption of the Interest on the Series 2020-A Bonds from
Gross Income for Federal Income Tax Purposes. The Board will
(a) in a timely manner, make all Series 2020-A Required Rebates and take such other
action as shall be necessary, under the provisions of the Code and any applicable regulations, to
preserve the exemption of the interest on the Series 2020-A Bonds from gross income of the
recipients thereof for Federal income tax purposes, and
(b) refrain from taking any action that would, under the Code and any applicable
regulations, result in the interest on any of the Series 2020-A Bonds being or becoming subject to
gross income of the recipients thereof for Federal income tax purposes. Further, and without in any
way limiting the generality of the foregoing,
(i) the Board will not apply the proceeds from the Series 2020-A Bonds in
a manner that would cause any of the Series 2020-A Bonds to be a "private activity
bond" within the meaning of Section 141(a) of the Code;
(ii) the Board will not make any investment of any moneys on deposit in any
of the special funds created under the Indenture if, as a result thereof, any of the
Series 2020-A Bonds would be considered "arbitrage bonds" within the meaning
of Section 102(b)(2) and 148 of the Code and any applicable regulations;
(iii) the Board will, within one hundred twenty (120) days following the end
of each Quinquennial Series 2020-A Bond Year during which any of the Series
2020-A Bonds were outstanding and unpaid, furnish to the Trustee a certificate of
the General Manager of the Board indicating that all Series 2020-A Bonds
Required Rebates that are due for the five-year period ending on the last day of
such Quinquennial Series 2020-A Bond Year with respect to the Series 2020-A
Bonds have been made; and
(iv) the Board will, within sixty (60) days following the date on which the
last of the Series 2020-A Bonds was fully retired, furnish to the Trustee a
certificate of the General Manager of the Board indicating that all Series 2020-A
Bonds Required Rebates that are due with respect to the Series 2020-A Bonds
have been made;
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provided, however, that the Board shall not be required to furnish to the Trustee the written determination referred to
in the preceding clauses (iii) or (iv) with respect to any particular Series 2020-A Bond Year if, prior to the date on
which such determination would otherwise be required to be furnished, it furnishes to the Trustee an opinion of Bond
Counsel acceptable to the Trustee stating either that the failure to make such determination will not adversely affect
the exemption of the interest on the Series 2020-A Bonds from gross income of the recipients thereof for Federal
income tax purposes or that such a determination is not relevant to computation of any Series 2020-A Bonds Required
Rebate.
All the covenants and agreements on the part of the Board contained above shall, notwithstanding any
contrary provision of the Indenture,
(1) survive any so-called "constructive" retirement and payment of the Series 2020-A
Bonds, and
(2) continue in full force and effect until
(A) all the Series 2020-A Bonds shall have become due and payable in
accordance with their terms, at maturity, through proceedings for redemption or
otherwise, and
(B) either the whole amount of principal and interest (and premium, if any)
due and payable thereon shall have been paid or there shall have been irrevocably
deposited with the Trustee an amount sufficient therefor.
Further, those covenants and agreements on the part of the Trustee contained in the Indenture that are necessary to
enable the Board to comply with the covenants and agreements on its part contained above shall also survive any such
"constructive" retirement and payment of the Series 2020-A Bonds and shall continue in full force and effect until
there have occurred the events specified in clauses (A) and (B) of the preceding subparagraph (2).
Covenant Not to Issue any Further Additional Bonds under the 2001 Indenture. The Board will not
hereafter issue any "additional bonds" under the provisions of the 2001 Indenture.
Insurance
Insurance Required. The Board will keep all portions of the Systems that are of the character and type
customarily insured by organizations operating a business similar to the Systems insured against loss by fire, including
extended coverage, tornado and windstorm, to the extent of the full insurable value thereof. The Board will also carry
workmen's compensation insurance and public liability insurance in such amounts and to such extent as is customarily
carried by like organizations engaged in like businesses of comparable size.
Disposition of Insurance Proceeds. Insurance proceeds on physical properties coming into the hands of the
Trustee shall be applied by the Trustee, at the direction of the Board, for one of the following purposes:
(a) purchase of additional property of utility equal to that destroyed;
(b) construction of additional property having in the opinion of the Board utility equal to
that of the property damaged or destroyed; or
(c) the repairing or the renewing of the property damaged or destroyed; provided, that the
Trustee may pay such proceeds to the Board upon being furnished with a certificate of an
independent engineer stating
(i) that additional property described in the certificate has been acquired by
the Board and is of equal utility in the operation of the Systems, or
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(ii) that the property damaged or destroyed has been repaired in a
workmanlike manner satisfactory to such engineer.
Events of Default and Remedies
Events of Default. Any of the following shall constitute default under the Indenture by the Board:
(a) Failure by the Board to pay the principal of and interest on any of the Bonds when such
principal and interest respectively become due and payable, whether by maturity or otherwise;
(b) Failure by the Board to commence the repair or replacement of any property forming
a part of the Systems that may be damaged or destroyed and that is necessary to the continued and
efficient operation of the Systems, within one hundred twenty (120) days after the occurrence of
such damage or destruction;
(c) The sale, lease or other disposition by the Board of the Systems or any integral part
thereof in violation of any provisions of the Indenture;
(d) Failure by the Board to perform any of the agreements on its part contained in the
Indenture (other than as provided in subsections (a), (b) and (c) of this section) after thirty (30) days'
written notice to it of such failure has been given to the Board by the Trustee or by the Holders of
twenty-five percent (25%) in Outstanding Amount of the Bonds unless during such period or any
extension thereof the Board has commenced and is diligently pursuing appropriate corrective
action.;
(e) Determination by a court having jurisdiction that the Board is insolvent or bankrupt, or
appointment by a court having jurisdiction of a receiver for the Board or for a substantial part of the
Systems, or approval by a court of competent jurisdiction of any petition for reorganization of the
Board or rearrangement or readjustment of its obligations under any provisions of the bankruptcy
laws of the United States; or
(f) a default by the Board under the 2001 Indenture.
Remedies on Default. Upon the occurrence of default, the Trustee shall have the following right and
remedies:
(a) Acceleration. The Trustee may, by written notice to the Board, declare the principal
of and the interest accrued on all the Bonds forthwith due and payable, and thereupon they shall so
be, anything in the Indenture or in the Bonds to the contrary notwithstanding; provided, however,
that a Supplemental Indenture authorizing a series of Additional Bonds secured in whole or in part
by a Credit Facility may provide that the right of the Trustee to accelerate the maturity of the Bonds
of that series (or the portion thereof secured by such Credit Facility), is subject to the consent of the
Credit Facility Obligor issuing such Credit Facility. If, however, the Board shall thereafter make
good that default and every other default under the Indenture (except for those installments of
principal and interest so declared due and payable that would, absent such declaration, not be due
and payable), with interest on all overdue payments of principal and interest, and makes
reimbursement of all the reasonable expenses of the Trustee, then the Trustee may (and, if requested
by the Holders of a majority in Outstanding Amount of the Bonds by written notice to the Trustee,
shall) by written notice to the Board, waive such default and its consequences, but no such waiver
shall affect any subsequent default or right relative thereto;
(b) Suits at Law or in Equity. The Trustee is empowered
(i) to sue on the Bonds,
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(ii) by mandamus, suit, or other proceedings to enforce and compel
performance of all agreements of the Board in the Indenture, including the fixing
of rates and the collection, proper segregation and proper application of the
revenues from the Systems,
(iii) by action or suit in equity, to require the Board to account as if it were
the trustee of an express trust for the Holders of the Bonds, and
(iv) by action or suit in equity, to enjoin any act or things which may be
unlawful or in violation of the rights of the Holders of the Bonds;
(c) Receivership. The Trustee shall be entitled to and shall have, regardless of the
sufficiency of any security or the availability of any other remedy, the appointment of a receiver to
administer and operate the Systems and perform the covenants on the part of the Board contained
in the Indenture. Any receiver so appointed shall be entitled to take over and administer all of the
following then on hand which shall be applicable to the Systems: cash on hand or on deposit,
accounts and notes receivable, stocks, evidences of indebtedness, choses in action, customers’
service and extension deposits, water, and other property held for sale in the ordinary course of
business or for consumption in the operation of the Systems.
Nothing contained in the Indenture, however, shall be construed to give any authority to the Trustee or the Holders of
any of the Bonds to compel a sale of the Systems or any part thereof, and no foreclosure proceedings or sale shall ever
be had with respect to the Systems or any part thereof.
Disposition of Receivership Moneys. Any moneys received from operation of the Systems by a receiver
shall, after payment of all costs of the receivership, including receiver’s fees and the fees and expenses of his attorney,
the costs of administration and operation of the Systems and the maintenance thereof in good repair and all charges
and expenses of the Trustee under the Indenture, be applied to the payment of the following items in the following
order:
(a) Unless the principal of all the Bonds shall have become or shall have been declared
due and payable, such moneys shall be applied:
FIRST: to the payment to the persons entitled thereto of all installments
of interest then due on the Bonds, in the order of the maturity of the installments
of such interest, with interest on overdue installments of interest, and, if the
amount available shall not be sufficient to pay in full any particular installment
plus said interest thereon, then to the payment ratably, according to the amounts
due on such installments and with respect to said interest, the persons entitled
thereto, without any discrimination or privilege;
SECOND: to the payment to the persons entitled thereto of the unpaid
principal of and premium, if any, on any of the Bonds which shall have become
due (other than Bonds matured or called for redemption for the payment of which
moneys are held pursuant to the provisions of this Indenture), in the order of the
maturities of such principal and premium, with interest on overdue installments
of principal and premium, if any, and, if the amount available shall not be
sufficient to pay in full all such principal (and premium, if any) due on any
particular date, together with such interest, then to the payment of such principal,
premium (if any) and interest ratably, without any discrimination or privilege; and
THIRD: the surplus, if any there be, into the Bond Fund to such extent
as will result in there being on deposit therein the respective amounts at the time
required to be maintained therein, or in the event the Bonds have been fully paid,
to the Board or to whomsoever may be entitled thereto.
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(b) If the principal of all the Bonds shall have become or been declared due and payable,
all such moneys shall be applied as follows:
FIRST: to the payment of the principal and interest then due and
unpaid upon the Bonds (with interest on overdue principal and interest), without
preference or priority of principal over interest or of interest over principal, or of
any installment of interest over any other installment of interest, or of any Bond
over any other Bond, ratably, according to the amounts due respectively for
principal and interest, to the persons entitled thereto without any discrimination
or privilege; provided, however, that if the principal of all the Bonds shall have
been declared due and payable and if such declaration shall thereafter have been
rescinded then, subject to the provisions of this subsection (b) in the event that the
principal of all the Bonds shall later become or be declared due and payable, such
moneys shall be applied in accordance with the provisions of subsection (a)
above; and
SECOND: the surplus, if any there be, to the Board or to whomsoever
may be entitled thereto.
Whenever moneys are to be applied pursuant to the foregoing provisions, such moneys shall be applied at such time
or times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming available for such application in the future.
Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it
shall deem another date more suitable) upon which such application is to be made, and upon such date interest on the
amounts of principal and interest to be paid on such date shall cease to accrue. The Trustee shall give such notice as
it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date and shall not be
required to make payment to the Holder of any unpaid Bond until such Bond shall be presented to the Trustee for
appropriate endorsement or for cancellation if fully paid.
Concerning the Trustee
Conditions to Acceptance of Trust. Among the conditions to the acceptance of the trust of the Indenture,
are the following
(a) that the Trustee shall not be answerable for anything whatever in connection with the
trust thereby created, except its willful misconduct or gross neglect;
(b) that in the event of default by the Board, the Trustee need not exercise any of the rights
or powers therein specified unless requested so to do in writing by the Holders of twenty-five percent
(25%) of the Bonds provided that the furnishing of indemnity satisfactory to the Trustee against
prospective expenses and liabilities of the Trustee by the holders requesting any action shall be a
condition to the duty of the Trustee to take such action; and
(c) any action taken by the Trustee at the request of and with the consent of a Holder of a
bond will bind all subsequent holders of the same bond or any bond issued in lieu thereof.
Payment of Prior Charges. The Trustee may pay any charge which the failure of the Board to pay has made
or will make an encumbrance or lien prior to the Indenture on the Systems. Any sum so expended by the Trustee shall
be secured by the Indenture, shall bear interest at the Base Rate plus two percent (2%) from the date of payment
thereof, and shall be entitled to priority of payment over any of the Bonds.
Resignation and Removal of Trustee. The Trustee may resign and be discharged of the trusts by the
Indenture created upon written notice specifying the effective date of such resignation, such notice to be given to the
Board and the Holders of the Bonds. The Trustee may at any time be removed by a written instrument signed by the
Holders of a majority in Outstanding Amount of the Bonds. If the corporate trust assets of the Trustee are sold to
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another banking or financial services institution, such sale shall be deemed to be a resignation by the Trustee
hereunder. No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective
until the acceptance of appointment by the successor Trustee. If the Trustee shall resign or be removed, it shall be
reimbursed for all its proper prior expenses reasonable under the circumstances.
Appointment of Successor Trustee. If the Trustee shall resign, be removed, be placed by a court or
governmental authority under the control of a receiver or other public officer, or otherwise become incapable of acting,
a successor may be appointed by a written instrument executed by the Board. If, within one year after the appointment
of such successor by the Board, the Holders of a majority in Outstanding Amount of the Bonds appoints a different
successor Trustee, such successor Trustee so appointed by the Holders of the Bonds shall immediately and ipso facto
supersede the one appointed as above by the Board. The Board shall give notice to the Holders of the Bonds of any
appointment by it of a successor Trustee. Any successor Trustee shall be a bank or trust company authorized to
administer trusts and having, at the time of its acceptance of such appointment combined capital, surplus and undivided
profits of at least $75,000,000.
Modification of the Indenture
Supplemental Indentures without Consent of Holder of a Bond. The Board and the Trustee may at any
time and from time to time enter into such Supplemental Indentures (in addition to such Supplemental Indentures as
are otherwise provided for contemplated by the Indenture) as shall not be inconsistent with the terms and provisions
of the Indenture for any one or more of the following purposes:
(a) to add to the covenants and agreements of the Board in the Indenture contained other
covenants and agreements thereafter to be observed and performed by the Board, provided that such
other covenants and agreements shall not either expressly or impliedly limit or restrict any of the
obligations of the Board contained in the Indenture;
(b) to cure any ambiguity or to cure, correct or supplement any defect or inconsistent
provision contained in the Indenture or in any Supplemental Indenture or to make any provisions
with respect to matters arising under the Indenture or any Supplemental Indenture for any other
purpose if such provisions are necessary or desirable and are not inconsistent with the provisions of
the Indenture or any Supplemental Indenture and do not adversely affect the interests of the Holders
of the Bonds;
(c) to subject to the lien of the pledge herein contained revenues from additional properties
forming a part of the Systems, including, without limitation, subjecting Additional Systems to the
lien of the Indenture.
Any Supplemental Indenture entered into under the provisions described above shall not require the consent of any
Holders of the Bonds.
Supplemental Indentures Requiring Consent of a Holder of a Bond. In addition to those Supplemental
Indentures permitted above, the Board and the Trustee may, at any time and from time to time, with the written consent
of the Holders of not less than sixty-six and two-thirds per cent (66-2/3%) of the Outstanding Amount of the Bonds,
enter into such Supplemental Indentures as shall be deemed necessary or desirable by the Board and the Trustee for
the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions
contained in the Indenture or in any Supplemental Indenture; provided that without the written consent of the Holder
of each Bond affected, no reduction in the principal amount of, rate of interest on, or the premium payable upon the
redemption of, any Bond shall be made; and provided, further, that, without the written consent of the Holders of all
the Bonds, none of the following shall be permitted:
(a) an extension of the maturity of any installment of principal of or interest on any Bond;
(b) any change in the schedule of required sinking fund or other similar payments with
respect to any series of the Bonds;
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(c) the creation of a lien or charge on the Systems or the Pledged Revenues ranking prior
to or (except in connection with the issuance of Additional Bonds) on a parity with the lien or charge
thereon contained therein;
(d) the establishment of preferences or priorities as between the Bonds; or
(e) a reduction in the aggregate Outstanding Amount of Bonds the Holders of which are
required to consent to such Supplemental Indenture.
Upon the execution of any Supplemental Indenture under and pursuant to the provisions of this section, the Indenture
shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations
under the Indenture of the Board, the Trustee and all Holders of the Bonds then Outstanding shall thereafter be
determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments.
Satisfaction of the Indenture
Satisfaction of Indenture. Whenever the entire indebtedness secured by the Indenture (including, without
limitation, any unpaid Reimbursement Obligation), including all proper charges of the Trustee thereunder, shall have
been fully paid, the Trustee shall cancel, satisfy and discharge the Indenture. For purposes of the Indenture, any of
the Bonds shall be deemed to have been paid when there shall have been irrevocably deposited with the Trustee for
payment thereof the entire amount (principal, interest and premium, if any) due or to be due thereon until and at
maturity, and, further, any of the Callable Bonds shall also be deemed to have been paid when the Board shall have
deposited with the Trustee the following:
(a) the applicable Redemption Price of such Bonds, including the interest that will accrue
thereon to the date on which it is to be redeemed, and
(b) a certified copy of the Resolution, if any, required by the Indenture for the redemption
of such Bonds.
In addition, any of the Bonds shall, for purposes of the Indenture, be considered as fully paid if there shall be
filed with the Trustee each of the following:
(i) a trust agreement between the Board and the Trustee making provision
for the retirement of such Bonds by creating for that purpose an irrevocable trust
fund sufficient to provide for payment and retirement of such Bonds (including
payment of the interest that will mature thereon until and on the dates they are
retired, as such interest becomes due and payable), either by redemption prior to
their respective maturities, by payment at their respective maturities or by
payment of part thereof at their respective maturities and redemption of the
remainder prior to their respective maturities, which said trust fund shall consist
of (A) Federal Securities which are not subject to redemption prior to their
respective maturities at the option of the issuer and which, if the principal thereof
and the interest thereon are paid at their respective maturities, will produce funds
sufficient so to provide for payment and retirement of all such Bonds, or (B) both
cash and such Federal Securities which together will produce funds sufficient for
such purpose, or (C) cash sufficient for such purpose;
(ii) a certified copy of a Resolution calling for redemption those of such
Bonds that, according to said trust agreement, are to be redeemed prior to their
respective maturities;
(iii) an opinion of Bond Counsel to the effect that
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(1) the execution and effectuation of the trust agreement
referred to in the preceding subparagraph (i) will not result in
the interest income on any of such Bonds which constitute Tax-
Exempt Bonds being includable in gross income of the
recipients thereof for Federal income tax purposes and
(2) upon the delivery of the items required in
subparagraphs (i) through (iv), such Bonds will no longer be
deemed outstanding under the Indenture;
(iv) a verification report prepared by an Independent Auditor expressing the
opinion that the cash and Federal Securities deposited into the trust fund referred
to in the preceding subparagraph (i) will produce funds sufficient to provide for
the payment and retirement of such Bonds in accordance with the provisions of
such trust agreement
The Trustee is hereby irrevocably authorized to publish or otherwise give notice of the redemption of any Bonds to
be made pursuant to any Resolution required by the Indenture.
For purpose of the above provisions,
(1) interest on Variable Rate Bonds shall not be deemed
paid unless the amount deposited in respect thereof is computed
at the maximum rate such Bonds may bear; provided, however,
that if, as a result of the interest actually borne by a Variable Rate
Bond being less than such maximum, the amount on deposit in
such trust fund in respect of such interest is in excess of the
amount actually required therefor, the Trustee shall (upon the
written request of the Board) pay and transfer such excess to the
Board; and
(2) Tender Option Bonds shall not be deemed paid
unless the amount deposited in respect thereof shall be
sufficient to pay the maximum principal and interest that could
become due and payable thereof upon the exercise of any
options exercisable by the Holders thereof; provided, however,
that if, as a result of any such Bond thereafter ceasing to be a
Tender Option Bond or other changed condition, the amount on
deposit in such trust fund in respect of such Tender Option
Bonds is in excess of the amount actually required therefor, the
Trustee shall (upon the written request of the Board) pay and
transfer such excess to the Board.
No principal or interest paid by a Credit Facility Obligor with respect to the Bonds under a Credit Facility
shall be deemed paid, and any such principal and interest shall continue to be due and owing hereunder until paid by
the Board in accordance with the Indenture.
Concerning the Rights of BAM to direct Enforcement of Remedies.
The rights granted to BAM under the Indenture to request, consent to or direct any action are rights granted to
BAM in consideration of its issuance of the Policy. Any exercise by BAM of such rights is merely an exercise of the
BAM’s contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Holders
of the Insured Obligations and such action does not evidence any position of BAM, affirmative or negative, as to
whether the consent of the Holders of the Insured Obligations or any other person is required in addition to the consent
of BAM.
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APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE
BOARD FOR FISCAL YEARS 2019 AND 2018
Audited Financial StatementsFiscal Year Ended September 30, 2019
OFFICIALS OF THE UTILITIES BOARD OF THE CITY OF OPELIKA BOARD OF DIRECTORS Jeffery A. Hilyer, Chairman Patsy Jones, Vice Chairman Herbert Slaughter, Secretary / Treasurer
William Brown, Member
Eric Canada, Member MANAGEMENT Dan H. Hilyer P.E., General Manager Ira Silberman, Assistant Treasurer
THE UTILITIES BOARD OF THE CITY OF OPELIKA
TABLE OF CONTENTS
Introductory Section
Officials of The Utilities Board of the City of Opelika ........................................................................... 2
Table of Contents ..................................................................................................................................... 3
Management’s Discussion and Analysis ................................................................................................... 6
Financial Section
Financial Statements:
Statements of Net Position ..................................................................................................................... 13
Statements of Revenues, Expenses and Changes in Net Position………………………………………… 15
Statements of Cash Flows ...................................................................................................................... 16
Notes to Financial Statements ............................................................................................................... 18
Required Supplementary Information:
Schedule of Changes in Net Pension Liability ………………………………………… ………………. 37
Schedule of Employer Contributions.…………………………………………………… ………………. 38
Note to the Required Supplementary Information……………………………………………………..… 39
Additional Information
Schedule of Operating Expenses…………………………………………………………………………41
Comparative Schedule of Operating Data ........................................................................... …………. 42
Schedule of Insurance in Force…………………………………………………………………………. 43
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors of The Utilities Board of the City of Opelika
We have audited the accompanying financial statements of the business-type activities of The Utilities Board of the City of Opelika (the “Board”) as of and for the years ended September 30, 2019 and 2018, and the related notes to the financial statements, which collectively comprise the Board’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the Board as of September 30, 2019 and 2018, and the
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respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 6-12, the schedule of changes in the net pension liability on page 35, the schedule of employer contributions on page 36, and the note to the required supplementary information on page 37 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Board’s basic financial statements. The introductory section, schedule of operating expenses, comparative schedule of operating data, and schedule of insurance in force are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The schedule of operating expenses, comparative schedule of operating data, and schedule of insurance in force are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of operating expenses, comparative schedule of operating data, and schedule of insurance in force are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.
Opelika, Alabama February 10, 2020
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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DESCRIPTION OF THE BASIC FINANCIAL STATEMENTS The Utilities Board of the City of Opelika (the “Board”) operates as a utility enterprise and presents its financial statements using the economic resources measurements focus and the full accrual basis of accounting. As an enterprise fund, the Board’s financial statements include the Statements of Net Position, Statements of Revenues, Expenses and Changes in Net Position, and Statements of Cash Flows. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. CONDENSED FINANCIAL INFORMATION The following condensed financial information provides an overview of the Board’s financial activities for the fiscal years ended September 30, 2019, 2018 and 2017. NET POSITION: Net position, the difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources, increased 3.5% in 2019 to $29,098,735 from the 2018 net position. In comparison, net position decreased less than 1% in 2018 to $27,422,841 from the 2017 net position.
September 30, September 30, September 30,
2019 2018 2017 2019-2018 2018-2017
Assets
Capital assets, net 85,770,547$ 83,825,782$ 84,063,132$ 2.3% -0.3%
Other assets 14,191,229 16,072,141 17,398,101 -11.7% -7.6%
Total assets 99,961,776 99,897,923 101,461,233 0.1% -1.5%
Deferred Outflows of Resources
Bond refunding costs, net 3,866,971 4,129,379 4,357,333 -6.4% -5.2%
Pension and retirement 965,673 731,257 642,635 32.1% 13.8%
Capital investments 27,331,133 26,404,053 26,406,187 3.5% 0.0%
Total net position 29,098,735$ 27,422,841$ 27,601,815$ 6.1% -0.6%
Change
Capital Assets, Net increased $1,944,765 or 2.3% from 2018 to 2019 and decreased $237,350 or -0.3% from 2017 to 2018. The activity in capital assets has been disclosed in Note 4 in the Notes to Financial Statements. The increase from 2018 to 2019 was primarily the result of an increase in additions totaling $5,283,056. This was partially offset by depreciation, totaling $3,338,291. The primary reason for the decrease from 2017 to
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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2018 resulted from the Board’s depreciation totaling $3,276,320 while additions net of disposals totaled $3,038,970. Other Assets decreased $1,880,912 or 11.7% from 2018 to 2019. The decrease was the result of capital projects that were paid out of the bond investment funds. Other assets decreased $1,325,960 or 7.6% from 2017 to 2018. The decrease was the result of capital projects that were paid out of the bond investment funds. The additional portion of the decrease was the result of a decrease in the Board’s cash position and accounts receivable – governments in 2018. Deferred Outflows of Resources decreased $27,992 or -0.6% from 2018 to 2019. The decrease was the result of the annual amortization of the bond refunding costs. Deferred outflows of resources decreased $139,332 or -2.8% from 2017 to 2018. The decrease was the result of the annual amortization of the bond refunding costs. Long-Term Liabilities decreased $1,782,332 or -2.4% from 2018 to 2019. The decrease was the result of bonds being paid down according to the debt schedules. From 2017 to 2018, long-term liabilities decreased $2,018,162 or -2.7% which was also the result of bonds being paid down according to the debt schedules. Other Liabilities increased $123,755 or 3.3% from 2018 to 2019 primarily as a result of an increase of $75,000 in current portion of bonds due per the bond schedule. Other liabilities increased $351,843 or 10.2% from 2017 to 2018 primarily as a result of an increase in the amount that is due to the city for sewer. In 2017, the timing of payments was made earlier. In addition, there is a new accrual for sludge pond maintenance for $60,000. Deferred Inflows of Resources increased $18,544 or 11.9% from 2018 to 2019 as a result of an increase in the net difference between projected and actual earnings on plan investments provided by actuarial valuation. Deferred inflows of resources increased $142,651 or -1,124.6% from 2017 to 2018 as a result of an increase in the net difference between projected and actual earnings on plan investments. Net Position – Unrestricted Funds increased $713,754 or 21.3% from 2018 to 2019. Net position – unrestricted funds decreased $448,430 or -15.4% from 2017 to 2018. Net position – unrestricted funds consists of net position that does not meet the definition of “restricted” or “capital investments.” Net Position – Restricted Funds increased by $35,060 or 0.8% from 2018 to 2019. Net Position – restricted funds increased $271,590 or 6.6% from 2017 to 2018. Net Position – Capital Investments increased $927,080 or 3.5% from 2018 to 2019. Net position – capital investments decreased $2,134 or 0.0% from 2017 to 2018. The increase resulted from depreciation expense, offset by capital asset addition and disposal activity and fluctuations in outstanding debt used to finance capital projects. CHANGES IN NET POSITION: The change in net position increased $1,675,894 or 6.1% from 2018 to 2019. The change in net position decreased $178,974 or -0.6% from 2017 to 2018. The driving force behind the increase was an increase in revenue which was caused by rate increases to water customers.
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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September 30, September 30, September 30,
2019 2018 2017 2019-2018 2018-2017
Revenues
Water sales 12,394,036$ 11,190,898$ 12,223,617$ 10.8% -8.4%
Other operating revenues 1,082,396 734,564 643,151 47.4% 14.2%
Total operating revenues 13,476,432 11,925,462 12,866,768 13.0% -7.3%
Other revenues 149,751 191,245 163,036 -21.7% 17.3%
Expenses
Other operating expenses 3,945,318 3,745,432 3,947,320 5.3% -5.1%
Total operating expenses 10,318,967 10,072,060 10,089,002 2.5% -0.2%
Other expenses - - 737,078 0.0% -100.0%
Interest and expenses on bonds 2,559,927 2,603,933 2,677,198 -1.7% -2.7%
Income before contribution 747,289 (559,286) (473,474) 233.6% -18.1%
Capital contributions 928,605 380,312 950,625 -144.2% 60.0%
Change in net position 1,675,894 (178,974) 477,151 -1036.4% -137.5%
Total net position - beginning of year 27,422,841 27,601,815 27,124,664 -0.6% 1.8%
Total net position - end of year 29,098,735$ 27,422,841$ 27,601,815$ 6.1% -0.6%
Change
Water Sales increased by $1,203,138 or 10.8% from 2018 to 2019 primarily as a result of an increase in water rates during the year and drought conditions during peak usage time that drove up demand. Water Sales decreased by $1,032,719 or -8.4% from 2017 to 2018 primarily as a result of a decrease in consumption by the Board’s commercial customers and other municipalities to which the Board supplies water. Other Operating Revenues increased $347,832 or 47.4% from 2018 to 2019 primarily as a result of an increase in system development fees which were at times waived in the past. Other operating revenues increased $91,414 or 14.2% from 2017 to 2018 primarily as a result of an increase in fire protection and non-payment fees. Other Revenues decreased $41,494 or -21.7% from 2018 to 2019 as a result of a decrease in interest income from 2017 bond investments due to decreasing balance on construction funds. Other revenues increased $28,209 or 17.3% from 2017 to 2018 as a result of an increase in interest income from 2017 bond investments. Other Operating Expenses increased $199,886, or 5.3% from 2018 to 2019 primarily as a result of a increase in production costs at the Board’s Saugahatchee and Betts Filter Plants. As the plants get older they need increasing maintenance. Other operating expenses decreased $201,888, or -5.1% from 2017 to 2018 driven by a decrease in productions costs because of customer demand decreases over the comparable prior year periods. Personnel Services decreased $14,950 or -0.5% from 2018 to 2019 and increased $116,523 or 4.0% from 2017 to 2018 primarily as a result of employee salary adjustments and turnover.
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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Depreciation increased $61,971 or less than 1.9% from 2018 to 2019 primarily due to depreciation recorded on assets placed in service during fiscal year 2019. Depreciation increased $68,424 or 2.1% from 2017 to 2018. Other Expenses remained at $0 from 2018 to 2019 as a result of no activity in 2018 or 2019. Other expenses increased $737,078 from 2017 to 2018 as result of no new bond issuances or disposals of assets this year. In 2017, there was bond issuance and disposals that made up the balance of other expenses. Interest and Expenses on Bonds decreased $44,006 or -1.7% from 2018 to 2019. Interest and expenses on bonds decreased $73,265 or -2.7% from 2017 to 2018. The decreases are primarily the result of the Board making its scheduled debt service payments during fiscal years 2017, 2018, and 2019. Capital Contributions consisted of the following projects during the years ended September 30, 2019, 2018 and 2017:
2019 2018 2017
The Springs of Mill Lakes -$ -$ 453,481$ National Village 7D and 7E - - 207,629 Shiloh Subdivision - - 148,515 The Village at Hamilton Lake - - 141,000 McDonalds - 39,823 - Andrews Rd Phase 2 - 40,650 - Northbrook Phase 3 - 210,000 - Waverly Pkwy Subdivision - 20,279 - Rocky Brook Subdivision Ph - 32,400 - The Estates Subdivision - 37,160 - Calcutta Subdivision 49,978 - - Creekstone Phase 3 277,798 - - Cannongate Subdivision 255,841 - - Camelot Subdivision 181,950 - - Hampstead Phase 2 The Estates 134,238 - - Eagles Ridge Phase 3 28,800 - -
928,605$ 380,312$ 950,625$
CHANGES IN CAPITAL ASSETS The activity in capital assets has been disclosed in Note 4 in the Notes to the Financial Statements. This activity was offset by depreciation expense.
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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LONG-TERM DEBT All scheduled bond payments through September 30, 2019 were made on time. As of September 30, 2019, the Board had $67,526,780 in bonds payable, a decrease of $1,963,863. The decrease was primarily the result of the Board making it’s scheduled bond payments. As of September 30, 2018, the Board had $69,490,643 in bonds payable, a decrease of $383,863 compared to September 30, 2017. The decrease was primarily the result of the scheduled bond payments being made in addition to issuance of 2017 and 2017-B bonds. The proceeds from these bonds were used to partially refund the 2009 and 2011 bonds. As of September 30, 2019, the Board was in compliance with its debt service coverage ratio, and met all other related debt covenants. The Board maintained a ratio of 1.50 while they were required to have a ratio of 1.20. OTHER FINANCIAL INFORMATION THE BOARD General Information The Board is a public corporation originally organized on April 22, 1948 under Sections 394 to 402, inclusive, of Title 37 of the Code of Alabama of 1940, as amended, and now exists as a public corporation under Article 9 of Chapter 50 of Title 11 of the Code of Alabama of 1975 (the “Authorizing Act”). The creation of the Board, its certificate of incorporation and all amendments thereto has, as required by the applicable statutes, been consented to by the governing body of the City of Opelika (the “City”). The Board is charged with the responsibility for the construction, operation and maintenance of all water facilities of the City and for the collection of all charges for water services. Control of the Board is vested in a five-member board of directors elected by the governing body of the City for six-year staggered terms. Under its certificate of incorporation, the Board has corporate power to acquire and operate the Water System and to issue the bonds payable from the revenues therefrom. Franchise The Board was incorporated with the objectives and powers to acquire, construct, operate, maintain, improve and extend a water works plant or plants and system or systems and any part or parts thereof in the City, and in the territory surrounding the City. The Board follows a policy of supplying water at its standard rates for subdivisions beyond the city limits where subdivision developers install service lines at their own expense and donate these lines to the Board upon connection to the Water System. The governing body of the City has granted a franchise to the Board to use the streets, avenues, alleys, public ways and public places in the City to operate the Water System which franchise extends for a period of 30 years from June 1, 1996. State Regulation The Board is not at present subject to rate regulation by the Public Service Commission of the State of Alabama or any other state regulatory agency. Debt Limitation The Board has full power under the applicable statutes and its certificate of incorporation to incur indebtedness without limitation as to aggregate principal amounts in accordance with the provisions of the Authorizing Act, and to issue in evidence of such indebtedness, interest bearing bonds payable solely from the revenues derived from the operation of the Systems and to mortgage, pledge or otherwise convey the Systems from which the revenues are so pledged.
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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THE WATER SYSTEM
Saugahatchee Filter Plant (“Saugahatchee WTP”)
The Water System has, as its original source of supply, the Saugahatchee Reservoir (an impoundment of Saugahatchee Creek), and raw water withdrawn from the reservoir is processed at the Saugahatchee Filter Plant, located at the W. Warner Williams Water Resource Park, for delivery into the distribution system. The Saugahatchee Filter Plant has a nominal delivery of 8.0 MGD. The Saugahatchee Filter Plant, originally constructed as a nominal 3.0 MGD facility in 1945, was expanded to a 6.0 MGD facility in 1968. In 1992, the facility was upgraded to meet new EPA regulations. The upgrading included a new sludge holding basin, new sludge handling process and new filter media. The plant also underwent a facelift that included new roofing, new paint and new landscaping. In 2010, construction began on a new facility to replace the original plant at Saugahatchee Lake. The new facility was completed in 2013 and has a nominal capacity of 8.0 MGD. Raw water is treated by coagulation, flocculation, sedimentation, membrane filtration and disinfection.
Water processed at the Saugahatchee Filter Plant is delivered into the distribution system through two major transmission mains, and the distribution system is comprised of approximately 150 miles of mains ranging in diameter from 2 to 30 inches. Storage is provided by six tanks having a total capacity of 9,250,000 gallons. Robert A. Betts Filter Plant (“Betts WTP”) As noted below under “Future Water Source,” in 1983, the Board financed the acquisition and construction of a new water filtration and transmission system ("the New Source Facility") which includes three major components: (1) a raw water intake facility which is comprised of a submerged raw water intake structure located on the Lower Halawakee Creek Arm of Lake Harding (an impoundment of the Chattahoochee River), a subaqueous raw water intake pipeline and a raw water pumping station on the shore approximately 125 feet from the raw water intake; (2) a water filtration plant having an initial nominal capacity of 4.0 MGD and a high rate filter nominal capacity of 8.0 MGD located approximately 2,000 feet from the raw water pumping station; and (3) a booster pumping station, water storage reservoir with a capacity of 2,000,000 gallons and a water transmission main approximately 15.2 miles in length connecting the filtration plant and booster pumping station to the Board's existing water distribution system.
The Board completed an expansion of the Betts WTP in 2003. The project increased the capacity of the plant to 16 MGD. The Board has since completed the construction of an additional 500,000 gallon storage reservoir at the booster pumping station. The raw water intake is designed to accommodate a raw water withdrawal of approximately 18.0 MGD. The filtration plant can be readily expanded in 2.0 MGD units as demand for potable water increases. Raw water is treated at the plant by coagulation, flocculation, sedimentation, filtration and disinfection. The water transmission main is designed to deliver and distribute a maximum of approximately 18.0 MGD to the distribution system as efficiently as possible.
The Board depends solely upon surface water supplies for its water. The Board has 9 MGD of raw water available at the Saugahatchee WTP and has 42 MGD available at the Betts WTP. No wells or well fields are maintained by the Board.
Rates – The Board increased rates by $0.77 per 1,000 gallons in May of 2019. This rate increase was approved by the Board in response to falling below the debt covenants in 2018. The rates are reviewed on an annual basis to ascertain their ongoing effectiveness.
THE UTILITIES BOARD OF THE CITY OF OPELIKA MANAGEMENT’S DISCUSSION AND ANALYSIS - UNAUDITED
SEPTEMBER 30, 2019 AND 2018
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Long-Term Capital Improvement Plan – The plan is maintained by the Board, reviewed on an annual basis and updated as needed. The current plan includes over 135 projects with a present estimated cost of over $80,000,000. 23 of the 135 projects have been completed at a cost of over $60,000,000. One of the largest projects, the R.A. Betts WTP Expansion, was completed in Fiscal Year 2004 at a cost of $10,000,000. The plan includes both new additions to the water system and rehabilitation projects. The Board began design of the new W. Warner Williams Water Resource Park in 2009 and construction began in August of 2010. The project was completed in April 2013. The resource park consists of a new 8 MGD water treatment plant, a new administration facility and a new distribution and maintenance building. This project will ensure that the City of Opelika’s primary drinking water source will be viable into the foreseeable future. The cost of the new facilities was approximately $41,500,000. Funding for the plan is provided by operating reserves, current and future debt. Security/Vulnerability Assessment – Security of the water system has become a top priority since September 11, 2001. We have completed a general security survey to determine the immediate security needs. Physical and operational changes have been implemented to provide our customers with a safe water supply. The Board completed the “Vulnerability Assessment” that is required by federal law. The survey not only includes recommendations for improved security, but also provides an implementation plan and schedule that outlines funding needs and sources. Security of our assets and public safety is a top priority. The Board continually reviews, updates and implements new security and safety measures. Future Water Source – The Board has two sources of water, Saugahatchee Lake and Lake Harding. Saugahatchee Lake is a 500-acre impoundment of Saugahatchee Creek that is owned by the Board. Lake Harding is a Georgia Power impoundment of the Chattahoochee River. This source was acquired in the mid 1980’s. During 2002, the Board negotiated a new contract with Georgia Power and increased its allowable daily withdrawal from Lake Harding from 16 MGD to 42 MGD. This will provide the Board with ample water for the next 30 years. With most water systems struggling to acquire adequate sources of water, the Board is in a very enviable position and is able to grow unhindered by the threat of lack of water. The severe drought of 2007 and 2008 tested the Board’s sources of supply and they performed extremely well. The Board did not have to consider any type of water use restrictions at any time.
THE UTILITIES BOARD OF THE CITY OF OPELIKA STATEMENTS OF NET POSITION
SEPTEMBER 30, 2019 AND 2018
The accompanying notes are an integral part of these statements. - 13 -
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES2019 2018
Current AssetsCash and cash equivalents 1,345,319$ 1,042,624$ Cash and cash equivalents - designated 579,055 329,244Accounts receivable - trade (net) 850,081 775,511Accounts receivable - governments 422,930 379,907Accounts receivable - unbilled 1,033,878 865,720Prepaid and other assets 334,711 369,800
Capital AssetsLand and improvements 595,908 595,908Building and improvements 7,799,395 7,760,312System and system improvements 121,710,646 116,689,985Equipment 3,480,459 3,415,277
85,710,997 83,825,782 Construction in progress 59,550 -
Total capital assets 85,770,547 83,825,782
Total assets 99,961,776 99,897,923
Deferred Outflows of ResourcesBond refunding costs, net 3,866,971 4,129,379Difference between actual and expected experience 563,029 343,718 Changes of assumptions 119,545 101,576 Employer retirement contributions 283,099 285,963
Total deferred outflows of resources 4,832,644 4,860,636
Total assets and deferred outflows of resources 104,794,420$ 104,758,559$
THE UTILITIES BOARD OF THE CITY OF OPELIKA STATEMENTS OF NET POSITION
SEPTEMBER 30, 2019 AND 2018 (CONTINUED)
The accompanying notes are an integral part of these statements. - 14 -
Total liabilities, deferred inflows of resources and net position 104,794,420$ 104,758,559$
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
THE UTILITIES BOARD OF THE CITY OF OPELIKA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018
The accompanying notes are an integral part of these statements. - 15 -
2019 2018
Operating Revenues
Water sales 12,394,036$ 11,190,898$ Nonpayment and delinquent service charges 280,985 290,446 Other fees 464,925 125,595 Tap and meter set fees 22,435 23,905Other operating revenues 314,051 294,618
Nonoperating Revenues (Expenses)Interest income 132,132 191,245 Gain on disposal of assets 17,619 - Interest and expenses on bonds (2,559,927) (2,603,933)
Total net nonoperating revenues (expenses) (2,410,176) (2,412,688)
Loss before contributions 747,289 (559,286)
Capital contributions 928,605 380,312
Change in net position 1,675,894 (178,974)
Total net position - beginning of year 27,422,841 27,601,815
Total net position - end of year 29,098,735$ 27,422,841$
THE UTILITIES BOARD OF THE CITY OF OPELIKA STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018
The accompanying notes are an integral part of these statements. - 16 -
2019 2018
Cash Flows From Operating ActivitiesCash received from water sales 11,993,468$ 11,133,946$ Other cash receipts 1,123,253 786,257 Cash payments for other operating expenses (3,831,897) (3,472,325) Cash payments for personnel expenses (2,925,927) (2,973,410)
Net cash provided by operating activities 6,358,897 5,474,468
Cash Flows From Capital And Related Financing ActivitiesPurchase of capital assets (4,372,071) (2,658,658) Proceeds received from sale of capital assets 17,619 - Interest payments (2,448,151) (2,409,546) Principal paid on bonds (1,820,000) (1,780,000)
Net cash used in capital and related financing activities (8,622,603) (6,848,204)
Cash Flows From Investing ActivitiesRelease of restricted investments 2,684,082 1,159,103 Interest on investments and other income 132,132 191,245
Net cash used in investing activities 2,816,214 1,350,348
Net increase (decrease) in cash 552,508 (23,388)
Cash and restricted assets at beginning of year 1,373,371 1,396,759
Cash and restricted assets at end of year 1,925,879 1,373,371
Designated cash at end of year 579,055 329,244
Restricted cash at end of year 1,505 1,503
Cash at end of year 1,345,319$ 1,042,624$
THE UTILITIES BOARD OF THE CITY OF OPELIKA STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018 (CONTINUED)
The accompanying notes are an integral part of these statements. - 17 -
2019 2018Reconciliation Of Operating Income To Net Cash
Provided By Operating ActivitiesOperating income 3,157,465$ 1,853,402$ Adjustments to reconcile operating income to net cash
provided by operating activitiesDepreciation expense 3,338,291 3,276,320 Changes in operating assets and liabilities:
Net cash provided by operating activities 6,358,897$ 5,474,468$
Noncash Investing, Capital, and Financing ActivitiesCapital contributions 928,605$ 380,312$
Total Noncash Investing, Capital, and Financing Activities 928,605$ 380,312$
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The Utilities Board of the City of Opelika (the “Board”) is a public corporation originally organized on April 22, 1948 under Sections 394 and 402, inclusive, of Title 37 of the Code of Alabama of 1940, as amended, and now exists as a public corporation under Article 9 of Chapter 50 of Title 11 of the Code of Alabama of 1975. Under its certificate of incorporation, the Board has corporate power to acquire and operate the system and to issue bonds payable from the revenues produced. Basis of Accounting The Board is accounted for as a proprietary fund type using a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities associated with the Board’s operations are included on the Statements of Net Position. The accrual basis of accounting is utilized by the proprietary fund type. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred or prepaid amounts have been utilized. Water revenue is recognized when the water is delivered. The accounting policies of the Board conform to accounting principles generally accepted in the United States of America as applied to governmental units. The Governmental Standards Board is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies: Cash and Cash Equivalents and Investments Cash and cash equivalents include amounts in time and demand deposits as well as short-term investments with a maturity date within three months of the date acquired by the Board, except for investments in money funds and treasury obligations administered for the Board by a trustee. State statutes authorize the Board to invest in deposit accounts and certificates of deposits with banks, in direct obligations of the United States Treasury Department and obligations of certain other federal agencies. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Since all of the Board’s investments are in cash or in direct obligations of the United States Treasury Department, it does not have any unrealized gains or losses. The Board also participates in the Alabama State Treasury’s Security for Alabama Funds Enhancement (SAFE) program. The bank holding the Board’s deposits is a certified participant in the SAFE program. Through the SAFE program, all public funds are protected through a collateral pool administered by the Alabama State Treasury. Accounts and Unbilled Service Receivable Revenues are recognized on the basis of monthly billings to customers. The Board also records accounts receivable with respect to services provided but not billed until after September 30. The Board maintains an allowance for uncollectible accounts, totaling $45,000 and $0 for 2019 and 2018, respectively, which is netted against accounts receivable - trade on the statements of net position. Net bad debt expense for the years ended September 30, 2019 and 2018 was $75,612 and $24,048, respectively. Bad debt expense is recorded as an offset to water sales in the accompanying Statements of Revenues, Expenses and Changes in Net Position.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets Land and improvements, building and improvements, system and system improvements and equipment are carried at cost. Costs include materials and allocated labor identified with improvements and additions. Replacements, maintenance and repairs which do not improve or extend the life of the respective assets are charged to operations as incurred. The Board's policy is to capitalize interest costs on construction projects financed with bonds, less any interest earned on the temporary investment of the proceeds of the bonds until the construction project is substantially complete. During the years ended September 30, 2019 and 2018, the Board did not record capitalized interest. Depreciation charges to operations are determined using the straight-line method over the estimated useful lives of the related assets. All assets capitalized have an estimated useful life in excess of one year and are depreciated using the straight-line method. All land is capitalized. Capitalization thresholds and estimated useful lives are as follows:
Minimum Cost Useful Life
Buildings 5,000$ 20 - 50 yearsImprovements 1,000$ 5 - 20 yearsSystem and system
improvements 5,000$ 20 - 40 yearsEquipment 1,000$ 3 - 20 years Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Prepaid and Other Assets Prepaid and other assets are comprised of supplies on hand to be used in the Board’s water system and other prepayments. Bond Premiums, Discounts, and Refunding Costs Bond premiums, discounts, and refunding costs related to outstanding bonds have been deferred and are being amortized as an element of debt service expense over the lives of the related bonds using the effective interest method. Amortization recorded as a component of interest expense totaled $262,408 and $227,954 for the years ended September 30, 2019 and 2018, respectively. Deferred Outflows of Resources/Inflows of Resources In addition to assets, the Statements of Net Position also report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so, will not be recognized as an outflow of resources until then. For the years ended September 30, 2019 and 2018, deferred outflows of resources are comprised of bond refunding costs totaling $3,866,971 and $4,129,379, respectively, employer retirement contributions totaling $283,099 and $285,963, respectively, the difference between actual and expected experience totaling $563,029 and $343,718, respectively, changes of assumptions totaling $119,545 and $101,576, respectively.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In addition to liabilities, the Statements of Net Position also report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources until that time. The Board reported deferred inflows of resources at September 30, 2019 and 2018 totaling $173,880 and $155,336, respectively. The totals of deferred inflows of resources are comprised of the estimated net difference in projected and actual earnings on retirement plan investments.
Net Position GASB Statement No. 34 requires the delineation of net position into the three following components:
Unrestricted – All other net position that does not meet the definition of “restricted” or “capital investments.”
Restricted – Consists of net position with constraints placed on its use by bond ordinances, less unspent bond funds designated for construction.
Capital investments – Consists of capital assets, net of accumulated depreciation, and reduced by the outstanding balances (not including unspent bond funds designated for construction) of any bonds or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.
Designated Cash The Board requires all system development fees to be used for capacity improvement projects. At September 30, 2019 and 2018, the Board’s designated cash from system development fees totaled $579,055 and $329,244, respectively. Restricted Assets Restricted assets are those assets designated by bond ordinances for construction, system improvement and debt service. The Board uses restricted resources first when expenses are incurred for purposes for which both restricted and unrestricted net position are available. Contributed Capital Contributed capital represents cash payments or facilities contributed by municipalities, developers and individuals for the improvement or expansion of the system or acquisition of capital assets. Contributed capital is recorded at fair market value as of the date the asset is contributed. Capital contributions made during the period ended September 30, 2019 and 2018 totaled $928,605 and $380,312, respectively. Accumulated Unpaid Time Off The Board maintains a Paid Time Off (“PTO”) policy. Under the PTO policy, Board employees receive PTO time at graduated rates based upon length of service. Employees initially receive 80 hours each calendar year and may receive up to 160 hours per calendar year. Employees may carry over a maximum of 40 hours of unused PTO time from one calendar year to the next.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes The Board is exempt from federal income taxes under Section 501(c)(12) of the Internal Revenue Code. Therefore, no provision of income taxes has been made. Pension The Board funds pension expense as required by the Alabama Employee’s Retirement System, operated by the State of Alabama. The plan is funded by contributions from both the Board and the employees. The Employee’s Retirement System of Alabama (the “Plan” or ERS) financial statements are prepared using the economic resources measurement focus and accrual basis of accounting. Contributions are recognized as revenues when earned, pursuant to the Plan requirements. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. Expenses are recognized when the corresponding liability is incurred, regardless of when the payment is made. Investments are reported at fair value. Financial statements are prepared in accordance with requirements of the Governmental Accounting Standards Board (GASB). Under these requirements, the Plan is considered a component unit of the State of Alabama and is included in the State’s Comprehensive Annual Financial Report. Budgets and Budgetary Accounting The procedures, as shown below, are observed by the Board in establishing the budgetary data:
a. Prior to September 1, a budget proposal is presented to the Board of Directors for the fiscal year commencing on October 1. The budget includes proposed expenditures and the means of financing them.
b. The budget is approved by the Board of Directors and is updated semi-annually for changes that
were not previously anticipated. Unearned Revenue Payments from the Auburn Water Board made under the Amended Water Supply Agreement for the right to purchase water until 2033 (50 years) from the Board have been recorded as unearned revenues. The Board recognizes revenues from the sale of this right ratably over the remaining life of the Amended Water Supply Agreement (including the 20-year option period explained in Note 5). Subsequent Events The Board has evaluated events subsequent to the date of the Statements of Net Position through February 10, 2020, the date the financial statements were available to be issued. No events have occurred subsequent to the Statements of Net Position through February 10, 2020 that would require adjustment or additional disclosure in the financial statements.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 2 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents stated at cost are as follows: 2019 2018UnrestrictedCash $ 1,345,319 $ 1,042,624 Cash - designated 579,055 329,244
Total cash and cash equivalents 1,924,374$ 1,371,868$
RestrictedCash 1,505$ 1,503$
Total restricted cash and cash equivalents 1,505$ 1,503$
NOTE 3 – RESTRICTED INVESTMENTS The Board has made all investments in accordance with the requirements under the Water Revenue Bonds, Series 2009, Series 2011, Series 2011-B, Series 2017, and Series 2017-B. Investments shown for the years ended September 30, 2019 and 2018 are not registered in the Board's name or insured but are held by the Trustee in the Board's name. The table below displays a summary of restricted investments.
2019 2018
Fair Maturity Fair MaturityValue Date Value Date
RestrictedU.S. Treasury $ 9,623,750 Various $ 12,307,832 Various
Total restricted investments 9,623,750$ 12,307,832$
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 4 – CAPITAL ASSETS
The following table displays a summary of changes in capital assets: Balance Transfer/ Transfer/ Balance
September 30, 2017 Additions Disposals September 30, 2018
Land and improvements 571,321$ $ - $ 24,587 595,908$ Building and
improvements 7,760,312 - - 7,760,312 System and system
Land and improvements 595,908$ $ - $ - 595,908$ Building and
improvements 7,760,312 39,083 - 7,799,395 System and system
improvements 116,689,985 5,020,661 - 121,710,646 Equipment 3,415,277 163,762 (98,580) 3,480,459 Construction in Progress - 59,550 59,550
Total $ 128,461,482 $ 5,283,056 $ (98,580) $ 133,645,958
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 5 – NOTES RECEIVABLE The Board has entered into an Amended Water Supply Agreement with the Utilities Board of the City of Auburn (Auburn Water Board), as amended by an Amendatory Agreement, dated March 27, 1995, which provides for the sale to the Auburn Water Board of up to 3.6 million gallons of water per day from the water filtration plant on Lake Harding (Betts) through May of 2013. In May of 2013, the Auburn Water Board had an option to extend the agreement an additional 20 years from the option date. In October of 2012, the Auburn Water Board notified the Board that it would exercise its option to extend the agreement through March of 2033. The Agreement provides that in consideration of payments totaling $6,897,184, the Auburn Water Board shall have the right to purchase water from the Board at a price based on cost as calculated annually. The Auburn Water Board made an initial payment of $571,135, subsequently made monthly payments from June 1, 1983 to May 31, 1986 totaling $828,089 and made additional monthly payments of approximately $22,000 per month until the year ended September 30, 2011. The Auburn Water Board agrees to purchase and take not less than 8 million gallons of potable water per month and not less than 138 million gallons of potable water per year. The cost of water sold to the Auburn Water Board for the years ended September 30, 2019 and 2018 was calculated to be $2.13 and $1.89 per 1,000 gallons, respectively, using the formula shown below. The Auburn Water Board is billed monthly for actual water usage using an estimated cost. After calculating the actual cost of water, the Board either bills or refunds the difference to the Auburn Water Board. The amount receivable from or due to the Auburn Water Board is included in accounts receivable – governments. As of September 30, 2019 and 2018, the Auburn Water Board owed the Board $400,949 and $356,005, respectively. COST OF WATER = Production costs @ New Source Facility (Betts)
Shrinkage factor x water produced @ new source facility
+ .35 x Transportation Costs The number of gallons of potable water delivered to all users during each fiscal year
NOTE 6 – COMMITMENTS AND CONTINGENCIES
On July 01, 2016, the Board entered into a water supply agreement with the Beulah Utilities District (“Beulah”). The agreement provides that the Board shall supply water to Beulah beginning on July 1, 2016 through June 30, 2036. The rate for the ensuing six (6) months was $1.63 per thousand gallons. Beginning with the first day of the second year and for the ensuing twelve months, the unit price for each 1,000 gallons of water sold was $1.70. Beginning with the third year the unit price for each 1,000 gallons sold was $1.80. Beginning with the fourth year the unit price for each 1,000 gallons sold was 1.90. Beginning with the fifth year the unit price for each 1,000 gallons of water sold was $2.00. Beginning with the sixth year and up to and including December 31, 2023, the unit price for each 1,000 gallons of water sold was $2.10.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 6 – COMMITMENTS AND CONTINGENCIES (CONTINUED) For each successive year, the price will be adjusted by the change in the Consumer Price Index. The agreement also stipulates a minimum monthly charge based on 15,000,000 gallons of treated water consumption. On February 23, 1998, the Board entered into a water agreement with the Loachapoka Water Authority (“Loachapoka”). The agreement provides that the Board shall supply water to Loachapoka beginning on October 1, 1999 through June 30, 2019. On June 30, 2019 a ten year extension was put in place that will run through June 30, 2029. Beginning on July 1, 1999, the cost of water was $1.60 per thousand gallons. Beginning on October 1, 1999 and on October 1 of each successive year of the agreement, the unit price for each 1,000 gallons for the ensuing year shall be determined by adjusting the unit price currently in effect by the annual percentage change of the Producer Price Index for all terms of the Bureau of Labor Statistics of the United States Department of Labor. The agreement also stipulates a minimum monthly charge based on 3,000,000 gallons of treated water consumption during the year ended September 30, 2001 and 5,000,000 gallons of treated water consumption for each successive year thereafter. NOTE 7 – PENSION PLAN General Information about the Pension Plan Plan Description. The ERS, an agent multiple-employer public employee retirement plan, was established as of October 1, 1945, pursuant to the Code of Alabama 1975, Title 36, Chapter 27 (Act 515 of the Legislature of 1945). The purpose of the ERS is to provide retirement allowances and other specified benefits for state employees, State Police, and, on an elective basis, to all cities, counties, towns, and quasi-public organizations. The responsibility for the general administration and operation of ERS is vested in its Board of Control which consists of 13 trustees. The Plan is administered by the Retirement Systems of Alabama (RSA). The Code of Alabama 1975, Title 36, Chapter 27 grants the authority to establish and amend the benefit terms to the ERS Board of Control. The Plan issues a publicly available financial report that can be obtained at www.rsa-al.gov. The ERS Board of Control consists of 13 trustees as follows:
1) The Governor, ex officio. 2) The State Treasurer, ex officio. 3) The State Personnel Director, ex officio. 4) The State Director of Finance, ex officio. 5) Three vested members of ERS appointed by the Governor for a term of four years, no two of
whom are from the same department of state government nor from any department of which an ex officio trustee is the head.
6) Six members of ERS who are elected by members from the same category of ERS for a term of four years as follows: a. Two retired members with one from the ranks of retired state employees and one
from the ranks of retired employees of a city, county, or a public agency each of whom is an active beneficiary of ERS.
b. Two vested active state employees. c. Two vested active employees of an employer participating in ERS pursuant to the
Code of Alabama 1975, Section 36-27-6.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED) Benefits provided. State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase in postretirement benefits for the ERS. Benefits for ERS members vest after 10 years of creditable service. State employees who retire after age 60 (52 for State Police) with 10 years or more of creditable service or with 25 years of service (regardless of age) are entitled to an annual retirement benefit, payable monthly for life. Local employees who retire after age 60 with 10 years or more of creditable service or with 25 or 30 years of service (regardless of age), depending on the particular entity’s election, are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members of the ERS (except State Police) are allowed 2.0125% of their average final compensation (highest 3 of the last 10 years) for each year of service. State Police are allowed 2.875% for each year of State Police service in computing the formula method. Act 377 of the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired on or after January 1, 2013. Tier 2 ERS members are eligible for retirement after age 62 (56 for State Police) with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, Tier 2 members of the ERS (except State Police) are allowed 1.65% of their average final compensation (highest 5 of the last 10 years) for each year of service. State Police are allowed 2.375% for each year of State Police service in computing the formula method. Members are eligible for disability retirement if they have 10 years of creditable service, are currently in-service, and determined by the RSA Medical Board to be permanently incapacitated from further performance of duty. Preretirement death benefits equal to the annual earnable compensation of the member as reported to the Plan for the preceding year ending September 30 are paid to the beneficiary. The ERS serves approximately 909 local participating employers. The ERS membership includes approximately 88,517 participants. As of September 30, 2018, membership consisted of: Retirees and beneficiaries currently receiving benefits 24,818 Terminated employees entitled to but not yet receiving benefits 1,426 Terminated employees not entitled to a benefit 7,854 Active members 56,760 Post-DROP participants who are still in active service 141
Total 90,999
Contributions. Covered members of the ERS contributed 5% of earnable compensation to the ERS as required by statute until September 30, 2011. From October 1, 2011 to September 30, 2012, covered members of the ERS were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012, covered members of the ERS are required by statute to contribute 7.50% of earnable compensation. Certified
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED) law enforcement, correctional officers, and firefighters of the ERS contributed 6% of earnable compensation as required by statute until September 30, 2011. From October 1, 2011 to September 30, 2012, certified law enforcement, correctional officers, and firefighters of the ERS were required by statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 8.50% of earnable compensation. State Police of the ERS contribute 10% of earnable compensation. ERS local participating employers are not required by statute to increase contribution rates for their members. Tier 2 covered members of the ERS contribute 6% of earnable compensation to the ERS as required by statute. Tier 2 certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 7% of earnable compensation. Tier 2 State Police members of the ERS contribute 10% of earnable compensation. These contributions rates are the same for Tier 2 covered members of ERS local participating employers. The ERS establishes rates based upon an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year with additional amounts to finance any unfunded accrued liability, the preretirement death benefit, and administrative expenses of the Plan. For the year ended September 30, 2019, the Board’s active employee contribution rate was 5.69% percent of covered employee payroll, and the Board’s average contribution rate to fund the normal and accrued liability costs was 12.57% percent of pensionable payroll. The Board’s contractually required contribution rate for the year ended September 30, 2019, was 13.27% of pensionable pay for Tier 1 employees, and 10.96% of pensionable pay for Tier 2 employees. These required contribution rates are based upon the actuarial valuation as of September 30, 2018, a percent of annual pensionable payroll, and actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount to finance any unfunded accrued liability. Total employer contributions to the pension plan from the Board were $283,099 for the year ended September 30, 2019. Net Pension Liability The Board’s net pension liability was measured as of September 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of September 30, 2017, rolled forward to September 30, 2018, using standard roll-forward techniques as shown in the following table:
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED)
Expected Actual
(a) Total Pension Liability as of September 30, 2017 8,111,182$ 8,423,761$ (b) Discount Rate 7.75% 7.75%(c) Entry Age Normal Cost for October 1, 2017 -
September 30, 2018 178,278 178,278 (d) Transfers Among Employers: - - (e) Actual Benefit Payments and Refunds for October 1,
2017 - September 30, 2018 (496,304) (496,304) (f) Total Pension Liability as of September 30, 2018 =
[(a) x (1+(b))]+(c)+(d)+[(e)x(1+0.5*(b))] 8,402,541$ 8,739,345$
(g) Difference between Expected and Actual: 336,804$ (h)
Less Liability Transferred for Immediate Recognition: -
(i) Experience (Gain)/Loss = (g)-(h) 336,804$ (j) Difference between Actual at 7.70% and Acural at
7.75% [Assumption Change (Gain)/Loss] = Actuarial Assumptions. The total pension liability as of September 30, 2018 was determined based on the annual actuarial funding valuation report prepared as of September 30, 2017. The key actuarial assumptions are summarized below: Inflation 2.75%Salary increases 3.25% - 5.00%Investment rate of return* 7.70% *Net of pension plan investment expense Mortality rates were based on the sex distinct RP-2000 Blue Collar Mortality Table Projected with Scale BB to 2020 with an adjustment of 125% at all ages for males and 120% for females ages 78 and older. The rates of mortality for the period after disability retirement are according to the sex distinct RP-2000 Disabled Retiree Mortality Table Projected with Scale BB to 2020 with an adjustment of 130% at all ages for females.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED) The actuarial assumptions used in the actuarial valuation as of September 30, 2017 were based on the results of an investigation of the economic and demographic experience for the ERS based upon participant data as of September 30, 2015. The Board of Control accepted and approved these changes in September 2016, which became effective at the beginning of fiscal year 2016. The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of geometric real rates of return for each major asset class are as follows:
Target Allocation Long-Term
Expected Rate of Return*
Fixed Income 17.0% 4.4%U.S. Large Stocks 32.0% 8.0%U.S. Mid Stocks 9.0% 10.0%U.S. Small Stocks 4.0% 11.0%International Developed Market Stocks 12.0% 9.5%International Emerging Market Stocks 3.0% 11.0%Alternatives 10.0% 10.1%Real Estate 10.0% 7.5%Cash and Cash Equivalents 3.0% 1.5%
Total 100.0%
*Includes assumed rate of inflation of 2.5% Discount Rate. The discount rate used to measure the total pension liability was the long-term rate of return, 7.70%. The projection of cash flows used to determine the discount rate assumed that Plan member contributions will be made at the current contribution rate and that the employer contributions will be made in accordance with the funding policy adopted by the ERS Board of Control. Based on those assumptions, components of the pension plan’s fiduciary net position were projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED)
Balances at 9/30/2017 8,111,182$ 4,761,280$ 3,349,902$ Changes for the year:Service cost 178,278 - 178,278 Interest 609,385 - 609,385 Change of assumptions 46,246 - 46,246 Differences between expected and
actual experience 336,804 - 336,804 Contributions - employer - 280,173 (280,173) Contributions - employee - 123,683 (123,683) Net investment income - 436,366 (436,366) Benefit payments, including refunds of
Net changes 674,409 343,918 330,491 Balances at 9/30/2018 8,785,591$ 5,105,198$ 3,680,393$
Increase (Decrease)
Total Pension
Liability (a)
Plan Fiduciary
Net Position (b)
Net Pension Liability (a)-
(b)
Sensitivity of the net pension liability to changes in the discount rate. The following table presents the Board’s net pension liability calculated using the discount rate of 7.70%, as well as what the Board’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.70%) or 1-percentage point higher (8.70%) than the current rate:
1% Decrease (6.70%)
Current Rate
(7.70%)
1% Increase (8.70%)
Board's net pension liability $4,698,627 3,680,393$ $2,818,565
Pension Plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued RSA Comprehensive Annual Report for the fiscal year ended September 30, 2018. The supporting actuarial information is included in the GASB Statement No. 68 Report for the ERS prepared as of September 30, 2018. The auditor’s report, dated August 17, 2019, on the Schedule of Changes in Fiduciary Net Position by Employer and accompanying notes is also available. The additional financial and actuarial information is available at https://www.rsa-al.gov/employers/financial-reports/gasb-68-reports/.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 7 – PENSION PLAN (CONTINUED) Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2019, the Board recognized pension expense of $391,928. At September 30, 2019, the Board reported deferred outflows of resources and deferred inflows of resources related to pensions of the following sources:
Deferred Outflows of Resources
Deferred Inflows of
Resources
Differences between expected and actual experience 563,029$ 6,645$
Changes of assumptions 119,545 -
Net difference between projected and actual earning on pension plan investments - 167,235
Employer contributions subsequent to the measurement date 283,099 - Total 965,673$ 173,880$
Amounts reported as deferred outflows of resources and deferred inflows of resources to pensions will be recognized in pension expense as follows: Year Ended September 30
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 8 – REFUNDED DEBT
In connection with the issuance of the 2001 Bonds, the Board defeased the Series 1993, 1996 and 1999 Bonds by depositing with the escrow holders an amount sufficient to pay principal and interest on the defeased 1993, 1996 and 1999 Bonds as they become due. On July 26, 2001, the Series 1993 Bonds were called, at which time the funds deposited with the escrow holders for the Series 1993 Bonds were used to pay off the Series 1993 Bonds in full. On December 1, 2005, the Series 1996 Bonds were called, at which time the funds deposited with the escrow holders for the Series 1996 Bonds were used to pay off the Series 1996 Bonds in full. On June 1, 2009, the Series 1999 Bonds were called, at which time the funds deposited with the escrow holders for the Series 1999 Bonds were used to pay off the Series 1999 Bonds in full. The difference between the amount paid to defease the Series 1993, 1996 and 1999 Bonds and the net carrying amount of the aforementioned Bonds totaled $524,947. This amount has been deferred and will be amortized over the remaining life of the Series 1999 Bonds (through 2019) using the effective interest method. In September of 2011, the Board issued the 2011-B Bonds to refinance the 2001 Bonds by depositing with the escrow holders an amount sufficient to pay principal and interest on the defeased 2001 Bonds. In October of 2011, the Series 2001 Bonds were called, at which time the funds deposited with the escrow holders for the Series 2001 Bonds were used to pay off the Series 2001 Bonds in full. The difference between the amount paid to defease the Series 2001 Bonds and the net carrying amount of the aforementioned Bonds totaled $277,722. This amount has been deferred and will be amortized over the remaining life of the Series 2001 Bonds (through 2031) using the effective interest method. In May of 2017, the Board issued the 2017 Bonds to refinance the 2011 Bonds by depositing with the escrow holders an amount sufficient to pay principal and interest to satisfy the payment of the defeased 2011 Bonds. The difference between the amount paid to defease the Series 2011 Bonds and the net carrying amount of the aforementioned Bonds totaled $1,987,329. This amount has been deferred and will be amortized over the remaining life of the Series 2011 Bonds (through 2041) using the effective interest method. In August of 2017, the Board issued the 2017-B Bonds to refinance the 2009 Bonds by depositing with the escrow holders an amount sufficient to pay principal and interest to satisfy the payment of the defeased 2009 Bonds. The difference between the amount paid to defease the Series 2009 Bonds and the net carrying amount of the aforementioned Bonds totaled $1,973,309. This amount has been deferred and will be amortized over the remaining life of the Series 2009 Bonds (through 2041) using the effective interest method. As of September 30, 2019 and 2018, bond refunding costs totaled $3,866,971 and $4,129,379, respectively, and are reported as a component of deferred outflows of resources in the Statements of Net Position.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 9 – BONDS PAYABLE During the year ended September 30, 2011, the Board issued the 2011 Bond Series to refund the 2008 Bond Series and to finance the Board’s Saugahatchee Water Treatment Plant project. The 2011 Series Bonds totaled $21,555,000 and bear interest at rates between 3.00% and 5.25%. The Bonds fully mature during the year ended September 30, 2041. During the year ended September 30, 2017, the 2011 Bond Series was partially refunded by the 2017 Series Bonds. During the year ended September 30, 2011, the Board issued the 2011-B Bond Series to refund the 2001 Bond Series. The 2011-B Bond Series totaled $19,425,000 and bear interest at rates between 3.00% and 4.50%. The Bonds fully mature during the year ended September 30, 2031. During the year ended September 30, 2017, the Board issued the 2017 Bond Series to partially refund the 2011 Bond Series. The 2017 Bond Series totaled $27,265,000 and bear interest at rates between 2.00% and 5.00%. The Bonds fully mature during the year ended September 30, 2041. During the year ended September 30, 2017, the Board issued the 2017-B Bond Series to partially refund the 2009 Bond Series. The 2017-B Bond Series totaled $23,380,000 and bear interest at rates between 2.00% and 4.00%. The Bonds fully mature during the year ended September 30, 2041. Future principal and interest requirement of the bonds payable consist of the following for the years ending September 30:
The table on the following page displays a summary of changes in bonds payable for the year ended September 30, 2019: The following table reflects the debt service requirements for the Series 2009, 2011, 2011-B, 2017 and 2017-B Bonds.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
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NOTE 9 – BONDS PAYABLE (CONTINUED)
Amount Range Range
of of Final of Balance Balance
Original Maturity Interest September 30, Retired/ September 30, Due within
Series Issue Dates Rates 2018 Issued Amortized 2019 one year
2017 B 23,380,000 2018-2037 2.00-4.00% 24,367,381 - 162,090 24,205,291 120,000
Total revenue bonds 69,490,643 67,526,780 1,925,000
Less: current portion 1,850,000 1,925,000
Total long-term revenue bonds 67,640,643$ 65,601,780$
The schedule displayed above does include related bond discounts and premiums. As of September 30, 2019, the Series 2011-B Bonds’ net premium totaled $642,604, the Series 2017 Bonds’ net premium totaled $813,885, and the Series 2017-B Bonds’ net premium totaled $1,020,291. At September 30, 2019, the Board’s Series 2009 Bonds, Series 2011 Bonds, Series 2011-B Bonds, Series 2017 Bonds and Series 2017-B Bonds each had an S&P rating of A+ and a Moody’s rating of Aa3. Changes in other long-term liabilities for governmental activities consisted of the following at September 30, 2019:
Long-term liabilities October 01, 2018 Additions Retirements September 30, 2019
Accumulated unpaid time off 98,774$ 98,774$ Unearned revenue 1,339,536$ 114,817$ 1,224,719$ Customer deposits 951,412$ 221,255$ 180,398$ 992,269$ In June of 2014, the Board obtained a line of credit from a financial institution. The line of credit agreement allows the Board to borrow up to $500,000. Interest payments are due monthly and are fixed at a rate of 5.560%. In June of 2019, the Board renewed the line of credit for a term of 12 months. The renewed line of credit expires on June 6, 2020. At September 30, 2019 and 2018, the Board did not have any outstanding borrowings related to the line of credit agreement.
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019 AND 2018
- 35 -
NOTE 10 – DEBT SERVICE COVERAGE RATIO During the year ended September 30, 2011, the Board issued Utility Revenue Bonds, Series 2011-B (the “Series 2011-B Bonds”) in the principal amount of $19,425,000. During the year ended September 30, 2017, the Board issued Utility Revenue Bonds, Series 2017 (the “Series 2017 Bonds”) in the principal amount of $27,265,000 and Utility Revenue Bonds, Series 2017-B (the “Series 2017-B Bonds”) in the principal amount of $23,380,000. In accordance with the aforementioned issuances, the Board is required to maintain a debt coverage ratio of 1.20. Annual income available for debt service for the year ended September 30, 2019 provides coverage of debt service requirements as displayed below:
Operating revenue 13,476,432$ Proportional share payments recognized (114,817) Net investment income
Interest income earned in the Bond Fund, the Reserve Fund and the Improvement Fund 287,625
Pledged revenues 13,649,240
Operating expensesGeneral and administrative (3,945,318) Personnel services (3,035,358)
Net revenues 6,668,564$
Amount required to be paid into the Bond Fund 4,441,048$
Debt service coverage ratio 1.50
As of September 30, 2019, the Board was in compliance with its debt covenants, as its calculated debt service ratio was above the requirement of 1.20.
REQUIRED SUPPLEMENTARY INFORMATION
THE UTILITIES BOARD OF THE CITY OF OPELIKA SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
LAST FISCAL YEAR ENDING SEPTEMBER 30
- 37 - UNAUDITED
2018 2017 2016 2015
Total Pension Liability
Service cost 178,278$ 176,469$ 170,954$ 156,412$
Interest 609,385 571,534 536,359 514,724
Changes of benefit terms - - 143,900 -
Differences between expected and actual experience 336,804 211,910 231,534 (18,725)
Changes of assumptions 46,246 - - -
Benefit payments, including refunds of employee contributions (496,304) (442,606) (382,591) (381,363)
Transfers among employers - (2,066) - -
Net change in total pension liability 674,409 515,241 700,156 271,048
Total pension liability - beginning 8,111,182 7,595,941 6,895,785 6,624,737
Total pension liability - ending (a) 8,785,591$ 8,111,182$ 7,595,941$ 6,895,785$
Contributions as a percentage of covered employee payroll 12.97% 13.30% 14.26% 14.86%
THE UTILITIES BOARD OF THE CITY OF OPELIKA NOTE TO THE REQUIRED SUPPLEMENTARY INFORMATION
SEPTEMBER 30, 2019
- 39 - UNAUDITED
Actuarially determined contribution rates are calculated as of September 30, three years prior to the end of the fiscal year in which the contributions are reported. Contributions for fiscal year 2019 were based on the September 30, 2016 actuarial valuation. Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age
Amortization method Level percent closed
Remaining amortization period 29.3 years
Asset valuation method Five-year smoothed market
Inflation 2.875%
Salary increases 3.375 - 5.125%, including inflation
Investment rate of return 7.875%, net of pension plan investment expense, including inflation
ADDITIONAL INFORMATION
THE UTILITIES BOARD OF THE CITY OF OPELIKA SCHEDULE OF OPERATING EXPENSES
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018
- 41 - UNAUDITED
2019 2018Personnel Services
System administration 801,202$ 781,751$ Filter Plant I 573,870 560,360 Filter Plant II 491,929 492,975 Distribution services 833,601 859,357 Meter reading 334,756 355,865
Total personnel services 3,035,358 3,050,308
Other Operating ExpensesAdministration 94,509 104,161 System administration 504,866 412,500 Filter Plant I 964,541 1,005,552 Filter Plant II 1,406,113 1,198,693 Distribution services 755,216 791,056 Meter reading 220,073 233,470
Total other operating expenses 3,945,318 3,745,432
Total personnel services and other operating expenses 6,980,676 6,795,740
DepreciationFilter Plant I 855,192 886,846 Filter Plant II 650,391 630,264 System 1,832,708 1,759,210
Total depreciation 3,338,291 3,276,320
Total operating expenses 10,318,967$ 10,072,060$
THE UTILITIES BOARD OF THE CITY OF OPELIKA COMPARATIVE SCHEDULE OF OPERATING DATA
FOR THE YEARS ENDED SEPTEMBER 30, 2019, 2018, 2017, 2016 AND 2015
FIDELITY BONDSJ. Smith Lanier & Company 25,000 All Employees 10/01/19
of Alabama, Inc. 75,000 Dan Hilyer 10/01/1975,000 Jeff Hilyer 10/01/1975,000 Ira Silberman 10/01/1975,000 Andrew Alsobrook 10/01/1975,000 Jan Clark 10/01/1940,000 Non-Employee Theft 10/01/19
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APPENDIX C
FORMS OF OPINIONS OF BOND COUNSEL
[Series 2020-A Bonds]
[Closing Date]
The Utilities Board of the
City of Opelika
Opelika, Alabama
Re: $10,725,000
The Utilities Board of the City of Opelika
Utility Revenue Bonds, Series 2020-A
Gentlemen:
We have acted as Bond Counsel in connection with the issuance of the above-referenced bonds (herein called
"the Series 2020-A Bonds") and as such we have examined certified copies of proceedings showing the organization
under the laws of Alabama of The Utilities Board of the City of Opelika (herein called "the Board"), together with
copies of proceedings of the Board and other documents submitted to us pertaining to the authorization, sale and
issuance of the Series 2020-A Bonds.
As to questions of fact material to our opinion, we have relied upon certified proceedings and other
certifications of public officials and others furnished to us without undertaking to verify the same by independent
investigation. The opinions hereinafter expressed and the statements hereinafter made are based upon our examination
of the aforesaid proceedings and documents.
The documents submitted to us show as follows:
(a) that the Board has heretofore executed and delivered to The Bank of New York Mellon
Trust Company, National Association, a Trust Indenture dated as of June 1, 2001 (herein called "the
2001 Indenture");
(b) that there is presently outstanding under the 2001 Indenture two (2) series of bonds
dated June 6, 2017 and August 30, 2017;
(c) that the Series 2020-A Bonds are being issued pursuant to a Trust Indenture dated as
of September 1, 2020 (herein called "the Indenture") between the Board and Regions Bank;
(d) that simultaneously with the issuance of the Series 2020-A Bonds, the Board will issue,
pursuant to the Indenture, its Taxable Utility Revenue Bonds, Series 2020-B (herein called "the
Series 2020-B Bonds and together with the Series 2020-A Bonds, "the Series 2020 Bonds"); and
(e) that the Board has reserved, in the Indenture, the privilege of issuing from time to time
additional bonds (herein called "Additional Bonds") in one or more series, without limitation as to
principal amount, secured on a parity with the Series 2020 Bonds, upon compliance with the
conditions set forth in the Indenture.
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We are of the following opinion:
(1) that the Board has been duly organized as a public corporation pursuant to the
laws of Alabama and has corporate power to own and operate its water works plant and
distribution system, (herein called "the Water System"), to issue the Series 2020-A Bonds
and to execute and deliver the Indenture;
(2) that in the authorization, execution and issuance of the Series 2020-A Bonds,
all applicable requirements of the constitution and laws of Alabama have been complied
with;
(3) that the Series 2020-A Bonds are in due and legal form and evidence valid
special obligations of the Board payable solely out of the revenues derived from the
operation of the Water System and any additional water, sewer, electric or gas system
hereafter acquired by the Board and subjected to the lien of the Indenture (the Water
System and any such other system hereafter acquired by the Board and subjected to the
lien of the Indenture being herein together called "the Systems"), remaining after payment
of the expenses of operating and maintaining the Systems and compliance by the Board
with the provisions of the 2001 Indenture;
(4) that the Series 2020-A Bonds have been issued under the Indenture and are
secured, pro rata with the Series 2020-B Bonds and with any of the Additional Bonds that
may hereafter be issued, and without preference or priority of one bond over another, by a
pledge of the said revenues out of which they are payable and by the provisions of the
Indenture;
(5) that the said pledge is a valid pledge of said revenues, subject to all prior
lawful charges on said revenues, including, without limitation, the 2001 Indenture;
(6) that under presently existing law, the interest on the Series 2020-A Bonds is
exempt from income taxation by the State of Alabama; and
(7) that under the Internal Revenue Code of 1986, as amended (herein called "the
Code"), as presently construed and administered, and assuming compliance by the Board
with the covenants set forth in the Indenture with respect to certain requirements of Federal
tax law, the interest income on the Series 2020-A Bonds will be excludable from gross
income of the recipients thereof for Federal income tax purposes pursuant to the provisions
of Section 103(a) of the Code. In addition, the interest income on the Series 2020-A Bonds
will not be an item of tax preference included in alternative minimum taxable income for
the purpose of computing the alternative minimum tax imposed by Section 55 of the Code.
We express no opinion with respect to the Federal tax consequences of ownership of the
Series 2020-A Bonds under any other provision of the Code.
We have not examined the title of the Board to the Water System, but have, pursuant to instructions, assumed
that the Board has good title to the Water System, subject to "Permitted Encumbrances," as that term is defined in the
Indenture.
The Indenture provides that in the event the Board should default in any of the provisions thereof in the
manner and for the time therein provided, the Trustee may declare all bonds then outstanding under the Indenture to
be forthwith due and payable, whereupon the same shall immediately become due and payable and the Trustee shall
be entitled to exercise the rights specified in the Indenture. The Indenture does not, however, constitute a mortgage
on the Systems and is not, therefore subject to foreclosure. The Indenture further provides that to the extent and in
the manner provided thereby, it may be amended with the written consent of the holders of at least 66-2/3% in principal
amount of the bonds then outstanding thereunder.
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We express no opinion with respect to the accuracy, adequacy or completeness of the Official Statement of
the Board relating to the Series 2020-A Bonds.
Very truly yours,
HAND ARENDALL HARRISON SALE LLC
By: P. Nicholas Greenwood
Member
C-4
[Series 2020-B Bonds]
[Closing Date]
The Utilities Board of the
City of Opelika
Opelika, Alabama
Re: $15,770,000
The Utilities Board of the City of Opelika
Taxable Utility Revenue Bonds, Series 2020-B
Gentlemen:
We have acted as Bond Counsel in connection with the issuance of the above-referenced bonds (herein called
"the Series 2020-B Bonds") and as such we have examined certified copies of proceedings showing the organization
under the laws of Alabama of The Utilities Board of the City of Opelika (herein called "the Board"), together with
copies of proceedings of the Board and other documents submitted to us pertaining to the authorization, sale and
issuance of the Series 2020-B Bonds.
As to questions of fact material to our opinion, we have relied upon certified proceedings and other
certifications of public officials and others furnished to us without undertaking to verify the same by independent
investigation. The opinions hereinafter expressed and the statements hereinafter made are based upon our examination
of the aforesaid proceedings and documents.
The documents submitted to us show as follows:
(a) that the Board has heretofore executed and delivered to The Bank of New York Mellon
Trust Company, National Association, a Trust Indenture dated as of June 1, 2001 (herein called "the
2001 Indenture");
(b) that there is presently outstanding under the 2001 Indenture two (2) series of bonds
dated June 6, 2017 and August 30, 2017;
(c) that the Series 2020-B Bonds are being issued pursuant to a Trust Indenture dated as
of September 1, 2020 (herein called "the Indenture") between the Board and Regions Bank;
(d) that simultaneously with the issuance of the Series 2020-B Bonds, the Board will issue,
pursuant to the Indenture, its Utility Revenue Bonds, Series 2020-A (herein called "the Series 2020-
A Bonds and together with the Series 2020-B Bonds, "the Series 2020 Bonds"); and
(e) that the Board has reserved, in the Indenture, the privilege of issuing from time to time
additional bonds (herein called "Additional Bonds") in one or more series, without limitation as to
principal amount, secured on a parity with the Series 2020 Bonds, upon compliance with the
conditions set forth in the Indenture.
We are of the following opinion:
(1) that the Board has been duly organized as a public corporation pursuant to the
laws of Alabama and has corporate power to own and operate its water works plant and
distribution system, (herein called "the Water System"), to issue the Series 2020-B Bonds
and to execute and deliver the Indenture;
C-5
(2) that in the authorization, execution and issuance of the Series 2020-B Bonds,
all applicable requirements of the constitution and laws of Alabama have been complied
with;
(3) that the Series 2020-B Bonds are in due and legal form and evidence valid
special obligations of the Board payable solely out of the revenues derived from the
operation of the Water System and any additional water, sewer, electric or gas system
hereafter acquired by the Board and subjected to the lien of the Indenture (the Water
System and any such other system hereafter acquired by the Board and subjected to the
lien of the Indenture being herein together called "the Systems"), remaining after payment
of the expenses of operating and maintaining the Systems and compliance by the Board
with the provisions of the 2001 Indenture;
(4) that the Series 2020-B Bonds have been issued under the Indenture and are
secured, pro rata with the Series 2020-A Bonds and with any of the Additional Bonds that
may hereafter be issued, and without preference or priority of one bond over another, by a
pledge of the said revenues out of which they are payable and by the provisions of the
Indenture;
(5) that the said pledge is a valid pledge of said revenues, subject to all prior
lawful charges on said revenues, including, without limitation, the 2001 Indenture; and
(6) that under presently existing law, the interest on the Series 2020-B Bonds is
exempt from income taxation by the State of Alabama.
We have not examined the title of the Board to the Water System, but have, pursuant to instructions, assumed
that the Board has good title to the Water System, subject to "Permitted Encumbrances," as that term is defined in the
Indenture.
The Indenture provides that in the event the Board should default in any of the provisions thereof in the
manner and for the time therein provided, the Trustee may declare all bonds then outstanding under the Indenture to
be forthwith due and payable, whereupon the same shall immediately become due and payable and the Trustee shall
be entitled to exercise the rights specified in the Indenture. The Indenture does not, however, constitute a mortgage
on the Systems and is not, therefore subject to foreclosure. The Indenture further provides that to the extent and in
the manner provided thereby, it may be amended with the written consent of the holders of at least 66-2/3% in principal
amount of the bonds then outstanding thereunder.
We express no opinion with respect to the accuracy, adequacy or completeness of the Official Statement of
the Board relating to the Series 2020-B Bonds.
Very truly yours,
HAND ARENDALL HARRISON SALE LLC
By: P. Nicholas Greenwood
Member
D-1
APPENDIX D
SUMMARY OF CONTINUING DISCLOSURE AGREEMENT
The following is a summary of the Continuing Disclosure Agreement ("the Agreement") entered into by the
Board for the benefit of the holders of the Series 2020 Bonds, in order to assist the Underwriter in complying with the
provisions of Rule 15c2-12 ("the Rule"), promulgated by the Securities and Exchange Commission ("the
Commission") pursuant to the Securities Exchange Act of 1934. Except where otherwise defined in this Appendix,
all capitalized terms have the meaning assigned in the front portion of this Official Statement.
Annual Report of the Board. The Board agrees, in accordance with the provisions of the Rule, to provide
or cause to be provided to each nationally recognized municipal securities information repository ("NRMSIR")
certified by the Commission in accordance with the Rule, within 180 days after the close of each fiscal year of the
Board (October 1 – September 30) commencing after September 30, 2019, the following annual financial information
and operating data ("the Board's Annual Report"):
(a) Except as hereinafter provided, the audited financial statements of the Board and notes
thereto, prepared on a basis comparable to that set forth in Appendix B to the Official Statement;
and
(b) unless the audited financial statements are filed as a part of the Board's Annual Report
and otherwise include such information the information with respect to the Water System set forth
in the Official Statement (charts and tables only) under the headings "THE WATER SYSTEM" and
"FINANCIAL INFORMATION."
Notwithstanding the foregoing, if the audited financial statements of the Board referred to in subparagraph
(a) above of this Section 1 for the related fiscal year are not submitted as part of the Board’s Annual Report, then the
Board agrees to provide such audited financial statements, when and if available, to the MSRB. The Board reserves
the right to modify from time to time the specific types of information provided or the format of the presentation of
the Board's Annual Report, to the extent necessary or appropriate in the judgment of the Board; provided that, the
Board agrees that any such modification will be done in a manner consistent with the Rule. The only NRMSIR
certified by the Commission is the Municipal Securities Rulemaking Board through its Electronic Municipal Market
Access ("EMMA") website at http://emma.msrb.org.
Notice of Certain Events. The Board agrees to provide or cause to be provided, notice to each NRMSIR,
in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with
respect to the Series 2020 Bonds:
(a) Principal and interest payment delinquencies;
(b) Non-payment related defaults, if material;
(c) Unscheduled draws on any reserve funds reflecting financial difficulties;
(d) Unscheduled draws on credit enhancements reflecting financial difficulties;
(e) Substitution of credit or liquidity providers, or their failure to perform;
(f) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final
determinations of taxability. Notice of Proposed Issue (IRS Form 5701 TEB) or other material
notices or determinations with respect to the tax status of the Series 2020 Bonds, or other material
events affecting the tax status of the Series 2020 Bonds;
(g) Modifications to rights of Bondholders, if material;