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for such purpose,Net Revenues and other legally available moneys shall be credited to the Note Account <br /> prior to substantial completion of the Project in order to make said payment when due. <br /> d) Reserve Account. <br /> i. Use ofMoneys in the Reserve Account. Moneys in the Reserve Account shall be used,if necessary, <br /> only to prevent a default in the payment.oftho principal of or interest on the Promissory Note on <br /> any Payment Date and the Reserve Account is hereby pledged to the payment of the Promissory <br /> Note. In the event the amounts credited to the Note Account are insufficient to pay the principal <br /> of or interest on Promissory Note when due,the City shall transfer from the Reserve Account to <br /> the Note Account an amount which, when combined with moneys in the Note Account will be <br /> sufficient to make such payments when due. <br /> ii. Funding and Maintenance of Required Reserve Amount. Commencing with the first Payment <br /> Date,the City shall annually credit an amount equal to one-tenth of the Required Reserve Amount <br /> on or before each Payment Date until such time as the amount credited thereto is equal to the <br /> Required Reserve Amount(i.e.,the Reserve Account is to be fully funded within ten years from <br /> substantial completion of the Project). In the event that moneys from the Reserve Account are <br /> transferred to the Note Account as provided in paragraph(i)of this Subsection,such amount shall <br /> be replenished within 90 days from the date of such transfer. Moneys credited to the Reserve <br /> Account may be invested or deposited in lawful securities or obligations and all interest income <br /> from the investment or reinvestment of moneys credited to the Reserve Account shall be credited <br /> to the Reserve Account until the amount therein is equal to the Required Reserve Amount,at which <br /> time as the balance of the Reserve Account shall be maintained in the Required Reserve Amount <br /> and such interest income shall be credited to the Note Account. <br /> e) Audits. At least once a year in the time and manner provided by law,the City will cause an audit to <br /> be performed of the records relating to the revenues and expenditures of the System. Such audit may <br /> be made part of and included within the general audit of the City, and made at the same time as the <br /> general audit. In addition,at least once a year in the time and manner provided by law,the City will <br /> cause a budget to be prepared and adopted. Copies of the budget and the audit will be filed and <br /> recorded in the places,time and manner provided by law. The City covenants to submit a copy of the <br /> annual audit and certificate of debt service coverage to the CWCB as provided in provision A(8)(f)of <br /> the Loan Contract. <br /> Section 5. Security for Payment of the Promissory Note;Flow of funds. <br /> a) Pledge of Net Revenues. The Promissory Note shall constitute an irrevocable and first lien <br /> upon the Net Revenue,but not necessarily an exclusive first lien. The Net Revenue is hereby <br /> pledged to the payment of the Promissory Note on a parity of the lien of the Parity Lien <br /> Obligations. The creation, perfection, enforcement and priority of the pledge of revenues to <br /> secure or pay the Promissory Note shall be governed by Section 11-57-208, C.R.S. and this <br /> Ordinance. The Net Revenue shall immediately be subject to the lien of such pledge without <br /> any physical delivery,filing or further act. <br /> b) Flow of Funds. The City shall credit to the Water Activity Enterprise Fund all Gross Revenue <br /> immediately upon receipt. The City shall pay from the Water Activity Enterprise Fund all <br /> Operation and Maintenance Expenses as they become due and payable. After such payment <br /> or the allocation of Gross Revenue to such payment,the City shall apply the Net Revenue in <br /> the following order of priority: <br /> FIRST, to the credit of the Note Account, the amounts required by the Section hereof <br /> entitled"Fund and Accounts-Note Account",and to the credit of any other account or subaccount <br /> which has been or will be established for the payment of interest on and principal of the Parity <br /> Lien Obligations and any Future Parity Obligations; <br /> SECOND,to the credit of the Reserve Account,the amounts required by the Section hereof <br /> entitled "Fund and Accounts - Reserve Account" and to the credit of any other account or <br /> subaccount which has been or will be established as a reserve account for the payment the Parity <br /> Lien Obligations and any Future Parity Obligations; <br /> THIRD,to the credit of any other fund or account hereafter established for the payment of <br /> Subordinate Lien Obligations,including any sinking fund,reserve fund or similar fund or account <br /> established therefor, the amounts required by the resolution or other enactment authorizing <br /> issuance of the Subordinate Lien Obligations;and <br /> APPEINDIX 5 <br />