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Home My WebLink AboutResolution_17-97/98_03/05/1997 RESOLUTION NO. /7 -97/98 A RESOLUTION OF THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, FLORIDA, AUTHORIZING THE ISSUANCE OF THE VILLAGE'S NOT TO EXCEED $9,000,000 AGGREGATE PRINCIPAL AMOUNT WATER REVENUE BONDS, SERIES 1998; SETTING FORTH A METHOD TO ESTABLISH THE PRINCIPAL AMOUNT, INTEREST RATES, MATURITY SCHEDULE AND REDEMPTION PROVISIONS FOR SUCH BONDS; AUTHORIZING VILLAGE OFFICIALS TO AWARD THE SALE OF THE BONDS AND MAKING CERTAIN FINDINGS IN CONNECTION THEREWITH; APPOINTING A PAYING AGENT AND REGISTRAR FOR THE BONDS; APPROVING THE FORM AND USE OF A PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING THE EXECUTION AND DELIVERY OF A FINAL OFFICIAL STATEMENT; AUTHORIZING THE PURCHASE OF A MUNICIPAL BOND INSURANCE POLICY AND RESERVE ACCOUNT SURETY BOND FOR THE BONDS AND MAKING CERTAIN COVENANTS IN CONNECTION THEREWITH; AMENDING AND SUPPLEMENTING CERTAIN PROVISIONS OF RESOLUTION NO. 7 -97/98 OF THE VILLAGE; AUTHORIZING AND DIRECTING CERTAIN OFFICIALS OF THE VILLAGE TO TAKE ALL ACTION REQUIRED IN CONNECTION WITH THE ISSUANCE OF THE BONDS; MAKING CERTAIN OTHER COVENANTS AND AGREEMENTS IN CONNECTION WITH THE ISSUANCE OF THE BONDS; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on January 9, 1998, the Village Council (the "Governing Body ") of the Village of Tequesta, Florida (the "Issuer ") adopted Resolution No. 7 -97/98 (the "Bond Resolution ") authorizing the issuance of water revenue bonds of the Issuer; and WHEREAS, pursuant to the Bond Resolution, prior to the issuance of bonds thereunder there is to be adopted by the Issuer a Supplemental Resolution or Resolutions authorizing the issuance of such bonds; and WHEREAS, the Issuer has determined to issue bonds under the Bond Resolution; NOW, THEREFORE, be it resolved by the Village Councillif'the Village of Tequ.e ta, orida, as follows: Section 1. aefinhions. Terms used herein Bd capitalizad fora W not otherwise defined . htr6a shall have the meanings ascribed thereto in the Ron€i Resolution (hereinafter defined). Section 2. Authority for this Resolution; Definitions This Resolution is adopted pursuant to the provisions of the Act and the Bond Resolution, including, but not limited to, Section 2.02 thereof. Section 3. Authorization of Series 1998 Bonds Obligations of the Issuer known as "Water Revenue Bonds, Series 1998" (the "Series 1998 Bonds") are hereby authorized to be issued under and pursuant to the Bond Resolution in one series in the aggregate principal amount of not exceeding $9,000,000 for the principal purpose of providing funds to pay the cost of the Series 1998 Project. The actual principal amount of Series 1998 Bonds to be issued shall be determined as provided in Section 4 hereof. Section 4. Terms of the Series 1998 Bonds The Series 1998 Bonds shall be dated, shall be issued in the aggregate principal amounts, shall bear interest at the rates per annum, computed on the basis of a 360 -day year consisting of twelve thirty (30) day months, payable semi - annually on the first day of March and September of each year (the "Interest Payment Dates "), commencing September 1, 1998, shall have such redemption provisions and shall mature on March 1 of the years and in the amounts, as set forth in a certificate in the form attached hereto as Exhibit A signed by the Mayor, Vice -Mayor or Village Manager, provided, however, that the arbitrage yield on the Series 1998 Bonds, as calculated for purposes of the Code, shall not exceed 5.5 %, the aggregate principal amount of the Series 1998 Bonds shall not exceed $9,000,000, the first optional redemption date for the Series 1998 Bonds shall not be later than March 1, 2010, and the maximum redemption price of the Series 1998 Bonds shall not exceed 102% of the principal amount thereof. The Mayor, the Vice -Mayor and the Village Manager are jointly and severally authorized to determine the details of the Series 1998 Bonds within the parameters set forth above, and upon such determination to execute a certificate it the form attached hereto as Exhibit A completed with the details of the Series 1998 Bonds, thereby establishing such details. Section 5. Paying gent and Registrar The Issuer hereby appoints First Union National Bank as the Paying Agent and Registrar with respect to the Series 1998 Bonds. The form of Paying Agent and Registrar Agreement (the "Paying Agent and Registrar Agreement ") attached hereto as Exhibit B is hereby approved and the Mayor and Vice -Mayor are hereby jointly and severally authorized and directed for and in the name of the Issuer to execute the Paying and Registrar Agreement, with such changes alterations or corrections thereto as shall be approved by the Mayor or Vice -Mayor executing the same, such execution to constitute conclusive evidence of such approval. Section 6. Award of the Series 1998 Bonds The Issuer hereby determines that a negotiated sale of the Series 1998 Bonds is in the best interest of the Issuer and the citizens and inhabitants of the Issuer by reason of the volatility of the market for tax- exempt bonds. Attached hereto as Exhibit C is a form of Bond Purchase Contract (the "Bond Purchase Contract ") between the Issuer and Raymond James & Associates, Inc. (the "Original Purchaser ") Prior to execution of the Bond Purchase Contract, the Original Purchaser shall file with the Issuer the disclosures required by Section 218.385, Florida Statutes and competitive bidding for the 2 Series 1998 Bonds is hereby waived pursuant to the authority of Section 218.385, Florida Statutes. Upon establishment of the terms of the Series 1998 Bonds, as described in Section 4 hereof, the Mayor, the Vice -Mayor or the Village Manager are, jointly and severally, authorized to award the Series 1998 Bonds to the Original Purchaser at a price of not less than 99% of the par amount thereof, exclusive of any original issue discount. The Issuer approves the form of the Bond Purchase Contract and upon award of the Series 1998 Bonds, the Mayor or Vice -Mayor are hereby jointly and severally authorized and directed for and in the name of the Issuer to execute and deliver the Bond Purchase Contract with such changes, alterations or corrections thereto as shall be approved by the Mayor or Vice -Mayor executing the same, such execution to constitute conclusive evidence of such approval. Section 7. Official Statement The Issuer hereby approves the form and content of the draft Preliminary Official Statement relating to the Series 1998 Bonds attached hereto as Exhibit D, with such alterations as may be approved by the Village Manager, and authorizes its use in connection with the sale of the Series 1998 Bonds. The preparation of a final Official Statement for the Series 1998 Bonds, which shall be in substantially the form of the Preliminary Official Statement, changed to reflect the terms of the Series 1998 Bonds and with such other changes, alterations and corrections therein as may be approved by the Mayor or Vice - Mayor, such approval to be conclusively established by such execution, is hereby authorized, and upon preparation thereof the Mayor or Vice -Mayor are jointly and severally authorized and directed for and in the name of the Issuer to execute and deliver the Official Statement, as hereby approved. Section 8. Book Entry System The Series 1998 Bonds shall be initially registered in the name of Cede & Co. ( "Cede "), as nominee of The Depository Trust Company ( "DTC "). Beneficial owners of the Series 1998 Bonds will not receive physical delivery of Series 1998 Bond certificates nor will they have a right to receive a certificate during the period that the Series 1998 Bonds are immobilized in the custody of DTC. The Issuer and the Paying Agent and Registrar are authorized and directed to execute a letter of representations with DTC in the form attached hereto as Exhibit E and to comply with the provisions thereof. Section 9. Application of Bond Proceeds Proceeds from the sale of the Series 1998 Bonds, including accrued interest, but excluding the cost of the bond insurance policy and reserve surety for the Series 1998 Bonds which shall be paid by the Original Purchaser directly to the Ambac Assurance (hereinafter defined), shall be applied as follows: (a) The accrued interest received upon the sale of the Series 1998 Bonds shall be deposited in the Interest Account; and (b) The remaining amount received upon the sale of the Series 1998 bonds shall be deposited in the Series 1998 Account of the Construction Fund. Section 10. Municipal Bonds Insurannce Provisions A new Section 5.19 is added to the Bond Resolution to provide as follows: 3 Section 5.19. Mu nicipal Bond lnsurance. Notwithstanding any provision to the contrary contained herein, the following provisions shall apply with respect to any Bonds as to which Ambac Assurance has issued a Municipal Bond Insurance Policy (as such terms are hereinafter defined): (A) "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin- domiciled stock insurance company. (B) "Municipal Bond Insurance Policy" shall mean the municipal bond insurance policy issued by Ambac Assurance. insuring the payment when due of the principal of and interest on the Bonds as provided therein. (C) Any provision of this Resolution expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. (D) Unless otherwise provided in this Section, Ambac Assurance's consent shall be required in addition to Bondholder consent, when required, for the following purposes: (i) execution and delivery of any Supplemental Resolution, (ii) removal of the Paying Agent or Registrar and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. (E) Any reorganization or liquidation plan with respect to the Issuer must be acceptable to Ambac Assurance. In the event of any reorganization or liquidation, Ambac Assurance shall have the right to vote on behalf of all Bondholders who hold Ambac Assurance- insured Bonds absent a default by Ambac Assurance under the applicable municipal bond insurance policy insuring such bonds. (F) Anything in this Resolution to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, Ambac Assurance shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders under this Resolution, including, without limitation: (i) the right to accelerate the principal of the Bonds as described in this Resolution and (ii) the right to annul any declaration of acceleration, and Ambac Assurance shall be entitled to approve all waivers of events of default. (G) Upon the occurrence of an Event of Default, Ambac Assurance may, by written notice to Issuer, declare the principal of the Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon 4 accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in Resolution or in the Bonds to the contrary notwithstanding. (H) While the Municipal Bond Insurance Policy is in effect, the Issuer shall furnish to Ambac Assurance: (a) as soon as practicable after the filing thereof a copy of any financial statement of the Issuer and a copy of any audit and annual report of the Issuer; (b) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this Resolution relating to the security for the Bonds; and (c) such additional information as it may reasonably request. (I) The Issuer shall notify Ambac Assurance of any failure of the Issuer to provide any notices, certificates, or other documentation required to be provided by the Issuer hereby. (J) The Issuer will permit Ambac Assurance to discuss the affairs, finances and accounts of the Issuer or any information Ambac Assurance may reasonably request regarding the security for the Bonds with appropriate officers of the Issuer. The Issuer will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Bonds at any reasonable time. (K) Ambac Assurance shall have the right to direct an accounting at the Issuer's expense, and the Issuer's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from Ambac Assurance shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Bonds. (L) Notwithstanding any other provision of this Resolution, the Paying Agent or the Issuer shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and /or interest on the Bonds as required, and immediately upon the occurrence of any Event of Default hereunder. 5 (M) To the extent that the Issuer enters into a continuing disclosure agreement with respect to the Bonds, Ambac Assurance shall be included as a party to be notified. (N) Notwithstanding anything herein to the contrary, in the event that the principal and /or interest due on the Bonds shall be paid by Ambac Assurance pursuant to the Municipal Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, shall not be defeased or otherwise satisfied and shall not be considered paid by the Issuer, and the assignment and pledge of the amounts pledged to repayment of the Bonds and all covenants, agreements and other obligations of the Issuer to the Bondholders shall continue to exist and shall run to the benefit of Ambac Assurance, and Ambac Assurance shall be subrogated to the rights of such Bondholders. (0) Ambac Assurance will allow only the following obligations to be used for defeasance purposes: (1) cash fully insured by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in (2) below, or (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America. (P) Nothing in this Resolution expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the Issuer, Ambac Assurance, the Registrar, the Paying Agent and the registered owners of the Bonds, any right, remedy or claim under or by reason of this Resolution or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Resolution contained by or on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, Ambac Assurance, the Registrar, the Paying Agent and the registered owners of the Bonds. (Q) To the extent that this Resolution confers upon or gives or grants to Ambac Assurance any right, remedy or claim under or by reason of this Resolution, Ambac Assurance is hereby explicitly recognized as being a third -party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. (R)(i) Upon the written request of Ambac Assurance, the Issuer shall take steps to remove any Paying Agent which shall have violated any provision hereof; (ii) the Issuer will provide Ambac Assurance written notice if any Paying Agent shall resign; (iii) every Paying Agent appointed under this Resolution shall be a financial institution in good 6 standing located in or incorporated under the laws of the State, duly authorized to exercise trust powers and subject to examination by federal or State authorities, having a reported capital and surplus of not less than $75,000,000 and not objected to by Ambac Assurance; (iv) any successor Paying Agent shall not be appointed unless Ambac Assurance approves such successor in writing; (v) notwithstanding any other provisions of this Resolution in determining whether the rights of the bondholders will be adversely affected by any action taken pursuant to the terms and provisions of this Resolution, the Paying Agent shall consider the affect on the Bondholders as if there were not municipal bond insurance policy; and (vi) notwithstanding any other provision of this Resolution, no removal, resignation or termination of the Paying Agent shall take effect until a successor, acceptable to Ambac Assurance shall be appointed (S) "Authorized Investments" shall mean the investments described in the Resolution, but only to the extent also described below and only to the extent the same shall be permitted from time to time by applicable laws of the State: (a) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America, including Federal Securities; (b) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America: Export- Import Bank; Farm Credit System Financial Assistance Corporation; Rural Economic Community Development Administration General Services Administration; U.S. Maritime Administration; Small Business Administration; Government National Mortgage Association; U.S. Department of Housing & Urban Development; Federal Housing Administration; and Federal Financing Bank; (c) direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations rated "AAA" by S &P and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; obligations of the Resolution Funding Corporation; senior debt obligations of the Federal Home Loan Bank System; senior debt obligations of other government sponsored agencies approved by Ambac Assurance; 7 (d) U.S. Dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of 'A -1' or 'A-I+' by S &P and 'P -1' by Moody's and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the issuing bank); (e) commercial paper which is rated at the time of purchase in the single highest classification, "A -1 +" by S &P and "P -1" by Moody's and which matures not more than 270 days after the date of purchase; (f) money market funds rated ' AAAm' or ' Aaam -G' or better by S &P; (g) units of participation in the Local Government Surplus Funds Trust Fund established pursuant to Part IV, Chapter 218, Florida Statutes, or any similar common trust fund which is established pursuant to State law as a legal depository of public moneys; and (h) other forms of investments approved in writing by Ambac Assurance with notice to S &P. (T) The value of all investments shall be determined as of the end of each month, and shall be calculated as follows: (i) as to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then in The New York Times): the average of the bid and asked prices for such investments so published on or most recently prior to the time of such determination; (ii) as to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times, the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Issuer in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service; (iii) as to certificates of deposit and bankers acceptances, the face amount thereof, plus accrued interest; and (iv) as to any investment not specified above, the value thereof established by prior agreement between the Issuer and Ambac Assurance. (U) As long as the Municipal Bond Insurance Policy shall be in full force and effect, the Issuer and any Paying Agent agree to comply with the following provisions: 8 (a) At least one (1) day prior to all Interest Payment Dates the Issuer or Paying Agent will determine whether there will be sufficient funds in the funds and accounts established pursuant to the Resolution to pay the principal of or interest on the Bonds on such Interest Payment Date. If the Issuer or Paying Agent determines that there will be insufficient funds in such funds or accounts, the Issuer or Paying Agent shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both. If the Issuer or Paying Agent has not so notified Ambac Assurance at least one (1) day prior to an Interest Payment Date, Ambac Assurance will make payments of principal or interest due on the Bonds on or before the first (1st) day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Issuer or Paying Agent. (b) The Issuer or Paying Agent shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to the United States Trust Company of New York, as insurance trustee for Ambac Assurance, or any successor insurance trustee (the "Insurance Trustee "), the registration books of the Issuer maintained by the Registrar or Paying Agent and all records relating to the funds and accounts maintained under this Resolution. (c) The Issuer or Paying Agent shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Municipal Bond Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon Bonds surrendered to the Insurance Trustee by the owners of Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) The Issuer or Paying Agent shall at the time it provides notice to Ambac Assurance pursuant to (a) above, notify owners of Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of owner entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the Owner's right to payment, (iii) that should they be entitled to receive full 9 payment of principal from Ambac's Assurance, they must surrender their Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Issuer or Paying Agent, and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Bonds for payment thereon first to the Paying Agent who shall note on such Bonds the portion of the principal paid by the Paying Agent and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. (e) In the event that the Issuer or Paying Agent has notice that any payment of principal of or interest on a Bond which has become Due for Payment (as defined in the Municipal Bond Insurance Policy) and which is made to an Owner by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Issuer or Paying Agent shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all Owners that in the event that any Owner's payment is so recovered, such Owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the Issuer or Paying Agent shall furnish to Ambac Assurance its records evidencing the payments of principal of and interest on the Bonds which have been made by the Issuer or Paying Agent and subsequently recovered from Owners and the dates on which such payments were made. (f) In addition to those rights granted Ambac Assurance under this Resolution, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Registrar or Paying Agent shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the Registrar or Paying Agent upon receipt from Ambac Assurance of proof of the payment of interest thereon to the Owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Registrar or Paying Agent shall note Ambac Assurance's rights as subrogee on the registration books of the Issuer maintained by the 10 Registrar or Paying Agent, if any, upon surrender of the Bonds by the Owners thereof together with proof of the payment of principal thereof. SECTION 11. Reserve Surety Provisions A new Section 5.20 is added to the Bond Resolution to provide as follows: Section 5.20. Reserve Account Surety Bond Notwithstanding any provision to the contrary contained herein, the following provisions shall apply while Ambac Assurance Corporation has issued a surety bond in order to fund all or a portion of the Reserve Account Requirement for such Bonds: (A) "Ambac Assurance" shall mean Ambac Assurance Corporation, a Wisconsin- domiciled stock insurance company. (B) "Surety Bond" shall mean the surety bond issued by Ambac Assurance guaranteeing certain payments into the Reserve Account with respect to the Bonds as provided therein and subject to the limitations set forth therein. (C) Any provision of this Resolution expressly recognizing or granting rights in or to Ambac Assurance may not be amended in any manner which affects the rights of Ambac Assurance hereunder without the prior written consent of Ambac Assurance. (D) Unless otherwise provided in this Section, Ambac Assurance's consent shall be required in addition to Bondholder consent, when required, for the following purposes: (i) execution and delivery of any Supplemental Resolution, (ii) removal of the Paying Agent or Registrar and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. (E) While the Surety Bond is in effect, the Issuer shall furnish to Ambac Assurance: (a) as soon as practicable after the filing thereof, a copy of any financial statement of the Issuer and a copy of any audit and annual report of the Issuer; (b) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this Resolution relating to the security for the Bonds; and (c) such additional information as it may reasonably request. G:\20241\2\award res.wo 11 (F) The Issuer will permit Ambac Assurance to discuss the affairs, finances and accounts of the Issuer or any information Ambac Assurance may reasonably request regarding the security for the Bonds with appropriate officers of the Issuer. The Issuer will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Bonds at any reasonable time. (G) Notwithstanding any other provision of this Resolution, the Paying Agent or the Issuer shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and /or interest on the Bonds as required, and immediately upon the occurrence of any Event of Default hereunder. (H) To the extent that the Issuer enters into a continuing disclosure agreement with respect to the Bonds, Ambac Assurance shall be included as a party to be notified. (I) As long as the Surety Bond shall be in full force and effect, the Issuer and any Paying Agent agree to comply with the following provisions: (i) In the event and to the extent that moneys on deposit in the Interest Account, Principal Account and /or Bond Amortization Account, plus all amounts on deposit in and credited to the subaccount of the Reserve Account established for the Bonds in excess of the amount of the Surety Bond, are insufficient to pay the amount of the principal and interest coming due, then upon the later of (x) one (1) day after receipt by the General Counsel of Ambac Assurance of a demand for payment in the form attached to the Surety Bond as Attachment 1 (the "Demand for Payment "), duly executed by the Paying Agent certifying that payment due under this Resolution has not been made to the Paying Agent; or (y) the payment date of Obligations as specified in the Demand for Payment presented by the Paying Agent to the General Counsel of Ambac Assurance, Ambac Assurance will make a deposit of funds in an account with the Paying Agent or its successor, in New York, New York, sufficient for the payment to the Paying Agent of amounts which are then due to the Paying Agent under the Resolution (as specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage, as defined in the Surety Bond; provided, however, that in the event that the amount on deposit in or credited to the subaccount of the Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, surety bond, or other such funding instrument (the "Additional Funding Instrument "), draws on the Surety GA=41\21award res.wo 12 Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency; (ii) the Paying Agent shall, after submitting to Ambac Assurance the Demand for Payment as provided in (i) above, make available to Ambac Assurance all records relating to the funds and accounts maintained under this Resolution; (iii) the Paying Agent shall, upon receipt of moneys received from the draw on the Surety Bond, as specified in the Demand for Payment, credit the subaccount of the Reserve Account to the extent of moneys received pursuant to such Demand; and (iv) the subaccount of the Reserve Account shall be replenished in the following priority: (x) principal and interest on the Surety Bond and on any Additional Funding Instrument shall be paid first from available funds on a pro rata basis; (y) after all such amounts are paid in full, amounts necessary to fund the subaccount of the Reserve Account to the required level, after taking into account the amounts available under the Surety Bond and any Additional Funding Instrument, shall be deposited from the next available funds. Section 12. Execution and Delivery of the Series 1998 Bonds The Mayor and Clerk are hereby authorized and directed on behalf of the Issuer to execute the Series 1998 Bonds as provided in the 1988 Resolution and herein, and such officials are hereby authorized and directed upon the execution of the Series 1998 Bonds in the form and manner set forth herein and in the 1988 Resolution to deliver the Series 1998 Bonds in the amount authorized to be issued hereunder to the Registrar for authentication and delivery to or upon the order of the Original Purchaser upon payment of the purchase price set forth herein. Section 13. Authorizations (a) The members of the Governing Body, the Village Manager and the Finance Director are hereby jointly and severally authorized to do all acts and things required of them by this resolution, the Bond Resolution or the Bond Purchase Contract, or desirable or consistent with the requirements hereof or thereof, for the full, punctual and complete performance of all terms, covenants and agreements contained in the Series 1998 Bonds, the Bond Resolution, this resolution and the Bond Purchase Contract. Any and all members of the Governing Body, the Village Manager and the Finance Director are hereby jointly and severally authorized to execute, publish, file and record such other documents, instruments, notices, and records and to take such other actions as shall be necessary or desirable to accomplish the purposes of this resolution and the Bond Resolution. (b) The Issuer accepts the Commitment for Municipal Bond Insurance and the Commitment for Surety Bond both dated February 25, 1998, of Ambac Assurance Corporation ( "Ambac Assurance ") attached hereto as Exhibits F and G, respectively. The Mayor, the Vice - G:\202d1\2\award res.wN 13 Mayor and Village Manager are jointly and severally authorized to execute, on behalf of the Issuer, the Guaranty Agreement attached to the Commitment for Surety Bond. Section 13. Resolution to Constitute a Contract In consideration of the purchase and acceptance of the Series 1998 Bonds authorized to be issued hereunder by those who shall be the Holders thereof from time to time, this resolution shall constitute a contract among the Issuer, Ambac Assurance and such Holders, and all covenants and agreements herein set forth to be performed by the Issuer shall be for the equal benefit and security of all of the Holders and of Ambac Assurance. Section 14. No Implied Beneficiary With the exception of any rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this resolution or the Series 1998 Bonds is intended or shall be construed to give any person other than the Issuer, Ambac Assurance, the Paying Agent and Registrar and the Holders, any legal or equitable right, remedy or claim under or with respect to this resolution, or any covenants, conditions and provisions herein contained; this resolution and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the Issuer, Ambac Assurance, the Bank and the Holders. Section 15. Sever If any provision of this resolution shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable in any context, the same shall not affect any other provision herein or render any other provision (or such provision in any other context) invalid, inoperative or unenforceable to any extent whatsoever. Section 16. Repealer All resolutions or parts thereof of the Issuer in conflict with the provisions herein contained are, to the extent of any such conflict, hereby superseded and repealed. Section 17. Effective Date This resolution shall take effect immediately upon its adoption. THE FOREGOING RESOLUTION was offered by Councilmember who moved its adoption. The motion was seconded by Councilmember , and upon being put to a vote, the vote was as follows: FOR ADOPTION AGAINST ADOPTION G:\20241\2\awud res.wo 14 The Mayor thereupon declared the Resolution duly passed and adopted this 5` day of March, 1998. Mayor of Tequesta [SEAL] ATTEST: Village Clerk GA2M41\2\award res.wo 15 EXHIBIT A Terms of the Series 1998 Bonds (a) Dated Date: (b) Amounts, Maturities and Interest Rates: Maturity Amount (March 1) Interest Rate (c) Optional Redemption The Series 1998 Bonds maturing prior to March 1, are not subject to optional redemption prior to maturity. The Series 1998 Bonds maturing on or after March 1, are subject to redemption prior to maturity, at the option of the Village, from any funds legally available for such purpose, on or after March 1, , in whole or in part on any date, and if in part in any order of maturity selected by the Village, and by lot within a maturity if less than an entire maturity is to be redeemed, at the redemption prices (expressed as percentages of the principal amount of the Series 1998 Bonds to be redeemed) set forth in the table below, plus accrued interest to the redemption date: Redemption Dates Redemption (Inclusive) Prices March 1, through February % March 1, through February % March 1, and thereafter % (d) Mandatory Redemption The Series 1998 Bonds maturing on March 1, (the if Term Bonds ") are subject to mandatory redemption in part, on March 1, , and on each March 1 thereafter in the years and in the amounts set forth below (except for the final amount due at maturity, which shall not be a redemption), at a price equal to 100% of the principal amount of the Series 1998 Bonds being redeemed, plus accrued interest to the redemption date: GA20241\2\award resmo A -1 TERM BONDS Year Amount (Maturity) The Series 1998 Bonds maturing .on March 1, (the " Term Bonds ") are subject to mandatory redemption in part, on March 1, , and on each March 1 thereafter in the years and in the amounts set forth below (except for the final amount due at maturity, which shall not be a redemption), at a price equal to 100% of the principal amount of the Series 1998 Bonds being redeemed, plus accrued interest to the redemption date: TERM BONDS Yuan Amount (Maturity) If prior to any March 1 the Village shall purchase for cancellation or redeem Term Bonds or Terms Bonds in excess of the aggregate mandatory redemption requirement for such Term Bonds or Terms Bonds to but not including such March 1, such excess of Term Bonds so purchased or redeemed and not previously applied as a credit pursuant to this paragraph shall be credited over such of the remaining mandatory redemption dates for such Term Bonds as the Issuer shall determine, and shall reduce the amount of Term Bonds or Terms Bonds otherwise subject to redemption and due, respectively, on such date(s). Provided, however, that no such excess shall be credited to the amount of Term Bonds or Terms Bonds subject to mandatory redemption on a particular March 1 after the, selection of Term Bonds or Terms Bonds to be redeemed on such date has been made. G:\20241\2\award res.wpd A-2 The above -terms of the Village of Tequesta Water Revenue Bonds, Series 1998 are hereby approved pursuant to Resolution No. -97/98 of the Village Council. Village of Tequesta By: Its Date: G:\20241\2\award res.wN A -3 EXHIBIT B PAYING AGENT AND REGISTRAR AGREEMENT G:\20241\2\award res.wN B -1 PAYING AGENT AND REGISTRAR AGREEMENT THIS PAYING AGENT AND REGISTRAR AGREEMENT is made and entered into as of the day of , 1998, by and between VILLAGE OF TEQUESTA, FLORIDA, having its administrative offices at , Tequesta, Florida (the "Issuer ") and FIRST UNION NATIONAL BANK, a national banking association, having its place of business at , , Florida (the "Bank "). WHEREAS, the Issuer has designated the Bank as Registrar and Paying Agent for its $ Water Revenue Bonds, Series 1998 (the "Bonds'); and WHEREAS, the Issuer and the Bank desire to set forth the Bank's duties as Registrar and Paying Agent and the compensation to be paid the Bank for its services. NOW, THEREFORE, it is agreed by the partes hereto as follows: 1. Duties The Bank agrees to serve as Registrar and Paying Agent for the Bonds and to perform the duties of Registrar and Paying Agent under Resolution No. 7 -97/98 of the Issuer, adopted January 8, 1998, as amended and supplemented (the "Indenture "). 2. Deposit of Funds The Issuer shall deposit or cause to be deposited with the Bank sufficient funds from the funds provided therefor under the Resolution to pay when due and payable the principal of, premium, if any, and interest on the Bonds. 3. Use of Funds; Cancelled Bonds The Bank shall use the funds received from or on behalf of the Issuer pursuant to paragraph 2 hereof to pay the principal of,_ premium, if any, and interest on the Bonds in accordance with the Resolution. The Bank shall destroy cancelled Bonds and transmit to the Issuer a certificate of destruction therefor. 4. Statements The Bank shall prepare and shall send to the Issuer upon written request statements of account relating to all transactions effected by the Bank pursuant to this Agreement. 5. Obligation to Act The Bank shall be obligated to act only in accordance with the Resolution and any written instructions received in accordance therewith; provided, however, that the Bank is authorized hereby to comply with any orders, judgments or decrees of any court with or without jurisdiction and shall not be liable as a result of its compliance with the same. 6. Reliance By Bank The Bank may rely absolutely upon the genuineness and authorization of the signature and purported signature of any party upon any instruction, notice, release, request, affidavit, or other document delivered to it pursuant to the Resolution. 7. Indemnity To the extent allowed by Florida law, the Issuer hereby agrees to indemnify the Bank and hold it harmless from any and all claims, liabilities, losses, actions, suits, or proceedings at law or in equity, or any other expenses, fees, or charges of any character or nature, which it may incur or with which it may be threatened by reason of its acting as Registrar and Paying Agent under the Resolution, unless caused by the Bank's willful misconduct or negligence; and in connection therewith, to indemnify the Bank against any and all expenses, including attorneys' fees and the costs of defending any action, suit, or proceeding, or resisting any claim, whether or not such claim is actually filed. The Issuer's obligations hereunder shall survive any termination of this Agreement. 8. Counsel; Limited Liabili The Bank may consult with counsel of its own choice and shall have sole and complete authorization and protection for any action taken or suffered by it under the Resolution in good faith. The Bank shall otherwise not be liable for any mistakes of fact or errors of judgment, or for any acts or omissions of any kind unless caused by the Bank's willful misconduct or negligence. 9. Fees and Expenses In consideration of the services rendered by the Bank as Registrar and Paying Agent, the Issuer agrees to and shall pay to the Bank a fee during the term of this Agreement as set forth on Exhibit "A" hereto, and all expenses, charges, attorneys' fees, and other disbursements incurred by it or its attorneys, agents, and employees in and about the acceptance and performance of its powers and duties as Registrar and Paying Agent. The Bank shall not be obligated to allow and credit interest upon any unclaimed monies in respect of principal, interest, or premium, if any, due in respect of the Bonds, which it shall, at any time, receive under any of the provisions of the Resolution of this Agreement. 10. Furnishing Information; Authorization The Bank shall, at all times, when requested to do so by the Issuer, furnish full and complete information pertaining to its functions as the Registrar and Paying Agent with regard to the Bonds, and shall without further authorization, execute all necessary and proper deposit slips, checks, certificates and other documents with reference thereto. 11. Cancellation; Termination Either of the parties hereto, at its option, may cancel this Agreement after giving thirty (30) days written notice to the other party of its intention to cancel, and this Agreement may be cancelled at any time by mutual consent of the parties hereto. This Agreement shall terminate without further action upon final payment of the Bonds, and the interest appertaining thereto. If any Bonds shall not be presented for payment within the period of three (3) years following the date when such Bond becomes due, whether by maturity or otherwise, the Paying Agent shall return to the Issuer the funds theretofore held by it for payment of such Bond. 12. Surrender of Funds, Registration Records; Notification of Bondholders In the event of a cancellation of this Agreement, the Issuer shall deliver any proper and necessary releases to the Bank (in a form acceptable to the Bank) upon demand and the Bank shall thereafter upon demand pay over the funds on deposit with the Bank as Paying Agent and Registrar in connection with the Bonds and surrender all registration books and related records, and the Issuer may appoint and name a successor to act as Registrar and Paying Agent for the Bonds. The Issuer 2 shall, in such event, notify all holders of the Bonds of the appointment and name of the successor, by providing notice in the manner required by the Resolution for the redemption of the Bonds. 13. Non - assignabili ty . This Agreement shall not be assigned by either party without the written consent of the other party. 14. Modification No modification of this Agreement shall be valid unless made by a written agreement, executed and approved by the parties hereto. 15. Severability Should any section or part of any section of this Agreement be declared void, invalid, or unenforceable by any court of law for any reason, such determination shall not render void, invalid, or unenforceable any other section or other part of any section of this Agreement. 16. Governing Law This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida. 17. Merger or Consolidation of the Bank Any corporation into which the Bank may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Bank is a party, shall be the successor Paying Agent and Registrar under this Agreement, without the execution or filing of any paper or further act on the part of the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their official seals to be hereunto affixed and attested as of the date first above written. VILLAGE OF TEQUESTA, FLORIDA By: Its Mayor FIRST UNION NATIONAL BANK By: Its Vice President GA20241\2 \Paying Agent Agr.wpd 3 EXHIBIT C BOND PURCHASE CONTRACT G:\202A1\2\awazd res.wpd C-1 Village of Tequesta, Florida WATER REVENUE BONDS SERIES 1998 BOND PURCHASE AGREEMENT The Honorable Mayor and Village Council, Village of Tequesta 250 Tequesta Drive, Suite 300 Tequesta, FL 33469 -0273 Honorable Lady and Gentlemen: Raymond James & Associates, Inc. (the "Underwriter "), by offers to enter into this Bond Purchase Agreement with you, the Village of Tequesta (the "Issuer ") , which upon the Issuer's acceptance hereof will be binding upon the Issuer and the Underwriter. This offer is made subject to the written acceptance of this Bond Purchase Agreement by the Issuer and the delivery of such acceptance to the Manager on or prior to 11:59 P.M. on the date of this Bond Purchase Agreement. All capitalized terms used in the Bond Purchase Agreement that are defined in the Resolution (hereinafter defined) and not defined herein shall have the respective meanings set forth in the Resolution. 1. Upon the terms and conditions and upon the basis of the representations warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, for reoffering to the public all (but not less than all) of $ aggregate principal amount of the Issuer's WATER REVENUE BONDS, SERIES 1998 (the "Bonds ") . The Bonds shall be dated March 1, 1998 and will mature, bear interest at the rates and be payable at the times set forth in Exhibit "A" hereto. The purchase price of the Bonds shall be (representing $_ in aggregate principal amount, less $ __ as Underwriter's discount, plus.$ as original issue premium and less $_ as original issue discount) plus accrued interest from March 1, 1998, to the Closing Date (as defined herein). The Underwriter shall, upon delivery to it by the Issuer 1 of a fully executed Bond Purchase Agreement, deliver to the Mayor of the Village of Tequesta (the "Mayor ") or such other person designated by the Issuer, a corporate check of the Underwriter payable to the order of the Issuer in the amount of $25,000.00 as security for the performance by the Underwriter of its obligations to accept and pay for the Bonds at the Closing (as defined herein) in accordance with the provisions of this Bond Purchase Agreement. The Issuer shall retain the check, uncashed and in trust, and such check shall be returned to the Underwriter at Closing, except under the circumstances set forth in the last sentence of this paragraph. If the Issuer does not accept this offer, or upon the Issuer's failure (other than for a reason permitted under this Bond Purchase Agreement) to deliver the Bonds at the Closing, or if the Issuer shall be unable to satisfy any material Condition to the Underwriter's obligations contained in this Bond Purchase Agreement (unless waived by the Underwriter), or if such obligations shall be terminated for any reason permitted by this Bond Purchase Agreement, the Issuer shall return such check to the Underwriter and thereupon all the Underwriter's claims and rights hereunder or in connection with the Bonds against the Issuer shall be fully released and discharged. If the Underwriter fails (other than for a reason permitted under this Bond Purchase Agreement) to accept and pay for the Bonds at the Closing, the proceeds of such check shall be retained by the Issuer as and for full liquidated damages for such failure and for any and all defaults hereunder or in connection with the Bonds on the part of the Underwriter, and thereupon all of the Issuer's claims and rights hereunder against the Underwriter shall be fully released and discharged and all of the Underwriter's claims and rights hereunder and in connection with the Bonds against the Issuer shall be fully released and discharged. 2. The Bonds shall be as described in and shall be issued pursuant to the Bond Resolution adopted by the Issuer on January 9, 1998 (Resolution 7- 97/98), and the Resolution supplementing the Bond Resolution adopted by the Issuer on _ __ (such resolutions being collectively referred to as the "Resolution ") . The Bonds will be issued under, pursuant to and in full compliance with the Florida Constitution, the Charter of the Village of Tequesta, and Chapter 166, Laws of Florida, as amended and supplemented, and other applicable provisions of Florida law (the "Act "), and this Bond Purchase Agreement. The Series 1998 Bonds are being issued for the purpose of providing funds, which, together with other funds available for such purpose, will be sufficient (1) to pay the costs of 2 construction of certain improvements (the 1998 Project ) to the Village's potable water treatment and distribution system t (the System ), (2) to purchase a surety bond to fund the 1998 Reserve Subaccount in an amount equal to the Reserve Account Requirement (hereinafter defined) on account of the Series 1998 Bonds, and (3) to pay costs and expenses related to the issuance of the Series 1998 Bonds. 3. The Underwriter represents that it is registered under the Securities Exchange Act of 1934 as a municipal securities dealer. 4. The Underwriter agrees to make a bona fide public offering of all the Bonds to the general public at the initial public offering prices set forth in Exhibit "A" hereto; provided, however, that the Underwriter reserves the right to sell the Bonds to bond houses, brokers, or similar persons acting in the capacity of Underwriter or wholesalers at prices lower than the initial public offering prices. Subsequent to such initial offering, the Underwriter reserves the right to change such the public offering prices as they deem necessary in conjunction with the marketing of the Bonds. 5. Within seven (7) business days after the Issuer's acceptance hereof, the Issuer' will deliver (unless previously delivered) to the Underwriter: (A) Two certified copies of (i) the Resolution, and (ii) if requested by the Underwriter any other resolutions of the Issuer described in the hereinafter described Preliminary Official Statement; (B) Two copies of the Preliminary Official Statement of the Issuer, pertaining to the Bonds, dated. _ _ (which, together with all appendices thereto,- is herein called the "Preliminary Official Statement "). The Issuer hereby ratifies and consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement, in connection with the initial public offering of the Bonds; (C) Two copies of the Official Statement of the Issuer, which shall be in the form of the Preliminary Official Statement, completed to reflect the terms of the Bonds, and with such other changes as are approved by the Issuer and the Underwriter, and which shall be dated March __, 1998 (which, together with all appendices thereto, is herein called "Official Statement "); (D) Two copies of financial statements of the Issuer 3 MAK— �--7es nu i � sa e • r.�.... -.,r �- ..._..— F y is for its fiscal years ended September 30, 1996, certified by a firm of certified public accountants to have been prepared in accordance with generally accepted accounting principles consistently applied; (E) One copy of the BOND FEASIBILITY REPORT, WATER REVENUE BONDS, Series 1998, prepared by Reese, Macon & Associates, Inc., the Issuer's consulting engineers and Public Resources Management Group, the Issuer's Rate Consultant; (F) Two copies, executed by the Issuer, of this Bond Purchase Agreement. The Issuer will also )make the Preliminary Official Statement and the Official Statement available to the Underwriter in sufficient quantities and in sufficient time to enable the Underwriter to comply with Reg. 240.15c2 -12(b) of the Code of Federal Regulations. 6. The Issuer represents to the Underwriter that, to the best of its ability, knowledge and belief: (A) The Preliminary Official Statement was, as of its date and is, as of the date hereof (other than as modified in the Official Statement), and the Official Statement, as supplemented or amended pursuant to subsection 6(R), will be as of its date and at all times subsequent thereto up to and including the Closing Date, true and complete in all material respects, contained, contains and will at all such times contain no untrue statement of any material fact, and did not, does not and will not at any such time omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation shall not apply as to the information contained in any supplement or amendment to the Official Statement under the caption "MUNICIPAL BOND INSURANCE ". The Issuer deems the Preliminary Official Statement to have been final as of its date, except for the omission of the information permitted to be omitted by Reg. 240.15c2- 12(b)(1), Code of Federal Regulations; (B) The Issuer is, and will be on the Closing Date, validly existing as a municipal corporation of the State, having the powers and authority set forth in the Act and the Resolution; (C) (i) The Issuer has, and on the Closing Date will have, full legal right, power and authority to enter into this 4 Bond Purchase Agreement, and this Bond Purchase Agreement has been duly executed and delivered to the Underwriter and constitutes a valid and binding obligation of the Issuer, enforceable in accordance with its terms except that the enforceability thereof is subject to (a) the exercise of Judicial discretion in accordance with general principals of equity, and (b) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable; (ii) the Issuer has, and on the Closing Date will have, full legal right, power and authority to issue and sell the Bonds to the Underwriter, to perform its obligations thereunder, and to carry out and effectuate the transactions contemplated by this Bond Purchase Agreement, the Official Statement, the Resolution, and all other documents necessary in connection with the issuance and sale of the Bonds; and (iii) on or prior to the Closing Date the Issuer will have taken all actions required to be taken by it to authorize the issuance, delivery and performance of the Bonds, the execution and delivery of the Official Statement, and the consummation by it of all transactions required to be taken by it in connection with the issuance of the Bonds; (D) By all necessary official action, the Issuer has duly adopted the Resolution, has duly ratified and approved the prior distribution of the Preliminary Official Statement, has duty authorized and approved the execution and delivery of the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the Issuer of the obligations on its part in connection with the issuance of the Bonds contained in the BondG, the Resolution and this Bond Purchase Agreement and the consummation by it of all other transactions contemplated by this Bond Purchase Agreement and the Official Statement in connection with the issuance of the Bonds; the Resolution constitutes a legal, valid and binding obligation of the Issuer, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, and similar laws affecting creditors rights and subject to enforceability to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) ; and the Bonds, when issued, authenticated and delivered to the Underwriters in accordance with the Resolution and this Bond Purchase Agreement, will constitute legal, valid and binding special obligations (as described in the Resolution) of the Issuer, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); 5 (E) The Issuer has complied, and on the Closing Date will be in compliance, in all material respects, with the terms of the Act and the Constitution of the State of Florida insofar as the same pertain to the Bonds, the Official Statement, this Bond Purchase Agreement and the Resolution, and with the obligations on its part contained in this Bond Purchase Agreement; (F) Both on the date of acceptance hereof and on the Closing Date, there will not have been any material adverse occurrence in the results of operations or financial condition, affairs or prospects of the Issuer, except as disclosed in the Official Statement; (G) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer, of its obligations in connection with the issuance of the Bonds under the Resolution have been duly obtained, except for such approvals, consents and orders as may be required under the legal investment laws or Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; (H) In reliance upon the opinion of Jones, Foster, Johnson & Stubbs, P.A., counsel to the Issuer, on the Closing Date, no consent, approval, authorization or order of, or filing, registration or declaration with, any court or governmental agency or body will be required on the part of the Issuer for the sale, issuance or delivery of the Bonds to the Underwriter or the consummation of the transactions contemplated by this Bond Purchase Agreement except for such filings or notices to the Division of Bond Finance of the State Board of Administration required pursuant to Florida Statutes, Sections 218.38 and 218.385, as amended, and except for such actions as may be regulations of such states and jurisdictions of the United States of America as the Underwriter may designate; (I) on the date of acceptance hereof and on the Closing Date, excerpt as disclosed in the Official Statement, no action, suit, proceedings, or investiq� ;tion's or will be pending or threatened against the Issuer (i) in any way affecting the existence of the Issuer or in any way challenging the respective powers of the several offices of the officials of the Issuer or the titles of the officials holding their 6 respective offices; or (ii) seeking to restrain or enjoin the issuance or delivery of any of the Bonds, or the collection of revenues or connection charges of the Issuer pledged or to be pledged to pay the principal of, premium, if any, and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of this Bond Purchase Agreement, the Resolution, or the Bonds, or contesting in any way the completeness or accuracy of the Official Statement, or contesting the powers of the Issuer or its authority with respect to this Bond Purchase Agreement, the Resolution, or the Bonds; (iii) questioning or affecting the validity of any of the proceedings relating to the authorization, sale, execution, issuance or delivery to the Underwriter of the Bonds; or (iv) in which a final adverse decision would (a) materially adversely affect the ability of the Issuer to issue the Bonds or (b) declare this Bond Purchase Agreement or the Bonds or any of the documents identified in (ii) above to be invalid and unenforceable in whole or in material part; (J) The Bonds, when issued, executed and delivered in accordance with the Resolution and sold to the Underwriters as provided herein, will be validly issued and outstanding obligations of the Issuer payable in accordance with the Resolution, entitled to the benefits of the Resolution; and upon such issuance, execution and delivery of the Bonds, the Resolution will provide, for the benefit for the Bondholders, a legally valid and binding pledge of the Pledged Funds; (to the extent described in the Official Statement). w (K) The Resolution is in full force and effect; (L) The descriptions of the Bonds and the Resolution in the Official Statement conform in all material respects to the Bonds and the Resolution; (M) The Issuer has good and lawful authority to: acquire, construct, manage and operate (certain improvements to the Issuer's potable water treatment and distribution system (the "System "); and to implement the 1998 Project (as defined " -' in the Official Statement and the Resolution); and to establish, levy (without the consent or approval of any agency or administrative body other than the Village's Council (the "Council ") ) and collect rates, fees, and charges as set forth in the Official Statement and the Resolution; and to perform all of its obligations under the Resolution; (N) At the time of preparation of the Official Statement and (unless an event occurs of the nature described in paragraph (S) of this Section 6) at all times subsequent 7 1'7f -iK- i thereto up to and including the Closing Date, the Official Statement will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (0) From the time of the Issuer's acceptance hereof through the Closing Date, except as described in the Official Statement, the Issuer will not have incurred any material liabilities, direct or contingent, or entered into any material transaction with respect to the 1998 Project, and there shall not have been any material adverse change in the condition, financial or physical, of the 1988 Project other than changes in the ordinary course of business or in the normal operation of the facilities operated by the Issuer; (P) W The Issuer is not in material breach or default under any applicable constitutional provision, law or administrative regulation, of the State or the United States insofar as the same pertain to the Bonds, the Official Statement, this Bond Purchase Agreement and the Resolution, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, or ordinance or resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer or any of its property or assets, is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a material default or event of default under any of the foregoing, except as disclosed in the Official Statement; and (ii) the execution and delivery of the Bonds, and this Bond Purchase Agreement, the adoption of the Resolution, and compliance with the obligations on the Issuer's part contained in all of the foregoing, did not as of its date, and will not, except as disclosed in the Official Statement (as the same may be supplemented or amended pursuant to subsection 6(S)), as of the Closing Date conflict with or constitute a material breach of or default under any state constitutional provision, state Jaw, administrative regulation, judgment, decree, agreement, indenture, bond, note,. resolution, ordinance, agreement, or any other instrument to which the Issuer is a party or to which the Issuer or any of its property or assets is otherwise subject, but excluding Blue Sky requirements. Such execution, delivery, adoption or compliance will not result in the creation or imposition of any lien, charge, or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer or under the terms of any such state law, regulation, judgment, decree, loan agreement, indenture, bond, note, resolution ordinance, agreement or other instrument, except as provided by the Bonds and the Resolution; 8 MAR- 5 -SS THU 15:00 THOMAS GFi +� NtY (Q) The Issuer will furnish such information, execute such instruments, and take such other actions (excluding litigation) in cooperation' with the Underwriter as the Underwriter may reasonably request in order to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate, and (ii) determine the eligibility of the Bonds for investment under the laws of such states or other jurisdictions, and will use its best efforts to continue such qualifications in effect as long as required for the distribution of the bonds; provided, however, that the Issuer shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction where it is not now so subject or qualified; (R) If the Official Statement is supplemented or amended pursuant to Subsection (S) of this Section 6, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subsection) at all times subsequent thereto up to and including the Closing Date (defined below), the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation shall not apply as to the information contained in any supplement or amendment to the Official Statement under the caption "MUNICIPAL BOND INSURANCE "; (S) If between the date of this Purchase Contract and the earlier of (i) ninety (90) days from the end of the Underwriting Period) as defined in Securities Exchange Commission Rule 15c2-12 (17 CFR 240.15c2 -12) ( Rule 15c2-12 ") or (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities information. repository (but in no event less than twenty-five lei F (25) days following the end of.the Underwriting Period), any event shall occur, of which the Issuer has actual knowledge, which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer shall notify the Representative thereof, and, if in the opinion of the Representative or the Issuer such event requires the preparation and publication of a supplement or amendment to the 9 M W t< - Official Statement, the Issuer will at its expense (unless such event is a result of information provided in writing by the Underwriters in which case it shall be at the expense of the Underwriters, or unless another party shall agree or be required to bear the expense of such supplement or amendment) supplement or amend the Official Statement in a form and in a manner approved by the Underwriters. The end of the Underwriting Period shall be deemed to be the Closing Date unless on or before the Closing Date the Underwriters otherwise notify the Issuer in writing, and in such event, the ). Underwriter will notify the Issuer in writing when the end of the Underwriting Period occurs. (T) The Issuer has previously delivered to the Underwriters for review copies of the Preliminary Official Statement. As of its date, the Preliminary Official Statement was deemed final by the Issuer for purposes of Rule 15c2 -12. The Issuer shall provide to the Underwriters, within a sufficient time period for the final Official Statements to accompany confirmations delivered by the Underwriters to potential investors in accordance with the rules of the Municipal Securities Rule Making Board ( MSRB ), but in no event later than seven (7) business days following the date hereof, a quantity of Official Statements adequate to enable the Underwriters to meet the continuing obligations imposed on them by Rule 15c2 -12 and the rules of the MSRB. This covenant shall survive the Closing. (U) The Issuer has not been in default as to principal or interest with respect to any obligation issued or guaranteed by the Issuer except as disclosed in the Official Statement. (V) The Issuer shall comply with Section 5.18 of the Bond Resolution, adopted January 9, 1998. 7. At 21:00 A.M., E.S.T., on __ or such other time or date as shall be mutually agreed upon by the Issuer and the Underwriter subject to the terms and conditions hereof, the *t Issuer will deliver to the Underwriter through the facilities of the Depository Trust Company ( "DTC "), New York, N.Y., the Bonds in fully registered form registered in the name of Cede & Co. or at such other location and form as may be mutually agreed on (all Bonds to bear proper CUSIP numbers), with one fully registered Series 1998 Bond for each maturity, duly executed and authenticated, as provided in the Resolution and Trust Agreement, together with the other documents herein required of the Issuer; and the Underwriter will accept such delivery and pay the purchase price thereof by wire transfer of 10 i 5 Federal Funds to the order of the Issuer. Such delivery and payment is called herein the "Closing ", and the date of such delivery and payment is herein called the "Closing Date ". The Bonds will be made available for checking, packaging and delivery at a mutually acceptable location one (1) business day prior to the Closing Date. 8. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and warranties of the Issuer contained herein, and the performance by the Issuer of its obligations hereunder, both on the date hereof and on the Closing Date. Accordingly, the Underwriter's obligations under this Bond Purchase Agreement are subject to satisfaction of the following further conditions on or prior to the Closing: (A) The representations of the Issuer contained herein will be true, complete and correct on the date hereof and on the Closing Date, as if made on the Closing Date, and the statements made in all certificates and other documents delivered to the Underwriter on the Closing Date, will be true, complete and correct on the Closing Date. (B) At the time of Closing, the Resolution shall be in full force and effect in accordance with its terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except as may have been agreed to in writing by the Underwriter. (C) At the time of the Closing, all necessary limp official action of the Issuer and the other parties thereto relating to this Bond Purchase Agreement and the Bonds shall be in full force and effect in accordance with their respective terms and shall not have been amended, modified or supplemented in any material respect, except in each case as may have been agreed to by the Underwriters; and (D) At the time of Closing, (i) this Bond Purchase Agreement and the Official Statement and will be in full force and effect and will not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter; (ii) the proceeds of the sale of the Bonds will be applied as described in the Official Statement and the Resolution; and (iii) all official actions which, in the opinion of Bond Counsel and Counsel to the Underwriter, are necessary in connection with the transactions contemplated hereby, will have been duly taken and be in full force and effect; and the Issuer will have performed all of its 11 F F4 M- 1=� obligations required under this Bond Purchase Agreement, the Official Statement, and the Resolution to be performed on or prior to the Closing Date. - t (E) No decision, ruling or finding will have been entered by any court or governmental authority since the date of this Bond Purchase Agreement (and not reversed on appeal or otherwise set aside) which has any of the effects described in Section 6(I) hereof. (F) On or prior to the Closing Date, the Underwriter will have received the following documents each in form and substance satisfactory to the Underwriter: (1) An approving opinion dated the Closing Date of Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, P.A., West Palm Beach, Florida ( "Bond Counsel "), in the form included as Appendix "E" to the Preliminary Official Statement; (2) An opinion of Bond Counsel addressed to the Underwriter, substantially in the form attached hereto as Exhibit "B "; (3) The opinion of Jones, Foster, Johnson & Stubbs, P.A., West Palm Beach, Florida, counsel to the Issuer, addressed to the Issuer, the Underwriter and Bond Counsel, dated the Closing Date (but subject to the understanding that no opinion will be issued as to the impact, effect or compliance by the Issuer or the Underwriter with the Code, or any Federal or state securities laws, including "Blue Sky" laws) to the effect that: - (i) The Issuer is a Municipal corporation, chartered, organized and validly existing under the Constitution and laws of the State of Florida, including particularly the Act; (ii) The Issuer has all requisite power and authority (a) to establish, maintain, levy and collect rates, fees and charges as set forth in the Resolution and Official Statement, (b) assuming that the interest on the Bonds is excluded from gross income for federal income tax purposes (to which no opinion need be expressed), to issue, sell, and deliver the Bonds, (c) to enter into this Bond Purchase Agreement, (d) to adopt the Resolution; and (e) to secure the payment of the Bonds with a pledge of the Pledged Funds (as defined in the Resolution and the official Statement) (f) to carry out the transactions contemplated by the Official Statement and this Bond Purchase Agreement; - 12 T (iv) Under the Constitution and laws of the State of Florida, including particularly the Act, this Bond Purchase Agreement, the Resolution and all other such agreements and documents that may have been legally required to be executed, delivered or received by the Issuer (excluding post - closing filings) in order to carry out, give effect to and consummat=e the transactions contemplated by the Resolution and this Bond Purchase Agreement have been authorized by all necessary action on the part of the Issuer and such action remains in full force and effect, such documents have been executed and delivered by the Issuer, and, assuming that they are the respective legal, valid, binding and enforceable obligations of the parties thereto other than the Issuer, except that the enforceability thereof may be subject to (a) the exercise of judicial discretion in accordance with general principals of equity, and (b) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable; (v) The Bonds (a) have been authorized and executed by the Issuer and, in reliance upon the Paying Agent and Registrar's execution of a receipt for same, have been delivered to the Paying Agent and Registrar for authentication, (b) .are legal, valid, binding and special and limited obligations of the Issuer, enforceable in accordance with their respective terms, except that the enforceability thereof may be subject to (i) the exercise of judicial discretion in accordance with general principles of equity, and (ii) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights theretofore or hereafter enacted to the extent constitutionally applicable; and (c) are entitled to the benefits and security of the Resolution. (vi) The Issuer has duly authorized the distribution and delivery of the Preliminary Official Statement and the distribution, execution and delivery of the Official Statement_; (vii) The Issuer has complied with the provisions of the Constitution and laws of the State of Florida, including the Act, required or necessary for the issuance and sale of the Bonds, and has properly adopted the Resolution and the Resolution is in full force and effect on the date hereof; (viii) The issuance and sale of the Bonds to the Underwriter, the adoption of the Resolution execution and delivery of this Bond Purchase Agreement and the compliance by the Issuer with the terms thereof and of the Bonds will not 13 MAR- S -9S TF-iU 1 a : r9 conflict with, or result in any breach of any of the provisions oE, or constitute a default under any federal or State of Florida constitutional provision or statute, agreement, resolution or other instrument to which the Issuer is a party or by which it or its property is bound, or any license, Judgment, decree, order, law, statute, ordinance or State of Florida governmental rule or regulation applicable to the Issuer which would result in the creation or imposition of any lien, charge, encumbrance or security interest on the property of the Issuer (other than as contemplated by the Resolution); (ix) All consents, approvals or authorizations, if any, of any Florida governmental authority required on the part of the Issuer in connection with the adoption of the Resolution, the execution and delivery of this Bond Purchase Agreement, the offer, issue, sale or delivery of the Bonds and the consummation of the transactions contemplated thereby or by the Official Statement have been obtained by Issuer (but no representation is made, as to consents, approvals or authorizations required to be obtained by the Underwriter) , and the Issuer has complied with all applicable provisions of law (except for post- closing filings to be made with the State of Florida or with the United States Government or under any Blue Sky laws) requiring any designation, declaration, filing, registration and /or qualification with any governmental authority in connection with the foregoing and the offer, sale, execution or delivery of the Bonds; (x) Except for the special and limited pledges created by the Resolution and the Financial Guaranty, the Issuer has not created, or permitted to be created, any lien, pledge, charge, encumbrance or security interest in the Trust Estate, as defined in the Resolution; (xi) Except as disclosed in the official Statement, the Issuer has not been served or notified in writing of any action, suit, proceeding or investigation and to their knowledge no action, suit, proceeding or investigation is pending against the Issuer or threatened against the Issuer (i ) in any way affecting the existence of the Issuer or in any way challenging the respective powers of the several offices of the officials of the Issuer or the titles of the officials holding their respective offices; or (ii) seeking to restrain or enjoin the issuance or delivery of any of the Bonds, or the collection of revenues or assets of the Issuer pledged or to be pledged to pay the principal of, premium, if any, and interest on the Bonds or in any way contesting or affecting the validity or enforceability of this Bond Purchase Agreement, the Resolution or the Bonds, or contesting in any way the 14 completeness or accuracy of the Official Statement, or contesting the powers of the Issuer or its authority with respect to this Bond Purchase Agreement, the Resolution or the Bonds; (iii) questioning or affecting the validity of any of the proceedings relating to the authorization, validation, sale, execution, issuance or delivery of the Bonds; or (iv) in which a final adverse decision would materially adversely affect the ability of the Issuer to issue the Bonds or declare this Bond Purchase Agreement or the Bonds or any of the foregoing documents to be invalid and enforceable in whole or in material part; (xii) Based upon the participation of said counsel in the preparation of the Preliminary Official Statement and the Official Statement as counsel to the Issuer, and without undertaking to determine independently the accuracy or completeness of the contents thereof, nothing has come to their attention which leads them to believe that the Preliminary Official Statement contained or that the Official Statement contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided that no opinion need be expressed about the information in the Preliminary Official Statement or Official Statement the captions "MUNICIPAL BOND INSURANCE," "SCHEDULE OF DEBT SERVICE REQUIREMF,NTS," "TAX EXEMPTION" and "UNDERWRITING "; furthermore, the information under the captions "SECURITY AND SOURCES OF PAYMENT "THE VILLAGE" and "LITIGATION" insofar as they purport to summarize the matters contained therein with respect to the Bonds, constitute a fair and accurate summary thereof; r� and (xiii) All actions taken by the Issuer in connection with the Resolution, this Bond Purchase- Agreement, the Preliminary Official Statement, the Official Statement and the Bonds are legal and valid in all respects and none of the proceedings had, or actions taken, with respect to any of the foregoing have been repealed, revoked or rescinded; (xiv) That the Issuer is empowered to cause the implementation of the 1998 Project and the Issuer may lawfully issue the Bonds in order to finance the cost of implementing the 1998 Project, (4) An opinion of The Carney Legal Group, P.A., Boynton Beach, Florida, counsel to the Underwriter, dated the Closing Date, and addressed to the Underwriter to the effect that (i) under existing laws, the Bonds may be offered and 15 sold without registration under the Securities Act of 1933, as amended, and the Trust Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended; (ii) the requirements contained in the Bond Purchase Agreement which are conditions precedent to the obligation of the Underwriter to accept and pay for the Bonds have been met, except as such requirements may be modified or waived by the Underwriter; and (iii) without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, but on the basis of their conferences with the Village Manager and other representatives of the Issuer, representatives of Florida Municipal Advisors, Inc,., the financial advisor to the Issuer, counsel to the Issuer, Bond Counsel and the Underwriter and their examination of certain documents referred to in the Official Statement, nothing has come to their attention which would lead them to be.l.ieve that the Official Statement (other than information provided by or relating to the Insurer and financial statements and other financial or statistical data contained therein and the information contained in the appendices, as to which no view need be expressed) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (5) A certificate of the Engineers, dated as of the Closing Date, in a form and substance satisfaction to the Underwriter. (6) The Insurance Policy issued by the Insurer, dated as of the Closing Date, in the form attached as Appendix "E" to --- the Official Statement; (7) A certificate of the Insurer, dated as of the Closing Date, in a form and substance satisfaction to the Underwriter. (8) An opinion of counsel to the Insurer, dated as of the Closing Date, in a form and substance satisfaction to the Underwriter. .(9) A certificate signed by the Mayor or Vice Mayor of the Issuer, dated the Closing Date, to the effect that (i) except as consented to in writing by the Underwriter, the representations of the Issuer herein are true and correct in all material respects as if made on the Closing Date; (ii) the Resolution has not been amended.or supplemented, except as consented to in writing by the Underwriter, and is in full force and effect; (iii) this Bond Purchase Agreement has been 16 f.t entered into and is in full force and effect; (10) An arbitrage certificate in compliance with the Internal Revenue Code of 1986, as amended, dated the Closing Date, signed by the Mayor or Vice Mayor of the Issuer; (11) A copy of all resolutions with respect to the Bonds (including the Resolution), as adopted by the Issuer, duly certified by the Secretary of the Issuer as of the Closing Date; (12) Written evidence that Standard & Poor's, a division of the McGraw Hill Companies, Inc., has issued a rating of AAA on the Bonds, and that Moody's Investors Service has issued a rating of Aaa on the Bonds, and such ratings shall still be in effect, shall not have been downgraded or withdrawn and the documents delivered on the Closing Date shall satisfy the conditions to the continuance of such ratings; and (13) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence (i) compliance with legal requirements, (ii) the truth and accuracy, on the Closing Date, of the representations contained herein and in the Official Statement, and (iii) the due performance or satisfaction by the Issuer on or prior to the Closing Date of all agreements relating to the sale and issuance of the Bonds then to be performed and all conditions then to be satisfied by the Issuer. All the opinions, letters, certificates, instruments and low documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Underwriter. Provided, however, that the Underwriter shall not reject any document for an arbitrary or capricious reason. 9. The Underwriter has the right to cancel their °+ obligations to purchase the Bonds, by written notice to the Issuer, if between the date hereof and the Closing: (i) any event shall occur which makes untrue any statement of a material fact set forth in the Official Statement or results in an omission to state a material fact necessary to make any statement therein, in light of the circumstances under which they are made, not misleading; (ii) there shall be commenced or threatened any proceeding by the Securities and Exchange Commission relating to the Bond; or (iii) the market for the Bonds or the market price of the Bonds or the ability of the 17 Underwriter to enforce contracts for sale of the Bonds shall have been materially and adversely affected, in the professional judgment of the Underwriter, by (a) legislation introduced in or passed by the United States House of Representatives or United States Senate of the Congress of the Untied States or' adopted by either House thereof, or an amendment to legislation pending in the Congress of the United States, or the recommending, or otherwise endorsing (by press release, other form of notice or otherwise) for passage of legislation to the Congress of the United States, by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman of the U.S. Senate Committee on Finance or the U.S. House of Representatives Committee on Ways and Means or the proposal for consideration of legislation by either such committee by any member thereof or the fact that legislation shall have been favorably reported for passage to either or both Houses of the Congress of the United States by a Committee of such House or a joint congressional committee of both houses to which such legislation has been referred for consideration, or the rendering of a decision by a court of the United States or the making of a ruling, regulation or official statement by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency, with respect to Federal taxation of revenues of the Issuer or upon interest received on securities of the general character of the Bonds or which would have the effect of changing, directly or indirectly, the Federal income tax consequences of receipt of interest on securities of the general character of the Underwriter would materially adversely affect the market price of the Bonds, or (b) any -new outbreak of hostilities or other national or international calamity or crisis, the effect of such outbreak, calamity or crisis on the financial markets of the United States of America being such as, in the professional judgment of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds, or (c) a general suspension of trading on the New York Stock Exchange, or filing of minimum or maximum prices for trading or maximum ranges for prices for securities on the New York Stock r1� Exchange, or (d) a general banking moratorium declared by either Federal, State of New York or State of Florida authorities having jurisdiction. If the Issuer shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Bond Purchase Agreement or if the Underwriter's obligations shall be terminated for any reason permitted by this Bond Purchase Agreement, the Bond Purchase Agreement shall, at the option of the Underwriter, terminate and neither the Issuer nor the 18 i�d H I'C � .7 � y g 1 A V 1 .7 . 1 / , r v • • r, ...- .� _ _ _ _ _ Underwriter shall have ,iny further obligation hereunder. 10. In accordan with Section 218.38 and 218.385, Florida Statutes, the Underwriter hereby discloses the required information as provided in Exhibit attached hereto. 11. Except' as set forth in the following paragraph, the. Tssuer will ply any and all expenses incident to the issuance of the Bonds, including but not limited to (i) the cost of preparation and reproduction of the Resolution (ii) the cost of the preparation and the printing of the Bonds, including the printing of the CUSIP numbers thereon, (iii) the fees and disbursements of Bond Counsel and Counsel to the Issuer, (iv) any fees and disbursements of the Engineers, (v) the fees and disbursements of any feasibility consultant engaged by the Issuer, (vi) the fees and disbursements of accountants and auditors used by the Issuer, (vii) the cost of printing and preparing for printing, and distributing the Preliminary Official Statement and the Official Statement, including word processing charges with respect thereto, (viii) all legal fees, disbursements and expenses relating to the validation of the Bonds, if any, (ix) the fees of the financial advisor to the Issuer, (x) the fees and disbursements of the Insurer, (xi) the fees and disbursements of Standard & Poor's and Moody's for issuing a rating on the Bonds and (xii) all other expenses related to the issuance and delivery of the Bonds not covered by the provisions of paragraph.12 immediately below. 12. The Underwriter will pay: (i) expenses of advertising in connection with the public offering of the Bonds, (ii) the CUSIP Service Bureau charge for the assignment of CUSIP numbers — rt1►;. with respect to the Bonds, (iii) the costs of printing the Blue Sky and Legal Investment Surveys with respect to the Bonds, and (iv) all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds, including fees and disbursements of Counsel to the Underwriter. 13. No recourse under or upon any obligation, covenant or agreement contained in this Bond Purchase Agreement shall be had against any Supervisor of the Issuer, or any officer, agent or employee of the Issuer, it being expressly understood that the obligation of the Issuer hereunder is solely a corporate one. Subject to the above, should any representation of the Issuer made herein be inaccurate or incomplete in any material respect, the Issuer shall use its best efforts to remedy the situation that caused such representation to be inaccurate or incomplete. 19 14. Any notice or other communication to be given to the Issuer under this Bond Purchase Agreement (other than the acceptance hereof as specified in the first paragraph hereof) may be given by delivering the same in writing to the Issuer at the address set forth above, and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to Raymond James & Associates, Inc., at 220 Congress Park Drive, Suite 240, Delray Beach, Florida 33445, Attention: Kevin McCarty, Vice President, Public Finance. 15. This Bond Purchase Agreement when accepted by the Issuer will constitute the entire agreement between the Issuer and the Underwriter and is made solely for the benefit of the Issuer and the Underwriter (including their successors or assigns). No other person shall acquire or have any right hereunder or by virtue hereof. The Issuer's representations, warranties and agreements contained in this Bond Purchase Agreement shall survive and remain operative and in full force and effect, regardless of (a) any investigation or any statement in respect thereof made by or on behalf of the - Underwriter, (b) delivery of an payment by the Underwriter for the Bonds hereunder, and (c) any termination of this Bond Purchase Agreement. Very truly yours, RAYMOND JAMES & ASSOCIATES, INC. By: Vice- President- Public Finance Accepted this th day of March, 1998: Village of Tequesta . w By:_ Mayor of Village of Tequesta Attest:_ _ Clerk [SEAL] 20 EXHIBIT D PRELIMINARY OFFICIAL STATEMENT G:\20241\2\award res.wpd D'1 The Mayor thereupon declared the Resolution duly passed and adopted this 5` day of March, 1998. Mayor of Tequesta [SEAL] ATTEST: Village Clerk G:\20241\2\award res.wpd 15 -SENT BY:FINANCIAL PTG CUST SER e3 -04 -98 05 :44PM 561 659 1789 # 2 PRELIMINARY OFFICIAL STATEMENT DATED MARCH 5, 1998 NEW ISSUE BOOK—ENTRY ONLY RAMGS: S&P: E o "BANK QUAUF1HO" MOODY'& g o (see "Radtlgr" herein) o in the, opinion of Bond Counsel, under rris:nt,7 law, and assuming cuml;liance- with certain tar covenants, interest on the Senes 1998 Bonds is excluded $ ca from gross ineume fur federal income tax purposes and is nut a specific preference item for purposes of the ferlerni alternative minimum tax Bond Counsel is of EL .' the opinion that the Series 19.E Bonds ure "qualifird has- exempt obligations fur p*rPosrs of Section 265 (b) (3) of the Internal Revenue C!4a of 1986, as E+ amended, Bond Cuume-1 is also of the opinion that the Series 1998 Sonia; are exempt frnni all present intangible penostal property taxes imposed by the State of FVirida See 'TAX EXEMPTION' hrrc,in for a description of certain other tax matirn. $ 7,805,000* Q C Village of Tequesta, Florida Water Revenue Bonds, Series 1998 Doted March 1, 1W.8 Due: March 1, E as shown below "ltte Series 1998 Bonds are. beinx N%jcd es fully registered bonds without coupons and will be initially issued to and registered in the name of Cede & C , w, nominee for'llie Depository Trust Cumimny ('TrM'� of New York, New York, which will act a8 wrs�nritfeF deposltnry for the Series 1998 Bonds, B The Series 1998 Bonds will be available to purchawem in the principal denominations of $5,000 or any integral multiple thcreuf under the book-entry N system maintained by DTC through brokers and dealers who are or no through DTC Participants, Purchasers of beneficial interests in the Series 1998 Bonds will not receive physical delivery of the Series 1998 Bonds, but will be Beneficial Owners (amt not registered owners) of the Series 1998 Bonds, For so long as any purchaser is the. BenvCit' l Owner of a Series 1998 Bond, such purchases mutt rnoinlain am .ucount wilt a broker or dealer who is, or acts h through, a I) TC Participant. in order to receive payment of the principal of, premium, if any, arid intrrest on such Series 1958 Bonds, See "BOOK -ENTRY & ONLY SYSTEM" herein. o The Series 1.998 Bonds will be dated March 1, 1998, will bear interest from that date, payable on March 1 and September 1 of each year, commencing Sclntcmbor 1, 199F, at the rates (calculated on the basis of u Ifs day year consisting of twelve 30-day months) and, subject to the redemption provisions dr:seribed herein, will mature on the dates and in the amounts set forth below. The Series 1998 Bonds are subjer l to c>t)Gor:al arid mandatory redemption i,rior to maturity as described herein. Tl,c S� rics 1998 Bonds are being issued by the Village of Tequesix, Florida (the "Village'7. The Village is a municipal corporation duly o'rested and 41kily cxir;unx pursuant to the Constitution and laws of the State of Florida The Series 1998 Ronde "I nut cunstiwtc a general obligation of the Village but shall be payable solely from the Pledged Funds (hereinafter defined), era pmvided in the Resolution (hereinafter defined). No holder ref any Series 1998 Bonds shall ever have the ri& to o compel the exer6w of the ad vvlor m taxing power of the Village, or tambon in an form of any real property therein to pay the Sues 1998 Bonds or the interest thereon. The Series 1998 Bonds are not oblitgldonea of the State of Florida or any political subdivision thereof other than the Village, payable only as aforesaid. Pmymrni..,f Ulr. principal of and interest on the Series 1998 Bonds when due will be insured by a municipal bond insurance policy to be issued by 1 •'" An,bac- A -swrancr. CoTImration simultaneously with the. delivery of the Sede.w 199A ilonds. CL 1 9 2 Am"c 'Ilse Scric¢ 19118 Bonds are being issued for the purpose of providirtR fimdn, which, tnRether with other bunds available for such purpose, will' be suffident 1 E (1) t,n construct certain improvements to the Village's potable water trvatment and distribution iiystem (the "System'), more fully described herein (the "1998 r Pmjis C), (2) tc, inirchasc• a surety bond to fund tie 1998 Reserve Subac:uuunt in an itmuwit equal to die Reserve Accowtt Requirement (hereinafter defined) for the Bering 1998 Bonds and (3) to pay costs and expenses related to the i*Aitinc c ( the• Scnes l99F Bands. z THIS C()VF.R PAGE: CONTAINS CERTAIN INFORMATION FOR QQICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THE. ISSUE, c 1NVFSMRS M11 RI AD T il? i ?N'ilKF' OF•F1C:IAL S1AIIbMENTTO OBTAIN INFORMATION E S.S E NTIALTO THE MAKING OF AN INFORMED INVESTMENT DECISION. V a , MA'R1RME.S, AMOUNTS, INT MM RATES, AND PRICES OR YIELDS a 1 $ Serial Bonds E �1 M ,( a t tu l rity � Inter Price � or /��y e,,,,,,',,` In Price or V - L�1f�i� NYIl4 AAFr �L•SY►18L� � E= L5/Y 2 t $ Term Bonds Due March 1, _ Price to Yield �'>6 .E $ _ %Trrm Ronda Due March 1. Price. to Yield % I Out accrued inCal. lrr from March 1. 1998) $n The Series 1998 Bonds are offered when as. and V issued and received by the Underwriter, mbjrct to appinwal of legality by Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, PA, West Palm Reach, Florida, Bond Counsel and to certain other conditions. Certain legal matters toll be pcaued vprA far the Village by o .. Junes, Foster, Johnston & Stubbs, PA., Village Attorneys, and for the Underwriter by its counsel, Carney Legal Group, P,A., Roynton Reach, Florida Florida E Municipal Aduroan inc Palm Reach Gardens, Florida, u financial advisor to the Village. It is expected that the Series 1998 Bon4s will be available/6r delivery in New Yc,rk, New lrirk lhrna.Rh 11st faeititiea ofWU on or about March ISSN. a Raymond James & Associates, Inc. t ! The datee of thi Official Stateme is 11998 Y. ec:nutarv, suCiect to cntrsaize VILLAGE OF TEQUESTA, FLORIDA 250 Tequesta Drive Tequesta Corporate Center Suite 300 Tequesta, Florida 33469 Telephone (561) 575 -6200 VILLAGE COUNCIL Elizabeth A. Schauer, Mayor Carl C. Hansen, Vice -Mayor Alexander Cameron Joseph N. Capretta Ron T. MacKail Councilmember Councilmember Councilmember ADNUNISTRATION Thomas G. Bradford Village Manager Bill C. Kascavelis Director of Finance Thomas C. Hall Water System Manager VILLAGE COUNSEL Jones, Foster, Johnston & Stubbs, P.A. West Palm Beach, Florida BOND COUNSEL Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, P.A. West Palm Beach, Florida CONSULTING ENGINEERS RATE CONSULTANT Reese, Macon and Associates, Inc. Public Resources Management Group, Inc. Lake Worth, Florida Maitland, Florida FINANCIAL ADVISOR Florida Municipal Advisors, Inc. Palm Beach Gardens, Florida NO BROKER, DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED BY THE VILLAGE 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 ANY OF THE SERIES 1998 BONDS AND THERE SHALL BE NO OFFER, SOLICITATION, OR SALE OF THE SERIES 1998 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 PUBLIC DOCUMENTS AND RECORDS, AMBAC ASSURANCE CORPORATION (THE "BOND INSURER ") 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 (i) THE VILLAGE, WITH RESPECT TO THE INFORMATION HEREIN UNDER THE CAPTION "MUNICIPAL BOND INSURANCE" WHICH WAS PROVIDED BY THE BOND INSURER OR (ii) THE UNDERWRITER. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN CONTAINED ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY.CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE VILLAGE SINCE THE DATE HEREOF. THE SERIES 1998 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 1998 BONDS UNDER THE SECURITIES LAWS OF THE JURISDICTIONS IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 1998 BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. THIS PRELIMINARY OFFICIAL STATEMENT HAS BEEN "DEEMED FINAL" BY THE VILLAGE FOR PURPOSES OF SECURITIES AND EXCHANGE COMMISSION RULE 15c2 -12. TABLE OF CONTENTS The Table of Contents for this Official Statement is for convenience of reference only and is not intended to define, limit or describe the scope or content of any provisions of this Official Statement. Page SUMMARY STATEMENT .....................................................iv- INTRODUCTION ........................... ............................... -1- THE SERIES 1998 BONDS .................................................... .1- General Description ....................... ............................... - I - Redemption Provisions ..................... ............................... .2- Registration and Transfer .................... ............................... .3- BOOK -ENTRY ONLY SYSTEM ................. ............................... .4- SECURITY AND SOURCES OF PAYMENT ......... ............................... .6- InGeneral ............................. ............................... .6- PledgedFunds .......................... ............................... .6- Rate Covenant ........................... ............................... .7- 1998 Reserve Subaccount ................... ............................... .7- The Reserve Account Surety Bond .............. ............................... .8- Additional Bonds .............. . ......... ............................... . 8- Rights of Bond Insurer ..................... ............................... .9- MUNICIPAL BOND INSURANCE ................ ............................... .9- General .............................................................. .9- Payment Pursuant to Municipal Bond Insurance Policy . ............................... .9- Ambac Assurance Corporation ............... ............................... .10- Available Information ..................... ............................... .11- Incorporation of Certain Documents by Reference ... ............................... .11- THE PLAN OF FINANCING .................... ............................... .12- Purpose of the Series 1998 Bonds ............. ............................... .12- Estimated Sources and Uses of Funds ........... ............................... .12- THE VILLAGE ............................ ............................... .12- General ............................................................. .12- Government ............................ ............................... .12- Administration ......................... ............................... .13- THE SYSTEM ............................................................. 13- Bond Feasibility Report .................... ............................... .13- Definition ............................ ............................... .13- Description of Existing Water System ........... ............................... .14- System Operations ....................... ............................... -15- Rates ............................... ............................... .15- Historic, Budgeted and Projected Operating Results and Debt Service Coverage ............... . 16- THE 1998 PROJECT ........................ ............................... .20- DEBT SERVICE REQUIREMENTS .............. ............................... .21- FLOWOF FUNDS ......................... ............................... .22- LITIGATION ............................. ............................... .22- LEGAL MATTERS ......................... ............................... .24- TAX EXEMPTION ......................... ............................... .24- RATINGS ............................... ............................... .25- UNDERWRITING .......................... ............................... .25- FINANCIAL STATEMENTS ................... ............................... .26- FINANCIAL ADVISOR ...................... ............................... .26- BOND FEASIBILITY REPORT ................. ............................... .26- CONTINUING DISCLOSURE .................. ............................... .26- -ii- MISCELLANEOUS ......................... ............................... .27- CERTIFICATE CONCERNING OFFICIAL STATEMENT .............................. .27- APPENDIX A -- Form of the Resolution APPENDIX B -- Bond Feasibility Report APPENDIX C -- Financial Statements for the Fiscal Year ended September 30, 1996 APPENDIX D -- Statistical Information Regarding the Village APPENDIX E -- Form of Opinion of Bond Counsel APPENDIX F -- Form of Municipal Bond Insurance Policy -iii- SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement. This Summary must not be detached from this Official Statement or otherwise be used without the entire Official Statement. Unless otherwise defined herein, terms used in capitalized form in this Official Statement shall have the same meanings as in the Resolution. See "APPENDIX A - Form of the Resolution" for definitions of terms used in the Resolution. The Village The Village of Tequesta, Florida (the "Village ") is located on the east coast of Florida approximately one hundred miles north of Miami. The estimated population (U.S. Census) of the Village for 1990 was 4,479. The estimated population (University of Florida) of the Village as of April 1, 1997 was 4,686. See "THE VILLAGE" herein for further information. pur The Series 1998 Bonds are being issued for the purpose of providing funds, which, together with other funds available for such purpose, will be sufficient (1) to construct certain improvements to the Village's potable water treatment and distribution system (the "System ") more fully described herein (the "1998 Project "), (2) to purchase a surety bond to fund the 1998 Reserve Subaccount in an amount equal to the Reserve Account Requirement (hereinafter defined) on account of the Series 1998 Bonds and (3) to pay costs and expenses related to the issuance of the Series 1998 Bonds. See "THE PLAN OF FINANCING," "THE SYSTEM" and "THE 1998 PROJECT" herein for further information. Security The Series 1998 Bonds are payable solely from and are secured by a pledge of the Pledged Funds, consisting of the Net Revenues derived from the operation of the System, the Pledged Accounts, and the extent described herein, the Impact Fees. The Net Revenues consist of the Gross Revenues of the System remaining after deduction of Operating Expenses. See "SECURITY AND SOURCES OF PAYMENT" herein for further information. A 1998 Reserve Subaccount will be established and maintained with respect to the Series 1998 Bonds. The amount on deposit in the 1998 Reserve Subaccount will be required to be maintained at a value (determined as provided in the Resolution) equal to the lesser of (i) ten percent (10 %) of the original principal amount of the Series 1998 Bonds, (ii) the maximum amount of principal and interest on the Series 1998 Bonds becoming due in the current or any succeeding Fiscal Year or (iii) one hundred twenty-five percent (125%) of the average annual amount of principal and interest on the Series 1998 Bonds (the "Reserve Account Requirement "). See "SECURITY AND SOURCES OF PAYMENT -- 1998 Reserve Subaccount" herein for further information. The Series 1998 Bonds shall not constitute a general obligation of the Village, but shall be payable solely from the Pledged Funds, as provided in the Resolution. No Holder of any Series 1998 Bonds shall ever have the right to compel the exercise of the ad valorem taxing power of the Village, or taxation in any form of any real property therein to pay the Series 1998 Bonds or the interest thereon. The Series 1998 Bonds are not obligations of the State of Florida or any political subdivision thereof other than the Village, payable only as aforesaid. See "SECURITY AND SOURCES OF PAYMENT" herein for further information. Municipal Bond Insurance Payment when due of the principal of and interest on the Series 1998 Bonds will be insured by a municipal bond insurance policy ( "Bond Insurance ") to be issued simultaneously with the delivery of the Series 1998 Bonds by Ambac Assurance Corporation (the "Bond Insurer ") . See "MUNICIPAL BOND INSURANCE" herein. Under certain circumstances, as provided in the Resolution, the Bond Insurer may consent to proposed amendments to the Resolution on behalf of the Bondholders. -iv- Additional Bonds The Resolution permits the issuance of pari passu Additional Bonds, payable on a parity with the Series 1998 Bonds from Pledged Funds, upon the satisfaction of certain conditions. See "SECURITY AND SOURCES OF PAYMENT - Additional Bonds" herein for further information. Rate Covenant The Village has covenanted in the Resolution to fix, establish and maintain and collect such charges for the services of the System, and to revise the same to the extent necessary, as will always provide in each Fiscal Year Net Revenues which are at least equal to 120% of the Debt Service Requirement for such Fiscal Year. See "SECURITY AND SOURCES OF PAYMENT - Rate Covenant" herein for further information. Redemption Provisions Certain of the Series 1998 Bonds are subject to optional and mandatory redemption prior to maturity as further described herein. See "THE SERIES 1998 BONDS - Redemption Provisions" herein for further information. Fninneer's Report The Bond Feasibility Report, dated February, 1998, prepared by Reese, Macon and Associates, Inc., and Public Resources Management Group, Inc. concerning the System and the 1998 Project (the "Feasibility Report") is included herein as Appendix B. The Feasibility Report may contain information material to investors in the Series 1998 Bonds and should be read in its entirety. Historic, Budgeted and Proiected Opernting Results and Debt Service Coverage The tables set forth below summarize the historic, budgeted and projected operating results and debt service coverage for the System for the Fiscal Years ended September 30, 1993 through 2002. The results for the Fiscal Years ended September 30, 1993 through 1996 are derived from the Village's audited financial statements. The information for the Fiscal Year ended September 30, 1997 is derived from unaudited financial statements and other available data provided by the Village. The unaudited financial statements include all adjustments which the Village considers necessary for a fair presentation of the financial position and the results of operations for such period. Information for the Fiscal Year ending 1998 is based upon the adopted budget of the Village. For further information concerning the projected operating results and the assumptions related thereto, see the Feasibility Report included herein as Appendix B. These tables should be read in conjunction with the financial statements, related notes, and other financial information included in this Official Statement and its Appendices. -v- Village of Tequests, Florida Water System Historical Operatine Results Line Fiscal Year Ended September 30, (I) No Description 1993 1994 1995 1996 1997(2) SYSTEM REVENUES I Water Sales - Existing Rate (3) (2,339,889 52.467,885 52,552.930 52,801,711 !2,324,768 2 Water Surcharge (4) 0 0 145.371 260,538 267,856 3 Total Sales Revenue 2,339,889 2,467,885 2,698,301 3,062,249 2,792,624 Other System Revenues 4 Connection Charges 15,677 17,162 14,657 12,605 17,402 S Fire Hydrant Rental 13,300 13,900 13,900 13,900 13,896 6 Other Income 19,588 7,540 6,042 6,328 4,510 7 Miscellaneous Revenue 50 5,431 5,993 1,784 905 8 Total Other Utility Revenue 48,615 44,033 40,592 34,617 36,714 9 Total System Revenues 2,388,504 2.511,918 2,738.893 3,096,866 2,829,338 EXPENDITURES ( 5) Pumping and Storage (Water Treatment) 10 Personal Services 5149.180 $164,112 5195.094 5217,056 5207,320 11 Water Purchases (3) 667,950 669,033 667,950 667,950 667,950 12 Utilit) Services 86,243 86,892 89.973 .90.671 93,313 13 Insurance 16,332 23,619 28.369 34,029 38,070 14 Repairs and Maintenance 69.443 64,448 144,227 103441 %,067 15 Chemicals 26,525 25.955 39,241 38.992 32.316 16 Other Expenses 28.849 19,543 20,888 27,722 23,849 17 Total Pumping and Storage 1,044,522 1,053.602 1,185,742 1,180,261; 1,158,885 Water Distribution IS Personal Services 192.676 203,638 221.8)9 243,803 225,135 19 Insurance 10.494 9,863 10.825 8,332 7,649 20 Witter System Maintenance 18,194 17,925 19,305 14.905 19,045 21 Other Expenses 12,787 14.490 15,712 15,656 20.557 22 Total Water Distribution 234,151 245,918 267,661 282.696 272,386 Administration and Office (6) 23 Personal Services 182,795 178,984 188,964 203,4D4 172,178 24 Engineering Services 10,466 23,755 49,860 31,150 36.678 25 Acctng. /Auditing Services 20.758 24.066 29,441 19,577 33.772 26 Other Expenses 71.631 %.625 163.471 190,572 623.611 27 Total Administration and Office 285,650 323,430 431,736 444.703 866,239 28 Total Operating Expenses 1,564,323 1.622.950 1.895, 139 1,907,660 2,297,510 29 Interest Income (7) 178,110 178,189 209,369 187,036 114,411 30 Total Other Income 178,110 178,189 209,369 187,056 114.411 31 Net Revenues 1,002,291 1,067,157 1,063,123 1,376,262 646,239 Debt Service 32 Series 1965 Bonds (8) 253,991 315.752 236.122 212.030 0 33 Total Debt Service 253,991 315,752 236,122 212,030 0 Debt Service Coverage 34 Estimated 3,95 338 4.50 6.49 N/A 35 Required 1.25 1.25 1.25 1.25 N/A Less Other Required Transfers 36 Renewal and Replacement Fund Transfer (9) 118,728 128.331 134.505 147,413 164,1% 37 Administrative Management Fees )21,900 132,175 140.765 145,760 150,135 Amounts Available for Capital Outlay, Additional 38 Improvements and Other Lawful Purposes $507,672 $490,899 5551,731 5871,059 5331.90 (1) Unless otherwise noted amounts shown derived from information provided by the Village and included in the Villages Comprehensive Annual Financial Report for each fiw4l year represented. (2) Amounts shown represent unaudited figures as supp lied by the Village. (3) Amounts shown do not include revenues associated with increase in rates to compensate for Town of Jupiter bulls rate increase. Conversely, the offsetting expense associated with the bulls rate increase has not been teftected. (4) Onside City surcharge implemented by the Village on January 12, 1995. (5) Amounts shown do not include depreciation or amortization expenses. (6) Administration and Office expenses see net of Administration Management and General Fund Repayment Fees which in order to be consistent with Bond Resolution provisions, are not considered as on operating expense of the System. (7) Amounts shown include interest earnings on balances in unrestricted funds (i.e., Operating Account, Renewal and Replacement Fund, etc.) and does two include earnings on monies held in escrow associated with Town oflupiwr bulk rate increase or Treasury Bonds purchased an association with series 1983 Bonds (reference footnote No. 8). (8) Annual debt service amounts shown are tact of aggregate purchase price of 5960,000 of U.S'. Treasury Bonds whereby the purchase price of the Treasury Bonds is added to the annual gross debt service and interest earnings are subtracted from gross debt service in order to derive debt service coverage ratios. (9) Amounts shown reflect transfer amount of 5.0% of previous years gross revenues which although was cam transferred during historical period, for presentation purposes, reflects forecasted transfer anticipated to be required under flow of funds requirement associated with the anticipated issuance of the Series 1997 Bonds. -V1 Village of Tequesta. Florida W'ater System Page 1 of 2 Proiected Operating Results and Debt Coverage Analvsis Line Fiscal Year Ending September 30 No. 1998 1999 2000 2001 2002 Operating Revenues 1 Water Sales - Existing Rate (1 x2) $2,856,094 $3,042,171 $3,055,473 $3,068,268 $3,080,773 2 Water Surcharge (I X3) 276,479 295,857 298,053 300,048 302,044 3 Rate Stabilization Transfer (to) /from 0 (190,000) (90,000) 30,000 94.000 4 Total Sales Revenue 3,132,572 3,148,027 3,263,527 3,398,316 3,476,817 Other System Revenues 5 - Interest income (4) 17,149 32.385 41,751 43,742 40.668 6 Meter Installation Charges 4,995 7,072 4,624 4.455 4.320 7 Fire Hydrant Rental 13,900 13,900 13,900 13,900 13,900 8 Other Income 3,000 3.033 3,055 3,076 3,097 9 Miscellaneous Revenue 1,000 1,000 1,000 1,000 1.000 10 Total Other Utility Revenue 40,044 57,390 64,330 66.174 62.985 11 Total System Revenues $3,172,616 $3,205,418 $3,327,857 $3,464.489 $3.539.802 Operating Expenses (5) Pumping and Storage (V1'2ter Treatment) (6) 12 Personal Services $270,561 $317,360 $332,460 $348.301 $364.918 )3 Bulk Water Purchased (5x7) 667,950 667.950 667,950 667,950 667.950 14 Utility Services 110.800 116,290 141,011 188,089 ; 195,962 IS Insurance 36.050 37,132 41,995 50,393 51.905 16 Repairs and Maintenance 83,500 85 88504 91,118 93,810 17 Chemicals 44.836 47,058 57,534 77,595 80,717 18 Other Expenses 79,200 81,439 86.244 89,617 92.311 19 Total Pumping and Storage 1,292,897 1,353,193 1,415,698 1,513,062 1,547,572 Water Distribution 20 Personal Services 255,501 270,831 284,373 298,591 313.521 21 Insurance 11,891 12,248 12,615 12,994 13.383 22 Water System Maintenance 20,000 20,600 21,218 21.855 22,510 23 Other Expenses 40,606 41.634 42,693 43,783 44.905 24 Total Water Distribution 327,998 345,313 360,899 377,222 394.319 Administration and Office 25 Personal Services 193,309 204,908 215,153 225,911 237,206 26 Engineering Services 27,000 27,810 28,644 29,504 30,389 27 Acct/Auditing Service 20,000 20,600 21,218 21,855 22.510 28 Contingency Allowance (8) 46,677 44,942 48,046 50,725 52,178 29 Other Expenses 305,847 123,470 (9) 102,755 105,426 108,173 30 Total Administration and Office 592,833 421,729 415,816 433,419 450,456 31 Total Operating Expenses $2,213,728 $2,120,235 $2,192,412 $2,323,704 $2,392,347 32 Net Revenues $958,887 $1,085,183 $1,135,445 51,140,785 51.147,455 Debt Service 33 Series 1998 Bonds $263,706 $455,554 $515,454 $516,910 5518,927 Coverage 34 Estimated 3.64 2.38 2.20 2.21 2.21 35 Required 1.20 1.20 1.20 1.20 1.20 Less Other Required Transfers 36 Debt Service Coverage (10) 52,741 91.111 103,091 103,392 103,785 37 Debt Service Reserve Fund Transfer (11) 0 0 0 0 0 38 Renewal and Replacement Fund Transfer (12) 117,800 158,631 169,771 170,893 171,724 39 Administration Management 166.795 171,799 257,952 263.260 268,728 Excess Revenues Above Required Expenses 40 And Transfers Per Bond Resolution (13) $357,845 $208,089 $89,177 $86,340 $84,290 Footnotes Page 2 of 2. -Vii- Page 2 of 2 Village Of Tequesta, Florida Water System Projected Operating Results And Debt Coverage Ana yc& Footnotes 1. Amounts shown based on rates as adopted by the Village Council as codified by Ordinance. The rate revenues also include the application of the adopted 4.0% rate increase as referenced in the Rate Ordinance to become effective October 1, 1998. 2. Amounts shown do not include any revenues associated with the bulk water surcharge currently being charged by the Village to fund the potential liability in a contended bulk water rate increase implemented by the Town of Jupiter which is subject to litigation between the Village and the Town. Reference the Official Statement for additional information. 3. Reflects revenues derived from the application of the 25% outside City surcharge applied to customers located outside the City as allowed by Chapter 180.191, Florida Statutes. 4. Amounts shown reflect interest earnings on unrestricted funds/ amounts do not include earnings on Water Capital Improvement Charges or Construction Fund balances which remain in such funds. 5. Amounts shown do not include depreciation and amortization expenses which are non -cash in nature and not included as an operating expense pursuant to the Bond Resolution. 6. Amounts shown include incremental expenses associated with the addition of the Reverse Osmosis Water Treatment Facility assumed to commence operation in June 2000. 7. Amounts reflect cost of bulk water purchases from the Town of Jupiter. Amounts based on rate of $1.22 per thousand gallons which is less than the rate being billed by the Town which is the subject of litigation between the two entities. Any increase in the rate will be offset by a concurrent or like kind increase in rate revenue (reference footnote 2). 8. Amount shown reflects a contingency allowance to account for any unknown or unplanned expenditures which may arise periodically during the forecast period. 9. Reduction in operating expenses represents reduced litigation costs which have been identified as an operating expense associated with the settlement of the issues subject to litigation between the Village and the Town of Jupiter. 10. Amount shown equal to 20% of the Debt Service Requirement for each respective fiscal year. 11. No deposits to the debt service Reserve Account assumed during the forecast since the Village anticipates purchasing a Reserve Account Letter of Credit to meet this financial obligation required by the Bond Resolution. 12. Amounts shown equal to the Renewal and Replacement Fund requirement as defined in the Bond Resolution which was assumed to equate to 5% of the Gross Revenues (without regard to Rate Stabilization Fund transactions) received in the .preceding fiscal year. 13. Excess revenues as defined for Rate Covenant purposes; amounts do not include any additional funds associated with the receipt of Water Capital Improvement Charges. -Via— OFFICIAL STATEMENT Relating To Village of Tequesta, Florida $7,805,000* Water Revenue Bonds, Series 1998 INTRODUCTION The purpose of this Official Statement, including the cover page and the appendices hereto, is to furnish certain information with respect to the Village of Tequesta, Florida (the "Village ") and the original issuance and sale of the Village's $7,805,000* aggregate principal amount Water Revenue Bonds, Series 1998 (the "Series 1998 Bonds "). The Series 1998 Bonds are issued pursuant to the authority of the Florida Constitution and Charter of the Village, Chapter 166, Florida Statutes, as amended, and other applicable provisions of law, and pursuant to Resolution No. 7 -97/98 adopted by the Village Council of the Village (the "Council ") on January 8, 1998, as supplemented (collectively, the "Resolution "). The Series 1998 Bonds are being issued for the purpose of providing funds, which, together with other funds available for such purpose, will be sufficient (1) to pay the costs of construction of certain improvements (the "1998 Project ") to the Village's potable water treatment and distribution system (the "System "), (2) to purchase a surety bond to fund the 1998 Reserve Subaccount in an amount equal to the Reserve Account Requirement (hereinafter defined) on account of the Series 1998 Bonds and (3) to pay costs and expenses related to the issuance of the Series - 1998 Bonds. The Series 1998 Bonds shall not constitute a general obligation of the Village but shall be payable solely from the Pledged Funds derived from the operation of the System, as provided in the Resolution. No Holder of any Series 19,98 Bonds shall ever have the right to compel the exercise of the ad valorem taxing power of the Village, or taxation in any form of any real property therein to pay the Series 1998 Bonds or the interest thereon. The Series 1998 Bonds are not obligations of the State of Florida or any political subdivision thereof other than the Village, payable only as aforesaid. See "SECURITY AND SOURCES OF PAYMENT" herein for further information. There follow in this Official Statement descriptions of the Series 1998 Bonds, the Village, the -1998 Project, the System and certain other matters. The descriptions and information contained herein do not purport to be complete, comprehensive, or definitive, and all references herein to documents or reports are qualified in their entirety by reference to the complete text of such documents or reports. Copies of documents and reports referred to herein that are not included in their entirety herein may be obtained from the Village Clerk upon payment of any required fee. Unless otherwise defined herein, terms used in capitalized form in this Official Statement shall have the same meanings as in the Resolution. See "APPENDIX A -Form of the Resolution" for definitions of terms used in the Resolution. THE SERIES 1998 BONDS General Descriptio The Series 1998 Bonds are being issued as fully registered bonds without coupons in principal denominations of $5,000 each or any integral multiple thereof. The Series 1998 Bonds will be dated as of March 1, 1998, and will bear interest from that date at the rates per annum and, subject to the redemption provisions set forth below, will *Preliminary, subject to change. mature on the dates and in the amounts set forth on the cover page of this Official Statement. Interest on the Series 1998 Bonds will be computed on the basis of a 360 -day year consisting of twelve 30 -day months. Interest on the Series 1998 Bonds will be payable semiannually on each March 1 and September 1, commencing September 1, 1998 (each, an "Interest Payment Date "). The principal of and premium, if any, on the Series 1998 Bonds shall be payable when due by check or draft, upon presentation and surrender of the Series 1998 Bonds at the designated office of First Union National Bank, or its successor, as Paying Agent (the "Paying Agent "), and interest will be payable by check or draft mailed by the Paying Agent on each Interest Payment Date to the Holders of the Series 1998 Bonds appearing as such on the registration books of the Village kept by First Union National Bank, or its successor, as Registrar (the "Registrar "), as of the Record Date, provided, however, that at the written request and expense of any Holder of at least $500,000 in an aggregate principal amount of Series 1998 Bonds (or the Holder of all Series 1998 Bonds if less than $500,000 shall be outstanding) payment of interest will be transmitted by wire transfer to the Holder. The "Record Date" is the fifteenth (15th) day of the month preceding the Interest Payment Date, whether or not such day is a Business Day. All payments of principal of and interest on the Series 1998 Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. For so long as the book -entry system of ownership of the Series 1998 Bonds continues, principal, premium, if any, and interest on the Series 1998 Bonds will be paid as described herein under 'Book -Entry Only System. " Redemption Provisions Optional Redemption The Series 1998 Bonds maturing prior to March. 1, are not subject to optional redemption prior to maturity. The Series 1998 Bonds maturing on or after March 1, are subject to redemption prior to maturity, at the option of the Village from any funds legally available for such purpose, on or after March 1, , in whole or in part on any date, and if in part in any order of maturity selected by the Village, and by lot within a maturity if less than an entire maturity is to be redeemed, at the redemption prices (expressed as percentages of the principal amount of the Series 1998 Bonds to be redeemed) set forth in the table below, plus accrued interest to the redemption date: Redemption Dates Redemption (Inclusive) Prices March 1, through February _, % March 1, through February _, % March 1, and thereafter % Mandatory Redemption The Series 1998 Bonds maturing on March 1, (the " Term Bonds ") are subject to mandatory redemption in part, on March 1, , and on each March 1 thereafter in the years and in the amounts set forth below (except for the final amount due at maturity, which shall not be a redemption), at a price equal to 100% of the principal amount of the Series 1998 Bonds being redeemed, plus accrued interest to the redemption date: -2- TERM B0 1�ID� Year Amount (Maturity) The Series 1998 Bonds maturing on March 1, (the " Term Bonds ") are subject to mandatory redemption in part, on March 1, , and on each March l thereafter in the years and in the amounts set forth below (except for the final amount due at maturity, which shall not be a redemption), at a price equal to 100`70 of the principal amount of the Series 1998 Bonds being redeemed, plus accrued interest to the redemption date: TERM BONDS Year Amount (Maturity) Notice of Redemption Notice of redemption of the Series 1998 Bonds shall be mailed by first class mail, postage prepaid, by the Registrar not less than thirty (30) days nor more than sixty (60) days before the date fixed for redemption to the registered owners of any Series 1998 Bonds or portions thereof which are to be redeemed, at their addresses as they appear upon the registration books maintained by the Registrar. Failure to give any notice of redemption, or any defect therein, shall not affect the validity of any proceedings for the redemption of any Series 1998 Bond with respect to which no such failure or defect as occurred. Any notice prepared and mailed as described herein shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Each notice shall set forth, among other information, the date fixed for redemption, the redemption price to be paid and, if less than all of the Series 1998 Bonds shall be called for redemption, the numbers of such Series 1998 Bonds. Effect of Calling for Redemption On the date designated for redemption, notice having been mailed in the manner and under the conditions hereinabove described, the Series 1998 Bonds so called for redemption shall become and be due and payable and, if payment of the redemption price has been duly provided for, interest on the Series 1998 Bonds so called for redemption shall cease to accrue, such Series 1998 Bonds shall cease to be entitled to any lien, benefit or security under the Resolution, and the Holders of such Series 1998 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Registration and Transfer The Series 1998 Bonds are transferable only upon the registration books of the Village maintained by the Registrar. For so long as the book -entry only system of ownership is being maintained for the Series 1998 Bonds, transfers of beneficial ownership interests in the Series 1998 Bonds will be accomplished as described herein under -3- "Book -Entry Only System," and Cede & Co. shall be the sole Bondholder of the Series 1998 Bonds. In the event such book -entry system of ownership is discontinued, transfers of the Series 1998 Bonds shall be accomplished as described below. The Series 1998 Bonds are transferable only upon the registration books of the Village maintained by the Registrar. Series 1998 Bonds may be presented for transfer or exchange at the designated office of the Registrar, initially in Charlotte, North Carolina. In each case, the Village or the Registrar may require payment of a sum sufficient to cover any tax, fee, expense or other governmental charge that may be imposed in relation to such exchange or transfer. Neither the Village nor the Registrar shall be required to transfer or exchange any Series 1998 Bonds for a period beginning fifteen (15) days next preceding any selection of Series 1998 Bonds to be redeemed or thereafter until the mailing of any notice of redemption, or to transfer or exchange any Series 1998 Bond that has been called for redemption. BOOK -ENTRY ONLY SYSTEM Unless the book -entry system described herein is terminated, as hereinafter described, The Depository Trust Company ( "DTC "), New York, New York, will act as securities depository for the Series 1998 Bonds. The Series 1998 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered Series 1998 Bond certificate will be issued for each maturity of the Series 1998 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited- purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Direct Participant's accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). The rules applicable to DTC and its participants are on file with the Securities and Exchange Commission. Purchases of the Series 1998 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 1998 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 1998 Bond (a "Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 1998 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 1998 Bonds, except in the event that use of the book -entry system for the Series 1998 Bonds is discontinued. To facilitate subsequent transfers, all Series 1998 Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Series 1998 Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 1998 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 1998 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. -4- Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. for so long as it is the registered owner of the Series 1998 Bonds. If less than all of the Series 1998 Bonds of a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Series 1998 Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 1998 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium, if any, and interest payments on the Series 1998 Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance with their respective holdings shown on DTC's records, unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Direct or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Village, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to DTC is the responsibility of the Village or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. NONE OF THE VILLAGE, THE PAYING AGENT OR THE REGISTRAR WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE DTC PARTICIPANTS OR THE PERSON FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS OF THE SERIES 1998 BONDS. THE VILLAGE CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS OF PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 1998 BONDS PAID TO DTC OR ITS NOMINEE, AS THE REGISTERED OWNER, OR ANY NOTICES TO THE BENEFICIAL OWNERS OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. The Village and the Paying Agent shall enter into a letter of representations (the "Book -Entry Agreement ") with DTC providing for such book -entry only system. However, the Book -Entry Agreement may be terminated upon the happening of either of the following: (a) DTC discontinues providing its services as securities depository by giving reasonable notice to the Village and the Paying Agent, or (b) the Village in its sole discretion elects to terminate the book -entry only system by notice to DTC and the Paying Agent. If the Village does not replace DTC, replacement Series 1998 Bonds shall be issued only upon surrender to the Registrar of the Series 1998 Bonds of each maturity by DTC, accompanied by registration instructions for the definitive Series 1998 Bonds for such maturity from DTC. Neither the Village nor the Paying Agent shall be liable for any delay in delivery of such instructions and conclusively may rely on and shall be protected in relying on such instructions of DTC. Portions of the foregoing concerning DTC and DTC's book -entry system are based on information furnished by DTC to the Village. No representation is made herein by the Village or the Underwriter as to the accuracy or completeness of such information. -5- SECURITY AND SOURCES OF PAYMENT In General The Series 1998 Bonds shall not constitute a general obligation of the Village, but shall be payable solely from the Pledged Funds, as provided in the Resolution. No Holder of any Series 1998 Bonds shall ever have the right to compel the exercise of the ad valorem taxing power of the Village, or taxation in any form of any real property therein to pay the Series 1998 Bonds or the interest thereon. The Series 1998 Bonds are not obligations of the State of Florida or any political subdivision thereof other than the Village, payable only as aforesaid. Pledged Funds "Pledged Funds" shall mean the Net Revenues, the Pledged Accounts and to the extent described herein, the Impact Fees. "Net Revenues" shall mean the Gross Revenues less Operating Expenses. "Gross Revenues" shall mean all income and monies received by the Village from the charges imposed by the Village for the use of services of the System, or otherwise received by the Issuer or accruing to the Village in the management and operation of the System, but excluding Impact Fees. For purposes of the rate covenant and additional bonds tests described herein, Gross Revenues shall include amounts transferred from the Rate Stabilization Fund to the Revenue Fund, but if during any period of time amounts are transferred from the Rate Stabilization Fund to the Revenue Fund, then during such period, Gross Revenues shall not include amounts transferred from the Revenue Fund to the Rate Stabilization Fund. "Operating Expenses" shall mean the Village's expenses for operation of the System, all to the extent properly attributable to the System in accordance with generally accepted accounting principles employed in respect of activities such as those involved in the operation of municipal water systems similar to the System, but not including any provision for interest, depreciation, amortization or similar charges and, for purposes of the Additional Bonds tests and rate covenant described herein, Operating Expenses shall not include administrative expenses allocable to the System or extraordinary non - recurring expenses of the System. "Pledged Accounts" shall mean, until applied in accordance with the provisions of the Resolution, all monies, including investments thereof, in the funds and accounts established under the Resolution, except (i) monies, including investments thereof, in the Rates Stabilization Fund, in any Rebate Fund and in the Impact Fee Fund, and (ii) to the extent monies on deposit in a Subaccount of the Reserve Account and /or an account of the Construction Fund are pledged solely for the payment of the series of Bonds for which such account was established in accordance with the provisions of the Resolution. "Impact Fees" shall mean all charges separately imposed by the Village upon new customers of the System as a non -user capacity charge for a proportionate share of the cost of the acquisition or construction of Expansion Facilities, which are imposed by the Village for the purpose of allocating to each such customer a proportionate share of the cost of the additional System capacity made necessary by the inclusion or expected inclusion of such new customers of the System, excluding those charges imposed by the Village on persons connecting to the System for the cost of physically connecting thereto, but only to the extent that any such fee or charge has been lawfully levied and collected by the Village and may under applicable law be used for the acquisition or construction of the Expansion Facilities or for Impact Fee Debt Service Components, and including any income from the investment of moneys on deposit in the Impact Fee Fund or any other moneys transferred to the Impact Fee Fund pursuant to the provisions of the Resolution. As further described herein under "The System - Rates," the Village charges a capital improvement charge upon each new connection to the System. The capital improvement charge is intended to cover the cost of the capacity of the System which is utilized by each connection. The capital improvement charges constitute "Impact Fees" within the meaning of the Resolution. Therefore, the aggregate amount of Impact Fees which may be allocated -6- to the Debt Service Requirements for the Bonds may not exceed the Impact Fee Debt Service Component, unless the Village is provided an opinion of bond counsel to the effect that a greater amount of Impact Fees could be applied to the Debt Service Requirements for the Bonds. The Impact Fee Debt Service Component of the Bonds is determined by multiplying the Debt Service Requirement of the Bonds by the Expansion Percentage. The Expansion Percentage is the percentage of the principal amount of a bond issue that is attributable to improvements to the System implemented in order to meet increased demand upon the System. The Expansion Percentage with respect to the Series 1998 Bonds is 90 %. Rate Covenant The Village has covenanted in the Resolution to fix, establish and maintain and collect such charges for the services of the System, and to revise the same to the extent necessary, as will always provide in each Fiscal Year Net Revenues which are at least equal to 120% of the Debt Service Requirement for such Fiscal Year. 1998 Reserve Suhaccount The Resolution requires the establishment and funding of the 1998 Reserve Subaccount in an amount equal to the lesser of ten percent (10%) of the aggregate initial principal amount of the Series 1998 Bonds and any additional Bonds secured by the 1998 Reserve Subaccount, the maximum amount of principal of and interest on the Series 1998 Bonds and any such additional Bonds becoming due in the current or any succeeding Fiscal Year or one hundred twenty-five percent (125 %) of the average annual amount of principal of and interest becoming due on the Series 1998 Bonds and any such additional Bonds. The Resolution authorizes the Village to obtain a surety bond, letter or line of credit or municipal bond insurance policy (a "Reserve Account Insurance Policy or Letter of Credit ") in lieu of funding the 1998 Reserve Subaccount with money, and the Village expects to purchase a surety bond (the "1998 Reserve Surety ") in the amount of $ from Ambac Assurance Corporation in order to satisfy the Reserve Account Requirement for the Series 1998 Bonds. See "The Reserve Account Surety Bond" for further information. Amounts on deposit in the 1998 Reserve Subaccount shall be used only for the purpose of paying principal, Redemption Price, if applicable, and interest on the Series 1998 Bonds and any Additional Bonds secured by the 1998 Reserve Subaccount when the amounts in the Interest Account, the Principal Account and the Bond Amortization Account are insufficient therefor. The Resolution authorizes the Village to establish a separate Reserve Subaccount for any other Series of Bonds issued under the Resolution. Except as provided in the next succeeding sentence each such separately created Reserve Subaccount shall constitute security only for the Series of Bonds to which it relates. Pursuant to the Resolution, the Village may, upon the issuance of one or more Series of additional Bonds, utilize the 1998 Reserve Subaccount as the Reserve Subaccount for such additional Bonds as well as the Series 1998 Bonds provided the moneys on deposit in the 1998 Reserve Subaccount equals the aggregate Reserve Account Requirement for such additional Bonds and for the Series 1998 Bonds. If a disbursement is made from a Reserve Account Insurance Policy and /or Letter of Credit, the Village is obligated to reinstate the maximum limits of such Reserve Account Insurance Policy and /or Letter of Credit immediately following such disbursement from monies becoming available in the applicable Subaccount of the Reserve Account by depositing funds in the amount of the disbursement made under such instrument with the issuer thereof. In addition, after the amount on deposit in the applicable Subaccount of the Reserve Account equals the Reserve Account requirement therefor, the Village shall reimburse the issuer of the Reserve Account Insurance Policy and/or Letter of Credit for interest and all reasonable expenses incurred by such issuer in connection with the draw on such Reserve Account Insurance Policy and /or Letter of Credit, as the case may be, if the Village is so obligated under the terms of the Reserve Account Insurance Policy and /or Letter of Credit. If at any time the amount on deposit in the 1998 Reserve Subaccount is less than the Reserve Account Requirement, the Village is obligated to deposit into the 1998 Reserve Account such sum, if any, as will be sufficient to restore, in not more than twelve equal monthly payments, the funds on deposit therein to the Reserve Account Requirement. In the event the amount available for deposit into all subaccounts in the Reserve Account is insufficient -7- to make all payments required to be made therein, the available amount shall be prorated among the various subaccounts in the Reserve Account in the same proportion that the Reserve Account Requirement for each subaccount bears to the total Reserve Account Requirement for all such subaccounts. If at any time there is on deposit in the 1998 Reserve Subaccount an amount in excess of the Reserve Account Requirement, the amount of such excess shall be deposited in the Revenue Fund. The Reserve Account Surety Bond Application has been made to Ambac Assurance Corporation ( "Ambac ") for the issuance of a surety bond to fund the 1998 Reserve Subaccount (the "Reserve Account Surety Bond "). The Series 1998 Bonds will only be delivered upon issuance of the Reserve Account Surety Bond. The premium on the Reserve Account Surety Bond is to be fully paid at or prior to the issuance and delivery of the Series 1998 Bonds. The Reserve Account Surety Bond provides that upon the later of (i) one (1) day after receipt by Ambac of a demand for payment executed by the Paying Agent certifying that provision for the payment of principal of or interest on the Series 1998 Bonds when due has not been made or (ii) the interest payment date specified in the Demand for Payment submitted to Ambac, Ambac will promptly deposit funds with the Paying Agent sufficient to enable the Paying Agent to make such payments due on the Series 1998 Bonds, but in no event exceeding the Surety Bond Coverage, as defined in the Reserve Account Surety Bond. Pursuant to the terms of the Reserve Account Surety Bond, the Surety Bond Coverage will be automatically reduced to the extent of each payment made by Ambac under the terms of the Reserve Account Surety Bond and the Town is required to reimburse Ambac for any draws under the Reserve Account Surety Bond with interest at a market rate. Upon such reimbursement, the Surety Bond will be reinstated to the extent of each principal reimbursement up to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the Village will be subordinate to the Village's obligations with respect to Series 1998 the Bonds. In the event the amount on deposit, or credited to the 1998 Reserve Subaccount, exceeds the amount of the Reserve Account Surety Bond, any draw on the Reserve Account Surety Bond shall be made only after all the funds in the 1998 Reserve Subaccount have been expended. In the event that the amount on deposit in, or credited to, the 1998 Reserve Subaccount, in addition to the amount available under the Reserve Account Surety Bond, includes amounts available under a letter of credit, insurance policy, surety bond or other such funding instrument (the "Additional Funding Instrument "), draws on the Reserve Account Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. The Resolution provides that the 1998 Reserve Subaccount shall be replenished in the following priority: (i) principal and interest on the Reserve Account Surety Bond and on the Additional Funding Instrument shall be paid from first available funds on a pro rata basis; and (ii) after all such amounts are paid in full, amounts necessary to fund the 1998 Reserve Subaccount of the Reserve Account to the required level, after taking into account the amounts available under the Reserve Account Surety Bond and the Additional Funding Instrument shall be deposited from next available funds. The Reserve Account Surety Bond will not insure against nonpayment caused by the insolvency or negligence of the Paying Agent. For information concerning Ambac, see "Municipal Bond Insurance" below. Addotional Bonds Pursuant to the Resolution, the Village covenants that it will not, except upon the conditions and in the mariner provided in the Resolution, issue any other obligations payable in whole or in part from the Pledged Funds, nor voluntarily create or cause to be created any debt, lien, pledge, assessment, encumbrance or other charge having priority to or being on a parity with the lien of the Series 1998 Bonds and the interest thereon upon any of the Pledged Funds. Any obligations issued by the Village other than the Series 1998 Bonds and any Additional Bonds issued pursuant to the Resolution are required to contain an express statement that such obligations are junior, inferior -8- and subordinate in all respects to the Bonds issued pursuant to the Resolution as to lien on and source and security for payment from the Pledged Funds and in all other respects. The Resolution authorizes the Village to issue Additional Bonds payable pari passu with the Series 1998 Bonds and other Bonds issued pursuant to the Resolution out of Pledged Funds if, and only if, among other things, the Net Revenues, adjusted as provided in the Resolution, received during the immediately preceding Fiscal Year or any twelve (12) consecutive months of the eighteen (18) months immediately preceding the issuance of the pari passu Additional Bonds, as certified by an independent certified public accountant, equal at least 120% of the Maximum Debt Service Requirement on (1) the Series 1998 Bonds then Outstanding, (2) any pari passu Additional Bonds theretofore issued and then Outstanding, and (3) the Additional Bonds then proposed to be issued. In the event any Additional Bonds are to be issued for the purpose of refunding any Bonds then Outstanding, the foregoing conditions shall not apply, provided that the issuance of such Additional Bonds shall result in a reduction or shall not increase the aggregate amount of principle of and interest on the Outstanding Bonds becoming due in the current Fiscal Year and all or any subsequent Fiscal Years.: The Resolution contains provisions concerning the issuance of Variable Rate Bonds and providing for certain adjustments to Net Revenues for purposes of the issuance of pari passu Additional Bonds, and for further information see "APPENDIX A - Form of the Resolution -- Issuance of Additional Bonds." Rights of Bond Insurer Pursuant to the Resolution, Ambac Assurance Corporation (hereinafter defined) is deemed to be the sole holder of all Series 1998 Bonds for purposes of all provisions of the Resolution governing remedies, so long as Ambac Assurance Corporation has not failed to comply with its payment obligations under the Policy (hereinafter defined). Furthermore, certain amendments and supplements to the Resolution are subject to the prior written consent of Ambac Assurance Corporation and may be made in such case without Bondholder approval. MUNICIPAL BOND INSURANCE General The Village has received a commitment from Ambac Assurance Corporation for the issuance of a municipal bond insurance policy which will insure payment of the principal of and interest on the Series 1998 Bonds when due. The following information has been furnished by Ambac Assurance Corporation for use in this Official Statement. Reference is made to Appendix F for a specimen of the Policy. Payment Pursuant to M inicipal Bond insurance poLcy Ambac Assurance Corporation ( "Ambac" or the "Insurer ") has made a commitment to issue a municipal bond insurance policy (the "Municipal Bond Insurance Policy," or the "Policy ") relating to the Series 1998 Bonds effective as of the date of issuance of the Series 1998 Bonds. Under the terms of the Municipal Bond Insurance Policy, Ambac will pay to the United States Trust Company of New York, in New York, New York or any successor thereto (the "Insurance Trustee ") that portion of the principal of and interest on the Series 1998 Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Village (as such terms are defined in the Municipal Bond Insurance Policy). Ambac will make sucli payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the Bite on which Ambac shall have received notice of Nonpayment from the Paying Agent. The insurance will extend for the term of the Series 1998 Bonds and, once issued, cannot be cancelled by Ambac. The Municipal Bond Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the Series 1998 Bonds become subject to mandatory redemption and insufficient funds are available for redemption -9- of all outstanding Series 1998 Bonds, Ambac will remain obligated to pay principal of and interest on outstanding Series 1998 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Series 1998 Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Paying Agent has notice that any payment of principal of or interest on a Series 1998 Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the Village has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac to the extent of such recovery if sufficient funds are not otherwise available. The Municipal Bond Insurance Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Municipal Bond Insurance Policy does not cover: 1. payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity. 2. payment of any redemption, prepayment or acceleration premium. 3. nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying Agent, if any. If it becomes necessary to call upon the Municipal Bond Insurance Policy, payment of principal requires surrender of Series 1998 Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such Series 1998 Bonds to be registered in the name of Ambac to the extent of the payment under the Municipal Bond Insurance Policy. Payment of interest pursuant to the Municipal Bond Insurance Policy requires proof of Bondholder entitlement to interest payments and an appropriate assignment of the Bondholder's right to payment to Ambac. Upon payment of the insurance benefits, Ambac will become the owner of the Series 1998 Bonds, appurtenant coupon, if any, or right to payment of principal or interest on such Bonds and will be fully subrogated to the surrendering Bondholder's rights to payment. The insurance provided by the Municipal Bond Insurance Policy is not covered by the Florida Insurance Guaranty Association. Amhac Acc urance Corporat Ambac is a Wisconsin - domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam and the Commonwealth of Puerto Rico, with admitted assets of approximately $2,813,000,000 (unaudited) and statutory capital of approximately $1,605,000,000 (unaudited) as of September 30, 1997. Statutory capital consists of Ambac's policyholders' surplus and statutory contingency reserve. Standard & Poor's Ratings Services, a division of The McGraw -Hill Companies, Inc., Moody's Investors Service and Fitch IBCA, Inc. have each assigned a triple -A claims- paying ability rating to Ambac. Ambac has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by Ambac will not affect the treatment for federal income tax purposes of interest on such obligation and that such insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its municipal bond insurance policy shall be treated for federal income purposes in the same manner as if such payments were made by the issuer of the bonds. Ambac makes no representation regarding the Series 1998 Bonds or the advisability of investing in the Series 1998 Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official -10- Statement other than the information supplied by Ambac and presented under the headings "Payment Pursuant to Municipal Bond Insurance Policy," "Ambac Assurance Corporation," "Available Information" and "Incorporation of Certain Documents by Reference." Available Information The parent company of Ambac, Ambac Financial Group Inc. (the "Company "), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act "), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission "). Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the public reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the aforementioned material may also be inspected at the offices of the New York Stock Exchange, Inc. (the "NYSE ") at 20 Broad Street, New York, New York 10005. The Company's Common Stock is listed on the NYSE. Copies of Ambac's financial statements prepared in accordance with statutory accounting standards are available from Ambac. The address of Ambac's administrative offices and its telephone number are One State Street Plaza, 17th Floor, New York, New York 10004 and (212) 668 -0340. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Commission (File No. 1- 10777) are incorporated by reference in this Official Statement. (1) The Company's Annual Report on Form 10 -K for the fiscal year ended December 31, 1996 and filed on March 31, 1997; (2) The Company's Current Report on Form 8 -K dated March 12, 1997 and filed on March 12, 1997; and (3) The Company's Quarterly Report on Form 10 -Q for the fiscal quarterly period ended March 31, 1997 and filed on May 15, 1997; (4) The Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 1997 and filed on August 14, 1997; and (5) The Company's Quarterly Report on Form 10-0 for the fiscal quarterly period ended September 30, 1997 and filed on November 14, 1997. All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Supplemental Official Statement will be available for inspection in the same manner as described above in "Available Information." -11- ° THE PLAN OF FINANCING Purpose of the Series 1998 Bonds The Series 1998 Bonds are being issued for the purpose of providing funds, which, together with other funds available for such purpose, will be sufficient (1) to pay the costs of the 1998 Project, (2) to purchase a surety bond to fund the 1998 Reserve Subaccount in an amount equal to the Reserve Account Requirement for the Series 1998 Bonds and (3) to pay costs and expenses related to the issuance of the Series 1998 Bonds. See "The 1998 Project" for further information. Estimated Sources and Uses of Funds The following table sets forth the estimated sources and uses of funds in connection with the Series 1998 Bonds: SOURCES OF FUNDS: Par Amount ................ (Original Issue Discount) ....... Accrued Interest ............. TOTAL SOURCES: USES OF FUNDS: Deposit to Construction Fund .... Purchase Reserve Account Surety Bond .......... Costs of Issuance(') ........... Deposit to Interest Account .... TOTAL USES: (1) Includes, among other items, underwriter's discount, financial advisory fees, legal fees, municipal bond insurance premium and contingency. (2) Accrued interest. THE VILLAGE Gfneral The Village of Tequesta, Florida, is a municipal corporation of the State of Florida. The Village was created in 1957 by action of the legislature of the State of Florida. The Village is located in northern Palm Beach County on the east coast of Florida approximately 100 miles north of Miami. The estimated 1990 population of the Village (U.S. Census) was 4,479. The estimated population (University of Florida) of the Village as of April 1, 1997 was 4,686. The geographical jurisdiction of the Village encompasses approximately 2.0 square miles of territory. Government Under Florida law, municipalities have full home rule powers, i.e., the governmental, corporate and proprietary powers to enable them to conduct municipal government, and they may exercise any power for municipal purposes, except when expressly prohibited by law. The governing body of a Florida municipality may enact -12- legislation on any subject matter upon which the State of Florida legislature may act, except as prohibited by the State Constitution, a State Statute, or, in certain circumstances, a County Charter. The form of government of a municipality is set forth in the municipal charter, with the constraint that the legislative body be elected. The Charter of the Village currently provides for a "Council -- Manager" form of government. The Village Council (the "Council ") is the legislative body, with the power to pass ordinances and adopt resolutions, and the Village Manager is the chief administrative officer and head of the administrative branch of the Village. The Council consists of five Councilmembers, each of whom is elected by the voters on an at -large basis. Councilmembers serve for two year terms of office. Three Councilmembers are elected in even - numbered years, and two are elected in odd - numbered years. The Councilmembers annually select from the Council a Mayor and a Vice - Mayor. The Mayor presides at all meetings of the Council, and is recognized as the head of the Village for service of process, for ceremonial purposes, and for execution of documents. The Mayor has no other administrative duties. The Vice -Mayor acts as Mayor in the absence or disability of the Mayor. If the office of a Councilmember becomes vacant the remaining Councilmember may fill the vacancy by majority vote, or a special election may be called for such purpose. Administration There are two charter officers of the Village, the Village Manager and the Village Clerk. The charter officers are appointed by the Council and serve at the pleasure of the Council. The Village Manager is responsible for the administration of all departments of the Village. There is no definite term of office of the Village Manager, as he or she holds office at the pleasure of the Council. Among the duties of the Village Manager are the appointment and removal of department directors, removal of subordinate officers and employees, the supervision of departments, the making of recommendations to the Council, the submission of an annual budget, and the submission of an annual report of the operations of the Village for the preceding fiscal year. The Village Clerk acts as the custodian of records of the Village. For adininistrative purposes, the Village is divided into departments. Currently, there are eight (8) departments, including the Executive Department, the Finance Department and the Water Department. THE SYSTEM Bond Feasibilit Report The Bond Feasibility Report dated January, 1998 (the "Feasibility Report"), prepared by Reese, Macon & Associates, Inc. (the "Consulting Engineer ") and Public Resources Management Group, Inc., (the "Rate Consultant ") which appears in Appendix B hereto, sets forth certain information concerning the System. The Feasibility Report should be read in its entirety. The following information is only a brief synopsis of the more detailed information contained in the Feasibility Report. Definition "System" means the water supply, treatment and distribution system owned and operated by the Village. The System does not include any component for the collection, treatment or disposal of sanitary sewage. Sewage service to the Village is provided by Loxahatchee River Environmental Control District. -13- Description of Eidst Water Syste m Service Area and Physical Plant The area presently served by the System includes the entire geographical area of the Village plus certain parts of the Town of Jupiter, Florida and of unincorporated Palm Beach and Martin Counties as well as all of the municipality of Jupiter Inlet Colony. Maps showing the System service area are included in the Feasibility Report. The System as of September 30, 1997, provided service to approximately 1,898 retail accounts (3,127 meter equivalents) within the Village, approximately 583 customers (900 meter equivalents) in the Town of Jupiter, Florida, approximately 237 retail accounts (296 meter equivalents) in the municipality of Jupiter Inlet Colony and approximately 1,946 retail accounts (2,990'meter equivalents)in unincorporated Palm Beach and Martin Counties. The Village has one small bulk water customer.' The System service area consists of approximately 5 square miles, an area significantly larger than the geographical area of the Village itself. The Village has obtained licenses from the Town of Jupiter, the municipality of Jupiter Inlet Colony, Martin County and Palm Beach County which authorize the Village to use road and other public rights -of -way and easements for water pipes, mains, pumps other facilities which are owned and operated by the Village for the purposes of serving the customers of the Water System. The licenses from Jupiter Inlet Colony expire in May, 2000, from Jupiter expire in July, 2003 and from Martin County expire in August, 2008. Some of the licenses from Palm Beach County have no stated expiration date and some have already expired. The licenses from Jupiter and Jupiter Inlet Colony provide that upon expiration of the license Jupiter and /or Jupiter Inlet Colony have the right to purchase the system assets located within the respective jurisdictions for a price to be determined by arbitration. In the event the system assets were to be purchased by one of these municipalities, while it cannot be predicted what the purchase price might be, the Net Revenues derived from the relevant service area would likely be a factor in determining the purchase price. However, in the event system assets located in Jupiter or Jupiter Inlet Colony were purchased by these municipalities, this could have a material adverse effect upon the financial condition of the Water System. In the event Jupiter were to purchase the Village assets located within Jupiter, it would be possible for Jupiter to connect this area with the Town of Jupiter water system although the cost of the required interconnecting piping would be significant. It is possible that Jupiter will purchase the Village assets upon expiration of the license. However, the areas in Martin County, Palm Beach County and Jupiter Inlet Colony served by the Village are geographically remote from any other water system, and it would be extremely expensive to construct an alternate system to serve any of these areas. For this reason, it is unlikely that the licenses in Martin County, Palm Beach County and Jupiter Inlet Colony will not be renewed or that the Village would not continue to provide water service to these areas under some alternate arrangement. The System consists of raw water supply wells, a water treatment plant ( "WTP "), ground storage tanks, high service pumps, raw water supply mains, water transmission and distribution lines and fire hydrants. Water Supply The raw water supply for the System is regulated by the South Florida Water Management District ( "SFWMD "), a governmental agency created by the State of Florida, which has the responsibility of . managing water resources within its boundaries. SFWMD has issued the Village a consumptive use permit which authorizes the Village to withdraw 4.40 million gallons- per -day ( "MGD ") from the Floridan aquifer and 2.70 MGD from the surficial acquifer (1.80 MGD from the surficial aquifer in the east wellfield and 0.90 MGD from the surficial aquifer in the west wellfield). During the twelve -month period ended September 30, 1997, daily average withdrawal was 1.2 MGD from the surficial aquifer. No withdrawals have been made from the Floridan aquifer as those wells will provide water to the reverse osmosis water treatment plant to be constructed as part of the 1998 Project. The consumptive use permit will expire on February 15, 2006. The Village and the Town of Jupiter, Florida have entered into a bulk sale contract pursuant to which the Village agrees to purchase from the Town of Jupiter, Florida a minimum of 1.5 MGD (average day) and the Town of Jupiter agrees to sell the Village up to a maximum daily amount of 2.25 MGD. Although, as described herein under the caption "Litigation," the rate charged by Jupiter to the Village is in dispute, the Village continues to purchase and the Town of Jupiter continues to sell 1.5 MGD of water. The bulk sale contract is scheduled to expire in 2007. Capacity. The total withdrawal capacity of the surficial wellfield is rated at 7.07 MGD. With the largest well out of service, the Village has a withdrawal capacity of 5.63 MGD, which still exceeds the permitted withdrawal -14- capacity. This provides the Village with substantial operational flexibility. The capacity of each of the Floridan wells to service the reverse osmosis treatment plant will be 1.7 MGD. In the Feasibility Report, the Consulting Engineers conclude that the existing surficial well capacity and the proposed Floridan well capacity along with the purchases of water from the Town of Jupiter is sufficient to meet the Village's demand beyond the fiscal year 2002, which is the forecast period reflected in the Feasibility Report. Condition. According to the Feasibility Report, the Consulting Engineers have concluded that the System facilities appear to be in average to good condition, and assuming that the Village continues to perform renewals, replacements, and capital improvements to the facilities as discussed in the Feasibility Report, it can be reasonably expected that the facilities will meet the capacity requirements of the System beyond the fiscal year 2002, which is the forecast period reflected in the Feasibility Report. System Operatoons The Village has created a Water Department, which is operated under the direction of a Water System Manager. The Water Department consists of approximately 14 employees. Thomas C. Hall is the Water System Manager of the Village. Mr. Hall has served as Water System Manager since August, 1987. Mr. Hall has been in Public Utilities /Public Works for 19 years, beginning in 1978. Most recently, he was Chief Operator of Acme Improvement District. He is a member of the American Water Works Association and the Florida Water and Pollution Control Association. Rates Rates for the usage of the products and services of the System are set by resolution adopted by the Council, and are not subject to regulation by the Florida Public Service Commission or any other administrative agency. Under Florida law, a municipality operating a water utility outside the boundaries of the municipality may charge consumers outside the boundaries a surcharge of not more than 25 % of the rates, fees and charges to customers inside the boundaries of the municipality. On November 13, 1997, the Village implemented a rate increase. Information concerning the current water rates is contained in Appendix B, the Feasibility Report. The Village charges a minimum monthly service charge that ranges from $16.80 to $840 per month depending upon the size of meter employed at each particular connection. These fees include a surcharge was implemented on January 1, 1996 in order to accommodate increases in rates caused by an increase in water rates to the Village from the Town of Jupiter, Florida. As further discussed herein under the caption "Litigation," in the event the Village is successful in overturning the water rate increase imposed by the Town of Jupiter, then the increased surcharge shall be returned, in accordance with the provisions of the ordinance which imposed the surcharge, to the customer that paid the surcharge and the rate surcharge will no longer be imposed. In addition to the fees described above, the Village charges a capital improvement charge ( "Impact Fee ") upon each new connection to the System. The capital improvement charge is intended to cover the cost of the capacity of the System which is utilized by such connection. Water capital improvement charges are $1,500.00 for each new connection other than on Jupiter Island, and are $3,810.00 for each connection on Jupiter Island due to the recognized increased capital costs associated with a subaqueous crossing required to service only this area. The capital improvement charges may lawfully be used to pay debt service on the indebtedness of the Village incurred to finance certain improvements and expansions to the System. The capital improvement charges are pledged to the repayment of the Series 1998 Bonds only to the extent described herein under "Security and Sources of Payment - Impact Fees." -15- The Village also charges customers fees for certain specifically requested services or needs. Examples of these fees include meter installation charges, turn -on fees and meter testing fees. Generally, these fees are designed on a cost recovery basis based upon the specifics of the services requested. Further information concerning the rate structure of the Village, including major customers and a comparison with rates charged by other Florida governmental utilities is contained in the Feasibility Report contained in Appendix B. Historic, Budgeted and Projected Operskting Results and Deht Service Coverage The tables set forth below summarize the historic, budgeted and projected operating results and debt service coverage for the System for the Fiscal Years ended September 30, 1993 through 2002. The results for the Fiscal Years ended September 30, 1993 through 1996 are derived from the Village's audited financial statements and other information made available by the Village. The information for the Fiscal Year ended September 30, 1997 is derived from unaudited financial statements and other financial information provided by the Village. The unaudited financial statements include all adjustments which the Village considers necessary for a fair presentation of the financial position and the results of operations for such period. Information for the Fiscal Year ending 1998 is based upon the adopted budget of the Village. For further information concerning the projected operating results and the assumptions related thereto, see the Feasibility Report included herein as Appendix B. These tables should be read in conjunction with the financial statements, related notes, and other financial information included in this Official Statement and its Appendices. [REMAINDER OF PAGE INTENTIONALLY BLANK] -16- Village of Tequesta, Florida Water System Historical Operating Results Line Fiscal Yew Ended September 30, (1) No. Description 1993 1994 1995 1996 1997 (2) SYSTEM REVENUES 1 Water Sales - Existing Rate (3) 52,339,889 (2,467,885 $2,552,930 $2.801,711 (2,524,768 2 Water Surcharge (4) 0 0 145,37) 260,538 267,856 3 Total Sales Revenue 2,339,889 2,467,885 2,698,301 3,062,249 2,792,624 Other System Revenues 4 Connection Charges 15,677 17,162 14.657 12,605 17,402 5 Fire Hydrant Rental 13,300 13,900 13,900 13,900 13,896 6 Other Income 19.388 7,540 6,142 6,328 4,510 7 Miscellaneous Revenue 50 3.431 5.993 1,784 903 8 Total Other Utility Revenue 48,615 44.033 40,592 34,617 36,714 9 Total System Revenues 2,388.504 2,511,918 2,738,893 3,0%,866 2,829.338 EXPENDITURES (5) Pumping and Storage (Water Treatment) 10 Personal Services 5149.180 $164,112 5195,094 $217.056 5207,320 I Water Purchases (3) 667, 950 669,033 667.950 667,950 667.950 12 Utility Services 86,243 86,892 89.973 90.671 93,313 13 Insurance 16,332 23,619 28,369 34,029 38.0 ?0 14 Repairs and Maintenance 69,443 64,448 144.227 103,841 %,067 15 Chemicals 26.525 25,955 39,241 38,992 32.316 16 Other Expenses 28,849 19.543 20,888 27,722 23.849 17 Total Pumping and Storage 1,044.522 1,053,602 1,185.742 1,180,261 1,158,885 Water Distribution IS Personal Services 192.676 203,638 221.819 243.803 225,135 19 Insurance 10.494 9,865 10.825 8,332 7,649 20 Water System Maintenance I&194 17,925 19,305 )4.905 19,045 21 Other Expenses 12.787 14.490 15,712 15.656 20.557 22 Total Water Distribution 234,151 245,918 267.661 282.696 272.386 Administration and Office (6) 23 Persona) Services 182,795 178,984 188,964 203,404 172,178 24 Engineering Services 10.466 23,755 49,860 31,150 36.678 25 Acctng. /Auditing Services 20.758 24,066 29.441 19,577 33,772 26 Other Expenses 71,631 %,625 163.471 190.572 623,611 27 Total Administration and Office 285,650 323,430 431,736 444,703 866,239 28 Total Operating Expenses 1,564,323 1,622,930 1,885.139 1,907,660 2,297,510 29 Interest Income (7) 178.110 178,189 209.369 187.056 114,411 30 Total Other Income 178,110 178,189 209,369 187,056 114.411 31 Net Revenues 1,002,291 1,067,157 1.063.123 1,376,262 646,239 Debt Service 32 Series 1983 Bonds (8) 253,991 315,752 236,122 212,030 0 33 Total Debt Service 253,991 315.752 236.122 212,030 0 Debt Service Coverage 34 Estimated 3.95 3.38 4.50 6.49 N/A 35 Required 1.25 1.25 1.25 1.25 N/A Less Other Required Transfers 36 Renewal and Replacement Fund Transfer (9) 118,728 129,331 134,303 147.413 164,1% 37 Administrative Management Fees 121,900 132,173 140.765 145,760 130,135 Amounts Available for Capita Outlay, Additional 38 Improvements and Other Lawful Purposes $507,672 $490.899 5551,731 $871,059 $331. (1) Unless otherwise noted, amounts shown derived from information provided by the Village and included in the Villages Comprehensive Annual Financial Report for each fiscal year represented. (2) Amounts shown represent unaudited figures as supplied by the Village. (3) Amounts shown do not include revenues associated with increase in rates to compensate for Town of Jupiter bulk me increase. Conversely, the offsetting expense associated with the bull, rate increase has not been reflected. (4) Outside City surcharge implemented by the Village on January 12, 1995. (5) Amounts shown do not include depreciation or amortization expenses. (6) Administration and Office ezpetises are net of Administration Management and General Fund Repayment Fees which in order to be consistent with Bond Resolution provisions, are not considered as an operating expense of the System. (7) Amounts shown include interest earnings on balances in unrestricted funds (i.e.. Operating Account, Renewal and Replacement Fund, etc.) and does not include earnings on monies held in escrow associated with Town of Jupiter bulk rate increase or Treasury Bonds purchased an association with series 1983 Bonds (reference footnote No. 8). (8) Annual debt service amounts shown are net of aggregate purchase price of $980,000 of U.S. Treasury Bonds whereby the purchase price of the Treasury Bonds is added to the annual gross debt smite and interest earnings are subtracted from gross debt service in order to derive debt senior coverage ratios. (9) Amounts shown reflect transfer amount of 3.0% of previous years gross revemues which although was not variderred during historical period, for presentation purposes, reflects foecasted transfer anticipated to be required under flow of funds requirement associated with the anticipated issuance of the Series 1997 Bonds. -17- Village of Tequesta, Florida Water System Page I of 2 Projected Operating Results and Debt Coverage Analysis Line Fiscal Year Ending September 30 No. 1998 1999 2000 2001 2002 Operating Revenues I Water Sales - Existing Rate (1 x2) $2,856,094 $3,042,171 $3,055,473 $3,068,268 $3,080.773 2 Water Surcharge (1)(3) 276,479 295,857 298,053 300,048 302,044 3 Rate Stabilization Transfer (to) /from 0 (190.000) (90,000) 30,000 94.000. 4 Total Sales Revenue 3,132,572 3,148,027 3,263,527 3,398,316 3,476.817 Other System Revenues 5 Interest Income (4) 17,149 32,385 41,751 43,742 40,668 6 Meter Installation Charges 4,995 7,072 4,624 4,455 4,320 7 Fire Hydrant Rental 13,900 13,900 13,900 13,900 13,900 8 Other Income 3,000 3,033 3,055 3,076 3,097 9 Miscellaneous Revenue 1,000 1,000 1,000 1,000 1.000 10 Total Other Utility Revenue 40,044 57,390 64,330 66.174 62.985 11 Total System Revenues $3,172,616 $3,205,418 $3,327,857 $3,464.489 $3,539,802 Operating Expenses (5) Pumping and Storage (Water Treatment) (6) 12 Personal Services $270,561 $317,360 $332,460 $348,301 $364.918 13 Bulk Water Purchased (5x7) 667,950 667,950 667,950 667,950 667.950 14 Utility Services 110,800 116,290 141,011 188.089 195,962 15 Insurance 36,050 37,132 41,995 50,393 51.905 16 Repairs and Maintenance 83.500 85,965 88,504 91,118 93,810 17 Chemicals 44,836 47,058 57,534 77,595 80,717 18 Other Expenses 79.200 81,439 86,244 89.617 92.311 19 Total Pumping and Storage 1,292,897 1,353,193 1,415,698 1,513,062 1,547,572 Water Distribution 20 Personal Services 255,501 270,831 284,373 298,591 313,521 21 Insurance 11,891 12,248 12,615 12,994 13,383 22 Water System Maintenance 20,000 20,600 2118 21,855 22,510 23 Other Expenses 40,606 41,634 42.693 41783 44,905 24 Total Water Distribution 327,998 345,313 360,899 377,222 394,319 Administration and Office 25 Personal Services 193,309 204,908 215,153 225,911 237,206 26 Engineering Services 27,000 27,810 28,644 29,504 30.389 27 Acct/Auditing Service 20,000 20,600 21,218 21,855 22.510 28 Contingency Allowance (8) 46,677 44,942 48,046 50,725 52,178 29 Other Expenses 305,847 123,470 (9) 102,755 105,426 108.173 30 Total Administration and Office 592,833 421,729 415,816 433,419 450,456 31 Total Operating Expenses $2,213,728 $2,120,235 $2,192,412 $2,323,704 $2,392,347 32 Net Revenues $958,887 $1,085,183 $1,135,445 $1,140,785 $1,141,455 Debt Service 33 Series 1998 Bonds $263,706 $455,554 $515,454 $516,910 $518,927 Coverage 34 Estimated 3.64 2.38 2.20 2.21 121 35 Required 1.20 1.20 1.20 1.20 1.20 Less Other Required Transfers 36 Debt Service Coverage (10) 52,741 91,111 103,091 103,382 103,785 37 Debt Service Reserve Fund Transfer (11) 0 0 0 0 0 38 Renewal and Replacement Fund Transfer (12) 117,800 158,631 169,771 170,893 171.724 39 Administration Management 166,795 171,799 257,952 263,260 268,726 Excess Revenues Above Required Expenses 40 And Transfers Per Bond Resolution (13) $357,845 $208,089 $89,177 $86.340 $84,290 Footnotes Page 2 of 2. -1� Page 2 of 2 Village Of Tequesta, Florida Water System Projected Operating ResultS And Debt Coverage Ana y& Footnotes 1. Amounts shown based on rates as adopted by the Village Council as codified by Ordinance. The rate revenues also include -the application of the adopted 4.0% rate increase as referenced in the Rate Ordinance to become effective October 1, 1998. 2. Amounts shown do not include any revenues associated with the bulk water surcharge currently being charged by the Village to fund the potential liability in a contended bulk water rate increase implemented by the Town of Jupiter which is subject to litigation between the Village and the Town. Reference the Official Statement for additional information. 3. Reflects revenues derived from the application of the 25% outside City surcharge applied to customers located outside the City as allowed by Chapter 180.191, Florida Statutes. 4. Amounts shown reflect interest earnings on unrestricted funds/ amounts do not include earnings on Water Capital Improvement Charges or Construction Fund balances which remain in such funds. 5. Amounts shown do not include depreciation and amortization expenses which are non -cash in nature and not included as an operating expense pursuant to the Bond Resolution. 6. Amounts shown include incremental expenses associated with the addition of the Reverse Osmosis Water Treatment Facility assumed to commence operation in June 2000. _ 7. Amounts reflect cost of bulk water purchases from the Town of Jupiter. Amounts based on rate of 51.22 per thousand gallons which is less than the rate being billed by the Town which is the subject of litigation between the two entities. Any increase in the rate will be offset by a concurrent or like kind increase in rate revenue (reference footnote 2). 8. Amount shown reflects a contingency allowance to account for any unknown or unplanned expenditures which may arise periodically during the forecast period. 9. Reduction in operating expenses represents reduced litigation costs which have been identified as an operating expense associated with the settlement of the issues subject to litigation between the Village and the Town of Jupiter. 10. Amount shown equal to 20% of the Debt Service Requirement for each respective fiscal year. 11. No deposits to the debt service Reserve Account assumed during the forecast since the Village anticipates purchasing a Reserve Account Letter of Credit to meet this financial obligation required by the Bond Resolution. 12. Amounts shown equal to the Renewal and Replacement Fund requirement as defined in the Bond Resolution which was assumed to equate to 5% of the Gross Revenues (without regard to Rate Stabilization Fund transactions) received in the preceding fiscal year. 13. Excess revenues as defined for Rate Covenant purposes; amounts do not include any additional funds associated with the receipt of Water Capital Improvement Charges. —10_ THE 1998 PROJECT General. A portion of the proceeds of the Series 1998 Bonds are being used to construct capital improvements to the System (the "1998 Project "). The 1998 Project consists of certain improvements, additions and extensions to the System for the purpose of providing improved water service to the existing and anticipated customers of the System. The estimated cost of the 1998 Project is $7,873,000, of which approximately $7,548,564 is being financed with proceeds of the Series 1998 Bonds, with the remaining $324,436 being derived from earnings on invested funds. The major components of the 1998 Project as presently envisioned are briefly discussed below, but the scope of the 1998 Project is subject to change by the Village. Further information concerning the 1998 Project is contained in the Feasibility Report. Reverse Osmosis Water Treatment Plan . The 1998 Project includes the construction of a reverse osmosis water treatment plant, with an initial capacity of 1.2 MGD. The reverse osmosis water treatment plant is designed so that its capacity can be increased in the future. The plant includes a building, piping, an emergency generator, well equipment and other miscellaneous items. The total cost of water treatment plant is estimated to be $6,473,000. Reverse Osmosis Well No. 2 . The initial capacity of the 1.2 MGD reverse osmosis treatment plant requires the construction of two (primary and back -up) Floridan raw water supply wells. One of the wells has already been completed, and the second well is included in.the 1998 Project. The estimated cost for well No. 2 is $485,000. Reverse Osmosis Reject Disposal Main A by- product of the reverse osmosis treatment plant is referred to reject or brine. Reject or brine is water containing a high concentration of dissolved solids which were extracted from raw water during the reverse osmosis process. The 1998 Project includes the construction of an open water discharge main in the Intracoastal Waterway in the area of Jupiter Inlet. The reject main will be capable of handling the potential ultimate reject brine flow produced by treating 3.6 MGD of raw water at the reverse osmosis treatment plant. Total cost of the reject main is $688,000. Remote Telemetry The 1998 Project includes a new remote telemetry system in order to more effectively monitor the water treatment plants, water supply wells and remote pressure points by the Village's Water Department staff, at a cost of $227,000. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -20- DEBT SERVICE REQUIREMENTS The following table sets forth the scheduled annual debt service requirements for the Series 1998 Bonds. Year Ending March 1 (inclusive) Principal Interest Total 1998 $ $ $ 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Total $ $ $ e -21- FLOW OF FUNDS The Resolution establishes the following funds and accounts in addition to the Construction Fund: (a) the Revenue Fund; (b) the Operation and Maintenance Fund; (c) the Debt Service, and therein a Principal Account, an Interest Account, a Bond Amortization Account and a 1998 Reserve Subaccount; (d) the Renewal and Replacement Fund; (e) the Rate Stabilization Fund; and (f) the Impact Fee Fund. All Gross Revenues will be collected by the Village and deposited as received into the Revenue Fund. Moneys on deposit in the Revenue Fund are applied on a monthly basis pursuant to the Resolution in the following order of priorities: (1) to the payment of Operating Expenses, (2) for deposits to the Principal Account, Interest Account and the Bond Amortization Account to provide for payment of principal and interest on the Series 1998 Bonds; (3) for required deposits to the 1998 Reserve Subaccount; (4) to make a deposit to the Rebate Fund in connection with any arbitrage rebate obligation of the Village; (5) to the payment of debt service for any Subordinated Indebtedness; (6) for required deposits, if any, to the Renewal and Replacement Fund; (7) to make a deposit into the Rate Stabilization Fund at the Village's option; and (8) for any lawful purpose. See "APPENDIX A - Form of the Resolution" for further information. LITIGATION General. In the opinion of Jones, Foster, Johnston & Stubbs, P.A., Village Attorneys, except as described below, there is no litigation or other proceeding pending, or to their knowledge, threatened, in any court or other tribunal, state or federal, (i) restraining or enjoining or seeking to restrain or enjoin the issuance, sale, execution or delivery of any of the Series 1998 Bonds, (ii) in any way questioning or affecting the validity of any provision of the Series 1998 Bonds, the Resolution, or the Bond Purchase Contract between the Village and the Underwriter, (iii) in any way questioning or affecting the validity of any of the proceedings relative to the imposition of charges for the use of the System, or the enforceability of the pledge thereof in favor of the Series 1998 Bonds, or the proceedings or authority for the issuance, authorization, sale, execution or delivery of the Series 1998 Bonds, or of any provision, program, or transaction made or authorized for their payment, (iv) questioning or affecting the organization or existence of the Village or the incumbency of any of its officers to their respective offices, (v) in any way questioning or affecting the ownership or operation of the System by the Village; or (vi) in which an adverse decision would materially and adversely affect the financial condition of the System or the ability of the Village to satisfy its obligations under the Resolution. There are, however, two judicial proceedings between the Village and the Town of Jupiter, as follows: Village of Tequesta v. Town of Jupiter As described elsewhere in this Official Statement, in 1976, the Village entered into a Bulk Sale Contract with Tri- Southern Utilities Company, Inc. Under the Bulk Sale Contract, the Village agreed to purchase and Tri - Southern agreed to sell a minimum of 1.5 MGD (expressed on an annual average basis) of finished (i.e., potable) water at a fixed price of 60 cents per thousand gallons. In 1978 Tri- Southern assigned to the Town of Jupiter its interest in the Bulk Sale Contract. In consideration for the Village's approval of the assignment to the Town of Jupiter, the Town of Jupiter and the Village entered into an agreement modifying the Bulk Sale Contract. Under the Bulk Sale Contract, the Village agrees to purchase a minimum of 1.5 MGD (expressed on an annual average basis) of fmished water, and the Town of Jupiter agrees to sell up to a maximum of 2.25 MGD of finished water, at rates established pursuant to the Bulk Sale Contract. The Bulk Sale Contract terminates in 2007. In 1995 a rate hearing was conducted by the Town Council of the Town of Jupiter and the water rate charged the Village pursuant to the Bulk Sale Contract was changed from $1.22 to $2.40 per thousand gallons. This rate increase was made effective January 1, 1996. -22- On November 21, 1995, the Village filed a complaint against the Town of Jupiter, seeking damages for breach of contract, declaratory relief and to enjoin Jupiter from charging a rate which the Village considers violative of the Bulk Sale Contract. Paragraph 5 of the Bulk Sale Contract provides that the Town of Jupiter has the right to revise the rate charged the Village provided that any proposed revision in rates shall be subject to rate proceedings and a public hearing, held as far as possible in accordance procedures then being followed by the Florida Public Service Commission in like matters. The Bulk Sale Contract provides that the Town of Jupiter's decision regarding matters of rates shall be based upon considerations of the costs of operating its water system, with requirements to maintain adequate coverage on its indebtedness then outstanding and relating directly thereto, in order to preserve and protect its credit, standing in the financial community, and to properly equate charges for services among classes of customers. The Town of Jupiter and the Village agreed that the capital costs of providing service to the limits of 2 MGD under the Bulk Sale Contract were established and are non - variable. In any proceeding involving a request for an increase in rates under the Bulk Sale Contract the Town of Jupiter is obligated to present a comparison between the cost of bulk sale service furnished during the first six months of the agreement with a like six month period immediately preceding the application for a rate increase. Such comparison is required to identify and compare the cost of power, chemicals and labor, and such elements are deemed to be the primary criteria upon which any rate changes is based. This matter went to trial before the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, and on August 18, 1997 a final judgment was entered by the Circuit Court, finding in favor of the Village as follows: (a) that the rate imposed by the Town of Jupiter effective January 1, 1996 is quashed and the pre- existing rate of $1.22 per thousand gallons remains in effect; (b) that the Town of Jupiter shall perform.in accordance with terms of the Bulk Sale Contract; (c) that the Town of Jupiter is enjoined from imposing any rate increase not in accordance with the Bulk Sale Contract and from enforcing the Town of Jupiter Town Council's decision imposing on the Village the rate effective January 1, 1996; and (d) that the Town of Jupiter's counterclaim seeking damages from the Village is denied. In the final judgment, the court found that under the plain meaning of the contract, the Town of Jupiter must compare the cost of power, chemicals and labor and treat such as the primary criteria for increasing rates. It was also found that the Town of Jupiter could not include system -wide capital and debt service costs in its rate calculation. Subsequent to entry of the final judgment in favor of the Village, the Town of Jupiter has filed an appeal from such decision in the District Court of Appeals for the Fourth Judicial District of Florida. No decision has been rendered in this appeal, and it is not possible to predict when a decision might be rendered. Although it is not possible to predict how the appellate court will rule, it is the position of Jones, Foster, Johnston & Stubbs, P.A., the Village Counsel, that the Village is likely to prevail on appeal. As noted elsewhere in this Official Statement and in the Feasibility Report, since January 1, 1996 the Village has included a surcharge in water rates in an amount sufficient to provide funds to pay the Town of Jupiter for bulk purchases at the rate that Jupiter has attempted to impose. In the event the Village ultimately prevails in the rate dispute, the amount of the surcharge collected, less the Village's fees and costs incurred in connection with this proceeding, will be returned to the customers from whom the surcharges were collected in accordance with the provisions of the ordinance imposing the same. In the event that the Town of Jupiter should prevail in the litigation, then the amount that has been collected would be used, to the extent necessary, as ordered by the Court, to make payments to the Town of Jupiter, and the surcharge would remain in effect for as long as might be necessary to enable the Village to continue to pay for water from the Town of Jupiter. Notwithstanding the foregoing, the terms of the Bulk Sale Contract do permit the Town of Jupiter to revise rates in accordance with the contract. Therefore, it is possible that even if the Village prevails in the litigation, the Town of Jupiter will be able to implement some form of rate increase. The amount of such increase cannot be predicted with certainty. Town of Jupiter v the of Tequesta Itl 1997 the Town of Jupiter filed a complaint against the Village in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida. the Town of Jupiter requested that the Court enjoin the Village from constructing the reverse osmosis water treatment facilities -23- included in the 1998 Project without obtaining the Town of Jupiter's consent. A final summary judgment was entered by the Circuit Court on July 29, 1997, finding in favor of the Village, and finding that the Village may construct such a facility as it deems necessary to service its customers and that the Town of Jupiter has no standing to challenge those decisions. The Town of Jupiter filed an appeal of this decision on August 12, 1997, and no final decision has been rendered. Although it is not possible to predict how the appellate court will rule, it is the position of the Village Counsel that the Village is likely to prevail on appeal. In the event that the Series 1998 Bonds are issued and the proceeds thereof are spent constructing the reverse osmosis water treatment plant included in the 1998 Project and the Town of Jupiter should thereafter prevail and obtain a decision holding that the Village is not authorized to construct the water treatment plant, the Village would nevertheless be required to continue making debt service payments on the Series 1998 Bonds. The Feasibility Report addresses this possibility by utilizing an assumed growth rate in the financial projections that is not predicated on the existence of the reverse osmosis water treatment plant. The Feasibility Report also includes rate projections that are based upon the low growth scenario and that include the debt service requirements for the Series 1998 Bonds. Therefore, in the event that the Village should complete construction of the reverse osmosis water treatment plant and then be unable to use the same, this would not be expected to have a material and adverse result on the projected financial results of the System from that set forth in the Feasibility Report. LEGAL MATTERS Certain legal matters incident to the authorization, issuance and sale of the Series 1998 Bonds are subject to the approval of Moyle, Flanigan, Katz, Kolins, Raymond & Sheehan, P.A., West Palm Beach, Florida, Bond Counsel, whose approving opinion will be available at the time of issuance of the Series 1998 Bonds. A form of the opinion of Bond Counsel is included herein in Appendix E. Certain legal matters will be passed upon for the Village by Jones, Foster, Johnston & Stubbs, P.A., West Palm Beach, Florida, Village Attorneys. Certain legal matters will be passed upon for the Underwriter by its counsel, Carney Legal Group, P.A., Boynton Beach, Florida. The fees of Bond Counsel and counsel for the Underwriter are contingent upon issuance of the Series 1998 Bonds. TAX EXEMPTION The Internal Revenue Code of 1986 (the "Code ") imposes certain requirements that must be met subsequent to the issuance and delivery of the Series 1998 Bonds for interest thereon to be and remain excluded from gross income for Federal income tax purposes. Noncompliance with such requirements could cause the interest on the Series 1998 Bonds to be included in gross income for Federal income tax purposes retroactive to the date of issue of the Series 1998 Bonds. The Village has covenanted in the Resolution to comply with each requirement of the Code necessary to maintain the exclusion of the interest on the Series 1998 Bonds from gross income for Federal income tax purposes pursuant to Section 103(a) of the Code. In the opinion of Bond Counsel, under existing law, and assuming continuing compliance with the aforementioned covenant, interest on the Series 1998 Bonds is excluded from gross income for federal income tax purposes. Bond Counsel is also of the opinion that the Series 1998 Bonds are not "specified private activity bonds" within the meaning of Section 57(a)(5) of the Code and, therefore, interest on the Series 1998 Bonds will not be treated as a preference item for purposes of computing the alternative minimum tax imposed by Section 55 of the Code. Interest on the Series 1998 Bonds owned by corporations will, however, be taken into account in determining the alternative minimum tax imposed by Section 55 of the Code on seventy-five percent (75%) of the excess of adjusted current earnings over alternative minimum taxable income (determined without regard to this adjustment and the alternative tax net operating loss deduction). The Village has designated the Series 1998 Bonds as "qualified tax- exempt obligations" for purposes of Section 265(b)(3) of the Code and has represented that the aggregate amount of tax- exempt obligations which the Village reasonably anticipates issuing during the calendar year 1998 will not exceed $10 million. Based upon such representation, Bond Counsel is of the opinion that, under existing statutes, the Series 1998 Bonds are qualified tax- exempt obligations. -24- Bond Counsel is also of the opinion that the Series 1998 Bonds and interest thereon are exempt from all intangible personal property taxes presently imposed by the State of Florida. Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Series 1998 Bonds may affect the tax status of interest on the Series 1998 Bonds. No assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not contain provisions which could directly or indirectly reduce the benefit of the exclusion of the interest on the Series 1998 Bonds from gross income for federal income tax purposes. Although Bond Counsel has rendered an opinion that interest on the Series 1998 Bonds is excluded from gross income for federal income tax purposes, a Bondholder's federal, State or local tax liability may otherwise be affected by the ownership or disposition of the Series 1998 Bonds. The nature and extent of these other tax consequences will depend upon the Bondholder's other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the Series 1998 Bonds should be aware that (1) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Series 1998 Bonds or, in the case of a financial institution, that portion of a holder's interest expense allocated to interest on the Series 1998 Bonds, (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent (15 %) of the sum of certain items, including interest on the Series 1998 Bonds, (iii) interest on the Series 1998 Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (iv) passive investment income, including interest on the Series 1998 Bonds, may be subject to Federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than twenty-five percent (25 %) of the gross receipts of such Subchapter S corporation is passive investment income, and (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the Series 1998 Bonds. Bond Counsel has expressed no opinion regarding any such other tax consequences. RATINGS Standard & Poor's, a division of The McGraw -Hill Companies, Inc., and Moody's Investors Service are expected to assign their municipal bond ratings of and , respectively, to the Series 1998 Bonds, with the understanding that upon delivery of the Series 1998 Bonds, a policy insuring the payment when due of the principal of and interest on the Series 1998 Bonds will be issued by Ambac Assurance Corporation. The ratings assigned to the Series 1998 Bonds by any rating agency reflect only the views of the rating agency, and an explanation of the significance of the ratings may be obtained only from the rating agency. The ratings are not a recommendation to buy, sell or hold the Series 1998 Bonds and there is no assurance that such ratings will remain in effect for any given period of time or that they will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 1998 Bonds. Neither the Underwriter nor the Village have undertaken responsibility to bring to the attention of the holders of the Series 1998 Bonds any proposed revision or withdrawal of the ratings of the Series 1998 Bonds, or to oppose any proposed revision or withdrawal. UNDERWRITING The Underwriter has agreed, subject to certain customary conditions precedent, to purchase the Series 1998 Bonds from the Village at a price of $ (representing the original principal amount of the Series 1998 Bonds less original issue discount of $ and less underwriter's discount of $ ), plus accrued interest to the date of delivery of the Series 1998 Bonds, and to reoffer the Series 1998 Bonds at the prices or yields shown on the cover hereof. If obligated to purchase any of the Series 1998 Bonds, the Underwriter will be obligated to purchase all of the Series 1998 Bonds. The Series 1998 Bonds may be offered and sold to certain dealers, dealer - banks, and banks acting as agent (including underwriters and other dealers depositing the Series 1998 Bonds into -25- investment trusts) and others at prices lower than the public offering price stated on the cover hereof, and such public offering prices and other selling terms may be changed from time to time by the Underwriter. FINANCIAL STATEMENTS Excerpts of the Village's Audited General Purpose Financial Statements for the year ended September 30, 1996, and the report of Nowlen, Holt & Miner, P.A., independent certified public accountants, in connection therewith, are included in Appendix C. FINANCIAL ADVISOR The Village has retained Florida Municipal Advisors, Inc., Palm Beach Gardens, Florida, as financial advisor with respect to the authorization and issuance of the Series 1998 Bonds. The Financial Advisor is not obligated to undertake and has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. Florida Municipal Advisors, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. The Financial Advisor will receive a fee in connection with the issuance of the Series 1998 Bonds (which includes a broker's commission in connection with the investment of certain of the Series 1998 proceeds), and the fee is contingent upon issuance of the Series 1998 Bonds. BOND FEASIBILITY REPORT The Bond Feasibility Report included herein in Appendix B was prepared by Reese, Macon & Associates, Inc., Lake Worth, Florida and Public Resources Management Group, Inc., Maitland, Florida. It has been included herein in reliance upon said firm as experts in the field of water utilities. CONTINUING DISCLOSURE Pursuant to the Resolution, the Village has covenanted and agreed that, so long as any of the Series 1998 Bonds remain outstanding, it will provide, in a manner consistent with Rule 15c2 -12 of the Securities and Exchange Commission (the "Rule ") (a) to each nationally recognized municipal securities information repository ( "NRMSIR ") and to the appropriate depository designated by the State of Florida ( "SID ") if any, (i) on or before one hundred eighty (180) days after each fiscal year of the Village ending on or after September 30, 1998 financial information and operating data of the Village for the preceding fiscal year of the type included in the Official Statement under the caption "Security and Sources of Payment" (other than any projections contained therein), and, (ii) if not submitted as part of the annual financial information pursuant to (i), above, then, when and if available, audited financial statements of the Village prepared in accordance with generally accepted accounting principles; (b) in a timely manner, to each NRMSIR or the Municipal Securities Rulemaking Board ( "MSRB "), and to the appropriate SID, if any, written notice of the occurrence of any of the following events with respect to the Series 1998 Bonds, if material: (i) principal and interest payment delinquencies; (ii) non - payment related defaults; (iii) unscheduled draws on debt services reserves reflecting financial difficulties; (iv) unscheduled draws.on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinion or events affecting the tax- exempt status of the security; (vii) modifications to rights of security holders; (viii) any call of the Series 1998 Bonds for redemption other than mandatory sinking fund redemptions of term Series 1998 Bonds; (ix) defeasances; (x) release, substitution, or sale of property securing the repayment of the securities; (xi) rating changes; and (xii) any change in the fiscal year of the Village; and (c) in a timely manner, to each NRMSIR or the MSRB, and to the appropriate SID, if any, written notice of a failure of the Village to provide the annual financial information described in (a)(i) above, on or before the date specified above, and (d) any other information required to be disclosed to any person to whom it is required to be disclosed by the Rule. The Village also covenanted to promptly provide a copy of the above information to the Paying Agent, each Insurer and the Underwriter. The Village shall provide such information to any requesting Holder of the Series 1998 -26- Bonds and any requesting beneficial owner of the Series 1998 Bonds held in street name or otherwise in a nominee capacity (the "Beneficial Owners "), provided that the Village shall be entitled to charge such requesting Holder or Beneficial Owner an amount sufficient to reimburse itself for costs incurred for copying and shipping such information. The foregoing covenants run to the benefit of the Underwriter, the Holders and the Beneficial Owners. However, failure by the Village to meet the covenants described herein shall not be deemed to constitute an event of default or a breach of any other covenant under the Resolution, and the sole remedy for such a default or breach shall be as described in the next paragraph. The Holder of any Series 1998 Bond or any Beneficial Owner may either at law or in equity, by suit, action, mandamus or other proceeding in any court of competent jurisdiction, protect and enforce any and all rights described under this caption and may enforce and compel the performance of all duties required to be performed by the Village or by any officers thereof and described under this caption. Notwithstanding the foregoing, the enforcement of the covenants contemplated hereby shall not affect the validity or enforceability of the Series 1998 Bonds. Notwithstanding any other provisions of the Resolution, the provisions of the Resolution described above may be amended only as follows: (a) the amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the Village or the type of business conducted by the Village; (b) the provisions of the Resolution, as amended, would have complied with the requirements of the Rule as in effect as of the date of issuance of the Series 1998 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the amendment does not materially impair the interest of the Holders and /or Beneficial Owners as determined by an opinion of nationally recognized bond counsel delivered to the Village, or by approving vote of the Holders or the Beneficial Owners of at least a majority of the outstanding principal amount of the Series 1998 Bonds at the time of the amendment. In the event of any amendment to the Resolution, the annual financial information provided subsequent to such amendment shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided by the Village. If the amendment affects the accounting principles to be followed in preparing financial statements of the Village, the annual financial information for the year in which the change is made must present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison must include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Village to meet its obligations. To the extent reasonably feasible, the comparison should also be quantitative. A notice of the change in the accounting principles must be sent to each NRMSIR or the MSRB and the appropriate SID, if any. ARSCELLANEOUS The summaries of and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such reference or summary is qualified in its entirety by reference to each such document, statute, report or other instrument. The information herein has been compiled from official and other sources and, while not guaranteed by the Village, is believed to be correct. So far as any statements made in this Official Statement and the appendices attached hereto involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. CERTIFICATE CONCERNING OFFICIAL STATEMENT The undersigned Village Manager of the Village does hereby certify that (i) this Official Statement has been duly authorized and approved by the Village; (ii) he has reviewed this Official Statement and that to the best of his knowledge and belief, the statements herein are true and correct; and (iii) nothing has come to his attention which would lead him to believe that the Official Statement contains an untrue statement of a material fact or omits to state -27- a material fact which should be included herein for the purposes for which this Official Statement is intended to be used, or which is necessary to make the statements contained herein, in light of the circumstances under which they are made, not misleading. VILLAGE OF TEQUESTA, FLORIDA Village Manager -28- APPENDIX A FORM OF THE RESOLUTION RESOLUTION NO. 7 -97/98 A RESOLUTION OF THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, FLORIDA, AUTHORIZING THE ISSUANCE BY THE VILLAGE OF NOT EXCEEDING $9,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF WATER REVENUE BONDS, SERIES 1998, TO PAY A PORTION OF THE COSTS OF IMPROVEMENTS TO THE VILLAGE'S WATER SYSTEM, TO FUND A DEBT SERVICE RESERVE AND TO PAY THE COSTS OF ISSUANCE OF SUCH BONDS; PLEDGING TO SECURE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON SUCH BONDS CERTAIN PLEDGED FUNDS, INCLUDING THE GROSS REVENUES OF THE VILLAGE'S WATER SYSTEM AND MONEYS ON DEPOSIT IN AND INVESTMENTS HELD FOR THE CREDIT OF CERTAIN FUNDS CREATED HEREUNDER; MAKING CERTAIN COVENANTS AND AGREEMENTS FOR THE BENEFIT OF THE OWNERS OF SUCH BONDS; PROVIDING FOR THE APPOINTMENT OF A PAYING AGENT AND REGISTRAR; PROVIDING FOR THE CREATION OF FUNDS AND ACCOUNTS; AND PROVIDING AN EFFECTIVE DATE. BE IT RESOLVED BY THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, FLORIDA: ARTICLE I GENERAL SECTION 1.01. Definitions When used in this Resolution, the following terms shall have the following meanings, unless the context clearly otherwise requires: "Accreted Value" shall mean, as of any date of computation with respect to any Capital Appreciation Bond, an amount equal to the principal amount of such Capital Appreciation Bond (the principal amount at its initial offering) plus the interest accrued on such Capital Appreciation Bond from the date of delivery to the original purchasers thereof to the Interest Payment Date next preceding the date of computation or the date of computation if an Interest Payment Date, plus, if such date of computation shall not be an Interest Payment Date, a portion of the difference between the Accreted Value as of the immediately preceding Interest Payment Date and the Accreted Value as of the immediately succeeding Interest Payment Date, calculated based on the assumption that Accreted Value accrues during any semiannual period in equal daily amounts. A -1 "Act" shall mean Part II, Chapter 166, Florida Statutes, Article VIII, Section 2(b), Constitution of the State of Florida, the Charter of the Issuer and other applicable provisions of law. "Additional Bonds" shall mean the obligations issued at any time under the provisions of Section 5.02 hereof. "Amortization Installment" shall mean a mandatory redemption amount (not including any amount due at maturity as opposed to redemption prior to maturity) designated as such by Supplemental Resolution and established with respect to any Term Bonds. "Annual Audit" shall mean the annual audit prepared pursuant to the requirements of Section 5.09 hereof. "Annual Budget" shall mean the annual budget prepared pursuant to the requirements of Section 5.06 hereof. "Authorized Depository" shall mean a qualified public depository, as defined in Chapter 280, Florida Statutes, or any successor provision thereof. "Authorized Investments" shall mean any of the following which shall be authorized from time to time by applicable laws of the State for deposit or purchase by the Issuer for the investment of its funds: (1) Federal Securities and obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. (2) Interest - bearing time deposits or savings accounts in banks organized under , the laws of the State, in national banks organized under the laws of the United States and doing business and situated in the State, in savings and loan associations which are under State supervision, or in federal savings and loan associations located in the State and organized under federal law and federal supervision, provided that any such deposits are secured by collateral as may be prescribed by law; (3) Obligations of the federal farm credit banks; the Federal Home Loan Mortgage Corporation, including Federal Home Loan Mortgage Corporation participation certificates; or the Federal Home Loan Bank or its district banks or obligations guaranteed by the Government National Mortgage Association; (4) Obligations of the Federal National Mortgage Association, including Federal National Mortgage Association participation certificates and mortgage pass - through certificates guaranteed by the Federal National Mortgage Association; (5) Securities of, or other interests in, any open -end or closed -end management type investment company or investment trust registered under the investment Company A -2 Act of 1940, 15 U.S.C. ss. 80a -1 et seq., as amended from time to time, provided the portfolio of such investment company or investment trust is limited to Federal Securities and to repurchase agreements fully collateralized by such Federal Securities and provided such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian; or (6) The Local Government Surplus Funds Trust Fund established pursuant to Part IV, Chapter 218, Florida Statutes. "Authorized Issuer Officer" for the performance on the behalf of the Issuer of any act of the Issuer or the execution of any instrument on behalf of the Issuer shall mean the Village Manager or any other person authorized by resolution of the Issuer or appointed by certificate of the Mayor to perform such act or sign such document. "Bond Amortization Account" shall mean the separate account of that name in the Debt Service Fund established pursuant to Section 4.03 hereof. "Bond Counsel" shall mean any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on obligations issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Insurance Policy" shall mean a municipal bond new issue insurance policy or policies issued by an Insurer guaranteeing the payment of the principal of and interest on any portion of the Bonds. "Bondholder" or "Holder" or "holder" shall mean any Person who shall be the registered owner of any Outstanding Bond or Bonds according to the registration books of the Issuer. "Bonds" shall mean the Series 1998 Bonds, any Additional Bonds and any Subordinated Indebtedness which accedes to the status of Bonds pursuant to Section 5.04 hereof. "Business Day" shall mean, as to any Series of Bonds, any day on which any Paying Agent for such Series is open for business. "Capital Appreciation Bonds" shall mean those Bonds so designated by Supplemental Resolution, which may be either Serial Bonds or Term Bonds and which shall bear interest payable at maturity or redemption. In the case of Capital Appreciation Bonds that are convertible to Bonds with interest payable prior to maturity or prior to redemption of such Bonds, such Bonds shall be considered Capital Appreciation Bonds only during the period of time prior to such conversion. "Clerk" shall mean the Village Clerk of the Issuer or such other person as may be duly authorized by the Clerk to act on his or her behalf. A -3 "Code" shall mean the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder, whether proposed, temporary or final, promulgated by the Department of the Treasury, Internal Revenue Service. "Construction Fund" shall mean the Construction Fund established pursuant to Section 4.03 hereof. "Consultants" shall mean the firm of water utility system consulting engineers retained by the Issuer to perform the duties of the Consultants under the provisions of this Resolution. "Cost" when used in connection with a Project, shall mean all amounts permitted to be paid by State law. "Coupon Bonds" shall mean any Bonds the interest payable on which shall be represented by bearer coupons attached thereto, and the interest on which Bonds shall be payable only upon the presentation and surrender of such coupons to the Paying Agent as they severally fall due. "Credit Bank" shall mean as to any particular Series of Bonds, the Person providing a Credit Facility as designated in the Supplemental Resolution providing for the issuance of such Bonds. Any Credit Bank must be rated in the highest short-term rating category assigned by Moody's and S &P. "Credit Facility" shall mean as to any particular Series of Bonds, a letter of credit, a line of credit or another credit or liquidity enhancement facility (other than insurance policies issued by an Insurer, Reserve Account Insurance Policies or Reserve Account Letters of Credit), as approved in the Supplemental Resolution providing for the issuance of such Bonds. "Debt Service Fund" shall mean the Debt Service Fund established pursuant to Section 4.03 hereof. "Debt Service Requirement" for any Fiscal Year shall mean the sum of: (1) The aggregate amount of interest becoming due on the Bonds, other than Capital Appreciation Bonds, during such Fiscal Year. Except as otherwise specified in this Resolution, for purposes of this definition, the interest due on any Variable Rate Bonds shall be assumed to be the greater of (a) 110% of the daily average interest rate on such Variable Rate Bonds during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Bonds shall have been outstanding, or (b) the actual rate of interest borne by such Variable Rate Bonds on the date of calculation. (2) The aggregate amount of principal becoming due on the Bonds, other than Capital Appreciation Bonds, for such Fiscal Year, whether by reason of maturity or mandatory redemption. A-4 (3) The aggregate amount of Accreted Value due on any Capital Appreciation Bonds maturing in such Fiscal Year. "Event of Default" shall mean the occurrence of any event designated as such pursuant to Section 6.01 hereof. "Expansion Facilities" shall mean improvements, extensions and additions to the System, together with all lands or interest therein, including plants, buildings, machinery, franchises, pipes, mains, fixtures, equipment and all property, real or personal, tangible or intangible, heretofore or hereafter constructed or acquired in order to meet the increased demand upon the System, whether actual or anticipated, created by new users connecting to the System. "Expansion Percentage" as applied to each Series of Bonds, shall mean a fraction having a numerator equal to that portion of the total original principal amount of all Bonds of such Series that are attributable to Expansion Facilities, if any, as shall be determined by the Consultants and set forth in the Project Certificate relating to such Series, and a denominator equal to the total original principal amount of all Bonds of such Series. The Expansion Percentage as to any Series of Bonds issued to refund other Bonds shall be the same fraction as applicable to the refunded bonds. "Federal Securities" shall mean negotiable direct obligations of the United States of America. "Fiscal Year" shall mean the period commencing on October 1 of each year and continuing through the next succeeding September 30, or such other period as may be prescribed by law as the fiscal year of the Issuer. "Governing Body" shall mean the Village Council of the Issuer or its successor in function. "Gross Revenues" shall mean all income and moneys received by the Issuer from the Rates or otherwise received by the Issuer or accruing to the Issuer in the management and operation of the System, but excluding Impact Fees. For purposes of Sections 5.02 and 5.07 hereof, Gross Revenues shall include amounts transferred from the Rate Stabilization Fund to the Revenue Fund, but if during any period of time amounts are transferred from the Rate Stabilization Fund to the Revenue Fund, then during such period Gross Revenues shall not include amounts transferred from the Revenue Fund to the Rate Stabilization Fund. "Impact Fees" shall mean all charges separately imposed by the Issuer upon new customers of the System as- a non -user capacity charge for a proportionate share of the cost of the acquisition or construction of Expansion Facilities, which are imposed by the Issuer for the purpose' of allocating to each such customer a proportionate share of the cost of the additional System capacity made necessary by the inclusion or expected inclusion of such new customers of the System, excluding those charges imposed by the Issuer on persons connecting to the System for the cost of physically connecting thereto, but only to the extent that any such fee or charge has been lawfully levied and collected by the Issuer and may under applicable law be used for the A -5 acquisition or construction of the Expansion Facilities or for Impact Fee Debt Service Components, and including any income from the investment of moneys on deposit in the Impact Fee Fund or any other moneys transferred to the Impact Fee Fund pursuant to the provisions of this Resolution. "Impact Fee Debt Service Component" for any Fiscal Year, as applied to the Bonds of any Series, shall mean the component of the Debt Service Requirement for such Series of Bonds, initially set forth in the Project Certificate and thereafter, from time to time as necessary, as determined by the Issuer, which shall be determined by multiplying the Debt Service Requirement for such Series of Bonds by the Expansion Percentage. "Impact Fee Fund" shall mean the Impact Fee Fund established pursuant to Section 4.03 hereof. "Insurer" shall mean such Person as shall be in the business of insuring or guaranteeing the payment of principal of and interest on municipal securities and with respect to any Series of Bonds, which shall have insured or guaranteed payment of the principal of or interest on such Bonds. "Interest Account" shall mean the separate account of that name in the Debt Service Fund established pursuant to Section 4.03 hereof. "Interest Payment Date" shall be such date or dates for the payment of interest on a Series of Bonds as shall be provided by Supplemental Resolution. "Issuer" shall mean the Village Tequesta, Florida. "Maximum Debt Service Requirement" shall mean, as of any particular date of calculation, the greatest annual Debt Service Requirement for the Bonds for the then current or any future Fiscal Year. "Maximum Interest Rate" shall mean, with respect to any particular Variable Rate Bonds, a numerical rate of interest, which shall be set forth in the Supplemental Resolution delineating the details of such Bonds, that shall be the maximum rate of interest such Bonds may at any time bear in the future (including during such times as such Bonds shall be owned by a Credit Bank) in accordance with the terms of such Supplemental Resolution. "Mayor" shall mean the Mayor of the Issuer or such other person as may be duly authorized by the Issuer to act on his or her behalf. " Moody's" shall mean Moody's Investors Service, Inc., a Delaware corporation, the nationally recognized securities rating firm, and any successor or successors thereto; and if such corporation shall be dissolved or liquidated or shall no longer perform securities rating functions, shall mean any other nationally recognized securities rating firm designated by the Issuer and approved by the Insurer and /or the Credit Bank, as applicable. A -6 "Net Revenues" shall mean Gross Revenues less Operating Expenses. "Operation and Maintenance Fund" shall mean the Operation and Maintenance Fund created pursuant to Section 4.03 hereof. "Operating Expenses" shall mean the Issuer's expenses for operation of the System, all to the extent properly attributable to the System in accordance with generally accepted accounting principles employed in respect of activities such as those involved in the operation of municipal water systems similar to the System, but not including any provision for interest, depreciation, amortization or similar charges, provided, however, that for purposes of Sections 5.02 and 5.07 hereof, Operating Expenses shall not include administrative expenses allocable to the System or extraordinary non - recurring expenses of the System. "Outstanding" shall mean all Bonds which have been authenticated and delivered under this Resolution except, (1) Bonds for which irrevocable (including revocable notice which shall have become irrevocable) notice of redemption has been given and for which moneys have been deposited with any Paying Agent(s) solely for the payment of such Bonds, (2) any Bond surrendered by the Holder thereof in exchange for another Bond or other Bonds under Sections 2.06, 2.07 or 2.08 hereof, (3) Bonds deemed to have been paid pursuant to Section 8.01 hereof, and (4) Bonds cancelled after purchase in the open market or because of payment at or redemption prior to maturity. "Paying Agent" shall mean any paying agent for Bonds_ appointed by or pursuant to resolution of the Governing Body, and its successors or assigns, and any other Person which may at any time be substituted in its place pursuant to resolution of the Governing Body. "Person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity. "Pledged Accounts" shall mean, until applied in accordance with the provisions of this Resolution, all moneys, including investments thereof, in the funds and accounts established hereunder, except (i) moneys, including investments thereof, in the Rate Stabilization Fund, in any Rebate Fund and the Impact Fee Fund, and (ii) to the extent moneys on deposit in a subaccount of the Reserve Account and /or an account of the Construction Fund are pledged solely for the payment of the Series of Bonds for which such account was established in accordance with the provisions hereof. "Pledged Funds" shall mean the Net Revenues, the Pledged Accounts and, to the extent allowed in Section 4.06 hereof, the Impact Fees. "Principal Account" shall mean the separate account of that name in the Debt Service Fund established pursuant to Section 4.03 hereof. "Project" shall mean any undertaking of the Issuer the cost of which is to be paid, in whole or in part, from amounts in the Construction Fund. A -7 "Project Certificate" shall mean that certificate of the Consultants filed with the Issuer at or prior to delivery of any Series of Bonds setting forth the estimated total cost of the Project to be financed with such Bonds, the estimated cost of the Expansion Facilities portion of the Project, the Expansion Percentage and the Impact Fee Debt Service Component. "Rate Stabilization Fund" means the Rate Stabilization Fund created pursuant to Section 4.03 hereof. "_Rates" shall mean the charges imposed by the Issuer for the use of the services of the System, other than any Impact Fees. "Rebate Fund" shall mean any Rebate Fund established pursuant to Section 4.07 hereof. "Redemption Price" shall mean, with respect to any Bond or portion thereof, the principal amount or portion thereof, plus the applicable premium, if any, payable upon redemption thereof. "Registrar" shall mean any registrar for the Bonds appointed by or pursuant to resolution of the Governing Body and its successors and assigns, and any other Person which may at any time be substituted in its place pursuant to resolution of the Governing Body. "Renewal and Replacement Fund" shall mean the Renewal and Replacement Fund established pursuant to Section 4.03 hereof. "Renewal and Replacement Fund Requirement" shall mean, as of any date of calculation, an amount of money equal to 5 % of the Gross Revenues of the System for the preceding Fiscal Year or such other greater or lesser sum as shall be recommended to the Issuer by the Consultants and approved by the Governing Body as a sum appropriate for the Renewal and Replacement Fund considering the purposes therefor as prescribed by this Resolution, the past performance and existing condition of the System and the probable future requirements of the Issuer, in keeping with sound water system management practices. "Reserve Account" shall mean the separate account of that name in the Debt Service Fund established pursuant to Section 4.03 hereof. "Reserve Account Insurance Policy" shall mean an insurance policy deposited in the Reserve Account in lieu of or in partial substitution for cash on deposit therein pursuant to Section 4.05(B)(4). "Reserve Account Letter of Credit" shall mean a Credit Facility (other than a Reserve Account Insurance Policy) issued by any bank or national banking association, insurance company or other financial institution and then on deposit in the Reserve Account in lieu of or in partial substitution for cash on deposit therein pursuant to Section 4.05(B)(4) hereof. "Reserve Account Requirement" shall mean, for a subaccount in the Reserve Account, unless otherwise provided with respect to a Series of Bonds by Supplemental Resolution adopted = A -8 prior to issuance of such Series, as of any date of calculation, an amount of money equal to the lesser of (1) the Maximum Debt Service Requirement for all Series of Bonds to which such subaccount relates, (2) 125% of the average annual Debt Service Requirement for all Series of Bonds to which such subaccount relates calculated as of the date of issuance of the most recently issued Series secured by such subaccount, or (3) the sum of 10% of the aggregate initial principal amount of each Series of Bonds to which such subaccount relates. In computing the Reserve Account Requirement, the interest rate on Variable Rate Bonds shall be assumed to be the lesser of (a) the 30 -year Revenue Bond Index most recently published by The Bond Buyer but in no event published more than two weeks prior to the date of issuance of such Variable Rate Bonds or (b) the Maximum Interest Rate. of and "this Resolution" shall mean this instrument, as the same may from time to time be amended, modified or supplemented by any and all Supplemental Resolutions. "Revenue Fund" shall mean the Revenue Fund established pursuant to Section 4.03 hereof. "Serial Bonds" shall mean all of the Bonds other than the Term Bonds. "Series" shall mean all the Bonds delivered on original issuance in a simultaneous transaction and identified pursuant to Sections 2.01 or 2.02 hereof or in a Supplemental Resolution authorizing the issuance by the Issuer of such Bonds as a separate Series, regardless of variations in maturity, interest rate, Amortization Installments or other provisions. "Series 1998 Bonds" shall mean the Issuer's Water Revenue Bonds, Series 1998, authorized pursuant to Section 2.02 hereof. "Series 1998 Project" means various capital improvements to the System, including construction of reverse osmosis treatment facilities, all as described in plans and specifications on file with the Issuer. "S &P" shall mean Standard and Poor's Ratings Group, a division of The McGraw Hill Companies, Inc., the nationally recognized securities rating firm, and any successor or successors thereto; and if such corporation shall be dissolved or liquidated or shall no longer perform securities rating functions, shall mean any other nationally recognized securities rating firm designated by the Issuer and approved by the Insurer and /or the Credit Bank, as applicable. "State" shall mean the State of Florida. "Subordinated Indebtedness" shall mean any indebtedness of the Issuer, subordinate and junior to the Bonds, issued in accordance with the provisions of Section 5.01 hereof, and any Variable Rate Bonds which become Subordinated Indebtedness in accordance with Section 5.02(F) hereof. A -9 "Supplemental Resolution" shall mean any resolution of the Issuer amending or supplementing this Resolution, adopted and becoming effective prior to the issuance of the Series 1998 Bonds or in accordance with the terms of Article VII hereof. "System" shall mean the water supply, treatment and distribution system owned and operated by the Issuer. "Taxable Bond" shall mean any Bond which states, in the body thereof, that the interest income thereon is includable in the gross income of the Holder thereof for federal income taxation purposes or that such interest is subject to federal income taxation. "Term Bonds" shall mean those Bonds which shall be designated as Term Bonds hereby or by Supplemental Resolution and which are subject to mandatory redemption by Amortization Installments. "Variable Rate Bonds" shall mean Bonds issued with a variable, adjustable, convertible or other interest rate which at the date of issue is not fixed as one or more stated percentages for the entire term of such Bonds. The terms herein, "hereunder," "hereby," "hereto," "hereof," and any similar terms, shall refer to this Resolution; the term "heretofore" shall mean before the date of adoption of this Resolution; and the term "hereafter" shall mean after the date of adoption of this Resolution. Words importing the singular number include the plural number, *and vice versa. SECTION 1.02. Authority or This Resolution This Resolution is adopted pursuant to the provisions of the Act. SECTION 1.03. Resolution to Constitute Contract In consideration of the purchase and acceptance of any or all of the Bonds by those who shall hold the same from time to time, the provisions of this Resolution shall be deemed to be and shall constitute a contract between the Issuer and the Holders from time to time of the Bonds and shall be a part of the contract of the Issuer with any Credit Bank and any Insurer. The pledge made in this Resolution and the provisions, covenants and agreements herein set forth to be performed by or on behalf of the Issuer shall be for the equal benefit, protection and security of the Holders of any and all of the Bonds and for the benefit, protection and security of any Credit Bank and any Insurer. All of the Bonds, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof except as expressly provided in or pursuant to this Resolution. SECTION 1.04. Findings. It is hereby ascertained, determined and declared as follows: (A) The Issuer deems it necessary, desirable and in the best interest of the Issuer that the Series 1998 Project be undertaken. A -10 (B) The estimated Gross Revenues to be derived in each year hereafter will be sufficient to pay Operating Expenses, the principal of and interest on the Bonds, as the same become due, and all other payments provided for in this Resolution. (C) No Bondholder, Credit Bank or Insurer shall ever be entitled to compel the payment of the principal of and interest on the Bonds or any other payments provided for in this Resolution from any funds or revenues of the Issuer other than the sources herein provided in accordance with the terms hereof. [End of Article I] A -11 ARTICLE II AUTHORIZATION, TERMS, EXECUTION AND REGISTRATION OF BONDS SECTION 2.01. Authorization of Bonds The Issuer hereby authorizes the issuance of Bonds of the Issuer to be designated as "Village of Tequesta, Florida, Water Revenue Bonds," which may be issued in one or more Series as hereinafter provided. The aggregate principal amount of the Bonds which may be executed and delivered under this Resolution is not limited except as may hereafter be provided by Supplemental Resolution or as limited by the Act or by other applicable law. The Bonds may, if and when authorized by the Issuer pursuant to this Resolution or Supplemental Resolution, be issued in one or more Series, with such further appropriate particular designations added to or incorporated in such title for the Bonds of any particular Series as the Issuer may determine and as may be necessary to distinguish such Bonds from the Bonds of any other Series. Each Bond shall bear upon its face the designation so determined for the Series to which it belongs. The Bonds shall be issued for such purpose or purposes; shall bear interest at such rate or rates not exceeding the maximum rate permitted by law; and shall be payable in lawful money of the United States of America on such dates; all as determined by this Resolution and by Supplemental Resolution. The Bonds shall be issued in such denomination or denominations and such form, whether coupon or registered; shall be dated such date or dates; shall bear such numbers; shall be payable at such place or places; shall contain such redemption provisions; shall have such Paying Agent(s) and Registrar(s); shall mature on such date or dates in such years and amounts; and the proceeds shall be used in such manner all as determined by this Resolution and by Supplemental Resolution. The Issuer may issue Bonds which may be secured by a Credit Facility or by a Bond Insurance Policy all as shall be determined by this Resolution or by Supplemental Resolution. SECTION 2.02. Authorization and Description of Series 1998 Bonds A Series of Bonds entitled to the benefit, protection and security of this Resolution is hereby authorized in an aggregate principal amount not to exceed $9,000,000 for the principal purpose of paying the cost of the Series 1998 Project. Such Series shall be designated as, and shall be distinguished from the Bonds of all other Series by the title "Village of Tequesta, Florida, Water Revenue Bonds, Series 1998. " The Series 1998 Bonds shall be dated such date as may be set forth by Supplemental Resolution of the Issuer; shall be issued as fully registered Bonds; and shall be numbered consecutively from one upward in order of maturity preceded by the letter R; shall be in denominations of $5,000 and integral multiples thereof and shall bear interest at a rate or rates not exceeding the maximum rate permitted by law (calculated on the basis of a 360 -day year of twelve 30 -day months), payable in such manner and on such dates in such years; shall consist of such amounts of Serial Bonds, Term Bonds, Variable Rate Bonds and Capital Appreciation Bonds, A -12 maturing in such amounts and on such dates in such years; shall be payable in such place or places; shall have such Paying Agent(s) and Registrar(s); and shall contain such redemption provisions; all as the Issuer shall hereafter provide by Supplemental Resolution. The principal of or Redemption Price, if applicable, on the Series 1998 Bonds is payable when due upon presentation and surrender of the Series 1998 Bonds at the office of the Paying Agent. Interest payable on any Series 1998 Bond on any Interest Payment Date will be paid by check or draft of the Paying Agent mailed on the Interest Payment Date to the Holder in whose name such Bond shall be registered at the close of business on the fifteenth day (whether or not a Business Day) of the calendar month next preceding such Interest Payment Date, or, unless otherwise provided by Supplemental Resolution, at the written request and expense of any Holder of at least $500,000 in principal amount of Series 1998 Bonds (or of all Series 1998 Bonds if less than $500,000 shall be unpaid), by bank wire transfer for the account of such Holder. In the event the interest payable on any Series 1998 Bond is not punctually paid or duly provided for by the Issuer on such Interest Payment Date, such defaulted interest will be paid to the Holder in whose name such Bond shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice sent by the Issuer to such Holder not less than ten (10) days preceding such special record date. All payments of principal of or Redemption Price, if applicable, and interest on the Series 1998 Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 2.03. Annlication of Series 1998 Bond Proceeds The proceeds derived from the sale of the Series 1998 Bonds, including accrued interest and premium, if any, shall be applied by the Issuer as directed by Supplemental Resolution adopted prior to the issuance of the Series 1998 Bonds. SECTION 2.04. Execution of Bonds The Bonds shall be executed in the name of the Issuer with the manual or facsimile signature of the Mayor and the official seal (or a facsimile thereof) of the Issuer shall be impressed or imprinted thereon, attested and countersigned with the manual or facsimile signature of the Clerk. In case any one or more of the officers who shall have signed or sealed any of the Bonds or whose facsimile signature shall appear thereon shall cease to be such officer of the Issuer before the Bonds so signed and sealed have been actually sold and delivered, such Bonds may nevertheless be sold and delivered as herein provided and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office.: Any Bond may be signed and sealed on behalf of the Issuer by such person who at the actual time of the execution of such Bond shall hold the proper office of the Issuer, although at the date of such Bond such person may not have held such office or may not have been so authorized. The Issuer may adopt and use for such purposes the facsimile signatures of any such persons who shall have held such offices at any time after the date of the adoption of this Resolution, notwithstanding that either or both shall have ceased to hold such office at the time the Bonds shall be actually sold and delivered. A -13 SECTION 2.05. Authentication No Bond of any Series shall be secured hereunder or entitled to the benefit hereof or shall be valid or obligatory for any purpose unless there shall be manually endorsed on such Bond a certificate of authentication by the Registrar or such other entity as may be approved by the Issuer for such purpose. Such certificate on any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered under this Resolution. The form of such certificate shall be substantially in the form provided in Section 2.10 hereof. SECTION 2.06. Temporary Bonds Until the definitive Bonds of any Series are prepared, the Issuer may execute, in the same manner as is provided in Section 2.04, and deliver, upon authentication by the Registrar pursuant to Section 2.05 hereof, in lieu of definitive Bonds, but subject to the same provisions, limitations and conditions as the definitive Bonds, except as to the denominations thereof, one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized by the Issuer by resolution of the Governing Body, and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The Issuer, at its own expense, shall prepare and execute definitive Bonds, which shall be authenticated by the Registrar. Upon the surrender of such temporary Bonds for exchange, the Registrar, without charge to the Holder thereof, shall deliver in exchange therefor definitive Bonds, of the same aggregate principal amount and Series and maturity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefits and security as definitive z Bonds issued pursuant to this Resolution. All temporary Bonds surrendered in exchange for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Registrar. SECTION 2.07. Bonds Mutilated Destroyed, Stolen or Lost In case any Bond shall become mutilated, or be destroyed, stolen or lost, the Issuer may, in its discretion, issue and deliver, and the Registrar shall authenticate, a new Bond of like tenor as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, and upon the Holder furnishing the Issuer and the Registrar proof of such Holder's ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the Issuer or the Registrar may prescribe and paying such expenses as the Issuer and the Registrar may incur. All Bonds so surrendered or otherwise substituted shall be cancelled by the Registrar. If any of the Bonds shall have matured or been called for redemption or be about to mature, instead of issuing a substitute Bond, the Issuer may pay the same or cause the Bond to be paid, upon being indemnified as aforesaid, and if such Bond be lost, stolen or destroyed, without surrender thereof. Any such duplicate Bonds issued pursuant to this Section 2.07 shall constitute original, additional contractual obligations on the part of the Issuer whether or not the lost, stolen or destroyed Bond be at any time found by anyone, and such duplicate Bond shall be entitled to equal and proportionate benefits and rights as to lien on the Pledged Funds to the same extent as all other Bonds issued hereunder and shall be entitled to the same benefits and security as the Bond so lost, stolen or destroyed. A -14 SECTION 2.08. Negotiability, Interchangeability and Transfer The Bonds issued under this Resolution shall be and have all the qualities and incidents of negotiable instruments under the laws of the State of Florida, subject to the provisions for registration and transfer contained in this Resolution and in the Bonds. So long as any of the Bonds shall remain Outstanding, the Registrar shall keep on behalf of the Issuer books for the registration and transfer of the Bonds. Upon surrender thereof at the office of the Registrar with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder thereof or such Holder's attorney -in -fact duly authorized in writing, Bonds may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of registered Bonds of the same Series and maturity of any other authorized denominations. Each Bond shall be transferable only upon the books of the Issuer, at the office of the Registrar, under such reasonable regulations as the Issuer may prescribe, by the Holder thereof in person or by such Holder's attorney -in -fact duly authorized in writing upon surrender thereof together with a written instrument of transfer satisfactory to the Registrar duly executed and guaranteed by the Holder or such Holder's duly authorized attorney -in -fact. Upon the transfer of any such Bond, the Issuer shall issue, and cause to be authenticated, in the name of the transferee a new Bond or Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. The Issuer, the Registrar and any Paying Agent or fiduciary of the Issuer shall deem and treat the Person in whose name any Outstanding Bond shall be registered upon the books of the Issuer as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price, if applicable, and interest on such Bond and for all other purposes, and all such payments so made to any such Holder or upon such Holder's order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid and neither the Issuer nor the Registrar nor any Paying Agent or other fiduciary of the Issuer shall be affected by any notice to the contrary. The Registrar, in any case where it is not also the Paying Agent in respect to any Series of Bonds, shall forthwith (a) following the fifteenth day of the calendar month next preceding an Interest Payment Date for such Series, (b) following the fifteenth day next preceding the date of first mailing of notice of redemption of any Bonds of such Series, and (c) at any other time as reasonably requested by the Paying Agent of such Series, certify and furnish to such Paying Agent the names, addresses and holdings of Bondholders and any other relevant information reflected in the registration books. In all cases in which the privilege of exchanging Bonds or transferring Bonds is exercised, the Issuer shall execute and the Registrar shall authenticate and deliver such Bonds in accordance with the provisions of this Resolution. Execution of Bonds by the Mayor and the Clerk for purposes of exchanging, replacing or transferring Bonds may occur at the time of the. original delivery of the Series of which such Bonds are a part. All Bonds surrendered in any such A -15 exchanges or transfers shall be cancelled by the Registrar. For every such exchange or transfer of Bonds, the Issuer or the Registrar may make a charge sufficient to reimburse it for any tax, fee, expense or other governmental charge required to be paid with respect to such exchange or transfer. The Issuer and the Registrar shall not be obligated to make any such exchange or transfer of any Bonds which shall have been selected for redemption or, in the case of any proposed redemption of Bonds, during the fifteen (15) days next preceding the date of selection of Bonds to be redeemed. SECTION 2.09. Coupon Bonds The Issuer, at its discretion, may by Supplemental Resolution authorize the issuance of Coupon Bonds, registrable as to principal only or as to both principal and interest. Such Supplemental Resolution shall provide for the negotiability, transfer, interchangeability, denominations and form of such Bonds and coupons appertaining thereto. Coupon Bonds (other than Taxable Bonds) shall only be issued if an opinion of Bond Counsel is received to the effect that issuance of such Coupon Bonds will not adversely affect the exclusion of the interest payable on such Bonds from gross income for federal income tax purposes. SECTION 2.10. Form of Bonds Except as otherwise provided pursuant to Section 2.09 hereof and except for Capital Appreciation Bonds and Variable Rate Bonds, the form of which shall be provided by Supplemental Resolution, the Bonds shall be in substantially the following form with such omissions, insertions and variations as may be necessary and /or desirable and approved by the Mayor or the Clerk prior to the issuance thereof (which necessity and /or desirability and approval shall be evidenced conclusively by the Issuer's delivery of the Bonds to the purchaser or purchasers thereof): [This space intentionally blank.] A -16 No. R UNITED STATES OF AMERICA STATE OF FLORIDA VILLAGE OF TEQUESTA, FLORIDA WATER REVENUE BOND, SERIES _ Interest Maturity Date of Rate Date Original Issue CUSIP Registered Holder: Principal Amount: KNOW ALL MEN BY THESE PRESENTS, that the Village of Tequesta (the "Issuer "), a municipal corporation and political subdivision created and existing under and by virtue of the laws of the State of Florida, for value received, hereby promises to pay, solely from the sources of payment hereinafter described, to the Registered Holder identified above, or registered assigns as hereinafter provided, the Principal Amount identified above on the Maturity Date identified above, subject to prior redemption as hereinafter provided, together with interest on such Principal Amount from the Date of Original Issue identified above or from the most recent interest payment date to which interest has been paid, at the Interest Rate per annum (calculated on the basis of a 360 -day year of twelve 30-day months) identified above on 1 and — — 1 of each year commencing , _ until such Principal Amount shall have been paid or provided for. Such Principal Amount and interest and the premium, if any, on this bond are payable in any coin or currency of the United States of America which, on the respective dates of payment thereof, shall be legal tender for the payment of public and private debts. Such Principal Amount and the premium, if any, on this bond, are payable when due upon presentation and surrender hereof at the principal office of , as paying agent, or such other paying agent as the Issuer shall hereafter duly appoint (the "Paying Agent "). Payment of each installment of interest shall be made to the person in whose name this bond shall be registered on the registration books of the Issuer maintained by , _, as registrar, or such other registrar as the Issuer shall hereafter duly appoint (the "Registrar "), at the close of business on the date which shall be the fifteenth day (whether or not a Business Day) of the calendar month next preceding each interest payment date and shall be paid by a check or draft of the Paying Agent mailed to such Registered Holder at the address appearing on such registration books or, in the case of a Holder of at least $500,000 principal amount of Bonds (or A -17 of all Bonds if less than $500,000 shall be unpaid), and at the written request and expense of such Registered Holder, by bank wire transfer for the account of such Holder. In the event interest payable on this bond is not punctually paid or duly provided for by the Issuer on such interest payment date, payment of each installment of such defaulted interest shall be made to the person in whose name this bond shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice sent by the Issuer to such Registered Holder not less than ten (10) days preceding such special record date. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE SIDE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. This bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Registrar. IN WITNESS WHEREOF, the Village of Tequesta, Florida, has issued this bond and has caused the same to be executed by the manual or facsimile signature of its Mayor and attested and countersigned by the manual or facsimile signature of its Clerk and its official seal or a facsimile thereof to be affixed or reproduced hereon, all as of the day of , 19_ VILLAGE OF TEQUESTA, FLORIDA (SEAL) By Mayor ATTESTED AND COUNTERSIGNED: Clerk A -18 CERTIFICATE OF AUTHENTICATION This bond is one of the Bonds of the issue described in the within - mentioned Resolution. DATE OF AUTHENTICATION: Registrar By: Authorized Officer (Provisions on Reverse Side of Bond) This bond is one of an authorized issue of bonds of the Issuer in the aggregate principal amount of $ 1 (the "Bonds ") of like date, tenor and effect, except as to maturity date, interest rate, denomination and number, issued under the authority of and in full compliance with the Constitution and laws of the State of Florida, particularly Chapter 166, Part II, Florida Statutes, Article VIII, Section 2 of the Constitution of the State of Florida, the Charter of the Issuer, and other applicable provisions of law (the "Act "), and a resolution duly adopted by the Village Council of the Issuer on , 19_, as amended and supplemented (the "Resolution "), and is subject to all the terms and conditions of the Resolution. The principal of or Redemption Price, if applicable, of and interest on this bond are payable solely from and secured by a pledge of the Pledged Funds, as defined in and in the manner and to the extent described in the Resolution. It is expressly agreed by the registered Holder of this bond that the full faith and credit of the Issuer is not pledged to the payment of the principal of or Redemption Price, if applicable, of and interest on this bond and that the registered Holder shall never have the right to require or compel the exercise of the ad valorem taxing power of the Issuer to the payment of such principal, Redemption Price, if applicable, and interest. This bond and the obligation evidenced hereby shall not constitute a lien upon any property of the Issuer, except the Pledged Funds, and shall be payable solely from the Pledged Funds in accordance with the terms of the Resolution. A -19 (INSERT REDEMPTION PROVISIONS) Notice of redemption, unless waived, is to be given by the Registrar by mailing an official redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered holders of the Bonds to be redeemed at such holders' addresses shown on the registration books maintained by the Registrar or at such other addresses as shall be furnished in writing by such registered holders to the Registrar; provided, however, that no defect in any such notice to any registered holder of Bonds to be redeemed nor failure to give such notice to any such registered holder shall in any manner defeat the effectiveness of a call for redemption as to all other registered holders of Bonds to be redeemed. Notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Bonds or portions of Bonds shall cease to bear interest. Any notice of redemption prepared and mailed as provided in the Resolution shall be conclusively presumed to have been duly given, whether or not the registered Holder receives the notice. This bond is transferable in accordance with the terms of the Resolution only upon the books of the Issuer kept for that purpose at the office of the Registrar upon the surrender of this bond together with a written instrument of transfer satisfactory to the Registrar duly executed by the Registered Holder or such Holder's attorney duly authorized in writing, and thereupon a new bond or bonds in the same aggregate principal amount shall be issued to the transferee in exchange therefor, and upon the payment of the charges, if any, prescribed in the Resolution. The Issuer, the Registrar and any Paying Agent shall treat the Registered Holder of this bond as the absolute owner hereof for all purposes, whether or not this bond shall be overdue, and shall not be affected by any notice to the contrary. The Issuer and the Registrar shall not be obligated to make any exchange or transfer of Bonds during the fifteen (15) days next preceding the date of selection of Bonds to be redeemed, or to make any exchange or transfer of Bonds selected for redemption. It is hereby certified and recited that all acts, conditions and prerequisites required to exist, to happen and to be performed precedent to and in connection with the issuance of this bond, exist, have happened and have been performed, in regular and due form and time as required by the Constitution and laws of the State of Florida applicable thereto, and that the issuance of the Bonds does not violate any constitutional or statutory limitations or provisions. A -20 LEGAL OPINION [Insert appropriate approving opinion of bond counsel.] The following abbreviations, when used in the inscription on the face of the within bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF TRANS MIN ACT -- (Cust. ) Custodian for under Uniform Transfers to Minors Act of (State) Additional abbreviations may also be used though not in list above. A -21 ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto Insert Social Security or Other Identifying Number of Assignee (Name and Address of Assignee) the within bond and does hereby irrevocably constitute and appoint , as attorneys to register the transfer of the said bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature to this assignment must correspond with the name of the Registered Holder as it appears upon the face of the within bond in every particular, without alteration or enlargement or any change whatever and the Social Security or other identifying number of such assignee must be supplied. [End of Article II] A -22 ARTICLE III REDEMPTION OF BONDS SECTION 3.01. Privilege of Redemption Any Series of Bonds may be subject to redemption prior to maturity in the manner and on such date or dates as specified by a Supplemental Resolution adopted prior to the issuance of such Series of Bonds. The terms of this Article III shall apply to redemption of Bonds other than Capital Appreciation Bonds or Variable Rate Bonds. The terms and provisions relating to redemption of Capital Appreciation Bonds and Variable Rate Bonds shall be provided by Supplemental Resolution. SECTION 3.02. Selection of Bonds to be Redeemed The Bonds shall be redeemed only in the principal amount of $5,000 each and integral multiples thereof. For purposes of any optional redemption of less than all of the Outstanding Bonds of a Series, the amounts of the particular maturity or maturities to be redeemed shall be selected by the Issuer. For purposes of any redemption of less than all of the Outstanding Bonds of a single maturity, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Registrar by such method as the Registrar shall deem fair and appropriate and which may provide for the selection for redemption of Bonds or portions of Bonds in principal amounts of $5,000 and integral multiples thereof. If less than all of the Outstanding Bonds of a single maturity are to be redeemed, the Registrar shall promptly notify the Issuer and Paying Agent (if the Registrar is not the Paying Agent for such Bonds) in writing of the Bonds or portions of Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed. SECTION 3.03. Notice of Redemption Unless waived by any Holder of Bonds to be redeemed, notice of any redemption of Bonds shall be given by the Registrar on behalf of the Issuer by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to each Holder of Bonds to be redeemed at the address of such Holder shown on the registration books maintained by the Registrar. Every official notice of redemption shall be filed by the Registrar with the Paying Agent and shall be dated and shall state: (1) the redemption date, (2) the Redemption Price, (3) if less than all outstanding Bonds for a maturity are to be redeemed, the number (and, in the case of a partial redemption of any Bond, the principal amount) of each Bond of such maturity to be redeemed, A -23 (4) that on the redemption date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (5) that such Bonds to be redeemed, whether as a whole or in part, are to be surrendered for payment of the Redemption Price plus accrued interest at the office of the Paying Agent. A notice of redemption may be conditioned upon the availability of funds to pay the Redemption Price of the Bonds to be redeemed on the redemption date, and in such event, the notice of redemption shall expressly state that it is subject to such condition. In the event that a conditional notice of redemption is given and in the event that funds are not available to pay the Redemption Price of the Bonds so called for redemption, such Bonds shall continue to be Outstanding as if such notice had not been given. Provided, however, that in such event the Registrar shall on behalf of the Issuer mail a notice to the Holders of the Bonds subject to such conditional notice stating that the condition to the call was not satisfied and that the Bonds shall remain outstanding. Prior to any redemption date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of and accrued interest on all the Bonds or portions of Bonds which are to be redeemed on that date. The failure to give any notice of redemption, or any defect therein, shall not affect the validity of any proceedings for the redemption of any Bond with respect to which no such failure or defect has occurred. Any notice prepared and mailed as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. SECTION 3.04. Redemption of Portions of Bonds Any Bond which is to be redeemed only in part shall be surrendered at any place of payment specified in the notice of redemption (with due endorsement by, or written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder thereof or such Holder's attorney -in -fact duly authorized in writing) and the Issuer shall execute and the Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds, of the same interest rate and maturity, and of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bonds so surrendered. SECTION 3.05. Payment of Redeemed Bonds Official notice of redemption having been given substantially as aforesaid, the Bonds or portions of Bonds to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Registrar and /or Paying Agent at the appropriate Redemption Price, plus accrued. interest. Each check or other transfer of funds issued by the Registrar and /or Paying Agent for the purpose of the payment of the Redemption A -24 a Price of Bonds being redeemed shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Installments of interest due on or prior to the Redemption Date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be cancelled by the Registrar and shall not be reissued. [End of Article III] A -25 ARTICLE IV SECURITY, SPECIAL FUNDS AND APPLICATION THEREOF SECTION 4.01. Bonds Not to be Indebtedness of Issuer The Bonds shall not be or constitute general obligations or indebtedness of the Issuer within the meaning of any constitutional or statutory provision, but shall be special obligations of the Issuer, payable solely from and secured by a pledge of the Pledged Funds in accordance with the terms of this Resolution. The Issuer may cause any Series of Bonds to be payable from and secured by a Credit Facility or a Bond Insurance Policy not applicable to any one or more other Series of Bonds. No Holder of any Bond or any Credit Bank or any Insurer shall ever have the right to compel the exercise of the ad valorem taxing power of the Issuer to pay such Bond or be entitled to payment of such Bond from any moneys of the Issuer except the Pledged Funds, in the manner provided herein. SECTION 4.02. Security for Bonds The payment of the principal of or Redemption Price, if applicable, and interest on the Bonds shall be secured forthwith equally and ratably by a pledge of the Pledged Funds; provided, however, a Series of Bonds may be further secured by a Credit Facility or any Bond Insurance Policy not applicable to any one or more other Series of Bonds, as shall be provided by Supplemental Resolution, in addition to the security provided herein. The Issuer does hereby irrevocably pledge the Pledged Funds in the manner provided in this Resolution to the payment of the principal of or Redemption Price, if applicable, and interest on the Bonds. SECTION 4.03. Funds and Accounts The Issuer covenants and agrees to establish with one or more Authorized Depositories the following separate funds: (1) "Construction Fund" (the "Construction Fund "), (2) "Revenue Fund" (the "Revenue Fund "), (3) "Operation and Maintenance Fund" (the "Operation and Maintenance Fund "), (4) "Debt Service Fund" (the "Debt Service Fund "), (5) "Renewal and Replacement Fund" (the "Renewal and Replacement Fund "), (6) "Impact Fee Fund" (the "Impact Fee Fund "), and (7) "Rate Stabilization Fund" (the "Rate Stabilization Fund)." The Issuer shall maintain in the Debt Service Fund four accounts: (1) the "Interest Account," A -26 (2) the "Principal Account," (3) the "Bond Amortization Account," and (4) the "Reserve Account," and therein, a "1998 Subaccount" which shall jointly secure all Series of Bonds, unless under the provisions of the Supplemental Resolution(s) authorizing one or more Series of Bonds, such Series of Bonds is or are to be separately secured by a separate subaccount in the Reserve Account, in which case a separate subaccount in the Reserve Account may secure only such Series of Bonds. The Issuer shall at any time and from time to time appoint one or more Authorized Depositaries to'hold, for the benefit of the Issuer and /or the Bondholders, any one or more of the funds and accounts established hereby. Such depositary or depositaries shall perform at the direction of the Issuer the duties of the Issuer in depositing, transferring and disbursing moneys to and from each of such funds and accounts as herein set forth, and all records of such depositary in performing such duties shall be open at all reasonable times to inspection by the Issuer and its agents and employees. SECTION 4.04. Construction Fund The Issuer shall establish within the Construction Fund a separate account for each Series of Bonds the proceeds of which are to be deposited in whole or in part in the Construction Fund. Moneys in each account of the Construction Fund, until applied in payment of any item of the Cost of a Project, shall be held in trust by the Issuer and shall be subject to a lien and charge in favor of the Holders of the Series of Bonds the proceeds of which were deposited in such account and held for the further security of such Holders. There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of this Resolution or Supplemental Resolution, and there may. be paid into the Construction Fund, at the option of the Issuer, any moneys received- for or in connection with a Project by the Issuer from any other source. The Issuer may make disbursements or payments from the Construction Fund to pay the Cost of a Project. Promptly after the date of the completion of a Project, and after paying or making provisions for the payment of all unpaid items of the Cost of such Project, the Issuer shall deposit in the following order of priority any balance of moneys remaining in the applicable account of the Construction Fund in (1) another account of the Construction Fund established in connection with another Series of Bonds for which the Authorized Issuer Officer has stated that there are insufficient moneys present to pay the Cost of the related Project, (2) the Reserve Account, to the extent of a deficiency therein, and (3) (i) the Debt Service Fund or (ii) such other fund or account of the Issuer, including those established hereunder, as shall be determined by the Governing Body, provided the Issuer has received an opinion of Bond Counsel to the effect that such transfer to such other fund or account shall not adversely affect the exclusion, if any, of interest on the Bonds from gross income for federal income tax purposes. A -27 SECTION 4.05. Flow of Funds (A) Revenue Fund The Issuer shall deposit all Gross Revenues into the Revenue Fund promptly upon the receipt thereof. On or before the last Business Day of each month, the moneys in the Revenue Fund shall be deposited or credited in the following manner and in the following order of priority: (1) Oneration and Maintenanc Fund. The Issuer shall deposit into or credit to the Operation and Maintenance Fund such sum as shall be necessary to cause the moneys in the Operation and Maintenance Fund to be sufficient to pay Operating Expenses for the next succeeding month; provided, however, that subject always to the provisions of Section 5.06 hereof, the Issuer shall transfer moneys from the Revenue Fund to the Operation and Maintenance Fund at any time to pay Operating Expenses to the extent there shall be a deficiency in the moneys in the Operation and Maintenance Fund for such purpose. Moneys in the Operation and Maintenance Fund shall be paid out from time to time by the Issuer to pay reasonable and necessary Operating Expenses as and when the same shall be incurred. (2) Debt Service Fund Next, the Issuer shall deposit into or credit to the Debt Service Fund such sums as shall be required for all of the deposits, transfers and payments described in Section 4.05(B) hereof. (3) Rebate Fund Next, the Issuer may, at its option, deposit into or credit to any Rebate Fund the amount described in Section 4.07(1) hereof. (4) Subordinated Indebtedness Next, the Issuer shall apply available moneys in the Revenue Fund to the payment of th e debt service for any Subordinated Indebtedness. (5) Renewal and Replacement Fund Next, whenever the balance on deposit in the Renewal and Replacement Fund shall be less than the Renewal and Replacement Fund Requirement, the Issuer shall deposit into or credit to the Renewal and Replacement Fund the lesser of the balance of all moneys remaining in the Revenue Fund or 2% of the deposits to the Revenue Fund during the current month, to the extent necessary to cause the moneys in the Renewal and Replacement Fund to equal 100% of the Renewal and Replacement Fund Requirement. If at any time the balance on deposit in the Renewal and Replacement Fund shall exceed the Renewal and Replacement Fund Requirement, such excess. may be withdrawn by the Issuer from the Renewal and Replacement Fund and deposited into the Revenue Fund. The moneys in the Renewal and Replacement Fund shall be applied by the Issuer to the payment of the cost of extensions, improvements and additions to, or renewals and replacements of the capital assets of, or extraordinary repairs of the System; provided, however, that whenever moneys in the Debt Service Fund and Impact Fee Fund shall be insufficient to pay all or any part of the principal of, Redemption Price or interest on any of the Bonds, moneys in the Renewal and Replacement Fund shall first be used to supplement the Debt Service Fund to the extent necessary to prevent a default on the Bonds. (6) Rate Stabilization Fund Next, the Issuer may, at its option, deposit into the Rate A -28 Stabilization Fund any amount desired by the Issuer. Moneys in the Rate Stabilization Fund may be used by the Issuer for any lawful purpose of the Issuer, including to make deposits to the Revenue Fund at any time and from time to time. (7) Excess Revenues The Issuer may withdraw the balance of all moneys remaining on deposit to the credit of the Revenue Fund and apply the same in any manner permitted by the laws of the State. (B) Debt Service The moneys on deposit in the Debt Service Fund shall be applied by the Issuer in the manner provided herein solely for the payment of the principal of or Redemption Price, if applicable, of and interest on the Bonds and for the reimbursement to any Credit Bank of any payments made by it for such purpose, or for the purchase of, and reinstatement of the maximum limits of, any Reserve Account Insurance Policy and /or Reserve Account Letter of Credit, and shall not be available for any other purpose. The moneys transferred from the Revenue Fund to the Debt Service Fund shall upon such transfer or credit be deposited or credited in the following manner and in the following order of priority (except that payments pursuant to (2) and (3) below shall be on a parity): (1) Interest Account The Issuer shall deposit into or credit to the Interest Account one -sixth (1/6) of the amount of interest becoming due on all Outstanding Bonds through the next succeeding Interest Payment Date, provided that no payment or only a partial payment need be made at any time to the extent that the amount on deposit in the Interest Account is, or together with such partial payment shall be, an amount sufficient to pay all interest becoming due on all Outstanding Bonds on the next succeeding Interest Payment Date, and, provided, that such monthly payments may be decreased proportionately by a Supplemental Resolution to take into account any deposit made to the Interest Account as capitalized interest upon the issuance of a Series of Bonds, and provided further in each month intervening between the date of delivery of a Series of Bonds (beginning with the month following the month in which such delivery takes place) and the next succeeding Interest Payment Date, the amount specified in this subsection shall be that amount which when multiplied by the number of deposits to the Interest Account required to be made during such period will equal the amount required for such next succeeding interest payment. Moneys in the Interest Account shall be applied by the Issuer to pay interest on the Bonds as and when the same become due, whether by redemption or otherwise, or to reimburse a Credit Bank for amounts drawn for such purpose, and for no other purpose. The Issuer shall adjust the amount of the deposit into the Interest Account not later than the month immediately preceding any Interest Payment Date so as to provide sufficient moneys in the Interest Account to pay the interest on the Bonds coming due on such Interest Payment Date. (2) Principal Account Next, beginning in the month which is twelve (12) months prior to the month in which the first principal payment date occurs, one - twelfth (1/12) of the principal of the Bonds other than Term Bonds scheduled to become due on the next succeeding principal payment date, provided, however, that no payment or only a partial payment need be made in any month to the extent the amount on deposit in the Principal Account is, or together with such partial payment shall be, sufficient to pay the principal of the Bonds (other than Amortization Installments of Term Bonds) scheduled to become due on the next succeeding principal payment date and A -29 provided further than in each month intervening between the date of delivery of the Series of Bonds (beginning with the month following the month in which such delivery takes place) and the next succeeding principal payment date (if less than 12 months) the amount specified in this subsection shall be that amount that when multiplied by the number of deposits to the principal account required to be made during such period will equal the amount required for the next t succeeding principal payment. Moneys in the Principal Account shall be applied by the Issuer to pay the principal of the Bonds (other than Amortization Installments of Term Bonds) as and when the same shall mature, or to reimburse a Credit Bank for amounts drawn for such purpose, and for no other purpose. The Issuer shall adjust the amount of the deposit into the Principal Account no later than the month immediately preceding any principal payment date so as to provide sufficient moneys in the Principal Account to pay the principal on the Bonds becoming due on such principal payment date. (3) Bond Amortization Account Commencing in the month which is twelve months prior to the month in which occurs the due date of each Amortization Installment, the Issuer shall deposit into or credit to the Bond Amortization Account, one - twelfth (1/12) of such Amortization Installment, provided, however, that no payment or only a partial payment need be made to the Bond Amortization Account in any month to the extent that the amount on deposit in the Bond Amortization Account is, or together with such partial payment shall be, sufficient to pay such Amortization Installment. Moneys in the Bond Amortization Account shall be applied by the Issuer to purchase or redeem Term Bonds in the manner herein provided, or to reimburse a Credit Bank for amounts drawn for such purpose, and for no other purpose. The Issuer shall adjust the amount of the deposit into the Bond Amortization Account not later than the month immediately preceding any due date of an Amortization Installment so as to provide sufficient moneys in the Bond Amortization Account to pay the Amortization Installment due on such date. Amounts accumulated in the Bond Amortization Account with respect to any Amortization Installment shall be applied by the Issuer, (i) on or prior to the sixtieth (60th) day preceding the due date of such Amortization Installment to the purchase of Term Bonds of the Series and maturity for which such Amortization Installment was established, at a price not greater than the Redemption Price at which such Term Bonds may be redeemed on the first date thereafter on which such Term Bonds shall be subject to redemption, or (ii) to the redemption at the applicable Redemption Price of such Term Bonds. The amount of the applicable Redemption Price of any Term Bonds so purchased or redeemed shall be deemed to be on deposit in the Bond Amortization Account until such Amortization Installment date for the purposes of calculating the amount on deposit in such Account. As soon as practicable after the sixtieth (60th) day preceding the due date of any such Amortization Installment, the Issuer shall proceed to call for redemption on such due date, by causing notice to be given as provided in Section 3.03 hereof, Term Bonds of the Series and maturity for which such Amortization Installment was established in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Amortization Installment. The Issuer shall pay out of the Bond Amortization Account and the Interest Account to the respective Paying Agents, on or before the day preceding such redemption date, the amount required for the redemption, and such amount shall be applied by such Paying Agents to such redemption. A -30 (4) Reserve Account Next, the Issuer shall deposit into or credit to each subaccount of the Reserve Account such sum, if any, as will be sufficient to restore in not more than 12 equal monthly payments the funds on deposit therein to an amount equal to the Reserve Account Requirement therefor including the reinstatement of any Reserve Account Insurance Policy or Reserve Account Letter of Credit on deposit therein or the cash replacement thereof. In the event the amounts available for such purpose shall be insufficient to make all payments required by the preceding sentence, the available amount shall be prorated among the various subaccounts in the Reserve Account in the same proportion that the Reserve Account Requirement for each subaccount bears to the total Reserve Account Requirement for all such subaccounts. On or prior to each principal payment date and Interest Payment Date for the Bonds, moneys in each subaccount of the Reserve Account shall be applied by the Issuer to the payment of the principal of or Redemption Price, if applicable, and interest on the Series of Bonds to which such subaccount relates to the extent moneys in the Interest Account, the Principal Account and the Bond Amortization Account shall be insufficient for such purpose. Whenever upon valuation of any subaccount of the Reserve Account there shall be moneys in any subaccount of the Reserve Account in excess of the Reserve Account Requirement, therefor such excess moneys shall be deposited by the Issuer into the Revenue Fund. Upon the issuance of any Series of Bonds, under the terms, limitations and conditions as herein provided, the Issuer shall provide for the funding of a subaccount in the Reserve Account in an amount equal to the Reserve Account Requirement, if any, for such Series. Whenever moneys on deposit in a subaccount of the Reserve Account, together with the other available amounts in the Debt Service Fund, are sufficient to fully pay all Outstanding Bonds (including principal and interest thereon) of the Series secured by such subaccount in accordance with their terms, the funds on deposit in such subaccount may be applied to the payment of such Series of Bonds. Notwithstanding the foregoing provisions, with the written consent of each Insurer, in lieu of the required deposits into the Reserve Account, and /or in substitution for money on deposit in the Reserve Account, the Issuer may, at its sole option and discretion, cause to be deposited a Reserve Account Insurance Policy and /or Reserve Account Letter of Credit in an amount equal to the difference between the Reserve Account Requirement applicable thereto and the sums then on deposit in the Reserve Account, if any, and, in the case of a substitution of a Reserve Account Insurance Policy and /or Reserve Account Letter of Credit for money on deposit in the Reserve Account, the Issuer may withdraw money from the Reserve Account in excess of the Reserve Account Requirement and may use such money for any lawful purpose provided the Issuer first obtains an opinion of Bond Counsel that such use is permitted and will not, in and of itself, adversely affect 'the exclusion from gross income of interest on any Bonds other than any Taxable Bonds. Such Reserve Account Insurance Policy and /or Reserve Account Letter of Credit shall be payable to the Paying Agent for such Series (upon the giving of notice as required thereunder) on any interest payment or redemption date on which a deficiency exists which cannot be cured by funds in any other fund or account held pursuant to this Resolution and available for such purpose. A -31 If fifteen (15) days prior to an interest payment or mandatory redemption date, the Issuer shall determine that a deficiency exists in the amount of moneys available to pay in accordance with the terms hereof interest and /or principal due on Bonds on such date, the Issuer shall immediately notify (a) the issuer of the applicable Reserve Account Insurance Policy and /or the issuer of the Reserve Account Letter of Credit, and (b) the Insurer, if any, of the amount of such deficiency and the date on which such payment is due, and shall take all action to cause such issuer or Insurer to provide moneys sufficient to pay all amounts due on such interest payment or redemption date. If a disbursement is made from a Reserve Account Insurance Policy and /or Reserve Account Letter of Credit provided pursuant to this Section 4.05(B)(4), the Issuer shall reinstate the maximum limits of such Reserve Account Insurance Policy and /or Reserve Account Letter of Credit following such disbursement from moneys becoming available in the applicable subaccount of the Reserve Account in accordance with the provisions of the first paragraph of this Section 4.05(B)(4), by depositing funds in the amount of the disbursement made under such instrument, with the issuer thereof. In addition, after the amount on deposit in the applicable subaccount of the Reserve Account equals the Reserve Account Requirement therefor, the Issuer shall reimburse the issuer of the Reserve Account Insurance Policy and /or the issuer of the Reserve Account Letter of Credit for interest and all reasonable expenses incurred by such issuer in connection with the draw on such Reserve Account Insurance Policy or the Reserve Account Letter of Credit, as the case may be, if the Issuer is so obligated under the terms of the Reserve Account Insurance Policy, or Reserve Account Letter of Credit. The Issuer may evidence its obligation to reimburse the issuer of any Reserve Account Letter of Credit or Reserve Account Insurance Policy by executing and delivering to such issuer a promissory note therefor, provided, however, any such note (a) shall not be a general obligation of the Issuer the payment of which is secured by the full faith and credit or taxing power of the Issuer, and (b) shall be payable solely from moneys available in the applicable subaccount of the Reserve Account in accordance with the provisions of the first paragraph of this Section 4.05(B)(4). To the extent the Issuer causes to be deposited into the Reserve Account a Reserve Account Insurance Policy and /or a Reserve Account Letter of Credit for a term of years shorter than the life of the Series of Bonds so insured or secured, then the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit shall provide, among other things, that the issuer thereof shall provide the Issuer with notice as of each anniversary of the date of the issuance of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit of the intention of the issuer thereof to either (a) extend the term of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit beyond the expiration dates thereof, or (b) terminate the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit on the initial expiration dates thereof or such other - future date as the issuer thereof shall have established. If the issuer of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit notifies the Issuer pursuant to clause (b) of the immediately preceding sentence, then the Issuer shall deposit into the applicable subaccount of the Reserve Account pursuant to the first sentence of this Section 4.05(B)(4), during the first full calendar month following the date on which such A -32 notice of intent to terminate is received by the Issuer and in each succeeding month, such sums as shall be sufficient to pay each month an amount equal to a fraction, the numerator of which is one (1) and the denominator of which is equal to the number of months remaining in the term of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit, of the portion of the Reserve Account Requirement covered by the Reserve Account Letter of Credit and /or the Reserve Account Insurance Policy on the date such notice was received, until the sum on deposit in the applicable subaccount of the Reserve Account, and no later than the expiration of such Reserve Account Insurance Policy and /or such Reserve Account Letter of Credit, shall be equal to the Reserve Account Requirement. If any Reserve Account Letter of Credit or Reserve Account Insurance Policy shall terminate prior to the stated expiration date thereof, the Issuer agrees that it shall fund the applicable subaccount of the Reserve Account pursuant to the first sentence of this Section 4.05(B)(4), over a period of not to exceed twelve (12) months during which it shall make consecutive equal monthly payments in order that the amount on deposit in such account at the end of such period shall be equal to the Reserve Account Requirement; provided, the Issuer may at its sole option and discretion, with the prior written consent of the Insurer, if any, obtain a new Reserve Account Letter of Credit or a new Reserve Account Insurance Policy in lieu of making the payments required by this paragraph. (C) The Issuer, in its discretion, may use moneys in the Principal Account and the Interest Account to purchase or redeem Bonds coming due on the next principal payment date, provided such purchase or redemption does not adversely affect_the Issuer's ability to pay the principal or interest coming due on the Bonds not so purchased or redeemed. (D) At least one (1) Business Day prior to the date established for payment of any principal of or Redemption Price, if applicable, or interest on the Bonds, the Issuer shall withdraw from the Debt Service Fund sufficient moneys to pay such principal or Redemption Price, if applicable, or interest and deposit such moneys with the Paying Agent for the Bonds to be paid. (E) In the case of Bonds secured by a Credit Facility, amounts on deposit in the Debt Service Fund or any accounts therein established for such Bonds may be applied as provided in the applicable Supplemental Resolution to reimburse the Credit Bank for amounts drawn under such Credit Facility to pay the principal of or Redemption Price, if applicable, and interest on such Bonds or to pay the purchase price of any such Bonds which are tendered by the Holders thereof for payment. SECTION 4.06. IIpact Fee Fund The Issuer shall deposit all Impact Fees received in each Fiscal Year into the Impact Fee Fund. All or any portion of the moneys in the Impact Fee Fund may, at the option of the Issuer, be deposited or credited to the subaccounts in the Debt Service Fund in the manner described in Section 4.05(B) hereof; provided, however, that such moneys shall be deposited or credited to the subaccounts in the Debt Service Fund in the manner described in Section 4.05(B) hereof in the event that moneys in the Revenue Fund are insufficient or unavailable to make all of the deposits A -33 into the subaccounts in the Debt Service Fund required by Section 4.05(B) hereof. Amounts in the Impact Fee Fund not required to be deposited to the Debt Service Fund may be expended for any lawful purpose of the Issuer. Notwithstanding anything to the contrary contained herein, the aggregate amount of Impact Fees applied and allocated to the aggregate Debt Service Requirements for the Bonds shall never exceed the aggregate Impact Fee Debt Service Components for the Bonds, unless the Issuer shall receive an opinion of legal counsel to the effect that a greater amount of Impact Fees could lawfully be applied to the Debt Service Requirements for the Bonds. SECTION 4.07. Rebate Fund If so provided by Supplemental Resolution with respect to any Series of Bonds, the Issuer may establish with a Authorized Depository a fund to be known as the "Rebate Fund" (the "Rebate Fund "). Amounts on deposit in the Rebate Fund shall be held in trust by the Issuer and used solely to make required payments to the United States Treasury (except to the extent the same may be transferred to the Revenue Fund) and the Bondholders shall have no right to have the same applied for debt service on the Bonds. The Issuer agrees to undertake all actions required of it pursuant to Section 5.15 hereof, including, but not limited to: (1) making a determination in accordance with the Code of the amount necessary to be deposited in the Rebate Fund; (2) depositing into the Rebate Fund from moneys in the Revenue Fund or from other moneys of the Issuer legally available for such purpose the amount determined in clause (1) above; (3) - paying on the dates and in the manner required by the Code to the United States Treasury from the Rebate Fund and any other legally available moneys of the Issuer such amounts as shall be required by the Code to be rebated to the United States Treasury; and (4) keeping such records of the determinations made pursuant to this Section 4.07 as shall be required by the Code, as well as evidence of the fair market value of any investments purchased with proceeds of the Bonds of the Series of which such accounts were created. If at any time the Issuer shall determine that the amount on deposit in the Rebate Fund exceeds the amount necessary to be on deposit therein to satisfy the foregoing covenants of the Issuer, the Issuer may transfer all or a portion of the amount on deposit in the Rebate Fund to the Revenue Fund to be applied in the same manner as other funds on deposit in the Revenue Fund. SECTION 4.08. Investments All funds and accounts hereunder shall be continuously secured in the manner by which the deposit of public funds are authorized and required to be secured by the laws of the State. Moneys on deposit in the Construction Fund, the Revenue Fund, the Operation and Maintenance Fund, the Rebate Fund, the Rate Stabilization Fund, the Renewal and Replacement Fund, the Impact Fee Fund and the Debt Service Fund, other than the Reserve Account, may be invested and reinvested in Authorized Investments maturing not later than the date on which the moneys therein will be needed. Moneys on deposit in the Reserve Account may A -34 be invested or reinvested in Authorized Investments which shall mature no later than five (5) years from the date of acquisition thereof. Any and all income received by the Issuer from the investment of moneys in the funds and accounts established pursuant to this Resolution shall be retained in such respective fund or account unless otherwise required by applicable law, provided that income received by the Issuer from the investment of moneys in any subaccount of the Reserve Account to the extent the amount therein is greater than the Reserve Account Requirement shall be deposited in the Revenue Fund. Nothing contained in this Resolution shall prevent any Authorized Investments acquired as investments of or security for funds held under this Resolution from being issued or held in book -entry form on the books of the Department of the Treasury of the United States. All investments shall be valued at their fair market values. Amounts in the Reserve Account shall be valued on each Interest Payment Date after the payments due on the Bonds on such date shall have been made. SECTION 4.09. karate Accounts The moneys required to be accounted for in each of the foregoing funds and accounts established herein may be deposited in a single bank account, and funds allocated to the various funds and accounts established herein may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the moneys on deposit therein and such investments for the various purposes of such funds and accounts as herein provided. The designation and establishment of the various funds and accounts in and by this Resolution shall not be construed to require the establishment of any completely independent, self - balancing funds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues for certain purposes and to establish certain priorities for application of such revenues as herein provided. [End of Article IV] ARTICLE V SUBORDINATED INDEBTEDNESS ADDITIONAL BONDS, AND COVENANTS OF ISSUER SECTION 5.01. Subordinated Indebtedne The Issuer will not issue any other obligations, except under the conditions and in the manner provided herein, payable from the Pledged Funds or voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge having priority to or being on a parity with the lien thereon in favor of the Bonds and the interest thereon. The Issuer may at any time or from time to time issue evidences of indebtedness that are not Additional Bonds and that are payable in whole or in part A -35 out of the Pledged Funds and which may be secured by a pledge of the Pledged Funds; provided, however, that such pledge shall be, and shall be expressed to be, subordinated in all respects to the pledge of the Pledged Funds created by this Resolution. The Issuer shall have the right to covenant with the holders from time to time of any Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Bonds may be issued pursuant to Section 5.02 hereof. SECTION 5.02. Issuance of Additional Bonds No Additional Bonds, payable from the Pledged Funds on a parity with the Bonds then Outstanding pursuant to this Resolution, shall be issued except upon the conditions and in the manner herein provided. The Issuer may issue one or more Series of Additional Bonds for any one or more of the following purposes: financing the Cost of any Project, or the completion thereof, or refunding any or all Outstanding Bonds or any Subordinated Indebtedness of the Issuer, or for any other purpose permitted by law. No Additional Bonds shall be issued or incurred unless the following conditions are complied with: (A) The Issuer shall certify that it is current in all deposits into the various funds and accounts established hereby and all payments theretofore required to have been deposited or made by it under the provisions of this Resolution and has complied with the covenants and agreements of this Resolution. (B) There shall have been obtained and filed with the Issuer a certificate of an independent certified public accountant: (1) stating that such accountant has examined the books and records of the Issuer relating to the collection and receipt of Pledged Funds; (2) stating the amount of Net Revenues adjusted as provided in Section 5.02(E) hereof for the "immediately preceding Fiscal Year or any twelve (12) consecutive months selected by the Issuer of the eighteen (18) months immediately preceding the issuance of such Additional Bonds as the case may be; (3) stating that the amount of such Net Revenues equals at least 1.20 times the Maximum Debt Service Requirement for all Outstanding Bonds and such Additional Bonds then proposed to be issued; and (4) stating that no Event of Default was disclosed in the report of the most recent Annual Audit, or if an Event of Default was so disclosed, that it shall have been cured. (C) In computing the Maximum Debt Service Requirement for purposes of this Section 5.02, the interest rate on outstanding Variable Rate Bonds, and on any additional parity Variable Rate Bonds then proposed to be issued, shall be deemed to be the Maximum Interest Rate applicable thereto. In addition, in connection with the issuance of any Variable Rate Bonds, at the time of issuance of such Variable Rate Bonds, the Maximum Interest Rate applicable thereto shall be established. (D) For the purposes of this Section 5.02, the phrase "immediately preceding Fiscal Year or any twelve (12) consecutive months selected by the Issuer of the eighteen (18) months immediately preceding the issuance of such Additional Bonds" shall be sometimes referred to as "twelve consecutive months." A -36 (E) The Net Revenues may be adjusted by the independent certified public accountant, at the option of the Issuer, as follows: (1) If the Issuer, prior to the issuance of the proposed Additional Bonds but not prior to the beginning of such twelve consecutive months, shall have increased the Rates, and /or shall have begun to derive revenues from newly acquired facilities of the System, the Net Revenues for the twelve consecutive months shall be adjusted to show the Net Revenues which would have been derived in such twelve consecutive months if such increased Rates had been in effect, and /or such new facilities had produced revenues, during all of such twelve consecutive months. (2) In the event the Issuer shall have completed additions, extensions or improvements to the System prior to the issuance of the proposed Additional Bonds but not prior to the beginning of such twelve consecutive months and /or shall be constructing or acquiring additions, extensions or improvements to the System to be financed wholly or in part from the proceeds of such Additional Bonds or from any other source, from which Project or Projects the Issuer expects to derive revenues within three (3) years after issuance of such Additional Bonds,. such Net Revenues may be adjusted by adding thereto the additional net revenues estimated by the Consultants to be derived (based upon the then current Rates or such Rates as shall have been adopted by the Issuer to become effective during the period in which completion of such improvements is anticipated to occur) during the first twelve (12) months of operation of such Project after completion of the construction or acquisition thereof. (F) Except as otherwise provided herein, Additional Bonds shall be deemed to have been issued pursuant to this Resolution the same as the Outstanding Bonds, and all of the other covenants and other provisions of this Resolution (except as to details of such Additional Bonds inconsistent therewith) shall be for the equal benefit, protection and security of the Holders of all Bonds issued pursuant to this Resolution; provided, however, any Supplemental Resolution authorizing the issuance of Additional Bonds may provide that any of the covenants herein contained will not be applicable to such Additional Bonds, provided that such provision shall not, in the opinion of Bond Counsel, adversely affect the rights of any Bonds which shall then be Outstanding. Except as expressly provided herein or in a Supplemental Resolution, all Bonds, regardless of the time or times of their issuance, shall rank equally with respect to their lien on the Pledged Funds and their sources and security for payment therefrom without preference of any Bonds over any other; provided, however, that the Issuer shall include a provision in any Supplemental Resolution authorizing the issuance of Variable Rate Bonds pursuant to this Section 5.02 that in the event the principal thereof is accelerated due to such Bonds being held by the issuer of a Credit Facility, the lien of such Bonds on the Pledged Funds shall be subordinate in all respects to the pledge of the Pledged Funds created by this Resolution. (G) In the event any Additional Bonds are issued for the purpose of refunding any Bonds then Outstanding, the conditions of Section 5.02(B) shall not apply, provided that the issuance of such Additional Bonds shall not result in an increase in the aggregate amount of principal of and interest on the Outstanding Bonds becoming due in the current Fiscal Year and /or all or any subsequent Fiscal Years. The conditions of Section 5.02(B) hereof shall apply to A -37 Additional Bonds issued to refund Subordinated Indebtedness and to Additional Bonds issued for refunding purposes which cannot meet the conditions of this paragraph. SECTION 5.03. Bond Anticipation Notes The Issuer may issue notes in anticipation of the issuance of Bonds which shall have such terms and details and be secured in such manner, not inconsistent with this Resolution, as shall be provided by resolution of the Issuer. SECTION 5.04. Accession of Subordinated Indebtedness to Parity Status with Bonds The Issuer may provide for the accession of Subordinated Indebtedness to the status of complete parity with the Bonds, if the Issuer shall meet all the requirements imposed upon the issuance of Additional Bonds by Section 5.02 hereof, assuming, for purposes of said requirements, that such Subordinated Indebtedness shall be Additional Bonds. If the aforementioned conditions are satisfied, the Subordinated Indebtedness shall be deemed to have been issued pursuant to this Resolution the same as the Outstanding Bonds, and such Subordinated Indebtedness shall be considered Bonds for all purposes provided in this Resolution. SECTION 5.05. Operation and Maintenance The Issuer will maintain or cause to be maintained the System and all portions thereof in good condition and will operate or cause to be operated the same in an efficient and economical manner, making or causing to be made such expenditures for equipment and for renewals, repairs and replacements as may be proper for the economical operation and maintenance thereof. The Issuer will obtain and renew to the full extent required by applicable law all permits for acquisition, construction, operation of the System. SECTION 5.06. Annual Budget The Issuer shall annually prepare and adopt an Annual Budget with respect to at least the System in accordance with applicable law. No expenditure shall be made in any Fiscal Year in excess of the amount provided therefor in the Annual Budget, (A) without a written finding and recommendation by an Authorized Issuer Officer, which finding and recommendation shall state in detail the purpose of and necessity for such increased expenditures, and (B) until the Governing Body shall have approved such finding and recommendation by resolution. If for any reason the Issuer shall not have adopted the Annual Budget before the first day of any Fiscal Year, other than the first Fiscal Year, the preliminary budget for such Fiscal Year shall be deemed to be in effect for such Fiscal Year until the Annual Budget for such Fiscal Year shall be adopted; and if the preliminary budget shall not have been prepared, the Annual Budget for the preceding Fiscal Year shall be deemed to continue in effect. The Issuer shall mail copies of such Annual Budgets and amended Annual Budgets and all resolutions authorizing increased expenditures to any Holder who shall file an address with the Clerk and request in writing that copies of all such Annual Budgets and resolutions be furnished to such Holder and shall make available all such Annual Budgets and resolutions authorizing increased expenditures at all reasonable times to any Holder or to anyone acting for or on behalf of any Holder. The Issuer shall be permitted to make a reasonable charge for furnishing to any Holder such Annual Budgets and resolutions. A -38 SECTION 5.07. Rates. The Issuer shall fix, establish, maintain and collect such Rates, and revise the same to the extent necessary, so that the Rates will always provide in each Fiscal Year Net Revenues which are at least equal one hundred twenty percent (120 %) of the Debt Service Requirement for such Fiscal Year. Such Rates shall not be so reduced so as to be insufficient to provide Net Revenues in each Fiscal Year fully adequate for the purposes provided therefor by this Resolution. The Issuer covenants and agrees that prior to the beginning of each Fiscal Year, whenever the Net Revenues which shall be projected by the Annual Budget proposed for such Fiscal Year shall be insufficient for the coverages required by the first paragraph of this section, the Issuer shall revise the Rates by adopting a schedule thereof by resolution or ordinance in the manner provided by applicable law of the State. For purposes of calculating the Debt Service Requirement for purposes of this Section 5.07, the interest rate on outstanding Variable Rate Bonds shall be deemed to be the lesser of the Maximum Interest Rate applicable thereto or the maximum interest rate borne by such Variable Rate Bonds at any time during the preceding twelve (12) months. Notwithstanding any other provision hereof to the contrary, for purposes of this Section 5.07, to the extent that in any Fiscal Year the Issuer budgets for deposit to the Revenue Fund and actually deposits to the Revenue Fund lawfully available funds of the Issuer not otherwise constituting Gross Revenues, such revenues shall be deemed to be Rates for purposes of determining compliance with this Section 5.07. SECTION 5.08. Books and Records The Issuer will keep books, records and accounts of the receipt of the Pledged Funds in accordance with generally accepted accounting principles, and any Credit Bank, Insurer, or Holder of any Bonds Outstanding or the duly authorized representatives thereof shall have the right at all reasonable times to inspect all books, records and accounts of the Issuer relating thereto. The Issuer covenants that within one hundred eighty (180) days of the close of each Fiscal Year it will cause to be prepared and filed with the Clerk and mailed to all Credit Banks, Insurers and Holders who shall have filed their names and addresses with the Clerk for such purpose a statement setting forth in respect of the preceding Fiscal Year: (A) the amount of the Pledged Funds received in the preceding Fiscal Year; (B) the total amounts deposited to the credit of each fund and account created under the provisions of this Resolution; (C) the principal amount of all Bonds issued, paid, purchased or redeemed; and (D) the amounts on deposit at the end of such Fiscal Year to the credit of each such fund or account. SECTION 5.09. Annual Audit. The Issuer shall, immediately after the close of each Fiscal Year, cause the financial statements of the Issuer to be properly audited by a recognized independent firm of certified public accountants, and shall require such accountants to complete their report of such Annual Audit in accordance with applicable law. Such Annual Audits shall contain, but not be limited to, a balance sheet, an income statement, a statement of changes in financial position, a statement of change in retained earnings, a statement of insurance coverage, A -39 and any other statements as required by law or accounting convention, and a certificate by such accountants disclosing any material default on the part of the Issuer of any covenant or agreement herein. Each Annual Audit shall be in conformity with generally accepted accounting principles. A copy of each Annual Audit shall regularly be furnished to any Credit Bank, to any Insurer and to any Holder who shall have furnished an address to the Clerk and requested in writing that the same be furnished to such Holder. The Issuer shall be permitted to make a reasonable charge for furnishing to any Holder such Annual Audit. SECTION 5.10. Mortgage, Sale or Closing of Facili iec The Issuer irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of any portion of the System except as provided in this section, until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has be_ en made in accordance with Section 8.01 hereof. The Issuer shall have and hereby reserves the right to sell, lease or otherwise dispose of any site, facilities or property comprising a part of the System in the manner provided in this Section 5. 10, if in the judgment of the Issuer such disposition will not adversely affect the security for the Bondholders and any one of the following conditions exist: (A) such site, facilities or property is not necessary for the operation of the System, (B) such site, facilities or property is not useful in the operation of the System, (C) such site, facilities or property is not profitable in the operation of the System, or (D) in the case of a lease of such site, facilities or property, such lease will be advantageous to the System. The proceeds from any such sale, lease or other disposition shall be deposited into the Revenue Fund. The Issuer may make contracts or grant licenses for the operation of, or grant easements or other rights with respect to, any part of the System if such contract, license, easement or right does not, in the opinion of the Consultants, as evidenced by. a certificate to that effect filed with the Issuer, impede or restrict the operation by the Issuer of the System, but any payments to the Issuer under or in connection with any such contract, license, easement or right in respect of the System or any part thereof shall constitute Gross Revenues. SECTION 5.11. Insurance So long as the Net Revenues are pledged - hereunder, the Issuer will carry, with a reputable insurance carrier or carriers, such insurance as is ordinarily carried by private or public corporations owning and operating water systems similar to the System, including public liability insurance, in such amounts as the Issuer shall determine to be sufficient. The property loss or damage insurance shall at all times be in an amount or amounts equal to the replacement value of the buildings, furniture, fixtures and equipment of the System. The Issuer may establish certain minimum levels of insurance for which the Issuer may self - insure. Such minimum levels of insurance shall be in amounts as recommended in writing by an insurance consultant who has a favorable reputation and experience and is qualified to survey risks and to recommend insurance coverage for Persons engaged in operations similar to the System. SECTION 5.12. No Impairment The pledging of the Pledged Funds in the manner provided herein shall not be subject to repeal, modification or impairment by any subsequent . A-40 ordinance, resolution or other proceedings of the Governing Body. This provision shall not, however, be deemed to prohibit the reduction or elimination of the Rates if such reduction or elimination will not result in a violation of Section 5.07 hereof. SECTION 5.13. Special Covenants Relating to Reserve Account Insurance P0licy Reserve Account Litter of Credit. (A) The Issuer shall annually submit to the issuer of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit, records of withdrawals on such Reserve Account Insurance Policy or such Reserve Account Letter of Credit, as the case may be, received by the Paying Agent and remaining unpaid, the respective dates of such withdrawals, the interest accrued on such withdrawals and the aggregate amount of interest due by the Issuer to the issuer of such Reserve Account Insurance policy or such Reserve Account Letter of Credit, as the case may be. (B) The Issuer hereby acknowledges that the issuer of the Reserve Account Insurance Policy and /or the Reserve Account Letter of Credit shall be deemed a third -party beneficiary of this Resolution, but not on a parity with the Bondholders, for the purpose of enforcing the terms, conditions and obligations of the Resolution which benefit the issuer of such Reserve Account Insurance Policy or such Reserve Account Letter of Credit, as the case may be. SECTION 5.14. Covenants with Credit Banks and Insurer The Issuer may make such covenants as it may in its sole discretion, determine to be appropriate with any Insurer, Credit Bank or other financial institution that shall agree to insure or to provide for Bonds of any one or more Series credit or liquidity support that shall enhance the security or the value of such Bonds. Such covenants may be set forth in the applicable Supplemental Resolution and shall be binding on the Issuer, the Registrar, the Paying Agent and all the Holders of Bonds the same as if such covenants were set forth in full in this Resolution. SECTION 5.15. Federal Income Tax Covenants; Taxable Bonds (A) The Issuer covenants with the Holders of each Series of Bonds (other than Taxable Bonds), that it shall not use the proceeds of such Series of Bonds in any manner which would cause the interest on such Series of Bonds to be or become includable in the gross income of the Holder thereof for federal income tax purposes. (B) The Issuer covenants with the Holders of each Series of Bonds (other than Taxable Bonds) that neither the Issuer nor any Person under its control or direction will knowingly make any use of the proceeds of such Series of Bonds (or amounts deemed to be proceeds under the Code) in any manner which would cause such Series of Bonds to be arbitrage bonds within the meaning of Section 148 of the Code, and neither the Issuer nor any such other Person shall knowingly do any act or fail to do any act which would cause the interest on such Series of Bonds to become includable in the gross income of the Holder thereof for federal income tax purposes. Specifically, without intending to limit in any way the generality of the foregoing, the Issuer covenants and agrees: A-41 (1) to pay to the United States of America from amounts in the Rebate Fund and from any other legally available funds, at the times required pursuant to Section 148(f) of the Code, the excess of the amount earned on all non - purpose investments (as defined in Section 148(f)(6) of the Code) (other than investments attributed to an excess described in this sentence) over the amount which would have been earned if such non - purpose investments were invested at a rate equal to the yield on the Bonds, plus any income attributable to such excess (the "Rebate Amount "); (2) to maintain and retain all records pertaining to and to be responsible for making or causing to be made all determinations and calculations of the Rebate Amount and required payments of the Rebate Amount as shall be necessary to comply with the Code; (3) to refrain from using proceeds from the Bonds in a manner that would cause the Bonds or any of them, to be classified as private activity bonds under Section 141(a) of the Code; and (4) to take or refrain from taking any action that would cause the Bonds, or any of them, to become arbitrage bonds under Section 103(b) and Section 148 of the Code. The Issuer understands that the foregoing covenants impose continuing obligations on the Issuer to comply with the requirements of Section 103 and Part IV of Subchapter B of Chapter 1 of the Code so long as such requirements are applicable. Unless otherwise specified in a Supplemental Resolution, the Issuer shall designate a certified public accountant, Bond Counsel, or other professional consultant having the skill and expertise necessary (the "Rebate Analyst ") to make any and all calculations required pursuant to this Section regarding the Rebate Amount. Such calculation shall be made in the manner and at such times as specified in the Code. The Issuer shall engage and shall be responsible for paying the fees and expenses of the Rebate Analyst. (C) The Issuer may, if it so elects, issue one or more Series of Taxable Bonds the interest on which is includible in the gross income of the Holder thereof for federal income taxation purposes, so long as each Bond of such Series states in the body thereof that interest payable thereon is subject to federal income taxation and provided that the issuance thereof will not cause the interest on any other Bonds theretofore issued hereunder to be or become includable in the gross income of the Holder thereof for federal income tax purposes. The covenants set forth in subsections (A) and (B) of this Section 5.15 shall not apply to any Taxable Bonds. SECTION 5.16. N_ _onnresentment of Bonds; Disposition of Unclaimed Money In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity, or otherwise, if funds sufficient to pay any such Bond shall have been made available to any Paying Agent for the benefit of the Holder thereof, all liability of the Issuer to the Holder thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of such Paying Agent to hold such funds, without A-42 liability for interest thereon, for the benefit of the Holder of such Bond, who shall thereafter be restricted exclusively to such funds fof any claim of whatever nature on the part of such Holder under this Resolution or on, or with respect to, such Bond. Any moneys so deposited with and held by such Paying Agent for the payment of Bonds not so claimed within seven years after the date the payment of such Bonds shall have become due, whether at maturity or otherwise, shall be presumed abandoned and shall be returned to the Issuer, and the Issuer shall comply with the provisions of Chapter 717, Florida Statutes, or any successor thereof, in respect of such moneys. SECTION 5.17. No Free Service; Enforcement of Charges The Issuer will not render, or cause to be rendered, any free services of any nature by the System or any part thereof, nor will any preferential rates be established for any particular user as opposed to other users of the System of the same class, nor, to the extent permitted by law, shall the Issuer permit the operation of any water utility competitive with the System. The Issuer shall compel the prompt payment of Rates, fees and other charges imposed for the service rendered by the System and will vigorously enforce all of the provisions of any ordinance or resolution of the Issuer relating to service provided by .the System. The Issuer shall take all steps required to lawfully impose the Impact Fees and shall diligently proceed to collect all Impact Fees and shall exercise all legally available remedies to enforce the same. SECTION 5.18. Continuing Disclosure Compliance The Issuer hereby covenants and agrees that, so long as any of the Series 1998 Bonds remain outstanding, it will provide, in a manner consistent with Rule 15c2 -12 of the Securities and Exchange Commission (the "Rule ") (a) to each nationally recognized municipal securities information repository ( "NRMSIR ") and to the appropriate depository designated by the State of Florida ( "SID ") if any, (i) on or before one hundred eighty (180) days after each fiscal year financial information and operating data of the Issuer for the preceding fiscal year of the type included in the Official Statement, including, but not necessarily limited to the operating data contained under the caption "The System" and (ii) if not submitted as part of the annual financial information pursuant to (i), then, when and if available, audited financial statements of the Issuer prepared in accordance with generally accepted accounting principles; (b) in a timely manner, to each NRMSIR or the Municipal Securities Rulemaking Board ( "MSRB "), and to the appropriate SID, if any, written notice of the occurrence of any of the following events with respect to the Series 1998 Bonds, if material: (i) principal and interest payment delinquencies; (ii) non - payment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) adverse tax opinions, or events affecting the tax- exempt status of the security; (vi) modifications to rights of security holders; (vii) any call of the Series 1998 Bonds for redemption other than mandatory sinking fund redemptions of Term Bonds; (viii) defeasances; (ix) release, substitution, or sale of property securing the repayment of the securities; (x) substitution of credit or liquidity providers, or their failure to perform; (xi) rating changes; (xii) any change in the fiscal year of the Issuer; (c) in a timely manner, to each NRMSIR or the MSRB, and to the appropriate SID, if any, written notice of a failure of the Issuer to provide the financial information described in (a)(i) above, on or before the date specified above, and (d) any other information required to be disclosed to any person to whom it is required to be disclosed by the Rule. A-43 The Issuer also covenants to promptly provide a copy of the above information to the Paying Agent, each Insurer and the underwriter of the Series 1998 Bonds. The Paying Agent shall provide such information to any requesting Bondholder of the Series 1998 Bonds and any requesting beneficial owner of the Series 1998 Bonds held in street -name or in a nominee capacity, (the "Beneficial Owners "), . provided that the Paying Agent shall be entitled to charge such requesting Bondholder or Beneficial Owner an amount sufficient to reimburse the itself for costs incurred for copying and shipping such information. The foregoing covenants shall run to the benefit of the Series 1998 Bondholders and the Beneficial Owners. However, failure to meet the covenants set forth in this Section 5.18 shall not be deemed to constitute an event of default or a breach of any other covenant under the resolutions authorizing the Series 1998 Bonds, and the sole remedy for such a default or breach shall be as described in the next paragraph. The Bondholder of any Series 1998 Bond or any Beneficial Owner may either at law or in equity, by suit, action, mandamus or other proceeding in any court or competent jurisdiction, protect and enforce any and all rights granted or contained in this Section 5.18 and may enforce any compel the performance of all duties required hereby to be performed by the Issuer or by any officers thereof. Notwithstanding the foregoing, the enforcement of the covenants contemplated hereby shall not affect the validity or enforceability of the Series 1998 bonds. Notwithstanding any other provision of this Resolution, this Section 5.18 may be amended only as follows: (a) the amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the Issuer or the type of business conducted by the Issuer; (b) the provisions of this Section 5.18, as amended, would have complied with the requirements of Rule 15c2 -12 of the Securities and Exchange Commission as in effect as of the date of issuance of the Series 1998 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the amendment does not materially impair the interest of the Series 1998 Bondholders and /or Beneficial Owners as determined by an opinion of nationally recognized bond counsel delivered to the Issuer, or by approving vote of the Beneficial Owners of the Series 1998 Bonds at the time of the amendment. In the event of any amendment hereto, the annual financial information provided subsequent to such amendment shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided by the Issuer. If the amendment affects the accounting principles to be followed in preparing financial statements of the Issuer, the annual financial information for the year in which the change is made must present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison must include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison should also be quantitative. A notice of the change in the accounting principles must be sent to each NRMSIR or the MSRB and the appropriate SID, if any. A-44 ARTICLE VI . DEFAULTS AND REMEDIES SECTION 6.01. Events of Default The following events shall each constitute an Event of Default hereunder: (A) Default shall be made in the payment of the principal of, Amortization Installment, Redemption Price or interest on any Bond when due. (B) There shall occur the dissolution or liquidation of the Issuer, or the filing by the Issuer of a voluntary petition in bankruptcy, or the commission by the Issuer of any act of bankruptcy, or adjudication of the Issuer as a bankrupt, or assignment by the Issuer for the benefit of its creditors, or appointment of a receiver for the Issuer, or the entry by the Issuer into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Issuer in any proceeding for its reorganization instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted. (C) The Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in this Resolution on the part of the Issuer to be performed, other than Section 5.18 hereof, and such default shall continue for a period of thirty (30) days after written notice of such default . shall have been received from any Insurer or the Holders of not less than twenty-five percent (25%) of the aggregate principal amount of Bonds Outstanding or any Credit Bank. Notwithstanding the foregoing, the Issuer shall not be deemed in default hereunder if such default cannot be cured within such thirty (30) days, but can be cured within -a reasonable period of time, if the Issuer in good faith institutes curative action and diligently pursues such action until the default has been corrected. SECTION 6.02. Remedies. Any Holder of Bonds issued under the provisions of this Resolution or any trustee or receiver acting for such Bondholders may either at law or in equity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights under the laws of the State, or granted and contained in this Resolution, and may enforce and compel the performance of all duties required by this Resolution or by any applicable statutes to be performed by the Issuer or by any officer thereof. This paragraph shall not be deemed to be a waiver by the Issuer of its venue rights. Upon the occurrence of an Event of Default, the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding may by written notice to the Issuer declare the principal of the Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable. A-45 The Holder or Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding may by a duly executed certificate in writing appoint a trustee for Holders of Bonds issued pursuant to this Resolution with authority to represent such Bondholders in any legal proceedings for the enforcement and protection of the rights of such Bondholders and such certificate shall be executed by such Bondholders or their duly authorized attorneys or representatives, and shall be filed in the office of the Clerk. Notice of such appointment, together with evidence of the requisite signatures of the Holders of not less than a majority in aggregate principal amount of Bonds Outstanding and the trust instrument under which the trustee shall have agreed to serve shall be filed with the Issuer and the trustee and notice of appointment shall be given to all Holders of Bonds in the same manner as notices of redemption are given hereunder. The Holders of not less than a majority in aggregate principal amount of all the Bonds then Outstanding may remove the trustee initially appointed and appoint a successor and subsequent successors at any time. SECTION 6.03. Directions to Trustee as to Remedial Proceedings The Holders of a majority in principal amount of the Bonds then Outstanding (or any Insurer insuring, or any Credit Bank providing a Credit Facility for, any then Outstanding Bonds) have the right, by an instrument or concurrent instruments in writing executed and delivered to any trustee appointed pursuant to Section 6.02 hereof, to direct the method and place of conducting all remedial proceedings to be taken by any trustee hereunder, provided that such direction shall not be otherwise than in accordance with law or the provisions hereof, and that such trustee shall have the right to decline to follow any such direction which in the opinion of such trustee would be unjustly prejudicial to Holders of Bonds not parties to such direction. SECTION 6.04. Remedies Cumulative No remedy herein conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. SECTION 6.05. Waiver of Default No delay or omission of any Bondholder to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default, or an acquiescence therein; and every power and remedy given by Section 6.02 of this Resolution to the Bondholders may be exercised from time to time, and as often as may be deemed expedient. SECTION 6.06. Application of Moneys After Default If an Event of Default described in Section 6.01(A) or (B) shall happen and shall not have been remedied, the Issuer or a court- appointed trustee or receiver shall apply all Pledged Funds as follows and in the following order: (A) To the payment of the reasonable and proper charges, expenses and liabilities the trustee or receiver, Registrar and Paying Agent hereunder; and A -46 (B) To the payment of the amounts required for reasonable and necessary Operating Expenses, and for the reasonable renewals, repairs and replacements of the System necessary to prevent loss of Gross Revenues, as certified by the Consultants; and (C) To the payment of the interest and principal or Redemption Price, if applicable, then due on the Bonds, as follows: (1) Unless the principal of all the Bonds shall have become due and payable, all such moneys shall be applied: FIRST: to the payment to the Persons entitled thereto of all installments of interest then due, in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference; SECOND: to the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due at maturity or upon mandatory redemption prior to maturity (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of Section 8.01 of this Resolution), in the order of their due dates, with interest upon such Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the amount of such interest due on such date, and then to the payment of such principal, ratably according to the amount of such principal due on such date, to the Persons entitled thereto without any discrimination or preference; and THIRD: to the payment of the Redemption Price of any Bonds called for optional redemption pursuant to the provisions of this Resolution. (2) If the principal of all the Bonds shall have become due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds, with interest thereon as aforesaid, 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 preference. SECTION 6.07. Control by Insurer or Credit Bank Upon the occurrence and continuance of an Event of Default, each Insurer or Credit Bank, if such Insurer or Credit Bank shall have honored all of its commitments under its Bond Insurance Policy or its Credit Facility, as the case may be, shall be entitled to direct and control the enforcement of all rights and remedies with respect to the Bonds it shall insure or for which such Credit Facility is provided. [End of Article VI) A-47 ARTICLE VII SUPPLEMENTAL RESOLUTIONS SECTION 7.01. Supplemental Resolution Without Bondholders' Consent Except as provided herein or in Sections 5.18 or 7.02, subsequent to the issuance of Bonds, no, amendment, revision or revocation of this Resolution shall be enacted by the Issuer. The Issuer, from time to time and at any time, may adopt such Supplemental Resolutions without the consent of the Bondholders (which Resolution shall thereafter form a part hereof) for any of the following purposes: (A) To cure any ambiguity or formal defect or omission or to correct any inconsistent provisions in this Resolution or to clarify any matters or questions arising hereunder. (B) To grant to or confer upon the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders. (C) To add to the conditions, limitations and restrictions on the issuance of Bonds under the provisions of this Resolution other conditions, limitations and restrictions thereafter to be observed. (D) To add to the covenants and agreements of the Issuer in this Resolution other covenants and agreements thereafter to be observed by the Issuer or to surrender any right or power herein reserved to or conferred upon the Issuer. (E) To specify and determine at any time prior to the first delivery of any Series of Bonds the matters and things referred to in Sections 2.01, 2.02 or 2.09 hereof, and also any other matters and things relative to such Bonds which are not contrary to or inconsistent with this Resolution as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination. (F) To authorize Projects or to change or modify the description of any Project. (G) To specify and determine matters necessary or desirable for the issuance of Capital Appreciation Bonds or Variable Rate Bonds. (H) To authorize Additional Bonds or Subordinated Indebtedness. (I) To maintain or obtain a rating on any Bonds, to implement or discontinue, if necessary, a book -entry system of registration of bonds or to preserve the tax- exempt status of Bonds. (J) To make amendments permitted by Section 5.18 hereof. A-48 (K) To make any other change that, in the opinion of Bond Counsel, would not materially adversely affect the security for the Bonds. In making such determination, Bond Counsel shall not take into consideration any Bond Insurance Policy. Except Supplemental Resolutions described in subsections (E), (F), (H) and (J) of this Section 7.01 and Supplemental Resolutions adopted for the purpose of authorizing Additional Bonds in compliance with all applicable provisions hereof, no Supplemental Resolution adopted pursuant to this Article VII shall become effective unless approved by every Insurer; and the Issuer covenants and agrees to furnish to each Insurer an executed original transcript of the Issuer's proceedings with respect to the adoption of each Supplemental Resolution. SECTION 7.02. Supplemental Resolution With Bondholders'. Insurer's and Credi Bank's Consent Except as otherwise provided in Section 7.03 hereof, subject only to the terms and provisions contained in Section 5.18 hereof and in this Section 7.02, the Holder or Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, to consent to and approve the adoption of such Supplemental Resolution or Resolutions hereto as shall be deemed necessary or desirable by the Issuer for the purpose of supplementing , modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution; provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any specified Series or maturity remain Outstanding, the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Bonds under this Section 7.02. Any Supplemental Resolution which is adopted in accordance with the provisions of this Section 7.02 shall also require the written consent of the Insurer of, or any Credit Bank providing a Credit Facility for, any Bonds which are Outstanding at the time such Supplemental Resolution shall take effect. No Supplemental Resolution may be approved or adopted which shall permit or require (A) an extension of the maturity of the principal of or the payment of the interest on any Bond issued hereunder, (B) reduction in the principal amount of any Bond or the Redemption Price or the rate of interest thereon, (C) the creation of a lien upon or a pledge of the Pledged Funds which adversely affects the rights granted by the Bonds or this Resolution in favor of any Bondholders, (D) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (E) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Resolution. If at any time the Issuer shall determine that it is necessary or desirable to adopt any Supplemental Resolution pursuant to this Section 7.02, the Clerk shall cause the Registrar to give notice of the proposed adoption of such Supplemental Resolution and the form of consent to such adoption to be mailed, postage prepaid, to all Bondholders at their addresses as they appear on the registration books and to all Insurers of, and Credit Banks providing a Credit Facility for, Bonds Outstanding. Such notice shall briefly set forth the nature of the proposed Supplemental Resolution and shall state that copies thereof are on file at the offices of the Clerk and the Registrar for inspection by all Bondholders. The Issuer shall not, however, be subject to any liability to any Bondholder by reason of its failure to cause the notice required by this Section 7.02 to be mailed and any such failure shall not affect the validity of such Supplemental Resolution when consented to and approved as provided in this Section 7.02. A-49 Whenever the Issuer shall deliver to the Clerk an instrument or instruments in writing purporting to be executed by the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding, which instrument or instruments shall refer to the proposed Supplemental Resolution described in such notice and shall specifically consent to and approve the adoption thereof in substantially the form of the copy thereof referred to in such notice, thereupon, but not otherwise, the Issuer may adopt such Supplemental Resolution in substantially such form, without liability or responsibility to any Holder of any Bond, whether or not such Holder shall have consented thereto. If the Holders of not less than a majority in aggregate principal amount of the Bonds Outstanding at the time of the adoption of such Supplemental Resolution shall have consented to and approved the adoption thereof as herein provided, no Holder of any Bond shall have any right to object to the adoption of such Supplemental Resolution, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Issuer from adopting the same or from taking any action pursuant to the provisions thereof. Upon the adoption of any Supplemental Resolution pursuant to the provisions of this Section 7.02, this Resolution shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Resolution of the Issuer and all Holders of Bonds then Outstanding shall thereafter be determined, exercised and enforced in all respects under the provisions of this Resolution as so modified and amended. SECTION 7.03. Amendment with Consent of Insurer and /or Credit Bank Only If all of a Series of Bonds Outstanding hereunder are insured or secured as to payment of principal and interest by an Insurer or Insurers and /or by a Credit Facility provided by a Credit Bank or Credit Banks, and the Insurer or Insurers and /or the Credit Bank or Credit Banks, as applicable, are not in default, and such Bonds, at the time of the hereinafter described amendment, shall be rated by the rating agencies which shall have rated the Bonds at the time such Bonds were insured or such Credit Facility was provided no lower than the ratings assigned thereto by such rating agencies on the date such Bonds were insured or such Credit Facility was provided, the Issuer may enact one or more Supplemental Resolutions amending all or any part of Articles I, IV, V, VI and VIII hereof with the written consent of said Insurer or Insurers and /or said Credit Bank or Credit Banks, as applicable, and the acknowledgment by said Insurer or Insurers and /or said Credit Bank or Credit Banks that its Bond Insurance Policy or its Credit Facility, as the case may be, will remain in full force and effect. The consent of the Holders of any Bonds shall not be necessary. The foregoing right of amendment, however, does not apply to any amendment to Section 5.15 hereof with respect to the exclusion, if applicable, of interest on said Bonds from the gross income of the Holders thereof for federal income tax purposes nor may any such amendment deprive the Holders of any Bond of right to payment of the Bonds from, and their lien on, the Pledged Funds and any additional security pledged hereunder. Upon filing with the Clerk of evidence of such consent of the Insurer or Insurers and /or the Credit Bank or Credit Banks as aforesaid, the Issuer may adopt such Supplemental Resolution. After the adoption by the Issuer of such Supplemental Resolution, notice thereof shall be mailed in the same manner as notice of an amendment under Section 7.02 hereof. A -50 SECTION 7.04. Required Opinion of Bond Counsel The Issuer shall not adopt a Supplemental Resolution unless the Issuer shall have received an opinion of Bond Counsel to the effect that such action is permitted hereunder and will not impair the exclusion of the interest on any Bonds (other than Taxable Bonds) from gross income for federal income tax purposes. [End of Article VII] A -51 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Defeasance If the Issuer shall pay or cause to be paid or there shall otherwise be paid to the Holders of all Bonds the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Resolution, then the pledge of the Pledged Funds and any additional security pledged hereunder, and all covenants, agreements and other obligations of the Issuer to the Bondholders, shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Paying Agents shall pay over or deliver to the Issuer all money or securities held by them pursuant to the Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption. Any Bonds or interest installments appertaining thereto, whether at or prior to the maturity or redemption date of such Bonds, shall be deemed to have been paid within the meaning of this Section 8.01 if (A) in case any such Bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to irrevocably call such Bonds for redemption and notice of such redemption shall have been duly given or irrevocable provision shall have been made for the giving of such notice, and (B) there shall have been deposited in irrevocable trust with a banking institution or trust company by or on behalf of the Issuer either moneys in an amount which shall be sufficient, or noncallable Federal Securities the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with such bank or trust company at the same time shall be sufficient, to pay the principal of or Redemption Price, if applicable, and interest due and to become due on said Bonds on and prior to the redemption date or maturity date thereof, as the case may be. Neither the Federal Securities nor any moneys so deposited with such bank or trust company nor any moneys received by such bank or trust company on account of principal of or Redemption Price, if applicable, or interest on said Federal Securities shall be withdrawn or used for any purpose other than, and all such moneys shall be held in trust for and be applied to, the payment, when due, of the principal of or Redemption Price, if applicable, of the Bonds for the payment or redemption of which they were deposited and the interest accruing thereon to the date of maturity or redemption thereof; provided, however, the Issuer may substitute new Federal Securities and moneys for the deposited Federal Securities and moneys if the new Federal Securities and moneys are sufficient to pay the principal of or Redemption Price, if applicable, and interest on such Bonds, and any trust agreement governing the deposit of such Federal Securities and moneys may provide for the investment of moneys unclaimed by Bondholders and for the payment to the Issuer of such unclaimed moneys and the investment earnings thereon. For purposes of determining whether Variable Rate Bonds shall be deemed to have been paid prior to the maturity or the redemption date thereof, as the case may be, by the deposit of moneys, or specified' Federal Securities and moneys, if any, in accordance with this Section 8.01, the interest to come due on such Variable Rate Bonds on or prior to the maturity or redemption date thereof, as the case may be, shall be calculated at the Maximum Interest Rate; provided, however, that if on any date, as a result of such Variable Rate Bonds having borne interest at less than the Maximum Interest Rate for any period, the total amount of moneys and specified Federal Securities on deposit for the payment of interest on such . A -52 Variable Rate Bonds is in excess of the total amount which would have been required to be deposited on such date in respect of such- Variable Rate Bonds in order to satisfy this Section 8.01, such excess shall be paid to the Issuer free and clear of any trust, lien, pledge or assignment securing the Bonds or otherwise existing under this Resolution. In the event the Bonds for which moneys are to be deposited for the payment thereof in accordance with this Section 8.01 are not by their terms subject to redemption within the next succeeding sixty (60) days, the Issuer shall cause the Registrar to mail a notice to the Holders of such Bonds that the deposit required by this Section 8.01 of moneys or Federal Securities has been made and said Bonds are deemed to be paid in accordance with the provisions of this Section 8.01 and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal of or Redemption Price, if applicable, and interest on said Bonds. Nothing herein shall be deemed to require the Issuer to call any of the Outstanding Bonds for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the Issuer in determining whether to exercise any such option for early redemption, but the Issuer may waive these rights by Supplemental Resolution. In the event that the principal of or Redemption Price, if applicable, and interest due on the Bonds or any portion thereof shall be paid by an Insurer or Insurers, a Credit Bank or Credit Banks and /or the issuer of a Reserve Account Letter of Credit 'or Reserve Account Insurance Policy and such Insurer, Credit Bank and /or issuer shall not have been reimbursed by the Issuer, such Bonds or any portion thereof shall remain Outstanding, shall not be defeased and shall not be considered paid by the Issuer, and the pledge of the Pledged Funds and any additional security pledged hereunder, and all covenants, agreements and other obligations of the Issuer to the Bondholders shall continue to exist and such Insurer or Insurers, such Credit Bank or Credit Banks and such issuer shall be subrogated to the rights of such Bondholders. SECTION 8.02. Capital Appreciation Bonds For the purposes of (A) receiving payment of the Redemption Price if a Capital Appreciation Bond is redeemed prior to maturity, or (B) receiving payment of a Capital Appreciation Bond if the principal of all Bonds becomes due and payable under the provisions of this Resolution, or (C) computing the amount of Bonds held by the Holder of a Capital Appreciation Bond in giving to the Issuer or any trustee or receiver appointed to represent the Bondholders any notice, consent, request or demand pursuant to this Resolution for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value. SECTION 8.03. General Authority The members of the Governing Body and the Issuer's officers, attorneys and other agents and employees are hereby authorized to do all acts and things required of them by this Resolution or desirable or consistent with the requirements hereof for the full, punctual and complete performance of all of the terms, covenants and agreements contained in the Bonds and this Resolution, and they are hereby authorized to execute and deliver all documents which shall be required by Bond Counsel or the initial purchasers of the Bonds to effectuate the sale of the Bonds to said initial purchasers. A -53 SECTION 8.04. No Personal Liability No representation, statement, covenant, warranty, stipulation, obligation or agreement herein contained, or contained in the Bonds, or in any certificate or other instrument to be executed on behalf of the Issuer in connection with the issuance of the Bonds, shall be deemed to be a representation, statement, covenant, warranty, stipulation, obligation or agreement of any member of the Governing Body, officer, employee or agent of the Issuer in his or her individual capacity, and none of the foregoing persons nor any officer of the Issuer executing the Bonds or any certificate or other instrument to be executed in connection with the issuance of the Bonds, shall be liable personally thereon or be subject to any personal liability or accountability by reason of the execution or delivery thereof. SECTION 8.05. No Third Party Beneficiaries Except such other Persons as may be expressly described herein or in the Bonds, nothing in this Resolution, or in the Bonds, expressed or implied, is intended or shall be construed to confer upon any Person other than the Issuer, any Insurer, any Credit Bank and the Holders any right, remedy or claim, legal or equitable, under and by reason of this Resolution or any provision hereof, or of the Bonds, all provision hereof and thereof being intended to be and being for the sole and exclusive benefit of the Issuer, any Insurer, any Credit Bank and the Persons who shall from time to time be the Holders. SECTION 8.06. Sal of Bonds The Bonds shall be issued and sold at public and /or private sale at one time or in installments from time to time and at such price or prices as shall be consistent with the provisions of the Act, the requirements of this Resolution and other applicable provisions of law. SECTION 8.07. Severabiity of Invalid Provisions If any one or more of the covenants, agreements or provisions of this Resolution shall be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements and provisions of this Resolution and shall in no way affect the validity of any of the other covenants, agreements or provisions hereof or of the Bonds issued hereunder. SECTION 8.08. R=eal of Inconsistent Resolutions All resolutions or parts thereof in conflict herewith are hereby superseded and repealed to the extent of such conflict. SECTION 8.09. Table of Contents and Headings not Part Hereof The Table of Contents preceding the body of this Resolution and the headings preceding the several articles and sections hereof shall be solely for convenience of reference and shall not constitute a part of this Resolution or affect its meaning, construction or effect. SECTION 8.10. Issuer Reserved Rig is. The Issuer reserves the right not to issue any Bonds for any reason. No Bonds shall be issued except pursuant to a Supplemental Resolution. SECTION 8.11. Holidays: Time In any case where the date of maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds is not a Business Day, A -54 then payment of principal, premium, if any, or interest need not be made on such date but may be made on the next succeeding Business Day, with the same force and effect as if made on the date of maturity or the date fixed for redemption. All references to specified times of day shall be deemed to refer to the then prevailing time within the jurisdiction of the Issuer. SECTION 8.12. Authorization to Deem Final and to Accept Insurance C o mitm The Mayor or Village Manager are severally authorized to "deem final" the Preliminary Official Statement for the Series 1998 Bonds for purposes of Securities and Exchange Commission Rule 1562 -12. SECTION 8.13 Section 265 D signation The reasonably anticipated amount of tax- exempt obligations which will be issued by the Issuer during 1998 does not exceed $10,000,000. The Issuer designates the Series 1998 Bonds as "qualified tax- exempt obligations" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986. SECTION 8.14. Effective Date. This Resolution shall become effective immediately upon its passage. THE FOREGOING RESOLUTION was offered by Councilmember Mackail , who moved its adoption. The motion was seconded by Councilmember Cameron , and upon being put to a vote, the vote was as follows: FOR ADOPTION AGAINST ADOPTION Alexander W Cameron Carl C. Hansen Ron L. Mackail Elizabeth A Schauer A -55 The Mayor thereupon declared the Resolution duly passed and adopted this _8 day of January— 1998. Mayor of Tequesta [SEAL] /s/ Elizabeth A Schauer ATTEST: /s/ Joann Manganiello Village Clerk A -56 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX B BOND FEASIBILITY REPORT A Reese, Macon and Associates, Inc. March 4, 1998 Mr. Thomas Bradford, Village Manager Village of Tequesta P.O. Box 3474 Tequesta, FL 33469 -0474 Re: Bond Feasibility Report Water Revenue Bonds, Series 1998 Dear Mr. Bradford: Please find enclosed, our Bond Feasibility Report for inclusion in the Official Statement which summarizes our findings in regards to the proposal by the Village of Tequesta (Village) to issue Water Revenue Bonds, Series 1998 (the Series 1998 Bonds) in an estimated aggregate principal amount not to exceed $7,805,000. The main purpose of the Series 1998 Bonds is to fund capital improvements related to the construction of the new reverse osmosis treatment facility and its appurtenances for the Water System. The enclosed report includes a description of the Village's service area, components of the capital improvement program, projected customer growth and water treatment capacity needs, as well as historical and projected financial operating results of the Village's Water Department relative to the financing. We also project the ability of the water system to meet rate covenant requirements of the Bond Resolution. The financial projections in this Report were issued upon discussions and information provided by the Village and their Financial Advisors as well as assumptions and analyses made by us with respect to the projections. The Report also outlines our conclusions regarding the ability to meet debt service requirements and the financial aspects projected. Such opinions and conclusions are subject to the assumptions and considerations identified in the Report and information obtained during the preparation of the Report. As such, the Report should be read in its entirety with respect to such projections. REESE, MACO A SOCIATES, INC. PUBLIC RESOURCES MANAGEMENT GROUP, INC. William D. Reese, P.E. Robert J. Ori WDRWO/PB repo U%-df —.teq 6415 Lake Worth Road • Suite 307 • Lake Worth, FL 33463 -2907 Telephone (561)433 -3226 • Facsimile (561433 -8011 e-mail • rma @iz.netcom -com i VILLAGE OF TEQUESTA Palm Beach County, Florida BOND FEASIBILITY REPORT Water Revenue Bonds Series 1998 �, Tf c0 February 1998 Reese, Macon & Associates, Inc. 6415 Lake Worth Road, Suite 307 Lake Worth, FL 33463 -2907 (561)433 -3226 (561)433 -8011• Facsimile Public Resources Management Group, Inc. 225 South Swoope Avenue, Ste. 211 Maitland, Florida 32751 (407)628 -2600 (407)628 -5884 Facsimilie Village of Tequesta Bond Feasibility Report Water Revenue Bonds, Series 1998 TABLE OF CONTENTS escri tion Page No. Transmittal Letter ......................... ............................... N/A Table of Contents .......................... ............................... i, ii List of Figures .............................. ............................... iii Listof Tables ................................ ............................... iii BOND FEASIBILITY REPORT ................. ............................... 1 General............................... ............................1,2 VILLAGE OF TEQUESTA WATER SYSTEM ..... ............................... 3 General............................. .........:..................... 3 System Operations .................... ............................... 3,4 WATERSYSTEM ............................ ..............................5 General............................... ...........................:..5 RawWater Supply ....................... ............................5,6 Water Treatment Facilities .............. ............................... 6,7 Pumping and Storage Facilities ............ ............................... 8 Water Distribution System .............. ............................... 8,9 Condition of Existing Facilities .......... ............................... 9 Regulatory Compliance .................. ............................... 9 i CAPITAL IMPROVEMENT PROGRAM ........ ............................... 10 General.............................. ............................. Capital Project Summary .......... ............................... 10-12 Regulatory Compliance ................ ............................... 13 HISTORICAL and PROJECTED SYSTEM SALES and CUSTOMER USAGE STATISTICS 14 General.............................. ............................. Water System ................... ............................... 15 -18 Ten Largest Customers of the System ..... ............................... 18 RATES, FEES and CHARGES .................................................. 19 General.................... ............................... ......19 WaterRates ...................... ............................... 19,20 Capital Improvement Charges ............ ............................... 21 Capacity Reservation Fees .............. ............................... 21 Rate Comparisons ................. ............................... 22,23 HISTORICAL OPERATING RESULTS ......... ............................... 24 ` General ............................... ............................. Summary of Historical Operating Results . ............................... 24,25 PROJECTED OPERATING RESULTS .......... ............................... 26 General............................... ............................. Principal Considerations and Assumptions Regarding Projected Operating Results 26 - 35 FINDINGS & CONCLUSIONS ................ ............................... 36 ii _ Village of Tequesta Bond Feasibility Report Water Revenue Bonds, Series 1998 LIST OF FIGURES Figure 1 Overall Location Map Figure 2 Corporate Boundaries/Utility System Service Area Figure 3. Historical System Water Demands Figure 4 Historical/Projected System Connections LIST OF TABLES Table 1 Raw Water Supply Well Summary Table 2. Capital Improvements - Engineers Estimate Table 3 Summary of Customer and Consumption Statistics Table 4 Historical Operating Results Table 5 Projected Operating Results and Debt Coverage Analysis (2 pages) Table 6 Comparison of Typical Monthly Residential Bills for Water Service Table 7 Identified Projected Residential Water Customer Growth iii Village of Tequesta Water Revenue Bonds, Series 1998 BOND FEASIBILITY REPORT Ge neral This Bond Feasibility Report (the "Report") summarizes our findings with regard to the proposal by the Village of Tequesta (the "Village ") to issue Water Revenue Bonds, Series 1998 (the "Series 1998 Bonds ") in the principal amount of $7,805,000.'The Series 1998 Bonds are issued under the authority of Resolution 7 -97/98 by the Village Council on January 8, 1998 (the "Bond Resolution "). For more information regarding the Bond Resolution, refer to Appendix A - Form of Resolution within the Official Statement relating to the Series 1998 Bonds. The Village plans to issue the Series 1998 Bonds to provide funds, together with other available funds, to; i) finance the cost of construction of a new reverse osmosis treatment facility and a Floridan well, the equipping of this well and another well previously drilled with other funds, and the construction of a reject disposal main and associated appurtenances, ii) fund a debt service Reserve Account, by purchase of a Reserve Account Insurance Policy and iii) pay the costs of issuing the Series 1998 Bonds. The purpose of this Report is to provide a summary of the Village's Water System, define the projects to be financed by the Series 1998 Bonds, and to present historical and projected operating results of the Water System for the five (5) fiscal year period commencing October 1, 1996 and ending September 30, 2001. The Village's Consulting Engineer, Reese, Macon & Associates, Inc. ( " RMA ") was responsible for the review of the water system as it related to the permitting/regulatory requirements, system condition, system demand projection and development of the capital improvements program which necessitates the issuance of the Series 1998 Bonds. RMA subcontracted the financial reviews to a Feasibility Consultant, Public Resources Management Group, Inc. ( "PRMG "). PRMG was responsible for the compilation of historical customer and financial results, preparation of financial projections of the Water System, and determination of the compliance of the rate covenant as defined in the Bond Resolution. For the preparation of this report, RMA and PRMG relied upon financial, statistical and operational data obtained within past operating reports/records and financial statements prepared by the Village. We have also utilized information and assumptions from the Village's financial advisor, Florida Municipal Advisors, Inc. of Palm Beach Gardens, Florida and have made use of information from other similar utility systems within the State of Florida as well as other sources. We believe the sources of the information as discussed above to be factual and reasonable for a report of this nature. It should be noted though, that actual results achieved during the projected period may vary from that calculated (projected) and any such variations could be material. Such ' Preliminary, subject to change -1- projections are subject to adjustments and we can give no assurances that the projections will be realized. It is therefore recommended that the projections made herein be evaluated periodically by the Village to ensure that the actual financial results satisfy the covenants defined in the Bond Resolution. This Report summarizes the results of our studies and financial projections up to the date of this Report. Prospective purchasers of the Series 1998 Bonds should not rely upon the information contained in this Report as it relates to a current description of the Water System subsequent to the date of this Report. Changed conditions occurring or becoming known after this report's effective date may affect the material presented herein. (End of Section) -2- VILLAGE OF TEQUESTA WATER SYSTEM General The Village of Tequesta is located within Palm Beach County, Florida and is bordered by the Atlantic Ocean to the east, the Loxahatchee River to the west, the Loxahatchee River /Jupiter Inlet to the south and the Palm Beach/Martin County line to the north. The Village was established by the Florida Legislature in 1957, and currently has a total land area of 2.3 square miles. According to the Florida Bureau of Economic and Business Research at the University of Florida, the permanent population of the Village was estimated at 4,686 as of April 1, 1997. The water system service area extends beyond the Village's corporate boundaries to include portions of the Town of Jupiter, The Town of Jupiter Inlet Colony, and portions of unincorporated Palm Beach and Martin Counties. This equates to a water service area of approximately 5 square miles. Figures 1 and 2 delineate the Village's location within Palm Beach County and their water system service areas respectively. The Village currently has two (2) sources of potable water supply to meet its current needs. One source is the Village's own water treatment plant, rated at 2.73 million gallons per day (MGD), which is supplied by eleven (11) surficial wells located throughout the Village. The other potable water source is the Town of Jupiter, with which the Village has a bulk user agreement for the purpose of purchasing 1.5 MGD (average day), with a maximum day of 2.25 MGD of potable water. This agreement is scheduled to expire in the year 2007. The improvements required to replace Jupiter's water source would not be expected to occur until the year 2005, which is beyond the financial forecast reflected in this report. However, the engineering design of the facilities to be constructed with these bond proceeds anticipates the future need to expand the facilities accordingly. Wastewater service to the area served by the Village's water system is provided by the Loxahatchee River Environmental Control District ( ENCON). The service and maintenance of the collection, transmission and treatment system is provided by ENCON and is financed through the monthly wastewater bills distributed to the customers. The Village does not own or maintain any wastewater facilities and no water system revenue is pledged or used by the Village to fund the ENCON wastewater system. System Operations The water system is managed by the Village of Tequesta Water Department which is set up as a separate enterprise fund of the Village. The Water Department is operated under the direction of the Water System Department Head who directly reports to the Village Manager. As of the date of this Report, the Water Department has four (4) specific operating divisions which are administration, pumping & storage (treatment), distribution and customer service. All - divisions report to the Water System Department Head. The water system department currently consists of 14 budgeted employees, of which 5 are licensed water plant operators. The following is a summary discussion of each of the operating divisions: -3- Administration This division consists of two (2) budgeted employees who are responsible for the supervision of the other divisions that are under the jurisdiction of the Water System Department. This division coordinates and supervises all capital improvement operations planned for the water system. Compliance with various local, state and federal regulatory agencies reporting requirements having jurisdiction over water issues is a key responsibility of this staff, as is the monitoring and analysis of the infrastructure required for the continual operation of the system. The Water System Department Head is a licensed, State of Florida, water plant operator. Pumnina & Storaae Division This division includes five (5) budgeted employees, four (4) of whom are licensed State of Florida certified operators. The other employee is considered an operator trainee. The division is responsible for the operation and maintenance of the existing raw water supply (wells) which is owned by the Village, the Town of Jupiter interconnects associated with bulk potable water purchases, the water treatment plant (owned by the Village), high service pumping and storage facilities. This division is also responsible for providing the water system customers with a safe and reliable supply of drinking water in order to comply with all local, state and federal standards for potable water quality. Distribution Division This division, consisting of five (5) budgeted employees, has the responsibility of providing maintenance for raw water mains, potable water mains, services/meters and fire hydrants within the total water system service area. The division also provides prompt repairs/maintenance of system leaks, line breaks, meter installation, meter reading services and all customer service field work. Customer Service Division This division consists of two (2) budgeted employees and is responsible for all customer service and accounting activities, including customer billing and collection. This division works in conjunction with the Village Finance Department for coordinating financial and budgetary documents. (End of Section) -4- WATER SYSTEM General The Village's existing water system consists of a raw water supply (wells), treatment, storage and pumping, and a transmission/distribution system. As of September 30, 1997, the system served a total of 4,825 water service connections (accounts) or 7,386 equivalent residential connections ( "ERC's ") within their service area. An ERC represents the average annual usage of a typical single family residential customer. Since commercial and multi - family customers are typically served by meters larger than those supplied to a standard residential customer, it is beneficial to equate these large users on an equivalent residential single family class for use in presenting the total customer base served. The existing water system consists of eleven (I 1) surficial groundwater wells, one (1) Floridan groundwater well, a raw water transmission main system consisting of approximately 7.0 miles of piping ranging in size from 6 to 12 inches in diameter, a Manganese Greensand water treatment plant rated at 2.73 million gallons per day ( "MGD "), four (4) ground storage tanks, pumping equipment and water distribution mains consisting of approximately 71 miles of piping ranging in size from 4 to 20 inches in diameter. Raw Water Sunpiv The raw water supply source utilized by the Village for its current treatment process is the Surficial Aquifer. Withdrawals from this source are regulated by the South Florida Water Management District ( "SFWMD "). The SFWMD is a political subdivision of the State of Florida formed as a multi - purpose water management district to manage the water resources within its boundaries of Southern Florida. The SFWMD requires permits for the consumptive use (withdrawal) of water, from any source, which the Village has acquired in the form of a consumptive use permit. It should be noted that the proposed capital improvements to be made under this bond issue will utilize a different type of treatment process which will make use of raw water from the Floridan Aquifer. Use of this water is also governed by the SFWMD and the Village has incorporated withdrawals from this source at amounts sufficient to meet projected capacity needs in their existing consumptive use permit. Presently, there are eleven (11) raw water wells in operation which withdraw water from the surficial aquifer, all of which are permitted by the SFWMD. In addition, there is one (1) proposed surficial well, which has been permitted by the SFWMD and which is planned to be constructed within the forecast period of this permit. It should be noted that the SFWMD has put limitations on the allowable withdrawal from the surficial aquifer over the past several years which has restricted the Village's ability to expand their existing production facilities. This limitation has created a need to tap the deeper, brackish water quality Floridan aquifer and construct a reverse osmosis treatment plant to treat this water. The Village has one (1) Floridan well which has been drilled and preliminarily tested. Four (4) other Floridan wells are proposed. All of the Floridan wells (existing & proposed) have been permitted by SFWMD. One (1) additional Floridan well will be drilled and the existing and proposed well-will be equipped under this bond issue. One well will be adequate to satisfy the initial capacity of the new water treatment plant, with the other well acting as a back -up. The regulatory agencies require that the wells be able to produce at a -5- rate consistent with plant capacity with the largest well out of service, The second well will satisfy this criteria. Refer to Table 1 for a description of the Village's individual raw water supply wells. The SFWMD approved the Village's Consumptive Use Permit (No. 50- 00046 -W) for groundwater withdrawals from the surficial and Floridan Aquifer on February 15, 1996. The permit expiration date is February 15, 2006. The following outlines the raw water use allocations - from the surficial and Floridan aquifers as permitted by the SFWMD: Village of Tequesta Consumptive Use (Raw Water) Permitting Allocations AUTHORIZED SFWMD EXPIRATION WrrHDRAWAL PERMIT NO. SOURCE DATE ALLOCATION (MGD) 50- 00046 -W S urficial 2/15/2006 2.70 50- 00046 -W Floridan 2/15/2006 4.40 Note that the withdrawal allocations from the surficial aquifer is divided among the east wellfield with an allocation of 1.80 MGD and the west wellfield with an allocation of 0.9 MGD, for a total surficial aquifer withdrawal allocation of 2.7 MGD. The present Consumptive Use Permit is capable of meeting the system demands through the year 2006, at which time an application would be made to renew. The Village has historically implemented a well rotation program to give the wells adequate recovery time (rest period) and maintains their withdrawal from the individual wells within SFWMD permitting requirements. A portable, diesel powered generator, is available to ensure continuous operation of the largest production well (Well 23) during power failures. Water Treatment Facilities The Village's existing water treatment plant has a permitted capacity of 2.73 MGD based upon maximum daily demands. The first phase of the existing treatment plant, rated at 1.80 MGD, was constructed in 1983. This facility replaced a 1.00 MGD aeration/filtration/chlorination system. The system was expanded in 1990 to bring it up to the 2.73 MGD rated capacity. The plant process is a Manganese Greensand filtration system which utilizes six (6) pressure type filter vessels to remove the high iron content in the surficial wells. Potassium permanganate is fed to oxidize the iron as part of the Manganese Greensand process. Aluminum sulfate is fed to enhance the process and chlorine and ammonia are fed for disinfection. Sodium hydroxide is fed to stabilize the finished product. After treatment, transfer pumps deliver the potable water to two (2) on -site ground storage tanks with capacities of 750,000 gallons and 2,000,000 gallons. From these storage reservoirs, the potable water is delivered to the distribution system via on -site high service pumps. -6- The plant maintains a permanent standby power source in case of electrical power failure. The stand -by power source consists of a diesel powered auxiliary generator. This generator is capable of operating the major plant components and exceeds the regulatory requirement for standby power. An additional generator will be supplied with the new R.O. water treatment facility capable of operating its major components and the Floridan well pumps (Well No's. 1R and 2R) as shown on Table 1. As discussed previously, the Village maintains a Bulk Users Agreement with the Town of Jupiter for the purchase of potable water. This agreement, which was established in 1976, enables the Village to purchase a minimum of 1.5 MGD and a maximum of 2.25 MGD. This agreement expires in the year 2007, Build out of the new reverse osmosis treatment facility, which will be constructed in phases to replace the water supply currently purchased from Jupiter, will not occur within the financial forecast period presented in this report. However, the facilities being proposed for construction with the proceeds of the Series 1998 Bonds contemplate replacement of the purchased capacity with the reverse osmosis treatment capacity after the agreement expires. The historical and projected water demands used to estimate the water treatment plant capacity required to meet potential service area needs for the Village are shown in Figure 3. The plant size is designed according to the projected maximum day demand, with peak diurnal demands being met by on -site or off -site storage facilities. It is anticipated that the Village will realize an ultimate water demand at build -out of 6.03 MGD in the year 2013 as outlined below. The demand projections in Figure 3 were developed from projections made from estimating the Village's absorption rate (number of new connections to be made per year) through the year 2002. Note that the Engineer's estimate of absorption is somewhat higher than that used by the Financial Consultant's analysis later in this report. This is due to the Financial Consultant using a lower value for growth so as to not over estimate the proposed revenue stream. The more aggressive absorption rate used by the Engineer would ensure that proposed development could be served by the water system. The historical and projected connections are shown in Figure 4. The Village's demand projections for the water system and the associated connections are summarized below. Village of Tequesta Water Demands /Connections Summary AVG. DAY MAX. DAY # /CONNECTIONS YEAR DEMAND(MGD) DEMAND (MGD) (AVG. YEAR END VALUES) 1992 (actual) 3.00 4.06 4400 1996 (actual) 3.22 4.35 4659 2000 (projected) 3.53 4.77 5100 2004 (projected) 3.78 5.10 5460 ' 2008 (projected) 4.03 5,44 5820 2013 (projected) 4.47 6.03 6450 -7- Pumping and Storage Facilities In addition to the 750,000 gallon and 2,000,000 gallon prestressed concrete ground storage tanks at the water treatment plant site, the Village owns and maintains two (2) additional off -site storage facilities. A gallon steel ground storage tank is located at the south end of the Village, referred to as Wellfield No. 1, which receives water from Jupiter for distribution (pumping) into the system. Another 500,000 gallon steel ground storage tank is located at the Village Hall facilities, known as Wellfield No. 2. This storage tank has not been in service for over a year and provides little or no hydraulic benefit to the distribution system. The tank is . planned to be removed from service by the Village during the fiscal year 1998. Refer to Figure 2 for the wellfield locations. All of the ground storage tanks have vertical turbine pumps connected to them for withdrawal from the tanks into the distribution system. The storage tanks within a distribution system provide the volume of water, in excess of treatment plant capacities or average purchase capacities, necessary to meet the system peak hour demands and fire flow requirements. Water Distribution System The Village's water distribution system consists of over 71 miles of piping ranging in size from 4 to 20 inches in diameter consisting of pipes constructed of polyvinyl chloride ( "PVC "), ductile iron ( "D.I. ") or cement asbestos ( "A.C. ") piping. The following is a summary of the amount of water distribution piping within the water system. Village of Tequesta Water Distribution System Piping Summary PIPE DIAMETER APPROX. LINEAR FEET 20 -inch 800 12 -inch 15,550 10 -inch 16,770 8 -inch 111,700 6 -inch 184,570 4 -inch 48,590 TOTAL 377,980 FT. (71.6 MILES) The pressure in the water distribution system is typically maintained between 50 and 60 pounds per square inch (psi). This adequately satisfies normal domestic usage requirements. In general, the distribution system consists of a looped network,_ but due to road and property configurations some dead end lines exist. These mains are periodically flushed to provide adequate movement of water through the pipes to assure consistent water quality. Throughout the system, isolation valves are provided to assist in maintenance and repairs so that significant portions of the water system is not shut down at any one time. Within the distribution system, 430 fire hydrants are provided for fire protection. A program developed by the Village's -8- fire /rescue department ensures that the hydrants are routinely exercised to assure their operation. Based upon a five year historical average, the water system unaccounted for water has averaged 9.09% annually. The allowance for unaccounted for water or unbilled water, is due to a variety of factors, including water used for line flushing, hydrant testing, main breaks, Fire - Department use, and/or water losses attributable to system leakage. It is estimated that approximately 2% of this 9.09% unaccounted for water is attributable to flushing and Fire - Department use. The.Village's unaccounted for water percentage of 9.09% is under the national average of 14.9% for their region for unaccounted for water. Note that the national average for flushing and Fire Department use is 3.5 %. The low unaccounted for water percentage that the Village experiences is attributable to their maintenance of the system and accounting procedures implemented to ensure that all meters are accurately read and billed. Condition of Existing Facilities Based upon the Engineer's historical involvement with the Village's water system and recent field observations of the above ground facilities, the water supply wells, treatment, pumping and storage facilities appear to be in good condition. Physical verification of the water distribution system (piping network) condition was not done. Based upon the Engineer's past and present involvement with the system and discussions with the Village's water system staff, the Engineer believes the distribution system (piping) is in average to good condition for its age. The relatively few complaints made by customers is a good indication of the system condition. Some areas utilize asbestos cement pipe, which is carefully monitored for breaks and replaced as required. Some areas of the distribution system experience lower flow due to the seasonal nature of the community. Some of these areas also have dead end lines. Pressures, however, even at the system extremities or dead ends are typically maintained above 40 psi. The Village maintains a program of flushing these areas to ensure that water quality issues are met for these customers. Under fire flow conditions, the minimum residual design pressure is 20 psi. Meter and meter boxes are in average to good condition. An update to the Village's meter replacement program is being contemplated to ensure older meters are being replaced and that existing meters are held to acceptable tolerances and accuracies. Main line valves are exercised as required and hydrants are tested/exercised periodically to ensure their operation. Regulatory Compliance The Florida Department of Environmental Protection ( "FDEP "), South Florida Water Management District ( "SFWMD "), U.S. Environmental Protection Agency ( "USEPA ") and Palm Beach County Health Unit ( "PBCPHU ") institute and enforce regulations governing the operation of a water system. Regulations issued by the FDEP, USEPA and PBCPHU deal with quality type issues associated with raw water, finished (potable) water and treatment methods. The SFWMD regulate the issues related to the consumptive use of raw water supplies. The Village's water . system is presently in compliance with existing permits from all of the agencies stipulated above. (End of Section) -9- CAPITAL IMPROVEMENT PROGRAM General The Village has planned capital improvements consisting of a new reverse osmosis treatment facility and appurtenances to increase the overall system treatment capacity. These improvements will be funded from the proceeds of the Series 1998 Bonds. The projected Capital Improvement cost of the planned facilities, including an allowance for contingencies, is anticipated by the Consulting Engineer to be $7,873,000. Refer to Table 2. The projected cost of the planned facilities was based upon estimates made by the Consulting Engineer at one hundred percent (100 %) completion of the design plans for the Reverse Osmosis ( "R.O. ") facility, seventy - five percent (75 %) completion of the reject main, fifty percent (50 %) completion of the R.O. Well No. 2 and zero percent (0 %) completion for the remote telemetry system. The cost estimates provided by the Engineer for the planned facilities were not based upon contractor bids, since many of the projects are still under design. The cost estimates provided for the planned facilities do not include allowances for a landscaping and irrigation system at the new plant, renewal and replacement costs, meter replacement program and equipment/vehicle purchases. Caaital Proiect Summary The following is a description of the major Capital Cost components as outlined within Table 2, anticipated to be funded from the proceeds of the Series 1998 Bonds and other Village funds for the Capital Improvement Program. 1. R.O. Water Treatment Plant - In order to meet present and future demands of the Village, additional treatment capacity is required. Due to the inability to increase the withdrawals from the surficial aquifer because of SFWMD permitting limitations, a different raw water supply source is required. The most reasonable and practical other source is deeper wells (1,100- 1,700 ft.) penetrating the Floridan Aquifer. The water in this aquifer is of ample volume but more highly mineralized (brackish) than that within the surficial aquifer. The treatment method being proposed is reverse osmosis (R.O.), a highly viable option for water treatment within the South Florida area. The water produced from R.O. will yield a high quality product satisfying all standards. The new facility (building, piping, emergency generator and miscellaneous items) will be sized to meet the ultimate demands of the Village as they are currently known. Initial treatment capacity will be rated at 1.2 MGD, with future treatment capacity being added as required. The future expansion capacity entails adding R.O. treatment membranes, or trains, plus the necessary pump capability and degasifiers to handle the increased capacity. The facility as designed will have the capability of ultimately treating 3.6 MGD. The facility is laid out to accommodate a.capacity of 4.8 MGD if a building addition is made. This provision for additional capacity beyond the 3.6 MGD is included in consideration of possible future unanticipated demand increases or possible decreased reliance on the existing plant to further improve water quality. All proposed piping to be installed can handle the hydraulic load of 4.8 MGD. The planned facility, at 1.2 MGD, will increase the Village's plant capacity from 2.73 MGD to 3.93 MGD. Adding in the Village's purchased water from Jupiter (2.25 MGD maximum day) would give the Village the ability to meet 6.18 MGD (maximum day). This increased treatment capacity t Estimated by Consulting Engineer, subject to change based upon receipt of construction bids. -10- is projected to be sufficient to meet the needs of the Village's service area through the year 2006, which is beyond the planning horizon of this report. The expansion capability to 3.6 MGD anticipates the expiration of the purchase contract with Jupiter in 2007 and a corresponding expansion. Components included in this improvement for the 1.2 MGD facility are as follows; ► On -site Raw Water Main Piping and Well Equipment ► Site Work (paving, grading, clearing/grubbing) ► High Service Pumps ► R.O. Equipment, 1.2 MGD ► Self Contained Generator ► Bulk Chemical Feeds ► Scavenger Tanks ► Building ► Degasifier and Scrubber ► Clearwell ► Transfer Pumps ► Electrical and Instrumentation/Controls The total estimated cost for the R.O. water treatment plant is $6,473,000 which includes a contingency, engineering services during construction/start-up services and final engineering design. A breakdown of these costs is shown in Table 2. 2. R.O. Well No. 2 - As discussed previously, the initial R.O. capacity of 1.2 MGD will require the construction of two (2) Floridan raw water supply wells. One of the wells has been drilled on the R.O. water treatment plant site utilizing other fund sources for its construction. The drilling of the second well, also on the plant site, is planned for in the Series 1998 Bonds. 'The total estimated cost for the R.O. Well No. 2 is $485,000 which includes a contingency and engineering services during construction. These costs are shown within Table 2. 3. R.O. Reject Disposal Main - A by- product of the reverse osmosis treatment facility is referred to as reject or brine. Essentially, the reject or brine contains a high concentration of dissolved solids which is extracted from the raw water during the R.O. process making the treated water very pure (potable). Two conventional means of disposing of reject which exist today are deep well injection and open water discharge. Due to the proximity of the Village to several open water areas, including the Intracoastal Waterway, Loxahatchee River and Atlantic Ocean, it was determined that the most cost efficient means of disposal would be open water discharge, The reject main point of discharge is within the Jupiter Inlet area, which lies approximately 1.8 miles to the south of the Village's plant location, (refer to Figure 2). The point of discharge will be approximately 100 feet offshore and will consist of a diffuser installed on concrete pilings. The reject main shall be 12 -inch diameter and be capable of handling the potential ultimate reject/brine flows of 3.6 MGD from the reverse osmosis treatment plant. The reject/brine to be generated in a R.O. process is typically equal to 25 percent of the flow into the plant, or 1.2 MGD. Note that the industrial waste permit from the Florida Department of Environmental Protection ( "FDEP ") is approved to discharge waste generated from the planned ultimate capacity of 3.6 MGD. The total estimated cost for the R.O. reject disposal main is $688,000 which includes a contingency, engineering services during construction and permitting. These costs are shown within Table 2. -11- 4. Remote Telemetry - The Village's existing telemetry system for the remote sites (wells, tanks, pumping equipment and remote pressure sites) is becoming obsolete as a result of the system age and availability of spare parts. It is being planned by the Village to replace this system with a more reliable and generic type system to increase reliability and reduce overall system maintenance costs. This new system would tie into the new reverse osmosis treatment plant operating center, which in addition to the above items listed, would also have the ability of operating the existing water treatment plant. These upgrades will be funded from the proceeds of the Series 1998 Bonds. The total estimated cost for the remote telemetry system is $227,000 which includes a contingency, engineering design and engineering services during construction. These costs are shown within Table 2. The total estimated capital cost of all the improvements described above is $7,873,000.00. It is currently anticipated by the Village that the capital improvements stated above would be operational by September 1999. A summary of the Engineer's estimate of construction for the various projects is shown within Table 2. A summary of the capital improvement program, exclusive of those projects associated with the performance of recurring renewals and replacements on the existing utility plant assets and equipment and vehicle purchases, is summarized below: CAPITAL PAPROVEMENT PROGRAM (1) R. 0. Water Treatment Plant $6,473,000 R.O. Well No. 2 485,000 Reject Disposal Main 688,000 Remote Telemetry 227.000 Total Capital Improvement Program $7,873,000 ANTICIPATED FUNDING SOURCES Series 1998 Bonds (2) $7,548,564 Interest Earned on Series 1998 Bonds Construction Fund (2) 324,436 Operating Reserves and Available Village Funds Total Funding Sources $7,873,000 (1) Derived from Table 2 (2) Based on information provided by Village's Financial Advisor. Preliminary subject to change. -12- Resmiatory Compliance For the proposed R.O. plant construction and appurtant components of the project as discussed previously, the Village has acquired the necessary plan approvals and permits. The Mowing outlines those permits. Agencv/Permit Permit No. Exp. Date SFWMD Consumptive Use Permit 50- 00046 -W 2 -15 -06 FDOT R/W Permit (Reject Main) 97 -H- 496- 0024 -9304 4 -24 -98 FDEP Industrial Waste Permit FL01 68572 11 -13 -01 P.B.C. Engineering R/W Permit for Reject Main WA00020 -0397 9 -01 -98 Corp. of Engineers, Reject Main 199600887(NW -MD) 2 -11 -02 FDEP Environmental Resource Permit 502839236 6 -13 -02 P.B.C. Engineering (Driveway Access) RIW0124 -0997 9 -17 -98 P.B.C. Public Health Unit - WC 50- 308237 10 -13 -02 Village of Tequesta, Development Permit Approved (10/23/97) N/A Note: SFWMD - South Florida Water Management District FDOT - Florida Department of Transportation PBC - Palm Beach County FDEP - Florida Department of Environmental Protection R/W - Right of Way (End of Section) -13- HISTORICAL AND PROJECTED SYSTEM SALES AND CUSTOMER USAGE STATISTICS General This section of the Report summarizes the recent trends in water customers, water production, bulk water purchases, and associated sales and usage characteristics for the Water System. The historical periods reflected in this Report cover the fiscal years ended September 30, 1993 through 1997 and the projections are for the Fiscal Years 1998 through 2002. The Village, in addition to serving customers located within the municipal boundaries of the Village, serves a number of water customers located within the Town of Jupiter, the Town of Jupiter Inlet Colony and unincorporated areas of Martin and Palm Beach Counties. The Table on page 18 provides statistical information regarding the various service areas of the water system. The Village has obtained licenses from the Town of Jupiter, the municipality of Jupiter Inlet Colony, Martin County and Palm Beach County which authorize the Village to use road and other public rights -of -way easements for providing water service through the water systems water mains and other facilities which are owned and maintained by the Village. The licenses from Jupiter Inlet Colony expire in May 2000, from Jupiter they expire in July 2003 and from Martin County they expire in August 2008. Some of the licenses from Palm Beach County have no stated expiration date and some have already expired. The licenses from Jupiter and Jupiter Inlet Colony provide that upon expiration of the license, the Town of Jupiter and /or Jupiter Inlet Colony have the right to purchase the system assets located within their respective jurisdictions for a price to be determined by arbitration. In the event the system assets were purchased by one of these municipalities, while it cannot be predicted what the purchase price might be, the net revenues derived for each service area resulting from such purchase would likely be a factor in determining the purchase price. However, in the event system assets located in Jupiter or Jupiter Inlet Colony were purchased by these municipalities, this could have an adverse effect upon the financial condition of the Water System. In the event Jupiter were to purchase the Village assets located within Jupiter, it would be possible for Jupiter to connect this area with the Town of Jupiter water system, although, the cost of the required interconnecting piping (including a crossing of the Intracoastal Waterway) would be significant. It is possible that Jupiter will purchase the Village assets upon expiration of the license. However, the areas in Martin County, Palm Beach County and Jupiter Inlet Colony served by the Village are geographically remote from any other water system, and it would be extremely expensive to construct an alternate system to serve any of these areas. For this reason, it is unlikely that the licenses in Martin County, Palm Beach County and Jupiter Inlet Colony will not be renewed or that the Village would not continue to provide water service to these areas under some alternate arrangement. The Village has entered into a water service agreement with Jupiter Island Beach Company, Inc. (the "Company ") whereby the Village agrees to sell the Company up to an average of 86,000 gallons per day subject to a maximum of 135,000 gallons per day. The Company agrees to buy from the Village all water necessary to fulfil the requirements of 100 metered single family and sprinkler system taps for residences, subject to the maximum amount available under the contract. The finished water is delivered by the Village to the Company through two master meters, and the Village charges the Company the same rate charged customers within the boundaries of the Village. This agreement expires in June 2007. -14- Water System The Water System has experienced an increase in customers and water sales over the past several years due to continued development within the Water System Service Area and the "Combined Service Area ". Table 3 at the end of this Report summarizes the historical and projected customer accounts in service, water sales, average customer usage statistics, and water purchased and production requirements for the Water System. The historical and projected customer accounts and associated water sales for the Water System are summarized as follows: Water System [ i 1 Fiscal Year Ended Average Annual Water Sales Average Monthly September 30, (Historical) Number of Accounts (000s of gallons) Water Use per Account 1993 4,403 863,833 16,349 1994 4,490 905,825 16,814 1995 4,563 888,176 16,220 1996 4,625 935,484 16,857 1997 4,664 864,686 15,450 Average Annual Historical Growth Rate 1.45% 0.02% Fiscal Year Ending September 30, (Projected) 1998 4,828 921,006 15,897 1999 4,881 929,376 15,867 2000 4,917 934,774 15,843 2001 4,951 939,206 15,808 2002 4,984 943,510 15,776 Average Annual Projected Growth Rate 0.80% 0.61% [11 Amounts derived from Table 3. As can be seen above, the Water System has incurred a historical growth rate of approximately 1.5% in the average number of accounts served per year since the fiscal year 1993. This growth in the number of accounts served is primarily due to in -fill of existing developments within the Village coupled with continuing build -out of existing and planned subdivisions located within the Water System service areas outside of the Village. It is estimated that the projected annual growth in water customers will continue to be derived from such development. Table 7 shows numerous planned residential developments located within the Combined Service Area and provides an indication of the currently available growth potential in the projected period. Water sales for the Combined Service Area have increased at an historical rate of approximately 0.02 %, which is less than the growth in customers (accounts) during the same time period, and which illustrates a trend in reduced average use per customer. This average annual compound growth rate recognizes the effects of a significant decrease in water sales which occurred during the Fiscal Year 1997, the last year of the historical period reflected in the Report. As can be seen on the above tabulation, average water use per account in Fiscal Year 1997 decreased by approximately 7% when compared to historical use. Based on discussions with the Village, this decrease in use was a result of i) increased rainfall experienced in the Combined Service Area -15- which reduced irrigation demands; ii) possible price elasticity effects of the implementation of a rate surcharge to recover increased bulk water purchases from the Town of Jupiter (reference is made to this matter in the rates and charges section of this Report); and iii) other factors. It is expected that water sales and associated usage requirements will increase above Fiscal Year 1997 levels assuming normalized conditions (e.g., average rainfall). However, for the purposes of this Report, we have assumed lower average use per account than the previously reported actual levels (i.e., prior to Fiscal Year 1997) to be conservative and to recognize that: i) most of the growth will be primarily individually metered single - family housing which generally has lower average use than other customers (i.e., commercial accounts); and ii) that water conservation efforts by customers will continue. The net effect of this assumption is that water sales will be less than recent historically reported levels, thus reducing the contribution margin of such customers relative to the Net Revenues of the System. It should be noted that the projection of water sales illustrated previously is less than the forecast of water demand requirements used in the projected plant capacity sizing criteria. This is due to inherent differences in planning for water capacity facilities and the need to have such facilities sized and on -line to serve the maximum anticipated growth of the Combined Service Area based on developer commitments and other factors. With respect to this section of the Report, a more conservative rate of growth was assumed relative to the development of the financial projections and associated rate impacts. As mentioned previously in the Report, the Village anticipates that the Water System will be expanding the dependable and permitted total water production and treatment capacity on a maximum daily flow basis during the forecast period with the addition of a 1.20 MGD Reverse Osmosis Water Treatment Plant. This expansion will supplement the existing water treatment capacity of 2.73 MGD at the Village's current facilities. In addition, the Village can purchase up to 2.25 MGD on a maximum day basis of treated potable water from the Town of Jupiter. The Village entered into a Bulk Sale Water Agreement with Tri- Southern Utilities Company, Inc. (the "Utility ") on July 15, 1976 (the "Bulk Water Agreement ") whereby the Utility agreed to furnish no greater than 2.25 MGD and in turn the Village agreed to receive and/or pay for a minimum of 1.50 MGD for a term of thirty (30) years. Subsequently, the Utility was purchased by the Town of Jupiter and the Town and the Village entered into an Amended Bulk Sale Water Agreement (the "Amended Bulk Water Agreement ") on June 29, 1978 whereby the Town agreed to accept all duties and responsibilities of the Utility under the original terms of the Bulk Water Agreement. The Amended Bulk Water Agreement is scheduled to expire on June 1, 2007. As can be seen on the following summary table, it is estimated by the Water Department that the Village will have sufficient water production and reserved capacity to serve the future customer demands of the Water System assuming the implementation of the capital expansion program. As seen in the table below, it is anticipated that the Village will utilize between 67% and 83% of the total permitted and reserved capacity of the Water System. This capacity utilization relationship was based on the forecast of water sales as summarized on Table 3, average day to maximum day demand relationships based on historical data provided by the Village which is assumed to continue in the forecast period, and the current and projected increase in treated and reserved water capacity occurring during the forecast period coincident with the expansion of water treatment facilities, as summarized below. -16- Water Production and Purchases (Finished Water) Fiscal Year Average Maximum Percent Ending Daily Flow Daily Flow Permitted/Reserved Capacity (MGD) Capacity September 30 (MGD) f 11 (MGD) f41 Permitted Reserved f21 Total Utilized 1997 (act.) 2.585 3.782 2.73 2.25 4.98 75.9% 1998 2.776 4.108 2.73 2.25 4.98 82.5% 1999 2.801 4.145 2.73 2.25 4.98 83.2% 2000 2.817 4.169 3.93 [3] 2.25 6.18 67.5% 2001 2.830 4.189 3.93 2.25 6.18 67.8% 2002 2.843 4.208 3.93 2.25 6.18 68.1% [1] Derived from Table 3. [2] Amounts shown reflect maximum day capacity reserved through the Town of Jupiter contracted through June 1, 2007. [3] Reflects capacity after addition of 1.20 MGD reverse osmosis facility; assumes no further increase to permitted capacity after FY 2000 for purposes of this comparison. [4] Maximum day flow based on historical relationships, flows would probably be higher during drought periods. The Water System customer base consists primarily of individually metered residential customers. As shown below, this class accounts for approximately 90.0% of the total average number of customers served by the Water System for Fiscal Year 1997. Average Annual Percent of Equivalent Customers Total Customers Meters f 1 Residential 4,199 90.0% 4,560 Multi- Family 92 2.0% 1,895 Commercial 292 6.3% 507 Government 43 0.9% 257 Irrigation 38 0.8% .944 Total 4,664[2] 100.0% 7,313 [ 1 ] Amounts shown reflect number of equivalent meter connections served based on customer billing information provided by the Village. [2] The total 4,664 reflects the average number of customers served during the past fiscal year. 4,825 customers were served as of 9/30/97. As summarized on the table above, the Water System provided service for the Fiscal Year 1997 to an average of approximately 7,313 meter equivalents which is greater than the number of accounts (bills). A meter equivalent represents the equivalent demand requirements of a single - family residential customer. Since commercial or multi - family customers are generally served by larger sized meters than the standard residential customer, it is useful to equate such customers on a basis equivalent to the residential class for a more consistent presentation of the total relative customer base served. The estimate of the meter equivalents served was developed based on: i) number of units (households) served for the residential class; and ii) meter equivalent factors which relates capacity relationships among service sizes based on information provided by the American Water Works Association which were applied to the commercial related customer classes. For the twelve (12) months ended as of September 30, 1997, 40.7% of the average annual customers (accounts) served are located within the Village. The following is a summary of the total average customers served by the Water System for each specific service area of the Combined Service Area. -17- Customers/Revenue for September 30, 1997 Fiscal Year Average Accounts Meter Equivalents 1997 Revenues Service Area Amount Percent Amount Percent Village of Tequesta 1,898 40.7% 3,127 42.8% $ 984,266 Martin County 1,161 24.9% 1,750 23.9 781,497 Palm Beach County 785 16.8% 1,240 17.0% 337,312 Town of Jupiter 583 12.5% 900 12.3% 267,091 Jupiter Inlet Colony 237 5.1% 296 4.0% 152,602 Totals 2-111 100.0% $2.524"768 Based on a review of the recent trends in customer growth for the various service areas and the known development areas where service is already available or will be served, the predominance of the growth will be occurring within the Village and Martin County areas. Ten Largest Customers of System In order to provide additional information regarding the Village's existing water customer base, a summary of certain statistical information of the ten largest System users has been compiled by the Village for consideration. Ten Largest Customers [ l ] [2] Service Metered Water Consumption Total Sales Revenues Area Amount OL QW Percent Amoun t cent Jupiter Cove Condo Association Town of Jupiter 21,649 2.3% $59,479 2.4% Tequesta Garden Condo Village of Teq. 12,272 1.3% 50,254 2.0% Turtle Creek Martin County 11,755 1.3% 35,913 1.4% Sandpointe Bay Condo Palm Beach Co. 9,896 l .1 % 24,777 1.0% Broadview Condo Association Palm Beach Co. 5,151 0.6% 20,950 0.8% Pines of J/T Town of Jupiter 6,197 0.7% 18,992 0.8% Sandy Pines Martin County 3,427 0.4% 15,148 0.6% Seawatch at Jupiter Island Condo Palm Beach Co. 4,436 0.5% 14,354 0.6% Passages Palm Beach Co, 6,287 0.7% 14,139 0.6% Tequesta Tower Condo Village of Teq. 5.601 0.6% 13,962 0.5% Total 86,671 9.5% $267,968 10.7% [1] Amounts shown for twelve (12) months ended August 31, 1997. [2] Amounts shown do not include statistics associated with the Jupiter Island Beach Company which serves 98 single family homes located in Martin County. Although considered as 98 individual customers for rate application purposes, this customer is served by 2 master meters. For the twelve months ended August 31, 1997, this customer accounted for the following: Am ount Percent Water Sales 62,593 6.9% Revenues 217,824 8.7% As can be seen above, the largest users of the system represent large homeowner or condominium associations (residential developments) served by large meters (master metered), which is typical in the south Florida area. The service area does not include a large commercial customer base. -18- RATES, FEES AND CHARGES General The Bond Resolution authorizing the issuance of the Series 1998 Bonds contains a covenant under which the Village will fix, establish, maintain, and collect such rates for the services of the System, and will provide in each fiscal year Net Revenues which are at least equal to: "....(a) 120% of the Debt Service Requirement for such Fiscal Year. Furthermore, the Village further covenants in the Bond Resolution that it will revise from time to time and as often as necessary the rates, fees, and charges of the System so that in each Fiscal Year Net Revenues are sufficient to meet the covenants of the Village as reflected in such Bond Resolution. Historical sales revenues were derived from monthly rates and user charges prior to November 13, 1997 as shown on Table 4 at the end of this Report. The projected operating results for the Water System as shown on Table 5 were developed based on rates, established pursuant to Ordinance No. 529 which was adopted by the Village on November 13, 1997 and which became effective prior to the issuance of the Series 1998 Bonds (the "Rate Ordinance "). Water Rates The water rates implemented pursuant to the Rate Ordinance include; .i) a constant service charge (readiness -to -serve charge) which varies by meter size and serves as the minimum bill; ii) a volumetric rate which increases as consumption increases in order to promote water conservation (applicable to both the residential and commercial class); iii) a monthly surcharge of $7.00 applied on an equivalent residential connection (ERC) basis which is additive to the readiness -to -serve charge in order to recover incremental operating costs incurred by the Village associated with purchased water rate increases enacted by the Town of Jupiter on January 1, 1996; and iv) for customers residing in unincorporated areas of Martin and Palm Beach Counties, a twenty -five percent (25 %) surcharge to be applied to the water rates as delineated in the Rate Ordinance. -19- The following is a summary of the rates recently adopted by the Village pursuant to the Rate Ordinance: Monthly Water Rate Schedule Monthly Service Charge: Residential (Single and Multi- Family) and Commercial Service Rate Effective November 1. 1997 Rate Effective October 1. 1998 Minimum Total Minimum Minimum Total Minimum Meter Size Monthly Service Monthly Service Monthly Service Monthly Service (ides) Charge f l l 3urchar¢e f 1 Char e I 11 Charp e [1 Surcharce W Charge I 1 5/8 59.80 $7.00 516.80 $10.20 57.00 517.20 3/4 9.80 7.00 16.80 10.20 7.00 17.20 1 24.50 17.50 42.00 25.50 17.50 43.00 11/2 49.00 35.00 84.00 51.00 35.00 86.00 2 78.40 56.00 134.40 81.60 56.00 137.60 3 147.00 105.00 252.00 153.00 105.00 258.00 4 245.00 175.00 420.00 255.00 175.00 430.00 6 490.00 250.00 840.00 510.00 350.00 860.00 Consumption Charge: (per 1,000 gallons of metered water) Consumption Block Parameters (000s) Block 1 Block 2 IH ock 3 Block 4 Rate Effective l l/l/97 51.55 S2.60 53.55 54.55 Effective 10/1/98 1.62 2.72 3.70 4.75 Residential and Multi Family Service (per unit) 0 -12 12 -25 25-40 Above 40 Commercial Meter Size 5/8" 0 -12 12 -25 25-40 Above 40 3/4" 0 -18 18 -37 37.60 Above 60 1" 0 -30 30-62 62 -100 Above 100 1 1/2" 0-60 60 -125 125 -200 Above 200 2" 0 -96 96.200 200 -320 Above 320 3" 0 -180 180.375 375 -600 Above 600 4" 0.300 300 -625 625 -1,000 Above 1,000 6" 0. 600 600 -1,250 1,250.2,000 Above 2,000 111 Metering of multi- family accounts where a single meter is installed in a water connection serving a multi - family structure, the minimum monthly service charge shall be not less than an amount equal to the number of dwelling units multiplied by the minimum charge for a 518 x 3/4 -inch meter or installed meter size, whichever is greater. As previously mentioned, the Village meets a portion of its water supply needs through bulk water purchases from the Town of Jupiter. On January 1, 1996, the Town of Jupiter materially adjusted the water rates for bulk water service and this increase has been challenged by the Village. Although the Village has formally disputed the bulk water rate increase enacted by the Town of Jupiter, the Village adopted the surcharge in order to recover the increased costs for this service. The Town of Jupiter is currently billing the higher rate for bulk water service to the Village. Such funds collected as a result of the implementation of the surcharge by the Village have been deposited in a separate escrow account which the Village has indicated that such funds have not been expended to date. In the event the Town of Jupiter rate increase is found to be justified in a court of law, such funds will then be distributed to the Town of Jupiter by the Village. To the extent the rates are not considered as being justifiable, the fiends on deposit in the escrow account shall be returned to the Village's customers in accordance with the provisions of the, applicable Rate Ordinance. Until the dispute is settled, the surcharge rate will remain in effect and all revenues received from the application of the surcharge will be continued to be deposited into the surcharge escrow account. If a final court ruling is in favor of the Town of Jupiter the surcharge will become a permanent component of the monthly service charge. -20- Capital Imrovement Charges In addition to the monthly rates for water service, the Village currently charges a capital improvement charge based upon an equitable and proportionate share of the cost of water production and transmission facilities of the System. The purposes of the capital improvement charge are for paying or reimbursing the equitable share of the capital costs relating to the construction, expansion, or equipping of excess or unused capacity of the System in order to serve new users. The obligation for the payment of these charges by a new customer or developer arises at the time a developer submits an application for connection to the System. If an existing customer requests an increase in water capacity due to increased development, an additional capacity improvement charge may be collected prior to the development consistent with the net increase in demand. The following table summarizes the water system capital improvement charges for each respective utility customer. Per 5/8 or 3/4 Water Meter Equivalent All Customers [ 1 I $1,500.00 Jupiter Island [21 3,810.00 [1] Amount shown not applicable for connections in geographical area known as Jupiter Island. [2] Due to the additional subaqueous crossing required to service this area. Capacity Reservation Fees The Village is anticipating charging a Capacity Reservation Fee where capacity has been reserved for service. Following the developer's application for connection to the System, all applicants holding water service authorizing connection to the Village's water facilities shall pay a capacity reservation fee on a per ERC of capacity reserved basis. The purpose of this fee is to recover the fixed operating, maintenance, and replacement costs of the facilities which the Village incurs on behalf of those requesting the reservation of service prior to actual connection. The proposed rate for the Capacity Reservation Fee for an equivalent residential connection to be billed by the Village is $7.25 per month per ERC. Miscellaneous Service Charges The Village has also adopted a schedule of fees, charges and deposits which are applicable to miscellaneous or customer requested services. The following is a summary of miscellaneous service fees, charges and deposits which are currently in effect for the System. Customer Deposit and Billing Procedures The Village will request a deposit. at the time of service application by the customer in order to defray the risk of non - payment for utility services. The deposit is based on the type of service (residential or commercial) requested by such customer. For the various customer classes, the deposit amounts are as follows: -21- Meter Size (inches) Deposit Amount 5/8 or /3/4 $60.00 All Other Meter Sizes Three (3) times minimum monthly service charge Water Meter Installation Charges The Village has adopted a fee schedule for water meter installation services in order to recover its cost of physically connecting a water customers to the System. Specifically, the Village has adopted the following schedule of fees for this specific service: M eter Size Meter Installation Fee 5/8" $125.00 3/4" 145.00 1" 180.00 l 1/2" 325.00 2" 550.00 Above 2" Actual Cost Other Miscellaneous Service Charges In addition to the above referenced charges, the Village also has several other charges which are applicable to miscellaneous or customer requested services. A summary of other miscellaneous charges imposed by the Village which are common in the utility industry include the following. ChargefFee Description Amoun t Private Fire Connections (monthly) 2 -inch service $7.00 3 -inch service 16.00 4 -inch service 29.00 6 -inch service 70.00 8 -inch service 120.00 Public Fire Protection Charge Village of Tequesta (annual) $110.00 per hydrant Other Areas (monthly) $0.60 per meter Reconnection Charge Four (4) times minimum monthly service charge Emergency Service Bulk Water Rate $1.40 per 1,000 gallons metered consumption Rate Comparisons Table 6 at the end of this Report provides a comparison of the monthly cost of providing water service for a 5/8 or 3/4 inch or smaller water meter at various usage levels calculated under the recently proposed rates for the System. Also included on the comparison are bills calculated under the approved rates of other neighboring Florida utilities as of the billing month of September 1997. The monthly bills for the various Florida utilities used for the comparison are exclusive of local taxes. The 5/8 or 3/4 inch meter or smaller comparison was prepared since service from this meter size represents the majority of the System's water residential customers and the majority of the customers for the other utilities reflected in the comparison. As can be seen in the comparison, the Village's water rates (exclusive of the Jupiter surcharge) produce bills for -22- the Village which are representative of the utility average billing cost when compared to the other neighboring utilities. The average residential customer of the Village uses approximately 10,000 to 11,000 gallons of monthly water service. A comparison of water rates at the monthly consumption level of 10,000 gallons between the Village and a number of the utilities surveyed is shown below: Comparison of Monthly Charges for Residential Water Service Residential Service Assuming 10,000 Gallons of Water Service f 11 Village of Tequesta [2] Rates Effective 11/1/97 $25.30 Rates Effective 10/1/98 26.40 Other Similar Utilities City of Boynton Beach [3] $18.12 City of Coral Springs 23.47 City of Delray Beach 20.82 Hobe Sound Water Company 26.74 Indian River County [3][4] 32.70 Town of Jupiter [3] 22.50 Martin County [3] 31.80 City of Melbourne [3] 20.74 Palm Beach County 20.25 City of Plantation 20.05 City of Port St. Lucie 32.45 Village of Royal Palm Beach [3] [4] 27.20 Seacoast Utility Authority 23.55 St. Lucie County 44.45 City of Tamarac 20.51 City of Venice [3] [4] 37.73 City of Vero Beach [3] 27.01 Village of Wellington [3][4] 30.77 City of West Palm Beach 16.74 Other Utilities' Average $26.19 [I ] Derived from Table 6. [2] Amounts shown do not include Town of Jupiter bulk water surcharge currently in effect for the Village of $7.00 which is additive to the minimum monthly service charge. [3] Utility totally or partially utilizes membrane process for water treatment. [4] Utility currently has a rate study in progress or anticipates a rate increase in the near future. The comparable rates including the surcharges would be as follows: Rates effective November 1, 1997 $32.30 Rates effective October 1, 1998 $33.40 -23- HISTORICAL OPERATING RESULTS Ge neral The historical operating results for the System, for the fiscal years ended September 30, 1993 through 1996 and estimated for the fiscal year ending September 30, 1997 (unaudited), are shown in detail on Table 4 at the end of this Report. The historical operating results were prepared based on financial information compiled by the Village and information included in the Comprehensive Annual Financial Report (Annual Audit) of the Village for the respective fiscal years shown. In general, the historical operating results have been prepared in a manner consistent with the requirements of the Bond Resolution relative to the determination of Net Revenues of the System and on a basis consistent with the flow of funds generally prescribed in the Bond Resolution. Therefore, the amounts shown may reflect certain differences in the presentation of the financial results when compared to the Comprehensive Annual Financial Reports of the Village. Specifically, these major differences relate to: i) the determination of Operating Expenses (i.e., deprecation and amortization expenses not recognized); ii) the development of interest income (i.e., does not include earnings on Capital Improvement Charges or Construction Fund balances, if any, which are restricted to such Funds); and iii) recognition of other transfers (i.e., General Fund Repayment Fees) which are not considered as an operating expense for the determination of Net Revenues. Summary of Historical Operating Results The historical operating results for the System is shown on Table 4 at end of this Report and is summarized below: Historical Operating Results Fiscal Year Ended September 30, [11 _ 1997 1993 1994 1995 1996 (Unaudited) Sales Revenues [2] $ 2,339,889 $ 2,467,885 $ 2,698,301 $3,062,249 $ 2,792,624 Other Revenues [3] 226,725 2 222 776 7,714 42 6.647 151,125 Total System Revenues 2,566,614 2,690,107 2,975,015 3,308,896 2,943,749 Operating Expenses 1,564,323 1.622.950 885 1 9 901, 7.660 2,297,510 Net Revenues 1,002,291 1,067,157 1,063,123 1,376,262 646,239 Debt Service [4] 253,991 315,752 236,122 212,030 0 Debt Service Coverage 3.95 3.38 4.50 6.49 N/A Amounts Available for Other Lawful Purposes $ 507.672 $490.899 $551.731 871.059 [ 1 ] Amounts shown derived from Table 4. [2] Sales revenues do not include monies associated with the application of the Town of Jupiter bulk water rate increase surcharge. [3] Amounts shown include interest earnings on available fund balances. [4] Amounts shown associated with annual net principal and interest payments on Series 1985 Bonds which were retired prior to outset of Fiscal Year 1997. As can be seen above, the Village has historically met the debt coverage requirements of Net Revenues being at least 125% of the annual debt service requirements for the Water System Revenues Bonds, Series 1985 -24- (the "Series 1985 Bonds") as required by the authorizing bond resolution for the issuance. The Series 1985 Bonds were retired in the Fiscal Year 1996 by the Village. It should be noted that the debt service payments shown above and on Table 4 for the historical period are adjusted to reflect Village obligations to purchase an aggregate of $980,000 par amount of U.S. Treasury Bonds as outlined in the Securities Contract associated with the issuance of the Series 1985 Bonds. These U.S. Treasury Bond purchases were made semi - annually by the Village through Fiscal Year 1993. Purchase prices of the U.S. Treasury Bonds were added to the gross debt service and the interest earnings subtracted from the gross debt service on the Series 1985 Bonds in computing debt service coverage. A summary of the debt service payments expressed on a gross and net basis is summarized below: Series 1985 Bonds Debt Service Fiscal Net Treasury Bonds Purchased/ Adjusted Year Gross (Interest Earned) Debt Service 1993 $188,736 $65,254 $253,991 1994 331,405 (15,653) 315,752 1995 333,280 (97,158) 236,122 1996 287,355 (75,325) 212,030 1997 - -- - -- There currently are no other outstanding senior lien or junior lien debt obligations payable from Water System revenues as of the date of this Report. (End of Section) -25- PROJECTED OPERATING RESULTS Ge neral We have prepared projections of the operating results of the System for the five (5) fiscal years (October 1 through September 30) 1998 through 2002. Projections for the Fiscal Year 1998 were based on: i) trends and actual operating expenses incurred by the system for the five year period ended Fiscal Year 1997 as contained in financial information and the Comprehensive Annual Financial Reports prepared by the Village; ii) adopted budgetary information for the Village's System for the Fiscal Year 1998; iii) discussions with Village staff and its consultants regarding current and future utility trends and capital improvement to the System; and iv) other information provided by the Village. Presented on Table 5 at the end of this Report are financial projections for the System. The table includes annual projections of revenues, operation and maintenance expenses, debt service, the funding of the deposits to the Renewal and Replacement Fund, and estimates of balances available for capital improvements and other expenditure requirements of the utility. Projected revenues includes those from sales (rate revenue), interest income available on unrestricted funds, and miscellaneous revenues derived from normal System operations. The projected debt service shown on Table 5 at the end of this Report is subject to change based on the actual terms of the sale of the Series 1998 Bonds. Projected sales revenue of the System is based on growth projections-in customers and usage as illustrated on Table 3 at the end of this Report. The customer forecast was based on historical growth and usage trends coupled with data provided by the Village relating to particular residential and commercial development within the Combined Service Area. Additionally, funds received from the application of water capital improvement charges to incremental customer additions (new capacity) for the System has been assumed, for the purposes of determination of System revenues, not to be available to pay operating expenses or debt service requirements. However, a portion of such charges are considered as a Pledged Revenue under the terms of the Bond Resolution and may be available to pay debt service requirements for the Series 1998 Bonds. The major operating expenses of the System includes wages and salaries and associated benefits, water purchases from the Town of Jupiter, and the cost of utility services (e.g., power and chemical expenses associated with the operation of the Village's water treatment facilities). For the Fiscal Year 1998, these expenditure requirements are estimated to account for approximately 70% of the total operating expenses of the System. This is consistent with recent historical operating levels of the System assuming that litigation fees associated with the Town of Jupiter issues are not included in the calculation. Principal Considerations and Assumptions Reeardine Proiected Operating Results In the preparation of this Report and the conclusions that follow, we have made certain assumptions with respect to conditions which may occur in the future. While we believe the assumptions are reasonable for the purpose of this Report, they are dependent upon future events and actual conditions may differ from those assumed. In addition, for our projections, estimates, and studies, we have used and relied upon certain information and assumptions provided to us or prepared by others, including: i) information and assumptions provided to us by the Village such as data regarding historical financial information and historical customer and sales statistics; ii) information contained in the Comprehensive Annual Financial -26- Reports (audited financial statements); iii) information provided by the Village's Financial Advisor with respect to assumptions regarding the issuance of the Series 1998 Bonds; and iv) information provided by the Village with respect to the System capital improvements program. While we believe use thereof to be reasonable for the purpose of this Report, we offer no further assurances with respect thereto. To the extent that actual conditions differ from those assumed by us herein or from information or assumptions provided to us, or prepared by others, the actual results will vary from those estimated and projected herein. In making the projections and estimates summarized in this Report, the principal considerations and assumptions made by us and the principal information and assumptions provided to us, or prepared by others, include the following: 1. The Fiscal Year 1998 Water System Budget as provided by the Village served as the baseline for the expenditure projections and the underlying projections included therein by the Village are reasonable and reflect anticipated operations. Such amounts were incorporated into the Fiscal Year 1998 component of the study. A comparison of the Fiscal Year 1998 Budget was made to the actual results for the Fiscal Years 1996 and 1997. As a result of this comparison and based on discussions with the Village, certain adjustments were made to the Fiscal Year 1998 Budget for the purposes of preparing the financial projections reflected herein. 2. Based on discussions with Village staff, salaries and wages expenses for Water System personnel in the Fiscal Year 1998 Budget were escalated to reflect an allowance for merit increases and inflationary salary adjustments during the course of the budget year. In order to recognize these increases given to utility employees for purposes of cost of living adjustments and performance- related rewards, an allowance of 5.0% was applied to previously budgeted salaries and wages amounts in Fiscal Year 1998 and escalated through the forecast period. Personnel benefits (i.e., contributions toward retirement, health insurance, FICA, etc.) were projected to remain at the same percentage relationship to total salaries as was reflected in the Fiscal Year 1998 Budget. 3. Projected operation and maintenance expenses have been increased based upon several assumptions predicated on the nature of the expenditure. The projected expenses were escalated for the forecast period as follows: a) Materials and supplies expense, other contractual services expense, repair and maintenance expense, and certain other operating expenses have been projected to increase in general from historical levels at a rate equal to inflation ranging from 1.5 to 3.0 percent based on the nature of the expenditure. These escalation factors were based on recent historical trends in the actual expenditures as well as a: i) review of historical price indices for a six year consecutive period used by many utilities for financial forecasting and the rate setting process which included: a) the Gross National Product Implicit Price Deflator Index which is used by the Florida Public Service Commission in the establishment of price indices for operating costs as required pursuant to Section 367.081(4)(x), Florida Statutes, in the regulation of private or investor - owned utilities; plus b) the Consumer Price index; and ii) projections of the consumer price index for urban customers forecast as prepared by the Congressional Budget Office as contained in The Economic and Budget Outlook dated January 1997. -27- b) Based on discussions with the Village, we have recognized additional Water System operating personnel during the course of the forecast period coincident with the capital improvement program (i.e., construction of the reverse osmosis water treatment facility) and as a result of increased capacity needs and service area requirements. The cost of personnel services, including employee benefits, reflects an increase in the cost of System operations to recognize the need to staff the water treatment facilities, for the performance of system maintenance, and to continue to provide a high level of water service to the Combined Service Area. The additional employees which are recognized in the development of the operating expense projections for the forecast period are summarized below: Annualized No. of Year of Salary/Benefit Utility /Classification Emplages Addition Expenses [ 11 Pumping & Storage (treatment) 1.0 1998 [2] $ 22,093 Pumping & Storage (treatment) 1_0 1999 30365 Total IQ $ 52.658 [ 1 ] Reflects expenses recognized in year of personnel addition. [2] Employee included as addition in Fiscal Year 1998 Budget. Incremental expenses (i.e., uniforms, travel and training, allowance for overtime, etc.) associated with the addition of these anticipated employees were also recognized in the analysis. No other personnel additions were assumed for the forecast period other than what is referenced above. c) The cost of purchased power expense and chemicals for the Water System have been forecasted based on: i) a review of historical costs and trends in finished water production (flow); ii) the anticipated cost reflected in the Fiscal Year 1998 Adopted Budget adjusted to reflect expense relationships incurred during recent historical periods; iii) the increase in the amount of water produced associated with anticipated customer growth for the forecast period of Fiscal Years 1998 through 2002; iv) recognition of incremental increases in costs due to the facility expansions being placed in service to meet System capacity needs; and v) assumed increases in power rates and chemical costs due to inflationary allowances for the forecast period. d) Bad debt expense was estimated to be approximately two- tenths of one percent (0.2 %) of total retail water sales, respectively, based on discussions with the Village and historical relationships incurred by the utility. e) Based on discussions with the Village, any interest earned on customer deposits is retained by the System to reduce overall operating expenses and associated rates. Therefore, we have not reflected any interest expense in the forecast period associated with the remittance of interest earned on deposits to those specific customers or accounts which currently have a deposit with the Water System. To the extent that the Village were to change this customer service policy and implement the return of interest earned to such customers, the estimated operating expenses would be increased by approximately $9,000 annually based on the current balance of deposits on account within the Water System and an assumed annual interest rate of 5.0 %. -28- 4. A contingency allowance of two percent (2.0 %) of total operating expenses was recognized in each fiscal year. The allowance has been included in order to have sufficient funds to meet unknown or unplanned expenditures throughout the fiscal year and to recognize potential changes in revenues due to weather, conservation, and other factors. This allowance increases the revenue requirements of the utility by approximately $47,000 annually and has been included as a component of the annual operating expenses of the System. 5. The Village has entered into an Amended Bulk Water Agreement with the Town of Jupiter which became effective on June 1, 1977 and which expires on June 1, 2007. The terms of the Amended Bulk Water Agreement provide, among other things, that that Village is obligated to receive and/or pay for a minimum purchase of 1.5 million gallons per day (MGD) of finished water. This minimum purchase requirement is adjusted annually if the preceding 12 months average annual water purchases expressed on an average daily basis is greater than 1.5 MGD (but in no event will it be less than 1.5 MGD). Furthermore, the Amended Bulk Water Agreement does provide that the Village may receive up to 2.25 MGD on a peak day basis. Based, on a review of recent historical trends in the purchase of finished water from the Town of Jupiter by the Village (reference Table 3 at end of Report), the purchases expressed on an average daily basis have not exceeded the minimum 1.5 MGD allowance referenced in the Amended Bulk Water Agreement. Based on discussions with the Village staff, it is not expected that this minimum threshold will need to be adjusted due to increased water usage demands during the forecast period (any usage demands for the forecast period are expected to be met by the addition of the 1.2 MGD reverse osmosis water treatment facility). The Amended Bulk Water Agreement also provides for the rate to be charged for bulk water service. As further described in the Official Statement, the rate to be charged by the Town of Jupiter has been the subject of litigation between the parties to the agreement. For the purposes of the financial projections contained in this Report, we have assumed a bulk water rate to be charged by the Town of Jupiter for finished water delivered to the Village of $1.22 per thousand (1,000) gallons of service. This bulk water rate reflects the then current rate which was being charged by the Town prior to the rate increase which resulted in the litigation between the two parties. The rate proposed by the Town was $2.42 per one thousand (1,000) gallons of service. As was previously discussed in this Report regarding the rate charged by the Village to its customers, the Village has initiated a surcharge (and an escrow account to separately account for monies received from the application of the surcharge) to recover the increased bulk water costs to the extent that the Village may not eventually prevail on this issue. Since the Village has: i) adopted in its Rate Ordinance a surcharge to recover the full cost of the Town of Jupiter's proposal to increase the bulk water rates and also includes a pass - through provision to automatically increase rates for service in the event the Town increases the rate for bulk water service; and ii) to date received favorable rulings from the courts relative to the rate to be charged, we have assumed a rate of $1.22 per one thousand (1,000) gallons of service. To the extent the bulk rate increases, the Village has expressed "it will automatically adjust its rates for service such that the Net Revenues of the Water System will not be materially affected (i.e., the rate adjustment will equal the increase in the cost of finished water purchases from the Town of Jupiter). -29- Based on these assumptions, the annual bulk water purchases from the Town of Jupiter were estimated as follows: Fiscal Years 1998 through 2002 Minimum Purchase Obligation (gallons) 1,500,000 Annual Purchases Billed (000s) 547,500 Bulk Water Rate ($ /1,000 gallons) $1.22 Annual Bulk Water Purchases Expense $667.950 6. The Village currently allocates or recognizes as an operating expense of the Water System an Administrative Management charge in order to recover the pro rata costs of certain management and support services accounted for in the General Fund but allocable to the Water System. Examples of costs reflected in this expense category include the cost of Village management, finance, purchasing, human resources, and other related expenditures. This expense was based on the Fiscal Year 1998 Budget and increased annually for inflationary allowances. Additionally, the Village also expects to construct a new Village Hall to be financed by general obligation indebtedness where a portion will be allocable to the Water System. For the purposes of the financial projections reflected in this Report and since this indebtedness will be an obligation of the General Fund, we have assumed the debt service cost allocable to the Water System to be an operating expense and an additional component of the Administrative Management Fee. Based on these assumptions, the Administrative Management Fee reflected to the financial forecast is shown below: Fiscal Ye A moun t 1998 $166,795 1999 171,799 2000 257,952 2001 263,260 2002 268,728 7. As discussed more fully in the Official Statement, the Village is currently in litigation with Town of Jupiter relative to the Village's ability to construct the R.O. Water Treatment Plant which is being financed by the proceeds of the Series 1998 Bonds. The Village has received a favorable judicial opinion on this litigation and we have assumed a continuation of this opinion. However, if the Town were to ultimately prevail on this issue, it is not expected that it would have a material impact on the financial projections reflected in this Report. As previously mentioned in this Report, the projection of customer growth for the determination of System rate revenues was conservatively estimated to be minor (ie., a growth rate less than 1% annually), although a higher growth rate for the System is anticipated by the Village. The growth rate assumed for these financial projections is not predicated on the existence of the R.O. Water Treatment Plant. Additionally, the Village recently adopted the Rate Ordinance to finance the Project based on: i) the growth rate for the financial projections reflected in this Report; and ii) the debt service requirements for the Series 1998 Bonds as provided by the Financial Advisor. 8. The Village currently has no utility system revenue bonds outstanding as of the date of this Report. All of the previous utility revenue bonds issued on behalf of the Water System have been fully paid and retired, the last debt service payment occurring during the Fiscal Year 1996. -30- The Village is currently anticipating the issuance of the Series 1998 Bonds in order to fund the capital improvement projects as identified by the Village. The assumptions provided by the Financial Advisor for the Village with respect to the debt service on the Series 1998 Bonds include: i) total principal amount of the bonds estimated at $7,805,000; i) assumed annual coupon interest rates on the serial bonds ranging from 4.00% to 5.25 %; iii) a term of 30 years; iv) the issuance of a Reserve Account Letter of Credit payable from bond proceeds in lieu of the funding of a debt service Reserve Account; and v) the payment of issuance costs associated with the Series 1998 Bonds. It was further assumed that the bonds would be dated February 1, 1998. For the purposes of this Report, it was also assumed that there would be no interest payments funded from the proceeds of the Series 1998 Bonds and that the debt service payments would reflect interest only payments for the first 18 months and that the debt service payments for the remainder of the term of the issue would essentially be levelized. Therefore, the debt service payment recognized in Fiscal Year 1998 represents eight (8) months of interest with on principal reduction. inally, the deposit to the Construction Fund to finance the Project is less than the total anticipated Project cost, however, it is estimated that the interest earnings expected to be earned on unspent Construction Fund balances together with the proceeds of the Series 1998 Bonds deposited into such fund will be sufficient to finance the Project. 9. As reflected in the Bond Resolution which authorized the issuance of the Series 1998 Bonds, the System is required to establish and deposit into a Renewal and Replacement Fund (R&R Fund) an amount equal to 5.0% of the Gross Revenues received by the Utility System in the immediately preceding fiscal year (the "R&R Fund Requirement ") for the purpose of paying the cost of extraordinary repairs to, extensions, improvements or additions to, or the replacement of capital assets of the Water System. It should be noted that a greater or lesser sum than that determined by an amount equal to 5% of the preceding years gross revenues may be based upon the recommendations of the Consulting Engineer. For the purposes of developing the revenue requirements from rates and based on discussions with Village staff, we have recognized an annual deposit to the R&R Fund of approximately 5.3% of the previous year's Gross Revenues which is slightly greater than the R &R Fund Requirement as reflected in the Bond Resolution. The annual deposit also recognizes the effects of anticipated increased revenues due to the rate adjustments recently enacted by the Village. The following table summarizes the estimate of the deposit to the R&R Fund. Fiscal Year Ending September 30 1998 N 1999 2000 '2001 2002 Previous Year's Gross Revenue $3,141,346 $3,172,616 $3,395,418 $3,417,857 $3,434,489 Minimum Funding Deposit Rate 5% 5% 5% 5% 5% Amount 117,800 158,631 1 69,771 170,893 171,724 Excess Recognized above Minimum Funding Deposit 38 -586 10.000 10.000 10 -000 10.000 Total Deposit Assumed for System Revenue Requirement Development $ 156,386 $168,631 $179,771 $ 180,893 $ 181,724 [ }] Minimum funding requirement shown for nine (9) month period coincident with intended issuance of Series 1998 Bonds. 10. The capital improvement program for the System was based on data derived from: i) the Fiscal year 1998 Budget; ii) the Village's most recent Five -Year Capital Improvement Plan developed with the Village staff in conjunction with the Village's Consulting Engineers; and iii) assumptions made relative to the financing of on -going renewals and replacements of the System. Included in the capital -31- improvement program analysis was a review of the sources of funds for the program to ensure that monies would be available to fund such projects during the forecast period and to determine additional amounts which needed to be funded from rate revenues, if any. The five year capital improvement plan and anticipated funding requirements are summarized below: Fiscal Year Ending September 30. 1998 1999 2000 2001 2002 Capital Projects -RO Plant Membrane Replmnt. Accrual $ 0 $ 5,000 $ 15,000 $ 15,000 $ 15,000 Vehicle Replacement 0 10,000 10,000 10,000 10,000 Meters, Valves, Hydrants 10,000 10,000 10,000 10,000 10,000 Equipment Replacement 7,800 10,000 10,000 10,000 10,000 Reconstruction of Monitor Wells 3,000 3,000 3,000 3,000 3,000 Spare Pumps and Motors 16,000 20,000 20,000 20,000 20,000 PC Prog. Backdlow Test 1,800 1,000 1,000 1,000 1,000 Distribution System Improvements 0 0 0 151,500 151,500 CADD Mapping 10,000 10,000 10,000 10,000 10,000 Cypress Dr. Drainage 52,600 0 0 0 0 Paint Bridge Crossings 0 0 25,000 0 0 Water Plant Landscaping/In igation 0 30,000 0 0 0 Well #28 0 0 200,000 0 0 R/O Well No. 2 [ 1 ] 165,000 320,000 0 0 0 R/O Reject Disposal Main [1 ] 624,500 63,500. 0 0 0 R/O Water Treatment Plant [1] 2,420,000 4,028,000 25,000 0 0 Remote Telemetry [ 1 ] 0 62.000 165.000 _Q 0 Total Capital Projects $3,310,700 $4,572,500 $494,000 $230,500 $230,500 Funding Sources Capital Improvements Charges $ 0 $ 0 $ 200,000 $ 0 $ 0 Utility Revenue Bonds [2] 3,209,500 4,473,500 190,000 0 0 Renewal and Replacement Fund 33,800 55,000 90,000 216,500 216,500 Operating Reserves 52,600 30,000 0 0 0 Rate Revenue 14.800 14.000 14.000 14.000 14.000 Total Funding Sources [3] $3310.700 $4.572.500 $494"000 $230.500 $230.500 [ 1 ] Reflects projects delineated in Table 2. [2] Includes interest earnings on Construction Fund established by the issuance of the Series 1998 Bonds. [3] Amounts shown do not include $303,000 of previously fixed engineering and permitting costs associated with the R.O. plant expansion program. These costs will be reimbursed from a portion of the proceeds from the Series 1998 Bonds. 11. The capital outlay expenditures for departmental furniture, fixtures, equipment, vehicles, and other related items were recognized as an additional capital requirement which is funded from Water System rates (are included in tabulation summarized in Assumption No. 10). These expenditures were considered to be in addition to the R&R Fund deposits described above (reference Assumption No. 9). These capital expenditures were based on recent expenditure trends and budgetary information provided by the Water Department staff. 12. Investment income on funds and accounts created by the Bond Resolution have been estimated utilizing average annual interest rates ranging from 2.0 percent to 5.5 percent. The interest rates have been applied to estimated balances in the debt service Sinking Fund, the Renewal and Replacement -32- Fund, the Meter Deposit Fund and the Revenue (operating) Fund. We have also assumed that any interest earnings on the Capital Improvements Fund and the Construction Fund, if any, will be deposited in the respective funds and not be available for operating expense or debt service requirements consistent with the provisions of the Bond Resolution. For the forecast period, the earnings by specific fund or account for the System are summarized below: Fiscal Year Ending September 30. 1998 1999 2000 2001 2002 Series 1997 Bonds Sinking Fund $ 3,296 $ 5,694 $ 6,443 $ 6,461 $ 6,487 Debt Service Reserve Fund [ I] 0 0 0 0 0 Renewal and Replacement Fund 2,145 6,279 9,839 10,786 9,555 Revenue (Operating) Fund 3,057 9,362 10,669 10,794 10,787 Rate Stabilization Fund 0 2,400 6,150 7,050 5,190 Meter Deposit Funds 8,650 8,650 8,650 8,650 8.650 Earnings Recognized 17,148 32,385 41,751 43,741 40,669 Capital Improvements Fee Fund [2] 3,638 4,466 2,990 1,410 1,798 Construction Fund 214,765 107.828 1.843 0 0 Total Earnings $ 235.551 $ 144.679 $ 46.584 45.151 42.467 [ 1 ] For purposes of this analysis, it is assumed that the Debt Service Reserve Fund will be financed with a surety bond funded from the proceeds of the Series 1998 Bonds. [2] For purposes of this analysis, assumed earnings on the Water Impact Fee Fund and the Construction Fund will be restricted to such Funds until time of use during forecast period. 13. Pursuant to the Rate Ordinance, the Village has adopted a surcharge which is currently applied to all customers of the System to recover potential increased bulk water costs which are currently being charged by the Town of Jupiter. This issue regarding the proper bulk rates to be charged is subject to litigation between the two entities (reference Assumptions Nos. 5 and 7). The Village has established a separate interest bearing escrow account for the deposit of all monies collected from the application of the surcharge in order to fund this potential liability. The Village has indicated that the application of the surcharge and the establishment of the escrow account was initiated coincident with the increase in bulk water rates by the Town of Jupiter. If the Village prevails in this litigation, the monies will be returned to the customers in accordance with provisions of the Rate Ordinance. If the Town of Jupiter is successful, the monies will be transferred accordingly and the rates for service (i.e., the surcharge) will remain in effect. Due to the uncertainty of the outcome of this litigation, we have not included as a revenue to the System any funds received from the application of this surcharge and accordingly have not recognized any associated increase in bulk water costs above what was discussed in Assumption No. 5 of this Report. 14. The Village is proposing to adopt a capacity reservation charge which represents a monthly fee charged to owners of vacant buildable lots which have reserved capacity from the Village at the water production or treatment facilities. The purpose of this fee is to recover the allocable fixed operating costs of the treatment facilities from such customers that have reserved capacity (a "carrying charge "). Since this is a new fee recently adopted by the Village and holders of the reserved capacity have six months to construct the respective projects and connect to the Water System, we have not assumed any revenues to be derived from this fee for the forecast period. 15. Included in the financial projections are other operating revenues associated with meter installations, service initiation and discontinuance fees, late payment fees, and other related customer requested -33- services revenues. For the purposes of this Report, other operating revenues were based on: i) the Fiscal Year 1998 budgeted revenues; ii) a review of historical amounts received from such charges; iii) projections of customer growth; and iv) discussions with the Village. Based on a review of such sources and the assumptions of System growth reflected in this Report, it was assumed that, such revenues would generally remain constant during the forecast period. 16. Revenues from monthly user charges were based on rates currently in effect for the Village and the customer sales forecast presented on Table 3, which was predicated on recent historical trends and relationships derived from detailed customer billing records provided by the Village and financial data regarding the collectibility of such revenues from the various rate components (i.e., monthly service charge). Except for the rate adjustments which have already been adopted by the Village Council by public hearing and which is codified by ordinance, no increase in the monthly user charges, including any application of a price index adjustment (which is part of the Rate Ordinance), was assumed during the forecast period. 17. In order to support the financing plan identified for the expansion of the System recommended in this Report, it has been assumed that a Rate Stabilization Fund will be established and utilized during the course of the forecast period as a method of levelizing rates and providing rate flexibility with respect to meeting the rate covenant requirements of the Bond Resolution. Based on the revenue requirements of the System and discussions with the Village, the following transfers to and from the Rate Stabilization Fund have been recognized in the projections of the System operations. Fiscal Beginning Deposits to Use of Ending Year Balance Fund [11 Fund [21 Balance 13 ] 1998 $ 0 $ 0 $ 0 $ 0 1999 0 190,000 0 190,000 2000 190,000 90,000 0 280,000 2001 280,000 0 30,000 250,000 2002 250,000 0 94,000 156,000 [ l ] Funded from System Revenue; amounts not recognized as revenues in year of deposit. [2] Transferred to Revenue Fund; reflected as revenues in year of transfer for rate covenant compliance. [3] Interest earnings on Rate Stabilization Fund automatically transferred to Revenue Fund. 18. For the purpose of this analysis, no funds from available Water Capital Improvement Charges have been included in the development of the financial analyses since such amounts are available only for capital projects for new customer growth and expansion and do not serve to effectively fund indebtedness. The use of such funds will be used recognized to fund the expansion - related projects of the System, thus reducing project funding from utility revenues or future debt service costs, etc. which are paid from rates of the System. Additionally, no funds from the imposition of Water Capital Improvement Charges were assumed to be used to offset the payment of any future debt service requirements of the Series 1998 Bonds even though a portion of such revenues are considered as a pledged revenue for bond coverage purposes. -34- As shown in Table 5 and summarized below, projections have been prepared of the operating results for the Water System. Such projections were prepared in accordance with our understanding of the flow of funds prescribed by the Bond Resolution and the assumptions and considerations used in the projections as described earlier. Proiected Overatine Results Fiscal Year Ending September 30 8 1999 2000 2001 2002 Total Sales Revenue $ 3,132,572 $ 3,338,028 $ 3,353,526 $ 3,368,316 $ 3,382,817 Other Operating Revenue 22,895 25,005 22,579 22.431 22,317 Total Operating Revenues 3,155,467 3,363,033 3,376,105 3,390,747 3,405,134 Other Income (7) 17,149 32,385 41,751 43,742 40,668 Rate Stabilization Fund Transfers (To)/From 0 (190,000) (90,000) 30.000 94,000 Total Revenue Recognized 3,172,616 3,205,418 3,327,857 3,464,489 3,539,802 Operating Expense 1) 2,213,728 2,120,235 2,192,412 2,323,704 2.392,347 Net Revenue 958,887 1,085,183 1,135,445 1,140,785 1,147,455 Debt Service 0) 263,706 455,554 515,454 516,910 578,927 Coverage for Rate Covenant Compliance 3.64 2.38 2.20 2.21 2.21 Less Other Required Transfers and Debt Coverage Allowance (S) 33 7,336 421,541 530,814 537,535 544,237 Excess of Net Revenues above Required Transfer and Coverage Requirements �� 357 -845 X4$4 89.177 34 (1) Amounts derived from Table 5; amounts may be different than what is shown on Table 5 due to rounding. (2) Amounts shown include interest income earned on unrestricted funds. (3) Amounts shown do not include depreciation or amortization expenses. (4) Amounts shown based on information as provided by the Village's Financial Advisor, for assumptions utilized in development of anticipated Series 1998 Bonds repayment schedule, refer to Assumption No. 8. (5) Amounts shown include transfers identified in the Bond Resolution, including: i) transfers to the Renewal and Replacement Fund; ii) the payment of Administrative Expenses; and iii) recognition of a debt coverage allowance equal to 20% of the annual debt service requirement. (6) Amounts shown do not include the recognition of any water capital improvement charges which may be received by the Village during the forecast period. (End of Section) -35- FINDINGS AND CONCLUSIONS Based on our studies, assumptions, and analyses as summarized herein, we are of the opinion that: 1. Based upon general field observations of the aboveground facilities, our knowledge of the facilities, and discussions with the Water Department staff, the existing facilities of the Water System appear to be in good condition. The System appears to be adequately operated and maintained in accordance with normal utility practice, and can reasonably be expected to provide sufficient and reliable service to meet the existing requirements of the System during the forecast time reflecte in this report. 2. The existing facilities of the System together with planned renewals, replacements, and additions described in this Report can reasonably be expected to meet the projected capacity requirements of the System at least through the fiscal year ending September 30,'2002. 3. The System under the rate structures currently in place, customer growth estimates and usage requirements coupled with rate stabilization transfers and utilization of other funding sources as assumed herein are projected to be adequate to fund the expansion projects recommended by the Village's Consulting Engineers. 4. The existing rates for water service, based on the assumptions presented herein and the estimated financing plan for System expenses coupled with Rate Stabilization transfers, are projected to be adequate for the Fiscal Years 1998 through 2002 to meet the senior lien debt service coverage requirements as defined in the Village's Bond Resolution based on the projection of water customers and usage needs. 5. The monthly rates for water service (exclusive of the Town of Jupiter bulk water surcharge) are reasonable and competitive when compared to similar rates charged by neighboring jurisdictions. -36- FIGURES • - � ivy � `��►� 706 1I1 JUPITER s a � W.W ,x - r ., Club _ • I L I PALM 0 BEACH • , \ �Y l PG,4 Golf Club ph :,:.. v ._W ., y I • VILLAGE OT TEQUESTA OVERALL LOCAMON MAP FIGURE I ROL LING HILLS SUBDIVISION UTILITIES MARTIN JONATHAN \ �p� T STATE DI BOY K C AMP 5 BLOWING CL v '" PITE r ROCKS PARK Y RIVER1 CO,^ kA 4 . \ is '0 TURTLE CREEK WTP SITE ` ' s MARTIN COUNTY ::: _ PALM BEACH COUNTY — �•' "� — k0 � n MARTIN COUNTY Q PAL1A BEACH COUNTY (O f \ 9, 7f B Fl QUESTA 04 COUNTRY CLUB HuA w' CORAL P t Q FIM t O f d FIELD / w ROAD 7� qi \ R FIE J ` BEACH ROAD JUPITER INLET LEGEND GT,� COLONY L I G HTHOUSE LIGHTHOUSE ATCM�. f �o PARK WELL FIELD N0. /LOCATION TOWN of JUPITER RiIr - - - CORPORATE BOUNDARIES _ -_- rA'- - • - • - WATER SERVICE AREA MLLAGE OF TEQUESTA CORPORATE BOUNDARIES / Res". Macon and Asseclatsa. Inc. SERVICE AREA Consulting Engineers FIGURE 2 e W N �1 - lk - - i d 7' Qom' f^ a O w o d � w 00 cc w � o o c7 - a N - O N N 4 O Ao • 09 s " S9oLosggo VILLAGE OF TEQUESTA HISTORICAUPROJECTED WATER DEMANDS s n4 A A 3 W A d 2 A 1 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 YEAR NOTE: 1. Projections are for use in WTP capacities and are not for Revenue Projections. 2. The decrease in demands in Year 1988 - 1990 are attributable to the implementation of a conservation based rate structure. FIGURE 3 TABLES TABLE 1 Village of Tequesta, Florida Water Revenue Bonds RAW WATER SUPPLY WELL SUMMARY WELLNO. 7 8 18 19 20 21' 23 24 25 26 27 28' 1W 2W 3W 4R' 51V Dia. (inches) 10 10 8 8 8 8 10 10 10 10 10 10 16 12/16 12/16 12/16 12/16 Total Depth (ft) 90 70 62 60 60 60 60 75 70 70 70 70 1735 1400 1400 1400 1400 Casing Depth (ft.) 50 50 37 35 35 35 1 45 40 50 50 50 50 1 20 1100 1100 1100 1100 Screened hriemal 50-85 50 -70 37-62 3560 35-60 35-60 45-60 40-70 50-70 50 -70 50-70 50 -70 N/A N/A N/A N/A N/A (R) Pump Capacity 750 750 150 150 150 200 950 275 205 365 365 300 1200 1200 1200 1200 1200 (GPM) Yearlastalled 1980 1980 1975 1975 1975 1 1975 1981 1 1991 1994 1995 1995 1998Est 1996 1998EA N/A N/A N/A 1 Presently this well is not equipped. 2 Proposed Well. 3 Well has been drilled, but is not equipped NOTES: Wells 1 R - 511 are Floridan wells, all others are Surficial wells. All wells shown, existing and proposed, have had their withdrawal allocations approved by SFWMD. TABLE 2 Village of Tequesta, Florida Water Revenue Bonds, Series 1998 CAPTIAL IMPROVEMENTS - ENGINEER'S ESTMIATE R.O. Water Treatment Plant R.O. Well No. 2 R.O. Reject Disposal Main Remote Telemetry Raw Water Piping (on site only w/ well equipnmt) S 150,000 12" - 16" Casing (1200 GPM) 5400,000 12" Main/Outfall S5 15,000 Design bt Construction $192,700 Site Worts (paving/grading, clearing/grubbing, fencing, etc.) 165,000 High Service Pumps (2 @ 2275 GPM) 80,000 R.O. Equipment, L2MGD (in plant piping, filters, membranes, pungrs, meters, cleaning system) 1,400,000 Self Contained Generator w/ contaimn nt 250,000 Bulk Chemical Feeds 220,000 Scavenger Tank 25,000 Building 1,229,000 Degasifier 6t 2 -stage Scrubber (rated ® 2.4 MGD) 275,000 Clearwell 75,000 Transfer Pumps (2 ® 2200 GPM each) 60,000 Yard Piping 265,000 Electrical, Instrumentation/Controls 1,100,000 Subtotal 55,294,000 $400,000 $515,000 192,700 10 529,000 40,000 51,500 19,300 ESDC dt START UP SERVICES 415,000 45,000 53,500 15,000 FINAL DESIGN 235,000 PERMITTING - 68,000 SUBTOTAL (PER ITEM) 56,473,000 5485,000 5688 „000 5227,000 TOTAL (ALL ITEMS) $7,873.000 Table 3 Village of Tequesta, Florida Water System Summary of Customer and Consumption Statistics Fiscal Year Ending September 30, Line Actual Projected No. Description 1993 1994 1995 19% 1997 1998 1999 2000 2001 2002 Residential ( 1) 1 Average Annual Accounts 3,985 4,044 4,109 4,160 4,199 4,362 (2) 4,414 4,448 4,481 4,513 2 Annual Consumption (trop's Gallons) 528,438 552,895 535,817 552 ,345 514,222 554,846 561,461 565,786 569,983 574,054 3 Avg. Monthly Use per Accupalloru) 11,051 11,395 10,867 11,063 10,205 10,600 10,600 10,600 10,600 10,600 Multi- Family 4 Average Annual Accounts 81 89 89 92 92 92 92 92 92 92 5 Average Annual Units 1,877 1,876 1,869 1,887 1,895 1,907 1,920 1,920 1,920 1,920 6 Annual Consumption (OWs Gallons) 204,901 215,142 212,564 224,321 211,807 223,119 224,640 224,640 224,640 224,640 7 Avg. Monthly Use per Unit (Gallons) 9,096 9,558 9,479 9,906 9,314 "9,750 9,750 9,750 9,750 9,750 Commercial 8 Average Annual Accounts 254 272 283 288 292 293 294 295 296 297 9 Annual Consumption (000's Gallons) 64,156 65,791 66,232 67,488 68,211 68,562 68,796 69,030 69,264 69,498 10 Avg. Monthly Use per Acct. (Gallons) 21,055 20,138 19,497 19,500 19,467 19,500 19,500 19,500 19,500 19,500 Government 11 Average Annual Accounts 47 49 45 46 43 43 43 44 44 44 12 Annual Consumption (OWs Gallons) 31,349 38,471 40,905 45,882 32,087 36,120 36,120 36,960 36,960 36,960 13 Avg. Monthly Use per Acct. (Gallons) 55,193 65,650 75,331 82,373 62,184 70,000 70,000 70,000 70,000 70,000 btigation 14 Average Annual Accounts 36 36 37 37 38 38 38 38 38 38 15 Annual Consumption (trolrs Gallons) 34,990 33,526 32,658 45,448 38,359 38,359 38,359 38,359 38,359 38,359 16 Avg. Monthly Use per Acct. (Gallons) 81,371 78,700 74,054 102,360 84,120 84,120 84,120 84,120 84,120 84,120 Total System 17 Average Annual Accounts 4,403 4,490 4,563 4,625 4,664 4,828 4,881 4,917 4,951 4,984 18 Average Annual Units 1,877 1,876 1,869 1,887 1,895 1,907 1,920 1,920 1,920 1,920 19 Annual Consumption lo00's Gallons) 863,833 905,825 888,176 935,484 864,686 921,006 929,376 934,774 939,206 943,510 20 Avg. Monthly Use per Acct. (Gallons) 16,349 16,814 16,220 16,857 15,450 15,897 15,867 15,843 15,808 15,776 Water Production (3) 21 Gallons Produced (000's) 429,150 493,929 492,649 499,621 418,187 485,069 494,276 500,214 505,089 509,824 22 Gallons Purchased (000's) 544,736 511,881 520,788 537,540 525,191 528,027 528,027 528,027 528,027 528,027 23 Total Prodution Gallons (000's) 973,886 1,005,810 1,013,437 1,037,161 943,378 1,013,097 1,022,303 1,028,241 1,033,116 1,037,851 24 Average Daily Flow (MGD) 2.668 2.756 2.777 2.842 2.585 2.776 2.801 2.817 2.830 2.843 25 Peak Daily Flow (MGD) 3.822 4.039 4.316 4.087 3.782 4.108 4.145 4.169 4.189 4.208 Unbilled Water 26 Amount (000's Gallons) 110,053 99,985 125,261 101,677 78,692 92,090 92,927 93,467 93,910 94,341 27 Percent ( %) 11.30% 9.94% 12.36% 9.80% 8.34% 9.09% 9.09% 9.09% 9.09% 9.09% (1) Projected growth assumed to be primarily Single Family individually metered Residential Accounts. (2) Increase in residential customers recognizes the addition of s significant development which was added to the System at the end of Fiscal Year 1997 (which is not fully recognized since cdstomers are represented on an average annual basis). (3) Unbilled water assumed to be 9.09% of total water production based on five year historical average. File: MODLXLS; CUSTSTAT; Date: 12/15/97 Table 4 Village of Tequesta, Florida Water System Wntorical 2Mrstina Results Line Fiscal Year Ended September 30, (1) No Description 1993 1994 1995 1996 1997 (2) SYSTEM REVENUES 1 Weser Sales - Existing Rate (3) (2,339,889 12, 467,885 (2,552,930 12,801,711 12,524,768 2 Water Surcharge (4) 0 0 145,371 260,538 267,856 3 Total Was Revenue 2,339,889 2,467,885 2,698 ,301 3,062,249 2,792,624 Other System Revenues 4 Connection Charges 15,677 17,162 14,657 12,605 1.7,402 5 Vim Hydrant Rental 13,300 13,900 13,900 13,900 13,896 6 Other Income 19,588 7,540 6,042 6,328 4,510 7 Misoellauous Revenue 50 5,431 5,993 1,784 905 8 Total Other Utility Revenue 48,615 44,033 40,592 34,617 36,714 9 Total System Revenues 2 ,388,504 2,511,918 2,738,893 3,096,866 2,829,338 EXPENDITURES (5) Pumping and Storage (Water Treatment) 10 Personal Services 1149,180 1164,112 1195,094 1217,056 1207,320 11 Water Purchases (3) 667, 950 669,033 667,950 667,950 667,950 12 Utility Services 86,243 86,892 89,973 90,671 93,313 13 Insurance 16,332 23,619 28,369 34,029 38,070 14 Repairs and Maintenance 69,443 64,448 144,227 103,841 %,067 15 Chemicals 26,525 25,955 39,241 38,992 ' 32,316 16 Other Expenses 28,849 19,543 20,888 27,722 23,849 17 Total Pumping and Storage 1,044,522 1,053,602 1,185,742 1,180,261 1,158,885 Water Distribution 18 Personal Services 192,676 203,638 221,819 243,803 225,135 19 Insurance 10,494 9,865 10,825 8,332 7,649 20 Water System Maintenance 18,194 17,925 19,305 14,905 19,045 21 Other Expenses 12,787 14,490 15,712 15,656 20,557 22 Total Water Distribution 234,151 245,918 267,661 282,696 272,386 Administration sad Office (6) 23 Personal Services 182,795 178,984 188,964 203,404 172,178 24 Engineering Services 10,466 23,755 49,860 31,150 36,678 25 Acmg. /Auditing Services 20,758 24,066 29,441 19,577 33,772 26 Other Expenses 71,631 96,625 163,471 190,572 623,611 27 Total Administration and /Mice 285,650 323,430 431,736 444,703 866,239 28 Total Operating Expenses 1,564,323 1,622,950 1,885,139 1,907,660 2,297,510 29 Interest Income (7) 178,110 - 178,189 209,369 187,056 114,411 30 Total Other Income 178,110 178,189 209,369 187,056 114,411 31 Net Revenues 1,002,291 1,067,157 1,063,123 1,376,262 646,239 Debt Service 32 Series 1985 Bonds (8) 253,991 315,752 236,122 212,030 0 33 Total Debt Service 253,991 315,752 236,122 212,030 0 Debt Service Coverage 34 Estimated 3.95 3.38 4.50 6.49 N/A 35 Required 1.25 1.25 1.25 1.25 N/A Lm Other Required Transfers 36 Renewal and Replacement Fund Transfer (9) 118,728 128,331 134,505 147,413 164,196 37 Administrative Management Fees 121,900 132,175 140,765 145,760 150,135 Amounts Available for Caput Outlay, Additional 38 Improvements and Other Lawful Purposes 5507,672 1490,899 1551,731 1871,059 1331, (1) Unions otherwise noted, amounts shown derived from information provided by the Village and included in the Villages Comprehensive Annul Financial Report for each fiscal yar represented. (2) Amounts shown represent unaudited fllu m as applied by the Village. (3) Amounts shown do not include revenues associated with increase in rates to compensate for Town of lupitr bulk rate increase. Conversely, the offsetting enpe se associated with the bulk rate increase hen no been reflected. (4) Outside City sttrehage implemented by the Village on January l2, 1995. (5) Amounts shown do not include depreciation or rnottiation expenses. (6) Administration said Office expenses we no of Administration Management and General Fund Repayment Few which in order to be consistent with Bond Resolution provisions, we not considered as an operating expense of the System. () Amounts shown include interest carvings an balances in unrestricted funds (i.e., Operating Aceouat, Renewal and Replacement Fund, ac.) and does not include earnings on monies held in escrow assodated with Town of upi ter bulk rate increase or Treasury Bonds purcJwed an association with series 1985 Bonds (reference foouate No. 8). (8) Annual debt service amounts shown we net of aggregate purchase price of 1980,000 of U.S. Treasury Bonds whereby the purchase price of the T reasury Bonds u added to the actual gross debt service and interest earnings we subtracted from gross debt service in order to derive debt service coverage ratios. (9) Amounts shown reflect transfer amount of 5.o% of previous years gross revenues which although was not aauferred during historical period. for presentation purpose; reflects forecasted vwfer anticipated to be required under flow of funds requirement associated with the anticipated issuance of the Soria 1997 Bonds. File: MODI.XLS; HISTOPRESULT; Date: 12/1597 Table 5 Village of Tequesta, Florida - Water System Pagel of 2 Projected Operatine Results and Debt Coverage Analysis Line Fiscal Year Ending September 30 No. 1998 1999 2000 2001 2002 Operating Revenues I Water Sales - Existing Rate (I x2) $2,856,094 $3,042,171 $3,055,473 $3,068,268 53,080,773 2 Water Surcharge (1x3) 276,479 295,857 298,053 300,048 302,044 3 Rate Stabilization Transfer (toyfrom 0 (190,000) (90,000) 30,000 94,000 4 Total Sales Revenue 3,132,572 3,148,027 3,263,527 3,398,316 3,476,817 Other System Revenues 5 Interest Income (4) 17,149 32,385 41,751 43,742 40,668 6 Meter Installation Charges 4,995 7,072 4,624 4,455 4,320 7 Fire Hydrant Rental 13,900 13,900 13,900 13,900 13,900 8 Other Income 3,000 3,033 3,055 3,076 3,097 9 Miscellaneous Revenue 1,000 1,000 1,000 1,000 1,000 10 Total Other Utility Revenue 40,044 57,390 64,330 66,174 62,985 11 Total System Revenues 53,172,616 $3,205,418 $3,327,857 $3,464,489 53,539,802 Operating Expenses (5) Pumping and Storage (Water Treatment) (6) 12 Personal Services $270,561 $317,360 $332,460 $348,301 $364,918 13 Bulk Water Purchased (5x7) 667, 950 667,950 667,950 667,950 667,950 14 Utility Services 110,800 116,290 141,011 188,089 195,962 15 Insurance 36,050 37,132 41,995 50,393 51,905 16 Repairs and Maintenance 83,500 85,965 88,504 91,118 93,810 17 Chemicals 44,836 47,058 57,534 77,595 80,717 18 Other Expenses 79,200 81,439 86,244 89,617 92,311 19 Total Pumping and Storage 1,292,897 1,353,193 1,415,698 1,513,062 1,547,572 Water Distribution 20 Personal Services 255,501 270,831 284,373 298,591 313,521 21 Insurance 11,891 12,248 12,615 12,994 13,383 22 Water System Maintenance 20,000 20,600 21,218 21,855 22,510 23 Other Expenses 40,606 41,634 42,693 43,783 44,905 24 Total Water Distribution 327,998 345,313 360,899 377,222 394,319 Administration and Office 25 Personal Services 193,309 204,908 215,153 225,911 237,206 26 Engineering Services 27,000 27,810 28,644 29,504 30,389 27 Acct/Auditing Service 20,000 20,600 21,218 21,855 22,510 28 Contingency Allowance (8) 46,677 44,942 48,046 50,725 52,178 29 Other Expenses 305,847 123,470 (9) 102,755 105,426 108,173 30 Total Administration and Office 592,833 421,729 415,816 433,419 450,456 31 Total Operating Expenses 52,213,728 $2,120,235 $2,192,412 52,323,704 $2,392,347 32 Net Revenues $958,887 $1,085,183 51,135,445 $1,140,785 51,147,455 Debt Service 33 Series 1998 Bonds $263,706 $455,554 $515,454 5516,910 $518,927 Coverage 34 Estimated 3.64 2.38 2.20 2.21 2.21 35 Required 1.20 1.20 1.20 1.20 1.20 Less Other Required Transfers 36 Debt Service Coverage (10) 52,741 91,111 103,091 103,382 103,785 37 Debt Service Reserve Fund Transfer (11) 0 0 0 0 0 38 Renewal and Replacement Fund Transfer (12) 117,800 158,631 169,771 170,893 171,724 39 Administration Management 166,795 171,799 257,952 263,260 268,728 Excess Revenues Above Required Expenses 40 And Transfers Per Bond Resolution (13) $357,845 5208,089 $89,177 586,340 $94,290 Footnotes Page 2 of 2. File: MODI.XLS; DEBTCOV; Date: 12/16/97 Page 2 of 2 Table 5 Village Of Tequesta, Florida Water System Projected Operating Results And Debt Coverage Anal, sis Footnotes 1. Amounts shown based on rates as adopted by the Village Council as codified by Ordinance. The rate revenues also include the application of the adopted 4.0% rate increase as referenced in the Rate Ordinance to become effective October 1, 1998. 2. Amounts shown do not include any revenues associated with the bulk water surcharge currently being charged by the Village to fund the potential liability in a contended bulk water rate increase implemented by the Town of Jupiter which is subject to litigation between the Village and the Town. Reference the Official Statement for additional information. 3. Reflects revenues derived from the application of the 25% outside City surcharge applied to customers located outside the City as allowed by Chapter 180.191, Florida Statutes. 4. Amounts shown reflect interest earnings on unrestricted funds/ amounts do not include' earnings on Water Capital Improvement Charges or Construction Fund balances which remain in such funds. 5. Amounts shown do not include depreciation and amortization expenses which are non -cash in nature and not included as an operating expense pursuant to the Bond Resolution. 6. Amounts shown include incremental expenses associated with the addition of the Reverse Osmosis Water Treatment Facility assumed to commence operation in June 2000. 7. Amounts reflect cost of bulk water purchases from the Town of Jupiter. Amounts based on rate of $1.22 per thousand gallons which is less than the rate being billed by the Town which is the subject of litigation between the two entities. Any increase in the rate will be offset by a concurrent or like kind increase in rate revenue (reference footnote 2). 8. Amount shown reflects a contingency allowance to account for any unknown or unplanned expenditures which may arise periodically during the forecast period. 9. Reduction in operating expenses represents reduced litigation costs which have been identified as an operating expense associated with the settlement of the issues subject to litigation between the Village and the Town of Jupiter. 10. Amount shown equal to 20% of the Debt Service Requirement for each respective fiscal year. 11. No deposits to the debt service Reserve Account assumed during the forecast since the Village anticipates purchasing - a Reserve Account Letter of Credit to meet this financial obligation required by the Bond Resolution. 12. Amounts shown equal to the Renewal and Replacement Fund requirement as defined in the Bond Resolution which was assumed to equate to 5% of the Gross Revenues (without regard to Rate Stabilization Fund transactions) received in the preceding fiscal year. 13. Excess revenues as defined for Rate Covenant purposes; amounts do not include any additional funds associated with the receipt of Water Capital Improvement Charges. 1056 -01 /foot note.doc Table 6 Village of Tequesta, Florida Water System Comparison of Typical Monthly Residential Bills for Water Service (1) Residential Service for a 5/8" or 3/4" Meter (Thousands of Gallons) Line 0 2 5 10 15 20 No. Gallons Gallons Gallons Gallons Gallons Gallons Village of Tequesta - Without Surcharge 1 Existing Rates S 8.80 S 11.68 $ 16.00 $ 23.20 S 33.28 S 45.28 2 Proposed Rates - Effective Nov. 1, 1997 9.80 12.90 17.55 25.30 36.20 49.20 3 Proposed Rates - Effective Oct. 1, 1998 10.20 13.44 18.30 26.40 37.80 51.40 Village of Tequesta - With Surcharge 4 Existing Rates S 15.80 S 18.68 S 23.00 S 30.20 $ 40.28 S 52.28 5 Proposed Rates - Effective Nov. 1, 1997 16.80 19.90 24.55 32.30 43.20 56.20 6 Proposed Rates - Effective Oct. 1, 1998. 17.20 20.44 25.30 33.40 44.80 58.40 Other Florida Utilities 7 City of Boynton Beach S 6.65 S 6.65 S 9.81 S 18.12 S 27.17 S 36.97 8 City of Coral Springs 13.59 15.45 18.24 23.47 29.57 35.67 9 City of Delray Beach 9.35 11.49 14.92 20.82 26.72 32.62 10 Hobe Sound Water Company 12.14 15.06 19.44 26.74 34.04 41.34 11 Indian River County (3) 11.20 14.70 20.75 32.70 50.05 74.30 12 Town of Jupiter (2) 9.80 12.34 16.15 22.50 28.85 35.20 13 Martin County (2) 13.80 17.40 22.80 31.80 44.05 59.55 14 City of Melbourne (2) 2.84 6.42 11.79 20.74 29.69 38.64 15 Palm Beach County (2)(4) 7.65 9.15 12.25 20.25 39.25 58.25 16 City of Plantation 5.75 8.61 12.90 20.05 27.20 34.35 17 City of Port St. Lucie 5.85 11.17 19.15 32.45 45.75 60.90 18 Village of Royal Palm Beach (2)(3) 11.00 14.24 19,10 27.20 35.30 43.40 19 Seacoast Utility Authority 11.75 12.51 13.65 23.55 35.45 47.35 20 St. Lucie County 9.25 16.29 26.85 44.45 62.05 79.65 21 City of Tamarac 6.71 9.23 13.01 20.51 28.31 37.61 22 City of Venice (2)(3) 9.33 15.01 23.53 37.73 51.93 66.13 23 City of Vero Beach 11.54 11.54 15.96 27.01 38.06 49.11 24 Village of Wellington. (2) (3) 13.75 16.85 21.50 30.77 42.32 57.82 25 City of West Palm Beach (3) 5.86 7.92 11.01 16.74 23.52 30.87 26 Other Florida Utilities' Average S 9.36 $ 12.21 S 16.99 S 26.19 S 36.80 S 48.41 (1) Unless otherwise noted, amounts reflect standard residential rates effective September 1997 and are exclusive of taxes or franchise fees, if any and reflect rates charged for inside the city service. All rates are as reported by the - respective utility. This comparison is intended to show comparable charges for similar service for comparison purposes only and is not intended to be a complete listing of all rates and charges offered by each listed utility. (2) Represents utilities that utilize the membrane softening process of water treatment. (3) Indicates that there is a rate study being performed or anticipated. (4) Reflects new rates to become effective October 1, 1997. FILE: TEQC0M9.A2S DATE: 12115197; ME. 2:01 PM TABLE 7 Village of Tequesta, Florida Water System Ldentified Projected Residential Water Customer Growth [11 Franchise/ Total No. of Units/ERCs No. of Units/ERCs Development eS tyice Area Availabl e ain'ng Cypress Ridge Tequesta 47 34 Eastwinds Landing Tequesta . 12 1 Windswept Pines Palm Beach County 8 3 Key West Villas Tequesta 30 12 Harken Terrace Martin County 10 2 Coconut Cove Tequesta 13 11 Heritage Oaks "C" Martin County 10 4 Tequesta Oaks Tequesta 159 2 Turtle Creek East R Martin County 34 1 Carlyle Palm Beach County 25 25 River Ridge Martin County 118 [2] 118 Jupiter Hills Martin County 36 [2] 36 Indian Hills Martin County 10 [2] 10 Conch Bar Martin County 6 [2] 6 Jillwood Acres Martin County 110 [2] 110 Turtle Creek Martin County 20 [2] 20 County Club Dr. Martin County 20 [2] 20 Jupiter Island Palm Beach County 24 [2] 24 Central Business Dist Tequesta 441 [2] 441 Total 1,133 880 [ 1 ] Reported development units statistics provided by Village and is as of October 1997. [2] Amounts shown reflect total number of vacant parcels available which, for the purposes of this Report, was assumed to equate to the total units available in each respective development. APPENDIX C FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 (THIS PAGE INTENTIONALLY LEFT BLANK) NH NOWLEN. HOLT & MIN ER, P.A. ('I R11I II.) I'I K Il A('COt \1 A\T� E:E E NOWLEN Cc. fDW ARL7 MOi- C AES PALM BEACH OFFI'E WILLIAM VINEF, Cc: F cTH STREET SUITE 2h^ AOEERT W HENDR'X JF CAA FCST OFFICE BOX 34' JA NET A BAR .CE ;;CH, CPL WES- PALS' BEACH FLORIDA 33= ':.0.347 KATHLEEN A MIr.Ec. CF, T P R GRESOP Sk• "M Ccc E.E HONE 156�I 65S 3uc: :AX -5E'• 635.0628 F.: _EFT V. -E�Rv L MOP JS C% \ AOhA,C BE'..E -' Cr. 0-1,CHAE. STE:E'�S CFc MADv. E E_M'_Ot'. Cu ,ANIELA E RjSSELL Cc= BE-LE G?:�E Gcc 35- S E 2': S' P`c INDEPENDENT AUDITOR'S REPORT - - E " " -AY FAX `_E' --- -• _ The Honorable Mayor and Village Council Village of Tequesta Tequesta, Florida We have audited the accompanying general purpose financial statements of the Village of Tequesta, Florida, as of September 30, 1996, and for the year then ended, as listed in the table of contents. These general purpose financial statements are the responsibility of the Village's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of Office of Management and Budget Circular A - 128, Audits of State and Local Governments. Those standards and OMB Circular A -128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Village of Tequesta, Florida, as of September 30, 1996, and the results of its operations and the cash flows of its proprietary fund type for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated January 20, 1997, on our consideration of the Village's internal control structure and a report dated January 20, 1997, on its compliance with laws and regulations.. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • ACCOUNTING FIRMS ASSOCIATED INC We have also reviewed the accounting requirements of the bond ordinances associated with both the Improvement Revenue Refunding Bonds, Series 1994 and Water Refunding Revenue Bonds, Series 1985, relating to the benefits and application of funds. In our opinion, based on our audit of the general purpose financial statements, the Village has complied with such provisions. It should be noted that information obtained on the basis of our audit of the general purpose financial statements would not necessarily disclose defaults of a nonaccounting nature. Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The supplemental information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the Village of Tequesta, Florida. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. We did not examine the statistical data as set forth in the table of contents and, therefore, express no opinion thereon. January 20, 1997 C -2 GENERAL PURPOSE FINANCIAL STATEMENTS C -3 VILLAGE OF TEQUESTA, FLORIDA Combined Balance Sheet - All Fund Types and Account Groups September 30, 1996 Governmental Fund Types Special Capital Hera] Revenu Projects Assets and other debits Cash and cash equivalents $ 470,556 $ 63,449 $279,657 Investments 633,941 198,171 Accounts receivable (net of allowance for uncollectibles) 6,723 Due from other funds 85,843 16,843 37,500 Due from other governments 20,547 Grants receivable 18,290 66,384 Inventories of supplies 11,542 Restricted assets Cash and cash equivalents Investments Fixed assets Amount to be provided for retirement of general long -term debt Total assets and other debits $1,247,442 $ 8,.292 $581,712 C -4 Proprietary Fiduciary -Fund Tyne Fund Types Account Groups Trust General General Totals and Fixed Lorig -Term (Memorandum E nterpris Agency Asse Debt Only) $1,171,989 $ 6,151 $ $ $1,991,802 1,317,853 776,240 2,926,205 320,273 326,996 4,410 144,596 20,547 84,674 26,991 38,533 400,111 400,111 1,196, 600 1,196,600 6,552,758 3,312,806 9,865,564 1, 961,1 35 1.961.135 9 9 g! $782,291 $3,312,806 $1,961,135 $18,256,763 (Continued) C -5 VILLAGE OF TE UESTA, FLORIDA Combined Balance Sheet - All Fund T '�ppes and Account Groups September 30, 196 (Continued) Governmental Fund Types Special Capital General Revenue Projects Liabilities, equity and other credits Liabilities Accounts payable $ 78,103 $ S 45,575 Accrued liabilities 142,247 Payable from restricted assets Accounts payable Deposits Due to other funds 4,410 Due to other governments 9,824 Deferred revenue 1,734 44,315 Contracts payable 16,046 Deferred compensation payable Current portion of: Capitarized leases Notes payable Compensated absences Obligations under capitalized leases Notes payable Improvement revenue bonds payable Obligations under joint venture agreements Total liabilities 23 6.318 44,315 61,621 Equity and other credits nvestments in general fixed assets Contributed capital Retained earnings Reserved for capital improvements Unreserved Fund balances Reserved for: Capital improvements 21,125 Inventorryy of supplies 11,542 Law enforcement and fire rescue 14,583 Employees' retirement plan Recreation and parks 6,595 Encumbrances 24,907 103,122 Unreserved Designated for: Compensated absences 95,170 Disaster emergency relief 50,000 Road project 52 Undesignated 808.327 ' 35,977 343,494 Total equity and other credits 1.01 1.124 35 520,091 Total liabilities, equity and other credits 1 247 44 S 8Q.222 5 1 712 C -6 Proprietary Fiduciary Fund Type n General Gen Totals and Fixed Long -Term (Memorandum ,enterprise Agency -Assets Debt Only) S 101,257 $ $ $ $ 224,935 20,582 162,829 15,141 15,141 219,588 219,588 140,186 144,596 11 424 419,7 465,806 62,850 78,896 406,036 406,036 797 797 3 60 76,8277 324,220 400,347 370,196 370,196 4,545 8,719 13,264 1,250,000 1,250,000 8.000 8.000 1.066.290 406,036 1.961.135 3.775.715 3,312,806 3,312,806 3,667,811 3,667,811 1,002,165 1,002,165 5,254,719 5,254,719 21,125 1 1, 458 371;480 371 490 128,029 95,170 50,000 1.187'798 9.924.695 376.355 3.312 -806 15,181,048 $ 10 , 920,985 7 2 $3.312.806 1 9 §1.135 $18,956-761 See notes to financial statements. C -7 VILLAGE OF TEQUESTA, FLORIDA Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types and Expendable Trust Funds For the Fiscal Year Ended September 30, 1996 General Revenues Taxes $2,866,417 Licenses and permits 167,659 Intergovernmental 517,798 Charges for services 213,283 Fines and forfeits 76,439 Interest 84,086 Impact fees 8,954 Miscellaneous 5,613 Inteagovernmental services 145.760 Total revenues 4,086.009 Expenditures Current General government 815,361 Public safety 2,578,374 Transportation 512,964 Human services 1,033 Culture /recreation 161, 766 Capital outlay 177,755 Debt service Principal retirement 40,556 Interest 25,7 Total expenditures 4, 313,559 Excess of revenues over (under) expenditures (227.550) Other financing sources (uses) Debt proceeds /note payables 20,452 Sales of surplus material 602 Operating transfers in 355,600 Operating transfers out (215.000) Total other financing sources (uses) 161.654 Excess of revenues and other sources over (under) expenditures and other uses (65,896) Fund balances, October 1, 1995 1,077,020 Residual equity transfer in - Fund balances, September 30, 1996 C -8 Fiduciary Governmental Fund Tapes anted T pe Totals Special Capital Expendable (Memorandum -Re venue Protects gust Fund Only)_ $ 317,590 $ $ $3,184,007 78,791 246,450 432,679 950,477 213,283 2,139 78,578 35,245 119,331 8,954 5,613 1 45,7 60 39 6381 467,924 19 4,952.453 815,361 2,578,374 512,964 1,033 161,766 1,156,176 1,333,931 60,000. 100,556 80.555 106.305 140.555 ...1,156,176 5.610.290 255.826 (688.252) 2.139 5657.837? 20,452 602 A05,600 , 334,000 89 20'6600) (305,600 334, 190,054 (49,774) (354,252) 2,139 (467,783) 85,751 513,233 2,736 1,678,740 361.110 361.110 35.977 520.091 11 See notes to financial statements. C -9 VILLAGE OF TEQUESTA, FLORIDA Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Governmental Fund Types For the Fiscal Year Ended September 30, 1996 General Fund Variance - Favorable Revenues Bud eg_ t Actual (Unfavorable) Taxes $2,799,945 $2,866,417 $ 66,472 Licenses and permits 124,400 167,659 43,259 Intergovernmental 489,445 517,798 28,353 Charges for services 217,130 213,283 (3,847) Fines and forfeits 41,000 76,439 35,439 Interest 71,000 84,086 13,086 Impact fees 8,954 8,954 Miscellaneous 10,000 5,613 (4,387) Intragovernmental services 145.760 145,7 Total revenues 3, 898.680 4.086.009 187.329 Expenditures Current General government 856,115 815,361 40,754 Public fety 2,669,105 2,518,374 90,751 Transportation 5,964 8,741 Human services 2,850 1,033 1,817 Culture/recreation 166,690 161,766 4 Capital outlay 189,765 177 12,010 Debt service Principal retirement 40,590 40,556 34 Interest 77 25.750 20 Total expenditures 4,472 4 313,559_ 159,051 Excess of revenues over (under) expenditures (573.930 (227.550) 346.38Q Other financing sources (uses) Debt proceeds /notes payable 20,452 20,452 Sales of surplus materials 2,600 602 (1,998 Operating transfers in 351,600 355,600 4,000 Operating transfers out (215,015) (215,000) - 11 Total other financing sources (uses) 139.185 161,654 22.469 Excess of revenues and other sources over (under) expenditures and other uses $(434,745) (65,896) $368,849 Fund balances, October 1, 1995 1,077,020 Residual equity transfer in Fund balances, September 30, 1996 ILQ 11. 124 C -10 S ial_ Revenue Egnq Capital Pr jests Fund V ariance Variance - Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $309 ' 565 $ 317,590 $ 8,025 $ $ $ 75,000 78,791 3,791 430,680 432,679 1,999 2,000 (2,000) 17,000 35,245 18,245 386.565 396,381 9.81 6 447 467,924 44 1,195,190 1,156,176 39,014 80'•565 80.555 10 140.565 1 40,555 .� 1,195,12 1,156.17 39,014 246.000 255.826 9.826 (747.510) (688.252) 59.258 (305,600 005.600) 334,015 334,000 (15) ) (305.600) (305.600) 334.015 334.000 (15) S( 19.600) (49,774) S 9.§26 (413,495) (354,252) 59.243 85,751 513,233 361.110 2 5, 2 77 S 52 0,091 (Continued) C -11 VILLAGE OF TEQUESTA, FLORIDA Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Governmental Fund Types For the Fiscal Year Ended September 30, 1996 (Continued) Totals (Memorandum Only) anance - Favorable Budget Actual (Unfavorable) Revenues Taxes $ 3,109,510 $3, 184,007 S 74,497 Licenses and permits 199,400 246,450 47,050 Intergovern mental 920,125 950,477 30,352 Charges for services 217,130 213,283 (3,847) Fines and forfeits 41,000 76,439 35,439 Interest 90,000 119,331 29,331 Impact fees 8,954 8,954 Miscellaneous 10,000 5,613 (4,387) Intragovern mental services 145,760 145.7 Total revenues 4.732.925 4,950,314 217.38 9 Expenditures Current General government 856,115 815,361 40,754 Public safety 2,669,125 2,578,374 90,751 Transportation 521,705 512,964 8,741 Human services 2, 850 1,033 1, 817 Culture /recreation 166,690 161,766 4,924 Capital outlay 1,384,955 1,333,931 51,024 Debt service Principal retirement 100,590 100,556 34 Interest 106.335 106.305 _3 Total expenditures ,5.808.365 x .610.290 198.075 Excess of revenues over (under) expenditures (1.075.440) (659.976) 415A Other financing sources (uses) Debt proceeds /notes payable 20,452 20,452 Sales of surplus materials 2,600 602 (1,998) Operating transfers in 685,615 689,600 3,985 Operating transfers out (520.615) j 25 0.600) _1� Total other financing sources (uses) 167.604 190.054 _.22,.4 Excess of revenues and other sources over (under) expenditures and other uses (2Q7,840 (469,922) $ 437 ,918 Fund balances, October 1, 1995 1,676,004 Residual equity transfer in 361.110 Fund balances, September 30, 1996 11. 5§7.192 See notes to financial statements. C -12 VILLAGE OF TEQUESTA, FLORIDA Statement of Revenues, Expenses and Changes in Retained Earnings /Fund Balance Proprietary Fund Ty and Similar Trust Fund For the Fiscal Year Ended September 30, 1996 Proprietary Fiduciary Fund Tyne Fund Tvne Totals Pension (Memorandum EnteMris g Trust Fund _ Only) C Operating revenues harges for services - water $3,070,698 $ $3,070,698 Charges for services - refuse and recycling 263,750 263,750 Contributions 129,153 129,153 Interest income 36.091 36.091 Total operating revenues 3,334,448 165,244 3,499,692 Operating expenses Purchased services - water 667,950 667,950 Purchased services - refuse and recycling 263,124 263,124 Personal services 664,263 664,263 Contractual services 380,264 380,264 Supplies 63,016 63,016 Heat light and power 100,225 100,225 Repairs and maintenance 177,702. 177,702 Depreciation 398,065 398,065 Administration 7,102 7,102 Distributions 11,144 11.144 Total operating expenses 2,714 18.246 2.732.855 Operating income 619.839 146.998 766.837 Nonoperating revenues (expenses) Interest income 213,224 213,224 Interest expense and fiscal charges (29,945) (29,945) Aid to community organizations 02.500) (12.500) Total nonoperating revenues (expenses) 170,7 170.779 Income before operating transfers 790,618 146,998 937,616 Operating transfers (out) (169.000) (169.000) Net income 621,618 146,998 768,616 Retained earnings, October 1, 1995 5,996,376 224,482 6,220,858 Residual equity transfer out (361,110) (361.110) Retained earnings, September 30, '1996 $6,256,884 1371.48 $6.61E.364 See notes to financial statements. C -13 VILLAGE OF TEQUESTA, FLORIDA Statement of Cash Flows - Proprietary Fund Type For the Fiscal Year Ended September 30, 1996 Proprietary Fund Type Enterprise Cash flows from operating activities: Net operating income $ 619,839 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 398,065 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (94,254) Due from other funds 52,828 Inventories (1,889) Increase (decrease) in: Accounts payable (73,390) Accrued liabilities 3,906 Deposits 8,049 Deferred revenue 419,757 Compensated absences 15,501 Due to other funds 33,160 . Due to other governments 1.600 Net cash provided by operating activities 1,383,172 Cash flows from noncapital financing activities: Operating transfer to other fund (169,000) Contribution (12,500) Net cash used for noncapital financing activities (181.500) C -14 Proprietary Fund T= E nteMris e Cash flows from capital and related financing activities: Capital contributions $ 96,630 Acquisition and construction of fixed assets (760,912) Principal paid on revenue bonds and equipment leases (281,438) Interest paid on revenue bonds and equipment leases (17,917) Fiscal charges paid on revenue bonds (4,474) Payments on construction contracts 129.723) Net cash used for capital and related financing activities (997.834 Cash flows from investing activities: Purchases of investments (181,769) Interest received on investments 209.659 Net cash provided by investing activities 27.890 Net increase in cash and cash equivalents 231,728 Cash and cash equivalents, October 1, 1995 1.340,372 Cash and cash equivalents, September 30, 1996 x,. 1.57_ Noncash Investing, Capital and Financing Activities Contribution of fixed assets from contractors $ 41,350 Construction contracts payable 62,850 Forgiveness of debt to Capital Improvement Fund 361 See notes to financial statements: C -15 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUN MARY OF SIGNIFICANT ACCOUNTL\G POLICIES The Renoning Entire The Village of Tequesta, Florida is a municipal corporation organized in 1957 pursuant to Special Act 57 -1915, Laws of Florida. The Village has a Council- Manager form of government. The Village's major operations include public safety (police, fire rescue), streets and roads, culture and recreation, public improvements, planning and zoning, water service and general and administrative. In accordance with Statement 14 of the Government Accounting Standards Board, the underlying concept of the governmental financial reporting entity is that governmental organizations are responsible to elected governing officials; therefore, financial reporting should report the elected officials' accountability for those organizations. Furthermore, the financial statements of the reporting entity should allow users to distinguish between the primary governments and its component units (if any) by communicating information about the component units and their relationships with the primary govemment. A component unit is a legally separate organization for which the elected officials of the primary government are financially accountable. Determining factors of financial accountability include appointment of a voting majority, imposition of will, financial benefit or burden on a primary government or fiscal dependency. In addition, component units can be other organizations for which the nature and significance of their relationship with a primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Based upon application of these criteria, the Village of Tequesta has determined that except for the Village Employees' Pension Trust Fund, there are no additional governmental departments, agencies, institutions, commissions, public authorities or other governmental organizations operating within the jurisdiction of the Village that would be required to be included in the general purpose financial statements of the Village. C -16 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 COTE l - SUNIIVIARY OF SIGNTFICANT ACCQUNTUI�Q POLICIES (Continued) Ae,ftporting Entity (Continued) Village Employees' Pension Trust Fund The Village's regular full -time employees who are sworn firefighters and any new hire employees January 1, 1996 or thereafter are eligible to participate in the Village Employees' Pension Trust Fund (VEPF). VEPF functions for the benefit of these employees and is governed by a seven member board, of which the Village Council appoints three. The Village and VEPF participants are obligated to fund all VEPF costs based upon actuarial valuations, with the Village funding the difference between member and other contributions and the actuarial cost. Based on these factors, it has been concluded that the VEPF is fiscally dependent on the Village of Tequesta, which makes the VEPF a component unit of the Village. Since the VEPF provides services exclusively for the benefit of the Village, the VEPF is reported as a blended component unit, specifically as the Village Employees' Pension Trust Fund. This component unit does not issue a stand alone financial report. Ba sis Qf Presentation - Fund Accounting The government uses funds and account groups to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self - balancing set of accounts. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. Funds are classified into three categories: governmental, proprietary and fiduciary. Each category, in turn, is divided into separate "fund types'. C -17 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SU'NMARY OF SIGNIFICANT ACCOUNTM POLICIES (Continued) Basis of Presentation - Fund Accounting (Continued) The following are the fund categories, funds and account groups used by the Village: governmental Fund ?Does Governmental funds are used to account for all or most of a government's general activities, including the collection and disbursement of earmarked monies (special revenue funds), and the acquisition or construction of general fixed assets (capital projects funds). The general fund is used to account for all activities of the general government not accounted for in some other fund. The Special Revenue Fund accumulates certain revenues as required by the Improvement Revenue Refunding Bonds, Series 1994. These revenues include franchise fees and occupational licenses. The Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those to be financed by the Proprietary Fund). The Village has established the following two capital projects funds: Bond Construction Fund Capital Improvement Fund All capital projects funds were established to be used for capital expenditures required by continued growth of the Village. C -18 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUNL IARY OF SIGNIFICANT ACCOUNTMG POLICIES (Continued) Bvsis of Presentation - Fund Accounting (Continued) Pro rp ietaa Fund LAf Enterprise Fund The Enterprise Fund is used to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The Enterprise Fund of the Village is the Water Fund which accounts for the provision of water services and refuse and recycling services to the residents of the Village and some residents of the County. All activities necessary to provide such services are accounted for in this fund including, but not limited to, administration, operations, maintenance, financing and related debt `service and billing and collection. Beginning October 1, 1995 refuse and recycling fees are billed as a non -ad valorem tax assessment and handled by the Palm Beach County Tax Collector. Those new residents not on the tax roll as of January 1, 1995 were billed along with the water service charges. Palm Beach County periodically remits the funds collected to the Village. Since refuse and recycling fees are billed along with the water service charges or collected by Palm Beach County Tax Collector, and the refuse and recycling services are subcontracted, which results in minimal administrative costs to the Village, a separate enterprise fund is not considered necessary. The proprietary fund is accounted for on a cost of services or "capital main- tenance" measurement focus. This means that all assets and all liabilities (whether current or noncurrent) associated with its activity are included on its balance sheet. The reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. C -19 VILLAGE OF TEQUESTA, FLORIDA Notds to Financial Statements September 30, 1996 NOTE 1 - SUNL OF SIGNIFICANT ACCOLfi"TM POLICIES (Continued) Basis of Presentation - Fund Accounting (Continued) ftPriet ry Fund Bps (Continued) Capital outlays for assets that cost $500 or more and have expected lives of greater than one year are capitalized and depreciated in the proprietary fund. Depreciation of exhaustible fixed assets is charged as expense against the opera- tions. Accumulated depreciation is reported on the proprietary fund's balance sheet. Depreciation has been provided over the estimated useful lives using the straight -line method. The estimated useful lives are as follows: Buildings 40 years Improvements 20 - 25 years Equipment 4 - 10 years Fiduciary Fund a= Pension Trust, Expendable Trust and Agency Funds Fiduciary Funds account for assets held by' the government in a trustee capacity or as an agent on behalf of others. Trust funds account for assets held by the government under the terms of a formal trust agreement. The Pension Trust Fund is accounted for in essentially the same manner as the proprietary funds, using the same measurement focus and basis of accounting. The Village has one pension trust fund, the Village Employees Pension Trust Fund to account for its retirement system for firefighters and any employees hired January 1, 1996 or thereafter. The Expendable Trust Fund is accounted for in essentially the same manner as the governmental fund types, using the same measurement focus and basis of accounting. Expendable trust funds account for assets where both the principal and interest may be spent. C -20 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE l - SUNMARY OF SIGNIFICANT ACCOUNIM POLICIES (Continued) Basis of Presentation - Fund Accounting (Continued) Fiduriary Fund apes (Continued) The Village has one Expendable Trust Fund, the Special Law Enforcement Trust Fund, to account for forfeitures received by the police department to be expended for certain law enforcement purposes as prescribed by Florida Statute Chapter 932.704. The Agency fund is custodial in nature and does not present results of operations or have a measurement focus. Agency funds are accounted for using the modified accrual basis of accounting. This fund is used to account for assets that the government holds for others in an agency capacity. The Village has one Agency Fund, the ICMA Retirement Fund, which consists of custodial funds held on behalf of Village employees representing deferred compensation. Account Groups General Fixed Assets Account Group The accounting and reporting treatment applied to the fixed assets associated with a fund are determined by its measurement focus. All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balances (net current assets) are considered a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. C -21 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 110TE 1 - SUMMARY OF SIGNIFIC&NT ACCOUNTING POLICIES (Continued) Basis of Presentation - Fund Accounting (Continued) Account Groubs (Continued) Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in govern- mental funds. Public domain ( "infrastructure ") general fixed assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and light systems, are not capitalized. The Village capitalizes assets that cost $500 or more and have expected lives of greater than one year. No depreciation has been prAvided on general fixed assets. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair market value on the date donated. General Long -Term Debt Account Group Long -term liabilities expected to be financed from governmental funds are accounted for in the General Long -Term Debt Group, not in the governmental funds. Because of their spending measurement focus, expenditure recognition for governmental fund types is limited to exclude amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long -term debt amounts are not recognized as governmental fund type expenditures or fund liabilities. They are instead reported as liabilities in the General Long -Term Debt Account Group. The two account groups are not "funds`. They are concerned only with the measurement of financial position. They are not involved with measurement of results of operations. C -22 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUILIIARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis Qf Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary funds and pension trust funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The modified accrual basis of accounting is used by all governmental fund types, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recognized susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The Village does not accrue property tax revenues since the collection of these taxes coincides with the fiscal year in which levied, and since the Village consistently has no material uncollected property taxes at year end. A 90 day availability period is.-used for revenue recognition for all other governmental fund revenues. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long -term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. C -23 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUNLNIARY OF SIGNIFICANT ACCOUNTV;Q POLICIES (Continued) Basis of Accounting (Continued) Those revenues susceptible to accrual are franchise fees, taxes, special assessments, licenses, interest revenue, intergovernmental revenues, and charges for services. Sales taxes collected and held by the state at year end on behalf of the Village also are recognized as revenue. Fines and permit revenues are not susceptible to accrual because generally they are not measurable until received in cash. The government reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. The accrual basis of accounting is followed for the proprietary fund and pension trust fund. Under this method of accounting, revenues are recognized during the accounting period in which they are earned and become measurable and expenses are recognized in the accounting period in which they are incurred if measurable. Governmental Accounting Standards Board (GASB) Statement #20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Funds, provides proprietary activities with a choice of authoritative guidance issued after November 30, 1989. The Village of Tequesta has elected to follow GASB pronouncements exclusively after that date. Total Columns on Combined Statements The Total columns on the combined statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, or results of operations in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not ban made in the aggregation of this data. C -2a VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 EJOTE 1 - SU 51 -ARY OF SIG>VMCANT ACCOUNTING POLICIES (Continued) Budgets and Budgetaa Accounting Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Fund, Capital Project Funds and the Enterprise Fund. All budgets are legally enacted through passage of a resolution. Budgets for the General, Special Revenue, Capital Project Funds and the Enterprise Fund are adopted on a basis consistent with generally accepted accounting principles. For budgeting purposes, current year encumbrances are not treated as expenditures. The Village follows these procedures in establishing the budgetary data reflected in the financial statements: 1. Prior to September 1, the Village Manager submits to the Village Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to October 1, the budget is legally enacted through passage of a resolution. Changes or amendments to the total budgeted fund expenditures must be approved by the Village Council. Management may make unlimited interfunctional transfers within a fund without seeking council approval. However, in order to make the most effective use of the budgetary process, it is the policy of the Village to make as few budget adjustments as possible. Appropriations are legally controlled at the fund level and expenditures may not legally exceed budgeted appropriations at that level. During the year three supplemental appropriations were made. C -25 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SCTMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Budgets and Budgetary Accounting (Continued) The Village has complied with the Florida requirement that budgets be in balance. The General Fund, Special Revenue and Capital Projects Funds budgets reflected in the accompanying financial statements are not balanced because they do not include amounts budgeted from the beginning fund balance. A budget for operating expenses of the Enterprise Fund (Water Fund) is also legally adopted on a basis consistent with generally accepted accounting principles in accordance with requirements of Ordinance 260 -Water Refunding Revenue Bonds, Series 1985. Appropriations lapse at the end of the fiscal year. Encumbrances Encumbrance accounting is used for purposes of budgetary control. Encumbrances outstanding at year end are reported as reservations of fund balances until expended or accrued as a liability of the fund. Investments Investments, consisting of U.S. treasury obligations and funds held with the state investment pool are stated at cost or amortized cost, which approximates market. Assets of the ICMA Retirement Fund and the Village Employees Pension Trust Fund are reported at market value. Inventor* Inventories are valued at cost, which approximates market, on a first -in, first -out (FIFO) method. Inventories in the General Fund consist of expendable supplies held for consumption. The cost is recorded as an expenditure at the time individual inventory items are purchased. Reported inventories are equally offset by a fund balance reserve which indicates that they do not constitute "available spendable resources" even though they are a component of net current assets. C -26 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTNG POLICIES (Continued) Amortization The issue costs and debt discount on long -term debt are amortized over the life of the bonds using the straight -line method. Ad Valorem Taxes Ad valorem taxes are assessed and liened as of January 1 and billed the following October. They are due and payable on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the Tax Collector. These taxes are collected by the County and remitted to the Village. Revenue is recognized at the time monies are received from the County. All unpaid taxes become delinquent on April l following the year in which they are assessed. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2 % in the month of January and 1% in the month of February. The taxes paid in March are without discount. At September 30, unpaid delinquent taxes, if any, are reflected as a receivable on the balance sheet and as deferred revenue. jnterfund Transactions Following is a description of the basic types of interfund transactions made during the year and the related accounting policy: Transactions for services rendered or facilities provided. These transactions are recorded as revenue in the receiving fund and expenditures in the disbursing fund. Transactions to transfer revenue or contributions from the fund budgeted to receive them to the fund budgeted to expend them. These transactions are recorded as operating transfers in and out. Transactions to loan funds from the fund budgeted to loan them to the fund budgeted to receive them. These transactions are recorded as advances to and from. C -27 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Equi Reserves represent those portions of fund equity not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. The portion of the fund balance resen for recreation and parks represents the amount of funds received for recreational improvements and park land which are not yet expended. Compensated Absences Compensated absences are absences for which employees will be paid, such as vacation and sick leave. A liability for compensated absences that are attributable to services already rendered and that are not contingent on a specific event, that is outside the control of the government and its employees, is accrued as employees earn the rights to the benefits. Compensated absences that relate to future services or that are contingent on a specific event that is outside the control of the government and its employees are accounted for in the period in which such services are rendered or such events take place. In the governmental and similar trust funds, compensated absences that are expected to be liquidated with expendable available financial resources, are reported as an expenditure and fund liability, in the fund that will pay for them. The remainder of the compensated absences liability is reported in the General Long -Term Debt Account Group. In the proprietary funds and similar trust funds, compensated absences are recorded as an expense and liability of the fund that will pay for them. Interest Capitalization The Financial Accounting Standards Board issued Statements of Financial Accounting Standards (FASB) No. 34, requiring capitalization of interest costs for all assets that are constructed for an enterprise's use. The amount of interest to be capitalized, is that portion of the interest incurred during the asset's acquisition period, which theoretically could have been avoided if expenditures for the asset had not been made. C -28 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 1 - SUh51ARY OF SIGNIFICANT ACCO NTN , POLICIES (Continued) Statement of Cash Flows For purposes of the statement of cash flows, the proprietary fund considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents, except for those investments which management intends to be long -term investments. NOTE 2 - CASH AND ENVESTNIENTS Cash and Cash Equivalents At year end, the carrying amount of the Village's deposits was $1,736,822 and the bank balances were $2,082,298. Cash consists of unrestricted and restricted funds entirely covered by federal depository insurance or by a multiple financial institution collateral pool that insures public deposits. The collateral pool exists pursuant to the Florida Security for Deposits Act, Chap- ter 280, which consists of assets pledged to the State Treasurer by financial institutions that comply with the requirements of Florida Statutes and have been thereby designated as a qualified public depository. These deposits are deemed to be insured for risk categorization purposes. Investments Florida statutes authorize the Village to invest surplus funds in the the Local Government Surplus Funds Trust Fund, administered by the State Treasurer; negotiable direct obligations of or obligations unconditionally guaranteed by the U.S. Government; interest - bearing time deposits in financial institutions located in Florida and organized under Federal or Florida laws; obligations of the Federal Farm Credit Banks, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank or its district banks, or obligations guaranteed by the Government National Mortgage Association and obligations of the Federal National Mortgage Association. Investments (including restricted investments) consist of funds held with the state investment pool, obligations of the United States government, funds held by the Village's agent in a deferred compensation plan, and funds held with the State Pension Trust Fund Pool. C -29 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 'NOTE 2 - CASH AND LNVESTMENTS (Continued) jai vestments (Continued) Obligations of the United States government are guaranteed and held by a qualified public depository. The Village was obligated by its Water Refunding Revenue Bond issue, Series 1985, to purchase U.S. Treasury Obligations. The treasury bonds are recorded net of unamortized discount of $941,188. The Village's Deferred Compensation plan has funds held by ICMA Retirement Corporation. The plan offers six different portfolios of mutual funds. The Village's investments are categorized as either (1) insured or registered or for which the securities are held by the Village or its agent in the Village's name, (2) uninsured and unregistered for which the securities are held by the financial institution's trust department or agent in the Village's name, or (3) uninsured and unregistered for which the securities are held by the broker or dealer, or by its safekeeping department or agent but not in the Village's name. Ca tegory Carrying Market - I_ Amount Value Obligations of United States government $941,188 $ 941,188: $1,017,054 Investment in: State investment pool 2,405,377 2,405,377 Deferred compensation mutual fund 406,036 406,036 Mutual funds (money market) 655,091 655,091 State pension trust fund pool 370.204 370.204 $ 4,777,896 4 7 The state investment pool, administered by the State Board of Administration of Florida, contained certain floating rate notes during the 1996 fiscal year and as of September 30, 1996 which were indexed based on the prime rate and /or onej and three month LIBOR rates. These investments, representing approximately 0.81% of the state investment pool portfolio at September 30, 1996, were purchased to add relative value to the portfolio. C -30 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 2 - CASH AND IINVESTNTENTS (Continued) InyPsrments (Continued) The following is a reconciliation of cash and cash equivalents and investments per the balance sheet and deposits and investments for risk categorization purpo §es. Cash and Cash Equivalents/ De spo its _ Investments Cash and cash equivalents $1,991,802 $ Investments 2,926,205 Restricted assets Cash and cash equivalents 400,111 Investments 1.196.600 Balance sheet totals 2,391,913 4,122,805 Adjustments Mutual funds (money market) (655.091) 655,091 Risk categorization totals $1.736.822 $4,777 NOTE 3 - RESTRICTED ASSETS Restricted assets as of September 30, 1996 consist of the following accounts: Cash Investments Total Meter Deposit Accounts $ 41,091 $ 173,000 $ 214,091 Capital Improvement Accounts 359,020 643,145 1,002,165 Jupiter Water Increase Account 380,455 380.455 $4�, � 111 11,196, 11,526,711 C -31 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 4 - ACCOUNTS RECEIVABLE - E'N'TERPRISE FUND Enterprise Fund type accounts receivable consists of the following: Billed services $ 280,792 Unbilled services 41,4 Total accounts receivable 322,273 Less allowance for uncollectibles x2.000) Net accounts receivable 2 27 NOTE 5 - CONIPOINT —NTS OF FIXED ASSETS A summary of changes in general fixed assets follows: Balance Balance October 1, September 30, 1995 Addition Deletions 1996 Land $ 397,653 $ $ $ 397,653 Buildings 294,333 654,227 948,560. Improvements other than buildings 258,778 258,778 Equipment 1,612,632 109,977 14 1,707,815 Construction in progress 561.809 81.830 643.639 1 5 Sa46.Q34 U2. 6 4JI C -32 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 ISOTE 5 - CONiPONTNTS OF FIXED ASSETS (Continued) The components of fixed assets at September 30, 1996 are summarized as follows: General Enterprise Fixed Assets Fund Account Groug Total Land $ 83,336 $ 397,653 $ 480,989 Buildings 399,907 948,560 1,348,467 Improvements other than . : buildings 9,462,385 258,778 9,721,163 Machinery and equipment 398,227 1,707,815 2,106,042 Construction in progress 981.133 9 &1.133 11,324,988 3,312,806 14,637,794 Accumulated depreciation 4.772.230 4.772.230 Total S 6,552,75 $3,3� $ 9.8_ 65 5 Significant construction commitments as of September 30, 1996 are as follows: Estimated Cost Cost to Completion Description to Date Complete Date to rise Fund Public Works/Water Garage Facility $ 47,237 $522,645 May 1997 Well x'26, transmission main and condemnation expenses 235,671 53,150 May 1997 Well X127 204,081 35,406 October 1996 Reverse Osmosis Treatment Plant - engineering, design and permitting 200,196 475,500 August 1997 C -33 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 �1jOTE 5 - COMPONENTS OF FIXED ASSETS (Continued) Estimated Cost Cost to Completion Description to Dat Complete Date Enterprise Fund (Continued) Reverse Osmosis Wells - engineering design and construction $220,390 $142,940 January 1998 Reverse Osmosis Project - disposal transmission line 9,750 175,750 April 1998 Water Treatment Rehabilitation Plant 36,080 23,555 March 1997 NOTE 6 - DEMED BENEFIT PE'N'SION PLAN All Village full -time employees, other than firefighers, hired prior to January 1, 1996 participate in the noncontributory Florida Retirement System, a cost - sharing multiple- employer public employee retirement system. The payroll for employees covered by the System for the year ended September 30, 1996 was $1,936,142. The Village's total payroll was $2,533,969. The Florida Retirement System has five classes of membership. Village employees belong to three of the five classes, the senior management service class (SMSC) consisting of the Village Manager, the regular class (RC) consisting of administrative, operations and clerical employees, and the special risk class {SRC) consisting of law enforcement officers. Employees who retire at or after age 62 (age 55 for SRC members) with ten years of credited service are entitled to a retirement benefit, payable monthly for life, equal to 2.0% (SMSC), 1.60 to 1.68% (regular class) and 2.02 to 3.0% (SRC) of their average final compensation for each year of credited service, depending on the years served. Average final compensation is the employee's average of the five highest years of credited service, depending on the years served. Benefits fully vest on reaching ten years of service (seven years for SMSC members). Vested employees may retire at or after age 55 and receive reduced retirement benefits. The System also provides death and disability benefits. Benefits are established by State statute. C -34 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 6 - DEFINED BE'N'EFIT PENSION PLAN (Continued) The Village's actuarially determined contribution requirement for the year ended September 30, 1996 was $399,558. The actual contribution made was $399,558 (General Fund $321,157, Enterprise Fund $78,401). The contribution equaled 20.62% of current covered payroll. The Village is required by statute to contribute at rates as of September 30, 1996 of 22.24 % of covered payroll for senior management service class, 17.43% of covered payroll for regular class and 27.10% for special risk class. These rates included .66% for the employer health insurance subsidy contribution, which is the same for all risk classes. Because this is a non - contributory plan, no employee contributions are required. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step -rate benefits, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess the System's funding status on a going- concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among PERS and employers. The System does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at July 1, 1995 (the latest available information) for the System as a whole, determined through an actuarial valuation performed as of July 1, 1 , 995, was $47.3 billion. The System's net assets available for benefits on that date (valued at market) were $41.6 billion, leaving an unfunded pension benefit obligation of $5.7 billion. The Village's actuarially determined contribution requirement represents less than one percent of all contributions. The Village has no responsibility to the System other than to make periodic payments required by state statutes. Ten -year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's June 30, 1995 Annual Report. On July 27, 1995, the Village Council enacted Resolution 27 -94/95 authorizing the Village to revoke its election to participate in the Florida Retirement System (the "FRS ") for all employees hired January 1, 1996 or thereafter, pursuant to Chapter 95 -338, Florida Laws. As a result of the adoption of Resolution 27- 94/95, all full -time and part -time employees hired on or after January 1, 1996 may not participate in the FRS and the Village has no obligation to the FRS with respect to such employees. All employees hired on or after January 1, 1996 must participate in the Village sponsored retirement plan in effect at the date of their employment. C -35 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 MOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST FUND On September 7, 1993, the Village established a single - employer defined benefit pension plan in accordance with Florida Statutes, Chapter 175. This plan solely benefitted full -time firefighters. On July 27, 1995 the Village Council enacted Resolution 27 -94/95 authorizing the Village to revoke the election to participate in the Florida Retirement System for all employees hired January 1, 1996 or thereafter, pursuant to Chapter 95 -338, Florida Laws. Subsequent to the revocation the Village enacted Ordinance 518 which amended the existing firefighters defined benefit plan to incorporate those police officers and general employees hired January 1, 1996 or thereafter. The ordinance amended the plan provisions and changed the name to the Village Employees' Pension Trust Fund. GENERAL PLAN DESCRIPTION AND PROVISIONS The following description of the retirement plan is provided for summary information purposes only. Plan participants should refer to the appropriate source documents for more complete information on the plan. The plan provides retirement benefits as well as death and disability benefits. All benefits vest after ten years of credited service. The payroll for employees covered by the plan for the year ended September 30, 1996 was $601,643, the Village's total payroll was $2,533,969. As of September 30, 1996, there were 17 nonvested active employees in the plan. The plan requires that the plan be administered by a Board of Trustee. The Board consists of seven trustees. Three trustees are appointed by the Village. Three are elected as follows: One whom is a full -time firefighter who is elected by a majority of the firefighter members of the plan; one of whom is a full -time police officer who is elected by a majority of the police officer members; and one of whom is a full -time general employee elected by a majority of the general employees. A seventh trustee is chosen by a majority of the first six trustees. DEFINITIONS OF THE PLAN "Average final compensation" means one - twelfth of the average salary of the five best years of the last ten years of credited service prior to termination, retirement or death of the member. "Credited service" is a member's period of employment with the Village measured in years and parts of years. C -36 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST FUT'D (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS Basis f Accounting The retirement system is reported on the accrual basis of accounting. Employee, employer and state contributions are recognized as revenues in the period in 'Which employee services are performed. Method Used to Value Assets The plan assets are reported at market value. SPECIFIC PLAN PROVISIONS FOR POLICE OFFICERS (HIRED JANUARY 1, 1996 OR THEREAFTER) AND ALL FIREFIGHTERS Any firefighter or police officer who completes ten or more years of credited sery ice and attains age 55, or completes 25 years of credited service and attains age 52 is eligible for normal retirement benefits. The monthly amount of normal retirement income for a firefighter or police officer is equal to the number of years of credited service multiplied by 3% of his average final compensation. Early retirement may be taken after a firefighter or police officer has attained the age of 50 and has ten years of credited service. In the event of early retirement, benefits are actuarially reduced to take into account the firefighter's or police officer's younger age and earlier commencement of retirement benefits. Such reduction shall not exceed 5% per year for firefighters and 3% for police officers. Disability benefits can be received for total and permanent disabilities as determined by the Board of Trustees. If the pension is granted, the benefit amount shall be: If the injury or disease is service connected, the firefighter or police officer shall be entitled to the greater of (a) or (b): (a) A monthly pension equal to 42% of his average compensation, or (b) An amount equal to the number of years of his credited service multiplied by 3% of his average monthly salary based upon his final five years of service. C -37 • VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOT 7 - VILLAGE EMPLOYEES' PENSION TRUST FUND (Continued) SPECIFIC PLAN PROVISIONS FOR POLICE OFFICERS (HIRED JANUARY 1, 1996 OR THEREAFTER) AND ALL FIREFIGHTERS (Continued) If the injury or disease is t= service connected, the firefighter or police officer shall be entitled to the greater of (a) or (b): (a) A monthly pension equal to 25 % of his average compensation, or (b) An amount equal to the number of years of his credited service multiplied by 3% of his average monthly salary based upon his final five years of service. If the firefighter or police officer dies prior to retirement from the Village his beneficiary shall receive the following benefit: (a) Line -of- Duty - Death - Benefit - a pension to the spouse (or children) of 50% of Average Compensation for life. (b) Non - Line -of- Duty - Death, the spouse of a member with ten years of credited service will receive the actuarial equivalent of the accrued early or normal retirement benefit. If the firefighter or police officer dies or terminates employment with less than ten years of credited service, he is entitled to a refund of the money contributed. Firefighters and police officers are required to contribute 5% of their compensation to the plan. The state makes a contribution from the Fire Insurance Premium Tax. The Village is required to contribute the remaining amount to fund the plan using the aggregate actuarial cost method as approved by the plan's Board of Trustees. C -38 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST FUND (Continued) SPECIFIC PLAN PROVISIONS FOR GENERAL EMPLOYEES Any general employee who completes ten or more years of credited service and attains age 62, or completes 30 years of credited service regardless of age is eligible for normal retirement benefits. The monthly amount of normal retirement income foi a general employee is equal to the number of years of credited service multiplied by 2% of his average final compensation. Early retirement may be taken after a general employee has attained the age of 50 and has ten years of credited service. In the event of early retirement, benefits are actuarially reduced to take into account the general employee's younger age and earlier commencement of retirement benefits. Such reduction shall not exceed 5% per year. Disability benefits can be received for total and permanent disabilities as determined by the Board of Trustees. If the pension is granted, the benefit amount shall be: If the injury or disease is service connected, the general employee shall be entitled to the greater of (a) or (b): (a) A monthly pension equal to 42% of his average compensation based upon his final five years of service, or (b) An amount equal to the number of years of his credited service multiplied by 2% of his average monthly salary based upon his final five years of service. If the injury or disease is W service connected, the general employee shall be entitled to the greater of (a) or (b): (a) A monthly pension equal to 25% of his average compensation based upon his final five years of service, or (b) An amount equal to the number of years of his credited service multiplied by 2% of his average monthly salary based upon his final five years of service. C -39 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 VILLAGE EMPLOYEES' PENSION TRUST FUND (Continued) SPECIFIC PLAN PROVISIONS FOR GENERAL EMPLOYEES (Continued) If the general employee dies prior to retirement from the Village, his beneficiary shall receive an amount equal to the vested pension benefit. A survivor benefit is payable to the beneficiary starting when the member would have reached retirement age. If the general employee dies or terminates employment with less than ten years of credited service, he is entitled to a refund of the money contributed. General employees are required to contribute 5% of their compensation to the plan. The Village is required to contribute the remaining amount to fund the plan using the aggregate actuarial cost method as approved by the plan's Board of Trustees. FUNDING STATUS AND PROGRESS The amount shown below' as the pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and any step -rate benefits, estimated to be payable in the future as a result of employee service to date. This measure is the actuarial present value of credited projected benefits and is intended to: (i) help the Board of Trustees of the Retirement Systems and the Village assess the systems funding status on a going - concern basis; (ii) assess progress being made in accumulating sufficient assets to pay benefits when due; and (iii) allow for comparisons ..among public employee retirement plans. The measure is independent of the actuarial funding method used to determine contributions in the systems. Additionally, the pension benefit obligation is being compared with plan assets at cost while the required contribution calculation uses total projected benefits and the actuarial value of plan assets. The pension benefit obligation is thus independent of the actuarial funding method used to determine contributions to the plan, discussed in Contributions Required and Contributions Made. C -40 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST FUND (Continued) FUNDING STATUS AND PROGRESS (Continued) The pension benefit obligation was determined as part of an actuarial valuation of the plan as of October 1, 1995. Significant actuarial assumptions used in determining the pension benefit obligations include: • The mortality rates are based on the 1984 Unisex Pension Table. • The rate of return on investment of present and future assets was assumed to be 8.0% compounded annually. • Future benefit payments were computed assuming early retirement occurs according to the withdrawal table below: Withdrawal Ag-C Rate 20 80 30 64 40 20 50 0 60 0 • Future contributions and benefit payments were computed assuming a 6.0% annual salary increase until the assumed retirement age. • Disability benefit payments were computed assuming 75% of service and 25% of nonservice. • Death benefit payments were computed assuming 20% of service and 80% of nonservice. • Valuation of assets is market for equities, bonds, cash and cash equivalents. All valuations are in conformity with Florida Statute 112. C-41 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 TOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST FUND (Continued) FUNDING STATUS AND PROGRESS (Continued) The pension benefit obligation as of October 1, 1995 is as follows: Retirees and beneficiaries currently receiving benefits and terminated employees entitled to benefits but not yet receiving them $ Current employees Accumulated employee contributions including allocated investment income 44,832 Employer - financed vested Employer - financed nonvested . 105,959 Total pension benefit obligation 150,791 Net assets available for benefits (market value) 224,482 Assets in excess of pension benefit obligation $73,691 CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE The total required contributions are determined using the Aggregate Actuarial Cost Method and consist of the normal cost, the current year's cost for benefits yet to be funded. The employer's contribution is calculated by taking the required contribution less the estimated employee and state contributions. The following contributions were made for the year ended September 30, 1996 based on an actuarial valuation as of October 1, 1995. C -42 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 - VILLAGE EMPLOYEES' PENSION TRUST (Continued) CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE (Continued) Plan Year Ended September 30. 1996 Actuarially Determined ReQuirements Actual % of % of Covered Covered Contribution Payroll Contribution Payroll Employees $ 29,033 4.8 $ 29,033 4.8 Employer 43,318 7.2 83,035 13.8 State 19.854 3.3 17.083 2.8 2 5 ] 9 1 The required contribution calculated consisted of $92,205 (15.3% of covered payroll) normal cost. Significant actuarial assumptions used to compute actuarially determined contribution requirements are the same as those used to compute the pension benefit obligation. TREND INFORMATION Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. As the plan was started in fiscal year ending September 30, 1993 and actuarial reports are not prepared every year, complete trend information is not yet available. Ten -year trend information may be found on pages 93 -95. Three -year trend information follows. C -43 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 7 • ViLLAGE EMPLOYEES' PENSION TRUST FUND (Continued) TREND INFORMATION (Continued) Fiscal Fiscal Fiscal Fiscal Year Ended Year Ended Year Ended Year Ended 1993 1994 1995 1996 Percentage of pension benefit obligation funded by available assets 115.9 130.7 148.9 (a) Assets in excess of pension benefit obligation as a percentage of annual covered payroll 2.5 5.1 13.9 (a) Village's contributions to the pension plan as a percentage of annual covered payroll 17.5 11.8 14.4 13.8 (a) No actuarial report available. Presenting the assets in excess of pension benefit obligation as a percentage of annual covered payroll approximately adjust for the effects of inflation for analysis purposes. NOTE 8 • DEFERRED COMPENSATION PLAN The Village offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Village employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. C -44 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 TOTE 8 - DEFERRED COMPENSATION PLAN' (Continued) All amounts of compensation deferred under the plan, all property and rights purchased with those and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the Village (without being restricted to the provisions of benefits under the plan), subject only to the claims of the Village's general creditors. Participants' rights under the plan are equal to those of general creditors of the Village in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the Village that it has no liability for losses under the plan, but does have the duty of due care, that would be required of an ordinary prudent investor. The Village believes that is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustee under one of six investment options, or a combination thereof. The funds are invested at the discretion of individual plan participants. NOTE 9 - COMPENSATED A' TNIJAL LEAVE ANTD SICK PAY As of September 30, 1996, the total liability for compensated absences was $400,347. The noncurrent portion of compensated absence liability pf the General Fund is recorded in the General Long -Term Debt Group. For the fiscal year ended September 30, 1996, the long -term amount was $324,220. The liability recorded by the Enterprise Fund was $76,127. NOTE 10 - RISK MANAGE)`�NT The Village is exposed to various risks of loss related to tore; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Village continues to purchase commercial insurance to cover the various risks. Retention of risks is limited to those risks that are uninsurable and deductibles ranging from $250 to $10,000 per occurrence. Major uninsurable risks include damages to infrastructure assets. Since the amount of loss cannot be reasonably estimated and the likelihood of occurrence is not determinable, no provi- sion for losses is reflected in the financial statements. There were no settled claims which exceeded insurance coverage during the past three fiscal years. C-45 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 j1jQTE 10 - RISK MANAGEINZENT (Continued) The Village is insured under a retrospectively rated policy for worker's compensation coverage. The plan is a trust fund comprised of local governmental entities. The premiums are based on the risk class and remuneration of covered employees adjusted by an experience modification based on the claims history of the Village. At the end of the premium year the Village can either receive a discount or pay additional premium based on its claims experience. The policy for the current fiscal year has been finalized with no additional premium due. Should a deficit develop in the trust fund after excess insurance recoveries, the Village shall thereafter be responsible for its individual costs. VOTE 11 - LEASE CONiENWITINTEWS During the fiscal year, the Village had the following capital lease agreements: General Fund Enterprise Fund Fire Truck Computer system Annual Payment: $56,658 Monthly payment: $692 10 year term 60 month term Expires October, 2003 Expires October, 1996 Principal amount outstanding at Principal amount outstanding 9/30/96 - $354,519 at 9/30196 - $797 Capitalized. cost - $466,140 (General Fixed Asset Account Group) 911 system Annual payment: -$5,093 5 year term Expires December 1999 Principal outstanding at 9/30/96 - $15,677 Capitalized cost - $20,452 (General Fixed Asset Account Group) C-46 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 MOTE 11 - LEASE COMMITMENTS (Continued) Capitalized costs and accumulated amortization of the enterprise fund leases are as follows: Cost S 81,349 Accumulated amortization 73.126 23 Amortization expense of $16,270 is included in depreciation expense. There are no contingent rents in the above leases. The following is a schedule of the future minimum lease payments under these capital lease arrangements and the present value of the net minimum lease payments at September 30, 1996: Fiscal Year General Ending Long -Term Enterprise September 30. Debt Fund 1997 $ 61,751 $ 803 1998 61,751 1999 61,751 2000 61,751 2001 56,658 Thereafter 169.99 Total minimum lease payments 473,654 803 Less: amount representing interest 103.458 6 Present value of future minimum lease payments $370.196_ 797 C -47 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 12 - LONGTERM AGREERSENT TO PURCHASE WATER On July 15, 1976, the Village entered into an agreement with Tri- Southern Utilities Company, Inc. (the agreement subsequently assumed by the Town of Jupiter) to purchase water for the Village's water system for a period of 30 years. Rates for water service are based on wholesale rates. The Village is billed monthly based upon a 1,500,000 gallons per day contracted minimum. NOTE 13-- LO'N'G- TERNS LEASE AGREENfENT On December 20, 1994, the Village entered into an interlocal agreement with Palm Beach County. Per the agreement Palm Beach County is to provide for partial funding, land acquisition and design and construction of a branch library within Tequesta. Upon completion of the project, the library will be leased to Palm Beach County for 50 years for an annual rent of one dollar. In the event the lease is terminated by the Village before the end of 50 years, the Village must reimburse Palm Beach County a depreciated value using a useful life of 25 years based on an initial value of $405,000 calculated on a straight -line basis. NOTE 14 - CONTRACTED SERVICES - FIRE PROTECTION/EMERGENCY MEDICAL SERVICE Effective October 1, 1993, the Village entered into an interlocal agreement with Jupiter Inlet colony for the Village to provide fire protection /emergency medical services for a fee. For the year ended September 30, 1996, fire protection fees received from Jupiter Inlet Colony was $159,879. Since January 1, 1995, the Village has maintained an Emergency Medical Service (EMS) program within the Fire Rescue Department. During the fiscal year September 30, 1996, North County Ambulance provided transportation services only. On November 14, 1996 the Village Council determined that there was a need for the Village to provide ambulance transportation. Resolution 2 -96/97 was enacted which approved the lease /purchase of two ambulances. The lease /purchase cost including interest is $224,656. The ambulances are to be financed over seven years with an interest rate of 5.80. The first installment is due October 15, 1997 in the amount of $32,093. C -48 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 15 - CONTRACTED SERVICES - REFUSE AND RECYCLING COLLECTIOti Effective October 1, 1989, the Village entered into a five year franchise agreement with Nichols Sanitation, Inc. for curbside solid waste and recycling collection sen On October 14, 1993, the Village amended the franchise agreement. The amendment extended the agreement for an additional five years commencing October 1, 1994. For consideration of the extension the collection rates were reduced. In addition, the Village assessed a 6% franchise fee for each residential customer, effective October 1, 1994. Nichols Sanitation may also adjust the curbside and recycling rates beginning October 1, 1995 and each October 1, thereafter based upon the change in the Consumer Price Index (CPI). NOTE 16 - LONG -TERM DEBT General Long -Term Deb Changes in general long -term debt of the Village for the year. ended September 30, 1996 are summarized as follows: Capital Improvement Joint Compensated Lease Note Revenue Venture Absences Obligation Payable Bonds Obligation Total General long -term debt at October 1, 1995 $356,977 $388,600 $12,416 $1,310,000 $ $2,067,993 Additions: Capital lease 20,452 20,452 Obligation under Joint Venture Agreement 8,000 8,000 Deletions: Repayments of debt 38,856 3,697 60,000 102,553 Decrease in accrual for compensated . absences 32.757 General long -term debt at September 30, 1996 $324.22 $37Q.1 S 8.719 �S,1,250000 S9. $1,96L.IL5 C -49 • VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 16 - LONGTEIL'11 DEBT (Continued) Revenue Bonds - 1994 This debt consists of Improvement Revenue Refunding Bonds Series 1994 in the amount of $1,365,000 with an interest rate of 6.15 %, dated June 24, 1994. Pursuant to the Bond Resolution, 16- 93/94, the Village is obligated to use Franchise Fees and Occupational Fees to pay the principal and interest on the Bond. At September 30, 1996, $1,250,000 of this issue were outstanding. Any remaining revenues after principal and interest may be used for any lawful purpose. Annual requirements to amortize this debt are as follows: Coupon October 1• Rate PrinciRal Interest m n 1997 6.15% $ 65,000 $ 76,875 $ 141,875 1998 6.15% 70,000 72,878 142,878 1999 6.15% 75,000 68,573 143,573 2000 6.15% 80,000 63,960 143,960 2001 6.15% 80,000 59,040 139,040 Thereafter 880, 2 1,139,838 Totals $1 000 W1,164 $1,851,1 Water Fund On October 1, 1994 the Village entered into an installment purchase agreement to purchase a copy machine for the Water Department. The Village financed $15,555 over a term of 48 months at an interest rate of 8 %. As of September 30, 1996 the balance of note was $8,405. C -50 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 MOTE 16 - LONGTERM DEBT (Continued) Total Long -Term bebt The annual requirements to amortize all outstanding debt including interest payments of $706,144 as of September 30, 1996 are as follows: Fiscal Capital Joint Year Ending Compensated Lease Notes Venture Improvement Sentem er 3030 Absences Obligation Payabl Obligglion Revenue Total 1997 $ $ 62,554 $ 8,949 $8,000 $ 141,875 $ 221,378 1998 61,751 8,949 142,878 213,578 1999 61,751 746 143,573:_ 206,070 2000 61,751 143,960 205,711 2001 56,658 139,040 195,698 Thereafter 169,992 1,139,838 1,309, 830 Various ,24.220 324.220 $2 24.22 34 74,457 SIE.644 58.000 $1.8� $2,676,485 Annual maturities of long -term compensated absences cannot be reasonably determined. NOTE 17 - DEFEASANCE OF PRIOR DEBT In prior years, the Village defeased the 1978 Series, $3,915,000 Water Revenue Refunding Bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Village's financial statements. At September 30, 1996, $3,530,000 of bonds outstanding are considered defeased. C -51 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 18 DUERFUND RECEIVABLES AND PAYABLES Individual fund interfund receivables and payables at September 30, 1996 are as follows: Interfund Interfund Fund Receivables Payables General Fund $ 85,843 $ 4,410 Special Revenue Fund 16,843 Capital Improvement Fund 37,500 Enterprise Fund 4.410 140. 1.8 $ 144 , 52 144 59 VOTE 19 INTERFUND ADIMMSTRATIVE FEE During the year ended September 30, 1996, the Enterprise Fund remitted $ 145,760 to the General Fund for administrative management fees. This amount is reflected as intra- governmental services revenue in the General Fund and as contractual services operating expenses in the Enterprise Fund. NOTE 20 CONTRIBUTED CAPITAL - E1' 7ERPRISE FUND The changes in contributed capital consists of the following: Capital Developer Improvement Contributions Charges TQtal Contributed capital at October 1, 1995 $1,089,543 $2,440,288 $3,529,831 Plus: contributions 41.35 96,M 137.980 Contributed capital at September 30, 1996 $1.1 31893 $ 2, 5 36M $3,667 C -52 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 VOTE 21 - RESIDUAL EQUITY TRANSFER In 19 fiscal year the Village Council authorized an advance of $361,110 from the Enterprise Fund to the Capital Improvement Fund. During the 1996 fiscal year the Council authorized forgiveness of such debt. Forgiveness of this debt resulted in a residual equity transfer from the Enterprise Fund to the Capital Improvement Fund. NOTE 22 - LITIGATION The Village is currently involved in a dispute with the Town of Jupiter regarding an increase in water purchase rates. The Village of Tequesta has a contract to purchase water from the Town of Jupiter until the year 2006 at an annual cost of approximately $667,000. The Town of Jupiter is disputing that the fees charged to Tequesta are $51,000 per month less than their cost and therefore are contesting the contract. As of the audit date negotiations between both municipalities and their lawyers are ongoing. The possible financial impact for Tequesta if Jupiter prevails will be a $600,000 per year increase in water purchase fees. Effective February 1, 1996 the Village increased the water charge to its customers to reflect the possible increase in costs. If the Village prevails, these funds would be refunded. Accordingly, the amounts collected during the fiscal year of $419,757 were deferred. In September of 1995 the Village pursued a quick taking and gained title to an easement needed for the installation of a potable water well site. The Village deposited a good faith compensation of $16,500. The property owners' appraiser estimated compensation of this property at $122,000 plus attorney fees and costs. Therefore, the property owners are contesting the Village's good faith deposit. Outside council for the Village advised that it is possible that the Village may incur costs ranging from $50,000 to $185,000, if the Village loses the case. However, the eventual outcome is not determinable at this time. NOTE 23 - JOINT Y .N'TURE The Village, in in conjunction with six other municipalities, organized a consortium to provide mutual fire and emergency aid. The consortium is known as The Northern Area Mutual Aid Consortium (NAMAC). During .the 1996 fiscal year each of the municipalities contributed $8,000 and agreed to contribute an additional $8,000 in the fiscal year 1997. Accordingly, $8,000 has been recorded in the Long -Term Debt Account Group as the Village's amount obligated under joint venture. The consortium did not conduct any other activity in the fiscal year 1996 other than to collect the contributions. The joint venture does not issue a stand alone financial report. C -53 VILLAGE OF TEQUESTA, FLORIDA Notes to Financial Statements September 30, 1996 NOTE 24 - SUBSEOM 'T EVENTS On December 6, 1996, the Village entered into a three year lease agreement to rent commercial office for the administrative, finance and water services staff. The base annual rent is $47,132 adjusted annually for the Consumer Price Index. At the end of the three year lease the Village has the option to renew for three additional one year terms. Upon renewal the lease rent may change. On July 25, 1996 the Village Council authorized the Village management to enter into a bond issuance of $7,650,000 to fund the Reverse Osmosis Water System. As of January 20, 1997, the Village has not completed the required contracts to provide for a bond issuance. The Village is in the permitting phase for the project. As soon as this phase is completed, the Village will continue with bond issuance. Village management anticipates that the issuance will take place by October 1997. On December 30, 1996 the Village filed for a petition concerning the installation of sewer facilities on Bermuda Terrace by The Loxahatchee River Environmental Control District (ECON). The Village alleges that the installation of the sewers will adversely impact Tequesta's groundwater resources. ECON along with the Palm Beach County Public Health Unit have filed a motion to dismiss the petition. As of January 20, 1997 a decision regarding the petition has not been addressed. C -54 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX D STATISTICAL INFORMATION REGARDING THE VILLAGE VILLAGE OF TEQUESTA, FLORIDA General Revenues by Source (Unaudited) (1) Last Ten Fiscal Years Licenses Fiscal Year Ended and September 30 Taxes _Permits 1987 $1,881,171 $123,303 1988 2,143,933 170,834 1989 2,199,925 219,862 1990 2 190,743 1991 2,545,957 153,314 1992 2,645,035 222,465 1993 2,666,148 188,477 1994 2,833,720 198,000 1995 2,985,573 292,272 1996 3,184,007 246,450 (1) Includes General, Special Revenue, Capital Projects, and Expendable Trust Funds. (2) Includes intragovernmental services, impact fees and interest income. Source: Village of Tequesta financial records. D -1 Charges for Fines and Intergovern mental Service s Forfeits Miseellaneous(2) Total $421,385 $ 8,880 $51,126 $123,140 $2,609,005 568,091 19,562 53,034 166,547 3,122,001 701,112 32,941 51,555 338,392 3,543,787 872,494 14,146 37,903 304,227 3,905,327 513,839 17,442 38,035 241,371 3,509,958 528,276 27,174 31,647 215,887 3,670,484 531,696 21,304 46,037 202,040 3,655,702 423,606 189,691 48,885 223,494 3,917,396 898,701 241,848 43,555 308,037 4,769,986 950,477 213,283 78,578 279,658 4,952,453 D -2 • VILLAGE OF TEQUESTA, FLORIDA General Government Expenditures by Function (Unaudited) (1) Last Ten Fiscal Years Fiscal Year Ended General Public September 30 Government Saf (2) Transportation 1987 $401,854 $1,328,602 $ 306,292 1988 509,134 1,435,360 462,873 1989 603,396 1,387,841 900,405 1990 671,631 1,725,165 1,206,458 1991 616,142 1,938,477 557,001 1992 743,343 2,056,825 651,665 1993 939,549 2,552,513 592,751 1994 678,217 2,662,075 859,763 1995 828,386 2,546,227 586,534 1996 891,574 2,662,616 1,045,018 (1) Includes General, Special Revenue, Debt Service, Capital Projects and Expendable Trust Funds (2) Includes Fire/Emergency Contract with Palm Beach County beginning year 1985 through year 199 Tequesta began its own department beginning in year 1994. (3) Refuse /Recycling Service reported in Enterprise Fund beginning year 1991. Source: Village of Tequesta financial records. D -3 Culture Physical Human and _ Debt Environment Service Recreati Service Total $278,752 $2,907 $ 111,146 $ 91,215 $2,520,768 308,215 502 111,466 89,350 2,916,900 337 1,067, 103,019 86,905 3,419,901 437 930 110,989 90,082 4,242,491 5,550 2,879 158,740 87,707 3,366,496 5,224 4,143 127,550 91,009 3,679,759 4,594 591 160,210 88,565 4,338,773 624 123,332 304,476 4,628,487 4,179 472 1,262,093 201,415 5,429,306 1,033 803,188 206,861 5,610,290 D -4 THIS PAGE INTENTIONALLY LEFT BLANK D -5 VILLAGE OF TEQUESTA, FLORIDA Property Tax bevies and Collections (Unaudited) (1) Last Ten Fiscal Years Fiscal Year Total Current Tax Percent Outstanding Delinquent Ended Tax Levy Collections of Levy Delinquent Taxes to September 30 (1) (1) Collected lected Taxes Tax L& yy- 1987 $1,255,399 $1,252,073 99.7% $ 3,326 .3qc 1988 1,501,241 1,496,727 99.7 4,514 .3 1989 1,527,891 1,522,364 99.6 . 5,527 .4 1990 1,821,025 1,813,915 99.6 7,110 .4 1991 1 1 864,093 1,850,505 99.3 13,588 .7 1992 1,969,500 1,960,892 99.6 8,608 .4 1993 1,973,375 1,958,191 99.2 15,184 .8 1994 1,968,572 1,950,778 99.1 17,794 .9 1995 2,048,066 2,028,987 99.1 19,079 .9 1996 2,166,385 2,158,420 99.6 7,965 .4 (1) Includes discounts taken by property taxpayers. Source: Palm Beach County Tax Collector's office. D -6 VILLAGE OF TEQUESTA, FLORIDA Taxable Value and Just Value of Taxable Property (Unaudited) Last Ten Fiscal Years Real Propg_rty Taxable September 30 Value Just Value 1987 $257,766,850 $324,296,888 1988 262,373,925 329,524,860 1989 290,375,566 366,488,883 1990 337,942,463 414,814,947 1991 346,506,060 424,334,994 1992 341,068,104 418,897,038 1993 329,131,590 406,420,054 1994 326,699,785 406,281,260 1995 328,167,741 409,679,164 1996 337,376,976 424,956,672 Source: Palm Beach County Property Appraiser's office. D -7 Personal Prop.�rty_ Total Ratio Taxable Just Taxable Just Taxable Value Value Value Value Value To Just Value $11,547,658 $12,241,396 $269,314,508 $336,538,284 80% 12,052,258 12,977,252 274 342,502,112 80% 14,685,689 15,755,728 305,061,255 382,244,611 80% 16,463,806 21,797,356 354,406,269 436,612,303 81% 15,726,846 20,588,283 362,232,906 444,923,277 81 15,846,444 20,706,881 356,914,548 439,603,919 81% 15,683,045 16,779,738 344,814,635 423,199,792 81% 16,461 17,709,182 343,161,444 423,990 81 16,070,906 18,042,404 344,238,467 427,721,568 80% 16,264,236 18,268,307 353,644,212 443,224,979 80% D -8 VILLAGE OF TEQUESTA, FLORIDA Property Tax Rates - All Direct and Overlapping Governments (Unaudited) (Per $1,000 of Assessed Value) Last Ten Fiscal Years South Florida County Water General School County Management September 30 Fund County Board Libr District 1987 5.3126 4.6190 7.5950 .3951 .5130 1988 5.7510 4.7862 8.1580 .9075 .4970 1989 5.7510 5.0562 8.4620 .9137 .5470 1990 6.1828 4.8904 9.1990 .3910 .5470 1991 5.4085 4.8314 9.2930 .3790 .5470 1992 5.7515 4.6440 9.7850 .3939 .5470 1993 5.9000 4.6221 9.6030 .3885 .5470 1994 5.9140 4.5499 10.0630 .3915 .5970 1995 6.1280 4.5193 10.1850 .4437 .5970 1996 6.3425 4.5191 9.7970 .4838 .5470 D -9 Florida Naviga- Jupiter tional Children's County Inlet Inland Services Health Care Distric Distdc Coun District Total .2115 18.6462 .1979 .0670 .0923 20.4569 .1920 .0395 .1537 21.1151 .1772 .0370 .1929 1.2500 22.8673 .1434 .0550 .2238 1.2500 22.1311 .1325 .0530 .2215 1.4750 23.0034 .1257 .0520 .3039 1.4750 23.0172 .1257 .0510 .3297 1.4750 23.4968 .1257 .0490 .3522 1.4500 23.8499 .1240 .0400 .3730 1.4250 23.6514 D -10 VILLAGE OF TEQUESTA, FLORIDA Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita (Unaudited) Last Ten Fiscal Years Fiscal Year Ended Taxable September 30 PoFulatio Value 1987 4,141 $269,314,508 1988 4,448 274,426,183 1989 4 305,061,255 1990 4,499 354,406,269 1991 4,508 362,567,496 1992 4,533 356,914,548 1993 4,551 344,814,635 1994 4,609 343,161,444 1995 4,623 344,238,467 1996 4,637 353,641,212 * Source: Palm Beach County Planning Board, University of Florida Estimates, Federal Census, and Village Building Department Records. D -11 Debt Ratio of Net Gross Service Net Bonded Debt Net Bonded Bonded Monies Bonded to Assessed Debt Debt Available Debt Value Per Capita $ 760,000 $118,377 $ 641,623 .23% 154.94% 735,000 111,920 623,080 .22 140.08 710,000 121,839 588,161 .19 131.32 680,000 127,917 552,083 .16 122.71 650,000 128,978 521,022 .14 115.58 615,000 123,720 491,280 .14 108.37 580,000 120,530 459 .13 100.96 1,365,000 98,453 1,266,547 .36 274.80 1,310,000 85,751 1,224,249 .35 264.82 1,250,000 35,977 1,214,023 .34 261.81 D -12 VILLAGE OF TEQUESTA, FLORIDA Computation of Legal Debt Margin September 30, 1996 Total assessed value $353.644.212 Legal debt margin: Debt limitation - 10% of total assessed value $ 35,364,421 Total debt outstanding $1,250,000 Less: amount available in debt service fund 35.977 Total debt applicable to limitation 1.214.023 Legal debt margin $ 34.150.398 D -13 VILLAGE OF TEQUESTA, FLORIDA Computation of Direct and Overlapping Debt (Unaudited) September 30, 1996 Percentage Amount Applicable Applicable Net Debt to to Taxing Authority Outstanding le �uesta TeQuesta Village of Tequesta $ 1,214,023 100.00% $1,214,023 Palm Beach County 108,150,000 .62% 670,530 Palm Beach County School Board 269.290.000 .62% 1,669,598 Total $378.654.023 $3,554 Source: Above Government Entities D -14 THIS PAGE INTENTIONALLY LEFT BLANK D -15 VILLAGE OF TEQUESTA, FLORIDA Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Expenditures (Unaudited) Last Ten Fiscal Years Ratio of Del: Total Service to Fiscal Year Total General Total Ended Debt Expenditures General September 30 Princi Interest Service (1) Expenditures 1987 $ 25,000 $ 65,855 $ 90,855 $2,520,768 3.6 1988 25,000 64,350 89,350 2,916,900 3.1 1989 25,000 61,905 86,905 3,419,901 2.5 1990 30,000 60,082 90,082 4,242,491 2.1 1991 30,000 57 87,707 3,366,496 2.6 1992 35,000 56,009 91,009: 3,679,759 2.5 1993 35,000 53,565 88,565 4,338,773 2.0 1994 221,383 83,093 304,476 4,628,487 6.6 1995 90,354 111,061 201,415 5,429,306 3.7 1996 100,556 106,305 206,861 5,610,290 3.7 (1) Includes General, Special Revenue, Capital Projects and Expendable Trust Funds. D -16 VILLAGE OF TEQUESTA, FLORIDA Revenue Bond Coverage Water Bonds (Unaudited) Last Ten Fiscal Years Fiscal Year Net Revenue Ended Gross Operating Available for September 30 Revenues Exl&nses Debt Service 1987 $1,760,534 $1,434,538 $325,996 1988 1,834,930 1,437,407 397,523 1989 2,142,260 1,555,291 586,969 1990 2,207,447 1,604,403 603,044 1991 2,240,220 1,629,337 610,883 1992 2,349,546 1,832,374 517,172 1993 2,566,614 2,051,891 514,723 1994 2,690,107 2,110,928 579,179 1995 2,948,260 2,414,540 533,720 1996 3,283,922 2,451,485 832,437 (1) Represents net debt service costs per a securities contract requiring the Village to purchase an aggregate of $980,000 par amount of U.S. Treasury Bonds due February 15, 2007, bearing interest at 7- 5/89, at an aggregate purchase price of $928,324. The purchase price of the Treasury Bonds is added to the gross debt service and the income from the Treasury Bonds is subtracted from gross debt service to compute Bond Service Requirements. D -17 Debt Service Requirements Debt Amortization Service principal Interest Account (1) Total Cover $ 70,000 $132,919 $ 54,427 $257,346 1.27 75,000 112,036 73,210 260,246 1.53 80,000 106,705 66,911 253,616 2.31 85,000 100,855 71,301 257,156 2.35 90,000 107,566 58,455 256,021 2.39 100,000 102,415 55,842 258,257 2.00 110,000 78,737 65,254 253,991 2.03 265,000 66,405 (15,653) 315,752 1.83 290,000 43,280 (97,158) 236,123 2.26 270,000 17,355 (75,325) 212,030 3.92 D -18 VILLAGE OF TEQUESTA, FLORIDA Property Value, Construction and Bank Deposits (Unaudited) Last Ten Fiscal Years Commercial Residential Construction (1) Construction (1) Property Value (3) Number Number Fiscal of of Real Personal Year Jjnjj Value UnD Value Deposits (2) Propgrty_ Property 1987 1 $ 116,250 27 $2,717,154 $269,494,041 $257,766,850 $11,547,658 1988 6 6,803,410 24 3,358,458 294,073,604 329,524,860 12,052,258 1989 6 1,615,526 18 2,694,552 289,305,649 366,488,883 15,755,728 1990 1 197,126 20 .3,206,343 313,199,861 414,814,947 21,797,356 1991 1 1,882,888 4 962,089 257,956,427 424,334,994 20,588,283 1992 0 0 11 2,395,128 308,119,520 418,897,038 20,706,881 1993 1 101,700 8 2,083,944 278,165,130 406,420,054 16,779,738 1994 0 0 25 3,134,633 293,551,944 406,281,260 17,709,182 1995 0 0 10 1,658,043 326,394,550 409,679,164 18,042,404 1996 3 2,248,278 6. 1,127,624 319,213,870 424,956,672 18,268,307 Source: (1) Village of Tequesta Building Department. (2) Tequesta Commercial Banks and Savings and Loan Associations. (3) Palm Beach County Property Appraiser's office. D -19 VILLAGE OF TEQUESTA, FLORIDA Miscellaneous Statistics (Unaudited) September 30, 1996 Date of Incorporation 1957 Forms of Government Council - Manager, 3 Councilmembers elected even years, 2 Councilmembers elected odd years Municipal Elections Non - Partisan eA: Approximately 2 square miles Miles of Streets Approximately 44 lane miles Fire Protection Number of stations - 1 Number of certified firefighters - 17 Fire Rating - 4 Police Protection Number of stations - 1 Number of certified officers - I6 Number of dispatchers - 4 Municipal Water Department Number of customers - 4 .9 652 Average daily consumption - 2.85 million gallons Miles of water mains - approximately 50 miles SanijwZj Sewage Service provided by Loxahatchee River Environmental Control District (ENCON) Storm Sewers Adequate coverage Garbage Collet ion Service franchised to Nichol's Sanitation Frequency of service is bi- weekly Electric Service Florida Power & Light Company Telephone Service Southern Bell Telephone & Telegraph Company Building Permits Issued 875 Recreation and Culture Number of parks - 4, approximately 52 acres Number of libraries - 1, branch of Palm Beach County System Number of volumes - 20,000 - 22,000 Municipal Em2loyees Full -time - 68 D -20 VILLAGE OF TEQUESTA, FLORIDA Principal Taxpayers (Unaudited) September 30, 1996 Percentz- 1996 of Assessed Assessed TaxRay Fyne of Business Valuation V u ti n County Line Plaza (K -Mart) (TAMWFST) Shopping Center $ 8,665,925 2.45': Tequesta Shoppes (Publix) (Sterling Tequesta/Trails) Shopping Center 5,499,420 1.54 Donner Properties (Bank of Palm Beach Undeveloped & Trust Company) Real Estate 4,443,763 1.25 Tequesta Shoppes, Ltd. (Waterway Village) (c /o Capital Management Lot A 3,802,061 1.07 Assoc., Inc.) Barnett Bank (First National Bank of Jupiter/Tequesta) Banking 2,060,414 .58 Tequesta Country Club Golf /Social Club 2 .73 Bowen, Smith, Stanley, Inc. Commercial Building A (Tequesta Motor Cars) Real Estate 1,354,344 .38 Tequesta Fashion Mall (Edwin J. Nelson) Shopping Center 2,195,074 .62 SHW, Ltd. Real Estate 1,615,701 .46 Professional Tequesta Financial Center, Ltd. Office Building 1.300.000 .37 133,52 8,868 9.4 Source: Palm Beach County Property Appraiser's Office D -21 VILLAGE OF TEQUESTA, FLORIDA Demographic Statistics (Unaudited) Last Ten Fiscal Years Education Level in Years of Fiscal Population Per Capita Median Formal Unemployment Year (1) Income (2) Age O Schooling (2) Rate (3) 1987 4,141 $ 7.7% 1988 4,448 7.2 1989 4,479 8 . 4 1990 4,499 20,362 7 . 9 1991 4,508 9.7 1992 4,533 8 . 8 1993 4,551 9 . 2 1994 4,609 8.4 1995 4,623 7.0 1996 4,637 7.5 Sources: (1) Palm Beach County Planning Board, University of Florida Estimates and Federal Census. (2) U.S. Department of Commerce, Bureau of the Census. Information only available for years provided. (3) Job Service of Florida. D -22 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION March , 1998 Village of Tequesta Tequesta, Florida RE: Village of Tequesta, Florida Water Revenue Bonds, Series 1998 Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance and sale by the Village of Tequesta, Florida (the "Issuer") of its $ aggregate principal amount Water Revenue Bonds, Series 1998 (the "Bonds "). The Bonds are issued pursuant to the Constitution and Laws of the State of Florida, including particularly Article VIII, Section 2 and Article VII, Section 12 of the Florida Constitution, Chapter 166, Florida Statutes and the Charter of the Issuer (collectively, the "Act ") and Resolution No. 7 -97/98 adopted by the Issuer January 8, 1998, as amended and supplemented (the "Resolution "). All terms used herein in capitalized form and not otherwise defined herein shall have the meanings ascribed thereto in the Resolution. In rendering the opinions set forth herein, we have examined the Resolution and other certifications, agreements, documents and opinions of public officials and other officers and representatives of the various parties participating in this transaction. As to questions of fact material to our opinion we have relied upon representations of the Issuer contained in the Resolution, and upon other certifications, agreements, documents, and opinions of public officials and other officers and representatives of the various parties participating in this transaction, furnished to us, without undertaking to verify the same by independent investigation. We have assumed the genuineness of all signatures on all documents and instruments, the authenticity of documents submitted as originals and the conformity to originals of documents submitted as copies. This opinion shall not be deemed or treated as an offering circular, prospectus or official statement, and is not intended in any way to be a disclosure document used in connection with the sale or delivery of the Bonds. We have not been engaged to and therefore express no opinion as to compliance by the underwriter(s) with any Federal or State statute, regulation or ruling with respect to the sale or distribution of the Bonds. E -1 Village of Tequesta March , 1998 Page 2 The opinions set forth below are expressly limited to, and we opine only with respect to, the laws of the State of Florida and the federal income tax laws of the United States of America. Based upon and subject to the foregoing, we are of the opinion as of the date hereof and under existing law, as follows: 1. The Issuer is duly created and validly existing as a municipality pursuant to the Constitution and Laws of the State of Florida, with the power to adopt the Resolution, perform its obligations thereunder and to issue the Bonds. 2. The Resolution has been duly adopted by the Issuer and constitutes the valid and binding action of the Issuer. 3. The Bonds have been duly authorized and executed by the Issuer and constitute valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms. 4. The interest on the Bonds is excludable from the gross income of the Bondholders for federal income tax purposes and is not an item of tax preference described in Section 57 of the Internal Revenue Code of 1986 (as amended) (the "Code ") for purposes of the federal alternative minimum tax imposed on individuals and corporations. Such interest may be required to be taken into account in determining adjusted current earnings for purposes of calculating the alternative minimum taxable income of certain corporations. The opinions expressed in the first sentence of this paragraph are conditioned upon continuing compliance subsequent to the issuance of the Bonds by the Issuer with various covenants contained in the Resolution, including, without limitation, its covenant to comply with applicable requirements of the Code necessary in order to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes. Failure by the Issuer to comply with such requirements could cause the interest on the Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. No opinion is expressed herein regarding other federal tax consequences that may arise due to ownership of the Bonds. 5. The Bonds are exempt from all present intangible personal property taxes imposed by the State of Florida. Our opinions expressed herein are predicated upon present laws and interpretations thereof. We assume no affirmative obligation with respect to any change of circumstances or law (including laws that may result from legislation pending before Congress) that may adversely affect the tax- exempt status of interest on the Bonds after the date hereof. E -2 Village of Tequesta March , 1998 Page 3 It is to be understood that the rights of owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject to the provisions of the bankruptcy laws of the United States of America and to other applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting creditors' rights, and that their enforcement may also be subject to equitable principles that may affect remedies or other equitable relief. Very truly yours, E -3 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX F FORM OF MUNICIPAL BOND INSURANCE POLICY Ambac Ambac Assurance C S coo CT Corporation y stems 44 East Mifflin Street. Madison, Wisconsin 5 3 - '() , Administrative Office Municipal Bond Insurance Policy one Start Street Plaza, \t:c l " iul ;. Ntsv,'„rk Innti; Telephone (2121668 -t)3 -4o Issuer: Police Number: Bonds: Premium: Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company in consideration of the payment of the premium and subject to the emus of this Police, hereby agrtcs to pay to United Stares Trust Con;p any of New York, as trustee, or its successor (the 'Insurance Trustee - ), for the benefit of Bondholders, thar portion of the prin ! �r an_? interest on the above- described debt obligations (the "Builds") which shall become Due for Pa} ment but shall be unpaid by reasr. ::ni�armtnt bt tilt Issuer. Ambac will make such payments to the Insurance Trustee within one (1) business day following notification r m � No .av nc. Lp:m a Bondholders presentation and surrender to the Insurance Trustee of such unpaid Bonds or appurtenan a ,r, s, uncar,, n btsrcr form and fret of any adcrrse claim. rile lnsurance Trustee will disburse to the Bondholder the. fare an nr p tip 1 interest ;ni: then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner the rr rider shall be fully subrogated to all of the Bondholder's right to payment. u In cases nhere the Bonds are issuable only in a form whereby principal is parable to re -re on e �cr . r their ssir tilt Insara-: - c Trustee shall dlSbnrSe principal to a Bondholder as aforesaid only upon presentation an . urren err tilt I ranee ti;r unpaid B(,:) I- uncanceled and free of any adverse claim, together with an instrument of assignme in fo sa slat n the suratrce Tru crt, dill }' executed bj- the Bondholder or such Bondholder's duly authorized reprrsenta e, so as o mi w nhi of s Bond ro be r,ristrr(d in the name of Ambac or its nominee. In casts where the Bonds are is suable y in orm h� y i re is p It to registered Bun.dholden or their assigns, the Insurance Trustee shall disburse interest to a Bun ho er as afo ti on vn res anon to the Insurance Trustee of proof that the claimant is the person entitled cc) the payment of in s n t e B i an liv r) , ti Insurance Trustee of in instrumenr of assignment, in form sarisfactory to the Insurance Trustee, duly rx 'ute ), r c i °nr Bo lho er or such Bondholders duly authorized representative, transferring to Ambac all rights under sue to cei\ th inte st re' rct of which the insurance disbunrment teas made. Ambac shall be subrogated to all the Bondhold rights to -ay lent n r •isle - d Bends ro the extent of the insurance dishu -cm -tics so made. In the evenr the trustee or paging ag eno for th Bon _ h notice tha t pa en of principal of interest on a Bond which has become Due for Payment and which is mad, to a Bo ro tr y o on behalf - ,f t e Is -r of the Bonds has been deemed a preferential tran,ftr and theretofore recovered from its registere con ursu nc t the Unit S :res Bankniprcy Code in accordance with a final, ron::ppcalahir order of a court of comperent jurisdictio uch giste o er a rill ed to payment from Ambac to the extent of such reavert if sufficient funds are not otherwise available. As used herein, the term " de ° means y pen other than the Issuer who, at the time of Nonpayment, is tht ow ner of a bm�d or of a coupon apperrainin a d. s ed I rein, " ue r Pa) ment when referring to the principal of bonds, is when the stated maturin date or a mandato re puo da fo the - ica of a required sinking fund installment has been reached and does not refer to any earlier date on will p men s e by ason call for redemption (other than by application of required sinking fund insradfrtent�), acceI rati er va ten f marlin , nd, when referring to interest on the Bonds, is when the stated dare for payment of interrsr has be rea ed As ed h in, 'Nonpayment" means the failure of the Issuer to have provided sufficient funds to the paying agent for pay no ful of a 1 vt cipa of and interest on the Bonds which are Due for Payment. This oli ri cance hl Th remium on this Policy is nor refundable for any reason, including payment of the Bonds prior to mafurn: This )ice' d su -a st loss of any prepaymenr or other acceleration payment which at an time may become due in respect of am Bond, of er than at e It option of Ambac, nor against any risk other than Nonpayment. In witnts he o , oac has caused this Policy to be affixed with a facsimile of its corporate seal and to be si bt its .filly authorized officers in o become effective as its original seal and signatures and binding upon Ambac by virtue of the counrcrs,, nature of irs duly authorized representative. ♦ JRPMCC C'� /!; t i� SEAL President � Secretary �`'•. �,uo� +`� Effective Date: Authorized �Represenratiyc UNITED STATES TRUST COMPANY OF N YORK acknowledges o that it a has agreed to perform the duties of Insurance Trustee under this Po Forn, No.: tit, -nuo, t' 9 -i A_ Authorized Officer bac c/o CT Assurance Corporation c/o CT Corporation Systems 4 4 East Mifflin Street, Madison. Wisconsin 537 03 Administrative Office: One State Street Plaza, New York, New York 10004 Endorsement Telephone: (212) 668 -0340 Police for: Attached to and forming part of Policy No.: Effective Datc of Endorse The insurance provided by this Policy is not cover V F ri In r c uaranty Association. Nothing here co taine sh ll be el to ry. alter, waive or extend any of the terms, conditions provisions. agreements or li o he ov ientione olicN other than as above stated. i r f, mbac has caused this Endorsement to be affixed with a facsimile of its corporate seal and to signed du rized officers in facsimile to become effective as its original seal and signatures and binding upon mbac b vi ue of the countersignature of its duly authorized representative. Ambac Assurance Corporation f� pF POif l' IP , .. Ore. ' ' C �'• o T o + SELL # /\ Secretar% ' �'•�° � " .� President t, Authorized Representative Form No. 2&(")4 ( -/9') EXHIBIT E LETTER OF REPRESENTATIONS G:\20241\2\award res.vW E-1 D BOOK-ENTRY-ONLY MUNICIPAL BONDS Letter of Representations [To be Complete by Issuer and Agent) [Name of Issuer] [lame of Agent] [Date] Attention: Underwriting Department The Depository Trust Company 55 Water Street; 50th Floor New York, NY 10041 -0099 Re: [Issue Description] Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the above - referenced issue (the "Bonds "). Agent will act as trustee, paying agent, fiscal agent, or other agent of Issuer with respect to the Bonds. The Bonds will be issued pursuant to a trust indenture, bond resolution, or other such document authorizing the issuance of the Bonds dated , 199_ (the "Document ")' 1—Underwriter"] is distributing the Bonds through The Depository Trust Company ( "DTC "). To induce DTC to accept the Bonds as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Bonds, Issuer and Agent, if any, make the following representations to DTC: 1. Prior to closing on the Bonds on , 199 —, there shall be deposited with DTC one Bond certificate registered in the name of DTCs nominee, Cede & Co., for each stated maturity of the Bonds in the face amounts set forth on Schedule A hereto, the total of which represents 100% of the principal amount of such Bonds. If, however, the aggregate principal amount of any maturity exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount. Each Bond certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ( "DTC "), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. In the event of any solicitation of consents from or voting by holders of the Bonds, Issuer or Agent shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall, to the extent possible, send notice of such record date to DTC not less than 15 calendar days in advance of such record date. 3. In the event of a full or partial redemption or an advance refunding of part of the outstanding Bonds, Issuer or Agent shall send a notice to DTC specifying: (a) the amount of the redemption or refunding; (b) in the case of a refunding, the maturity date(s) established under the refunding; and (c) the date such notice is to be mailed to beneficial owners or published (the "Publication Date "). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 days nor more than 60 days prior to the redemption date or, in the case of an advance refunding, the date that the proceeds are deposited in escrow. 4. In the event of an invitation to tender the Bonds, notice by Issuer or Agent to Bondholders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. 5. All notices and payment advices sent to DTC shall contain the CUSIP number of the Bonds. 6. Notices to DTC pursuant to Paragraph 2 by telecopy shall be sent to DTC's Reorganization Department at (212) 709 -6896 or (212) 709 -6897, and receipt of such notices shall be confirmed by telephoning (212) 709 -6870. Notices to DTC pursuant to Paragraph 2 by mail or by any other means shall be sent to: Supervisor; Proxy Reorganization Department The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004 -2695 7. Notices to DTC pursuant to Paragraph 3 by telecopy shall be sent to DTC's Call Notification Department at (516) 227 -4164 or (516) 227 -4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 227 -4070. Notices to DTC pursuant to Paragraph 3 by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530 -4719 -2- S. Notices to DTC pursuant to Paragraph 4 and notices of other actions (including mandatory tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's Reorganization Department at (212) 709 -1093 or (212) 709 -1094, and receipt of such notices shall be confirmed by telephoning (212) 709 -6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004 -2695 9. Agent must provide DTC, no later than noon (Eastern Time) on the payment date, CUSIP numbers for each issue for which payment is being sent, as well as the dollar amount of the payment for each issue. Notification of payment details should be sent using automated communications. 10. Interest payments and principal payments that are part of periodic principal- and - interest payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same -day funds no later than 2:30 p.m. (Eastern Time) on each payment date (in accordance with existing arrangements between Issuer or Agent and DTC). Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: Chemical Bank ABA 021000128 For credit to A/C The Depository Trust Company Dividend Deposit Account 066 - 026776 Issuer or Agent shall provide interest payment information to a standard announcement service subscribed to by DTC. In the unlikely event that no such service exists, Issuer agrees that it or Agent shall provide this information directly to DTC in advance of the interest record date as soon as the information is available. This information should be conveyed directly to DTC electronically. If electronic transmission is not available, absent any other arrangements between Issuer or Agent and DTC, such information should be sent by telecopy to DTC's Dividend Department at (212) 709 -1723 or (212) 709 -1686, and receipt of such notices shall be confirmed by telephoning (212) 709 -1270. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Announcements Dividend Department The Depository Trust Company 7 Hanover Square; 22nd Floor New York, NY 10004 -2695 11. DTC shall receive maturity and redemption payments allocated with respect to each CUSIP number on the payable date in same -day funds by 2:30 p.m. (Eastern Time). Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: Chemical Bank ABA 021000128 For credit to A/C The Depository Trust Company Redemption Account 066- 027306 in accordance with existing SDFS payment procedures in the manner set forth in DTC's SDFS Paying Agent Operating Procedures, a copy of which has previously been furnished to Agent. 12. DTC shall receive all reorganization payments and CUSIP -level detail resulting from corporate actions (such as tender offers, remarketings, or mergers) on the first payable date in -3- same -day funds by 2:30 p.m. (Eastern Time). Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: Chemical Bank ABA 021000128 For credit to A/C The Depository Trust Company Reorganization Account 066- 027608 13. DTC may direct Issuer or Agent to use any. other telephone number or address as the number or address to which notices or payments of interest or principal may be sent. 14. In the event of a redemption, acceleration, or any other similar transaction (e.g., tender made and accepted in response to Issuer's or Agent's invitation) necessitating a reduction in the aggregate principal amount of Bonds outstanding or an advance refunding of part of the Bonds outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue and authenticate a new Bond certificate, or (b) may make an appropriate notation on the Bond certificate indicating the date and amount of such reduction in principal except in the case of final maturity, in which case the certificate will be presented to Issuer or Agent prior to payment if required. 15. In the event that Issuer determines that beneficial owners of Bonds shall be able to obtain certificated Bonds, Issuer or Agent shall notify DTC of the availability of Bond certificates. In such event, Issuer or Agent shall issue, transfer, and exchange Bond certificates in appropriate amounts, as required by DTC and others. 16. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to Issuer or Agent (at which time DTC will confirm with Issuer or Agent the aggregate principal amount of Bonds outstanding). Under such circumstances, at DTC's request Issuer and Agent shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Bonds to any DTC Participant having Bonds credited to its DTC accounts. 17. Issuer: (a) understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the Bonds any information contained in the Bond certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Bonds shall be deemed to have notice of the provisions of the Bond certificate(s) by virtue of submission of such certificate(s) to DTC. 18. Nothing herein shall be deemed to require Agent to advance funds on behalf of Issuer. -4- Notes: Very truly yours, A. If there is an Agent (as defined in this Letter of Representations), Agent, as well as Issuer, must sign this Letter. If there is noA gent, in Slin this Letter Issuer itself undertakes to perform aU of the obligations set forth (Issuer) B. Under Rules of the Municipal Securities Rulemaldng By' Board relating to "good delivery" a municipal securities (Authorized Officer's Signature) dealer must be able to determine the date that a notice of a partial call or of an achance refunding of a part of an issue is published (the "publication date'). The establishment of (Agent) such a publication date is addressed in Paragraph 3 of the Letter. Bv: C. Schedule B contains statements that DTC believes (Authorized Officer's Signature) accurateh• describe DTC, the method of effecting book- entry t 4dfers of securities distributed through F)T6, and certain related matters. Received and Accepted: THE DEPOSITORY TRUST COMPANY By: (Authorized Officer) CC: Underwriter Underwriter's Counsel SCHEDULE A (Describe Issue) CUSIP Principal Amount Maturity Date Interest Rate SCHEDULE B SAMPLE OFFICIAL STATEMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE (Prepared by DTC-- bracketed material may be applicable only to certain issues) 1. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the securities (the "Securities "). The Securities will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully - registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC is a limited - purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ( "Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( "Indirect Participants "). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 3. Purchases of Securities under the DTC. system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ( "Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants` records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal and Income Payments Rider 1. This Rider supersedes any contradictory language set forth in the Letter of Representations to which it is appended. 2. With respect to payments in the Securities: A. Issuer or Agent shall provide notice to a standard interest and dividend announcement service subscribed to by DTC. In the event that no such service exists, Issuer or Agent shall provide such notice directly to DTC electronically, as previously arranged by Issuer or Agent and DTC. If electronic transmission has not been arranged, absent any other arrangements between Issuer or Agent and DTC, such notice shall be sent by telecopy to DTC's Dividend Department at (212) 709 -1723 or (212) 709 -1686, and receipt of such notices shall be confirmed by telephoning (212) 709 -1270. Notices to DTC pursuant to the above by mail or any other means shall be sent to: Manager, Announcements Dividend Department ' The Trust Company 7 Hanover Square, 22nd Floor New York, NY 10004 -2695 B. Issuer or Agent shall provide DTC, no later than noon (Eastern Time) on each periodic interest, principal or dividend payment date, a written notice of payment information containing the Security CUSIP numbers for which payment will be sent, as well as the dollar amount of payment. C. Dividends, interest payments, and principal payments that are part of periodic principal- and - interest payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same- day funds no later than 2:30 p.m. (Eastern Time) on each payment date. Absent any other arrangements between Issuer or Agent �t01t019E; and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For Credit to a/c Cede & Co. c/o The Depository Trust Company Dividend Deposit Account # 066 - 026776 D. Maturity and redemption payments with CUSIP -level detail shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same -day funds by 2:30 p.m. (Eastern Time) on the payable date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For Credit to a/c Cede & Co. c/o The Depository Trust Company Redemption Deposit Account # 066 - 027306 E. Principal payments (plus accrued interest, if any) as the result of optional tenders for purchase effected by means of DTC's Repayment Option Procedures shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same -day funds by 2:30 p.m. (Eastern Time) on the first payable date. Absent any other arrangements between Issuer or Agent and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA # 021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Reorganization Deposit Account # 066- 027608 -2— iionO/961 EXHIBIT F COMMITMENT FOR MUNICIPAL BOND INSURANCE G:\20241\2 \award res.wN F -1 Commitment for Municipal Bond Insurance Ambac Assurance Corporation c/o CT Corporation Systems 44 East Mifflin Street Madison, Wisconsin 53703 Administrative Office: One State Street Plaza New York, New York 10004 Issuer: VILLAGE OF TEQUESTA, FLORIDA Commitment Number: 16237 Commitment Date: February 25, 1998 Expiration Date: May 26, 1998 Bonds: $7,805,000 Water Revenue Bonds, Series 1998, dated Insurance premium: 0.280% of the total principal February 1, 1998 and maturing on January 1 in the years 2000 and interest due on the Bonds (Fitch IBCA, Inc., through 2029, both inclusive. Moody's Investors Service and Standard & Poor's Ratings Services assess separate rating fees which are payable directly to them. Each such rating agency will bill separately and all questions regarding the payment of such fees must be addressed to the applicable agency.) Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company hereby commits to issue a Municipal Bond Insurance Policy (the "Policy") relating to the above - described debt obligations (the "Bonds "), substantially in the form imprinted in this Commitment, subject to the terms and conditions contained herein or added hereto (see conditions set forth on page 2 and following). To keep this Commitment in effect after the expiration date set forth above, a request for renewal must be submitted to Ambac prior to such expiration date. Ambac reserves the right to refuse wholly or in part to grant a renewal. The Municipal Bond Insurance Policy shall be issued if the following conditions are satisfied: 1. The documents to be executed and delivered in connection with the issuance and sale of the Bonds shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary in order to make the information contained therein not misleading. 2. No event shall occur which would permit any purchaser of the Bonds, otherwise required, not to be required to purchase the Bonds on the date scheduled for the issuance and delivery thereof. 3. There shall be no material change in or affecting the Bonds (including, without limitation, the security for the Bonds) or the financing documents or the official statement (or any similar disclosure document) to be executed and delivered in connection with the issuance and sale of the Bonds from the descriptions thereof heretofore provided to Ambac. 4. The Bonds shall contain no reference to Ambac, the Policy or the municipal bond insurance evidenced thereby except as may be approved by Ambac. 5. Ambac shall be provided with: (a) Executed copies of all financing documents, the official statement (or any similar disclosure document) and the various legal opinions delivered in connection with the issuance and sale of the Bonds, including, without limitation, the unqualified approving opinion of bond counsel rendered by a law firm acceptable to Ambac. The form of Bond Counsel's approving opinion shall also indicate, if applicable, that the Bonds are exempt from federal income taxation, that the issuer must comply with certain covenants under and pursuant to the new tax law and that the issuer has the legal power to comply with such covenants. Such opinion of bond counsel shall be addressed to Ambac or, in lieu thereof, a letter shall be provided to Ambac to the effect that Ambac may rely on such opinion as if it were addressed to Ambac. (b) A letter from bond counsel or counsel to the purchaser or otherwise from another person acceptable to Ambac to the effect that the financing documents, the official statement (or any similar disclosure document) and the various legal opinions executed and delivered in connection with the issuance and sale of the Bonds are substantially in the forms theretofore submitted to Ambac for review, with only such amendments, modifications or deletions as approved by Ambac. (c) A certified or cashier's check for or evidence of wire transfer of an amount equal to the insurance premium at the time of the issuance and delivery of the Bonds. If the amount of premium exceeds $100,000.00, payment must be made by federal funds wire transfer. 6. Unless expressly waived in whole or in part by Ambac, the financing documents and the Official Statement shall contain (a) the terms and provisions provided in the Ambac Assurance STANDARD PACKAGE transmitted herewith, and (b) any additional oral or written provisions or comments submitted by Ambac. 7. Ambac shall receive a copy of any insurance policy, surety bond, guaranty or indemnification or any other policy, contract or agreement which provides for payment of all or any portion of the debt, the costs of reconstruction, the loss of business income or in any way secures, ensures or enhances the income stream anticipated to pay the bonds. 8. Any provisions or requirements of the Purchase Contract or Bond Purchase Agreement referencing Ambac must be sent to the attention of Danielle Brackett not less than five (5) business days prior to closing. If such provisions or requirements are not received within that time, compliance may not be possible. o Author' Authorizep Offict EXHIBIT G COMMITMENT FOR SURETY BOND G:\20241\2\award res.wpd G -2 AMBAC ASSURANCE CORPORATION — COMMITMENT FOR SURETY BOND Issuer: VILLAGE OF TEQUESTA, FLORIDA Commitment Number: SB16238 Date of Commitment: February 25, 1998 Expiration Date: May 26, 1998 Premium: 2.50% of the Debt Service Reserve Bonds: $7,805,000* Water Revenue Bonds, Series 1998, dated Fund Requirement February 1, 1998 and maturing on January 1 2029. Surety Bond Amount: $521,635* Ambac Assurance Corporation ( "Ambac" or " Ambac Assurance "), A Wisconsin Stock Insurance Company, hereby commits to issue a Surety Bond (the "Commitment ") relating to the Debt Service Reserve Fund for the above - described debt obligations (the "Bonds "), substantially in the form attached hereto, subject to the terms and conditions contained herein or added hereto (see conditions set forth herein). To extend this Commitment after the expiration date set forth above, an oral (subsequently confirmed in writing) or written request for renewal must be submitted to Ambac at least one business day prior to such expiration date. Ambac reserves the right to refuse to grant a renewal or may renew this Commitment subject to additional terms and conditions. The Surety Bond (the "Surety") shall be issued if the following conditions are satisfied: 1. Ambac shall receive an opinion of counsel or a certificate of an officer of the Issuer or ultimate obligor stating that the information supplied to Ambac in order to obtain the Surety and the documents to be executed and delivered in connection with the issuance and sale of the Bonds do not contain any untrue or misleading statement of a material fact and do not fail to state a material fact required to be stated therein or necessary in order to make the information contained therein not misleading. 2. No event shall occur which would permit any purchaser of the Bonds, otherwise required, not to be required to purchase the Bonds on the date scheduled for the issuance and delivery thereof. 3. There shall be no material change in or affecting the Bonds, the Issuer or ultimate obligor (including, but not limited to, the security for the Bonds), the Official Statement, if any (or any similar disclosure document), including any financial statements therein contained, the financing documents or any legal opinions to be executed and delivered in connection with the issuance and sale of the Bonds, or any other information submitted to Ambac in order to obtain the Surety, from the descriptions thereof provided to Ambac at any time prior to the issuance of the Bonds and there shall not have occurred or come to the attention of the issuer or purchaser any material change of fact or law adverse to the interests of Ambac, unless approved by Ambac in writing *(subject to change with Ambac approve) 4. Unless expressly waived in whole or in part by Ambac, the financing documents shall contain a) the terms and provisions provided in the Ambac STANDARD PACKAGE transmitted herewith, and b) any provisions or comments given orally by Ambac. 5. AMBAC will prepare, and the Issuer will execute, a Guaranty Agreement in the form (with such revisions as AMBAC and the Issuer agree to) contained in the Standard Package. 6. No later than five (5) business days prior to closing, Ambac shall be provided with: (a) proposed copies of all financing documents, and (b) the proposed official statement (or any similar disclosure document); and (c) the proposed various legal opinions delivered in connection with the issuance and sale of the Bonds, including, without limitation, the unqualified approving opinion of bond counsel rendered by a law firm acceptable to Ambac. The form of bond counsel's approving opinion must be acceptable to Ambac. The form of bond counsel's approving opinion shall indicate that the Issuer must comply with certain covenants under and pursuant to the Internal Revenue Code of 1986, as amended and that the Issuer has the legal power to comply with such covenants. Ambac shall also be provided with executed copies of all financing documents, including but not limited to the Official Statement (or any similar disclosure document) and the various legal opinions rendered. The executed opinion of bond counsel shall be addressed to Ambac or in lieu thereof, a letter shall be provided to Ambac to the effect that Ambac may rely on such opinion as if it were addressed to Ambac and such letter shall be delivered with an executed opinion; and (d) any provisions of the Purchase Contract or Bond Purchase Agreement referencing Ambac or the issuer of the Surety in general. If such provisions are not received in a timely manner or if provisions are inserted in the Purchase Contract or Bond Purchase Agreement without Ambac Assurance's knowledge, compliance with such provisions may not be possible; and (e) a letter from bond counsel or counsel to the purchaser or otherwise from another counsel acceptable to Ambac to the effect that the financing documents, the Official Statement (or any similar disclosure document) and the various legal opinions executed and delivered in connection with the issuance and sale of the Bonds, are substantially in the forms previously submitted to Ambac for review, with only such amendments, modifications or deletions as may be approved by Ambac; and (f) a copy of any insurance policy, surety bond, guaranty or indemnification or any other policy, contract or agreement which provides for payment of all or any portion of the debt, the costs of reconstruction, the loss of business income or in any way secures, ensures or enhances the income stream anticipated to pay the Bonds; and , (g) a certified or cashier's check for or evidence of wire transfer of an amount equal to the payment for the Surety at the time of the issuance and delivery of the Bonds. Wire transfer shall be used for any payment for the Surety in an amount greater than $100,000; and (h) the final debt service schedule. 2 7. Ambac Assurance must receive, at least five (5) business days prior to closing, the escrow agreement, in form and substance acceptable to Ambac, for the complete defeasance of the applicable Bonds (the "Prior Bonds "). A thorized Offic r 3 [6. Redemption notices shall be sent to Cede & Co. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures. DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC account.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. -ii- 4. Unless expressly waived in whole or in part by Ambac, the financing documents shall contain a) the terms and provisions provided in the Ambac STANDARD PACKAGE transmitted herewith, and b) any provisions or comments given orally by Ambac. 5. AMBAC will prepare, and the Issuer will execute, a Guaranty Agreement in the form (with such revisions as AMBAC and the Issuer agree to) contained in the Standard Package. 6. No later than five (5) business days prior to closing, Ambac shall be provided with: (a) proposed copies of all financing documents, and (b) the proposed official statement (or any similar disclosure document); and (c) the proposed various legal opinions delivered in connection with the issuance and sale of the Bonds, including, without limitation, the unqualified approving opinion of bond counsel rendered by a law firm acceptable to Ambac. The form of bond counsel's approving opinion must be acceptable to Ambac. The form of bond counsel's approving opinion shall indicate that the Issuer must comply with certain covenants under and pursuant to the Internal Revenue Code of 1986, as amended and that the Issuer has the legal power to comply with such covenants. Ambac shall also be provided with executed copies of all financing documents, including but not limited to the Official Statement (or any similar disclosure document) and the various legal opinions rendered. The executed opinion of bond counsel shall be addressed to Ambac or in lieu thereof, a letter shall be provided to Ambac to the effect that Ambac may rely on such opinion as if it were addressed to Ambac and such letter shall be delivered with an executed opinion; and (d) any provisions of the Purchase Contract or Bond Purchase Agreement referencing Ambac or the issuer of the Surety in general. If such provisions are not received in a timely manner or if provisions are inserted in the Purchase Contract or Bond Purchase Agreement without Ambac Assurance's knowledge, compliance with such provisions may not be possible; and (e) a letter from bond counsel or counsel to the purchaser or otherwise from another counsel acceptable to Ambac to the effect that the financing documents, the Official Statement (or any similar disclosure document) and the various legal opinions executed and delivered in connection with the issuance and sale of the Bonds, are substantially in the forms previously submitted to Ambac for review, with only such amendments, modifications or deletions as may be approved by Ambac; and (f) a copy of any insurance policy, surety bond, guaranty or indemnification or any other policy, contract or agreement which provides for payment of all or any portion of the debt, the costs of reconstruction, the loss of business income or in any way secures, ensures or enhances the income stream anticipated to pay the Bonds; and , (g) a certified or cashier's check for or evidence of wire transfer of an amount equal to the payment for the Surety at the time of the issuance and delivery of the Bonds. Wire transfer shall be used for any payment for the Surety in an amount greater than $100,000; and (h) the final debt service schedule. 2 7. Ambac Assurance must receive, at least five (5) business days prior to closing, the escrow agreement, in form and substance acceptable to Ambac, for the complete defeasance of the applicable Bonds (the "Prior Bonds "). A thorized Offic r 3 [6. Redemption notices shall be sent to Cede & Co. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). S. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulator requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase \%ill be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC account.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. -ii-