(A) Establishment. There is created and established a sinking fund for the payment of the principal of and interest on revenue bonds which by their terms are payable from the net revenues of the utility, and the payment of any fiscal agency charges in connection with the payment of obligations and interest, which fund shall be designated (with additional designations as deemed useful by the officer or official establishing the account) as the Sewage Utility Sinking Fund (the “Sinking Fund”). There shall be set aside and deposited in the Sinking Fund, as available, and as hereinafter provided, a sufficient amount of the net revenues of the utility to meet the requirements of the Bond and Interest Account and the Debt Service Reserve Account hereby created in the Sinking Fund. These payments shall continue until the balance in the Bond and Interest Account, plus the balance in the Debt Service Reserve Account hereinafter described, equals the amount needed to redeem all the then outstanding obligations of the issuer.
(B) Bond and Interest Account.
(1) There shall be credited, on the last day of each calendar month, to the Bond and Interest Account an amount of net revenues equal to the sum of:
(a) One-sixth of the interest on all then outstanding obligations payable from net revenues on the then next succeeding interest payment date (except with respect to the first interest payment date, the fraction credited on a monthly basis shall be sufficient to assure that funds will be available to make the interest payment); and
(b) At least one-twelfth of the principal (provided, if the bonds are issued with scheduled principal payments due on January 1 and July 1 of each year, then in lieu of one-twelfth of the principal payment, the transfer shall be at least one-sixth of the principal payment) on all then outstanding obligations payable from net revenues of the utility payable from net revenues on the then next succeeding principal payment date (except with respect to the first principal payment date, the fraction credited on a monthly basis shall be sufficient to assure that funds will be available to make the principal payment), until the amount of interest and principal payable on the then next succeeding respective interest and principal payment dates shall have been so credited.
(2) There shall similarly be credited to the account the amount necessary to pay the bank fiscal agency charges for paying principal and interest on the obligations payable from net revenues of the utility as the same become payable.
(3) The issuer shall, from the sums deposited in the Sinking Fund and credited to the Bond and Interest Account, remit promptly to the registered owner and to the bank fiscal agency sufficient monies to pay the principal and interest on the due dates thereof together with the amount of bank fiscal agency charges.
(C) Debt Service Reserve Account.
(1) Following the issuance of the bonds, there shall be credited to and become a part of the Debt Service Reserve Account not less than the required monthly deposit or some higher amount as fixed by the issuer from the net revenues of the utility on the last day of each calendar month until the balance therein equals, but does not exceed, the lesser of:
(a) The maximum annual debt service on the obligations payable from net revenues of the utility;
(b) 125% of average annual debt service on the obligations payable from net revenues of the utility; or
(c) 10% of the proceeds of the obligations payable from net revenues of the utility (“reserve requirement”).
(2) The amount of the monthly deposits shall be equal in amount and sufficient in the aggregate to accumulate the reserve requirement within five years from the date of delivery of the obligations payable from net revenues of the utility. The balance within the Debt Service Reserve Account shall never exceed the reserve requirement.
(3) The Debt Service Reserve Account shall constitute the margin for safety and protection against default in the payment of principal of and interest on outstanding obligations payable from net revenues of the utility, and the monies in the Debt Service Reserve Account shall be used to pay current principal and interest on outstanding obligations payable from net revenues of the utility to the extent that monies in the Bond and Interest Account are insufficient for that purpose. Any deficiency in the balance maintained in the Debt Service Reserve Account shall be promptly made up from the next available net revenues remaining after credits into the Bond and Interest Account. In the event the money in the Debt Service Reserve Account are transferred to the Bond and Interest Account to pay principal and interest on outstanding obligations payable from net revenues of the utility, then this depletion of the balance in the Debt Service Reserve Account shall be made up from the next available net revenues after the credits into the Bond and Interest Account.
(4) Any monies in the Debt Service Reserve Account in excess of the reserve requirement shall be transferred to the Improvement Fund unless used for the prepayment of installments of principal on the then outstanding obligations payable from net revenues of the utility which are then callable or prepayable, or for the purchase of outstanding obligations payable from net revenues of the utility including accrued interest.
(5) For purposes of assuring compliance with the foregoing provisions, the Debt Service Reserve Account investments shall be valued at fair market value and marked to market at least once per year. No such investment shall have a final maturity extending beyond five years except as approved by the insurer.
(1987 Code, § 9-97) (Ord. passed 6-26-2000)