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establish, levy and collect rates, charges and fees as described in APPENDIX 3, in amounts <br /> sufficient to pay this loan as required by the terms of this CONTRACT and the PROMISSORY <br /> NOTE, to cover all expenditures for operation and maintenance and emergency repair <br /> services, and to maintain adequate debt service reserves, including obtaining voter <br /> approval, if necessary, of increases in the BORROWER'S rate schedule or taxes, if <br /> applicable. <br /> d. Debt Service Reserve Account or Fund. To establish and maintain the debt service <br /> reserve account or fund, the BORROWER shall deposit an amount equal to one-tenth of an <br /> annual payment into its debt service reserve account or fund on the due date of its first <br /> annual loan payment and annually thereafter for the first ten years of repayment of this loan. <br /> In the event that the BORROWER applies funds from this account to repayment of the loan, <br /> the BORROWER shall replenish the account within ninety (90) days of withdrawal of the <br /> funds. The debt service reserve account or fund requirement is in effect until the loan is <br /> paid in full. <br /> e. Additional Debts or Bonds. The BORROWER shall not issue any indebtedness payable <br /> from the PLEDGED REVENUES and having a lien thereon which is superior to the lien of this <br /> loan. The BORROWER may issue parity debt only with the prior written approval of the <br /> CWCB, provided that: <br /> i. The BORROWER is currently and at the time of the issuance of the parity debt in substantial <br /> compliance with all of the obligations of this CONTRACT, including, but not limited to, being <br /> current on the annual payments due under this CONTRACT and in the accumulation of all <br /> amounts then required to be accumulated in the BORROWER'S debt service reserve fund; <br /> ii. The BORROWER provides to the CWCB a Parity Certificate from an independent certified <br /> public accountant certifying that, based on an analysis of the BORROWER'S revenues, for <br /> 12 consecutive months out of the 18 months immediately preceding the date of issuance <br /> of such parity debt, the BORROWER'S revenues are sufficient to pay its annual operating <br /> and maintenance expenses, annual debt service on all outstanding indebtedness having a <br /> lien on the pledged revenues, including this loan, the annual debt service on the proposed <br /> indebtedness to be issued, and all required deposits to any reserve funds required by this <br /> CONTRACT or by the lender(s) of any indebtedness having a lien on the pledged revenues. <br /> The analysis of revenues shall be based on the BORROWER'S current rate structure or the <br /> rate structure most recently adopted. No more than 10% of total revenues may originate <br /> from tap and/or connection fees. <br /> The BORROWER acknowledges and understands that any request for approval of the <br /> issuance of additional debt must be reviewed and approved by the CWCB prior to the <br /> issuance of any additional debt. <br /> f. Annual Statement of Debt Coverage. Each year during the term of this CONTRACT, the <br /> BORROWER shall submit to the CWCB an annual financial statement. <br /> 9. Pledged Revenues During Loan Repayment. The BORROWER shall not sell, convey, assign, <br /> grant, transfer, mortgage, pledge, encumber, or otherwise dispose of the PLEDGED REVENUES, so <br /> long as any of the principal, accrued interest, and late charges, if any, on this loan remain unpaid, <br /> without the prior written concurrence of the CWCB. <br /> Loan Contract C150408A <br /> Page 4 of 12 <br />