Contract analysis

Section 1.01 — Defined Terms As used in this Tax Regulatory Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Indenture or the First Supplemental Indenture, as applicable. "Bonds" means the $220,000,000 aggregate principal amount of Cascadia State Infrastructure Authority Water Treatment Reven

Section 1.02 — Rules of Construction For purposes of this Tax Regulatory Agreement, the following rules of construction shall apply: (a) References to any section of the Code shall include the applicable Treasury Regulations promulgated or proposed thereunder, as well as any applicable revenue rulings, revenue procedures, notices, and other official guidance published by the IRS, in each case as in effect on the date

ARTICLE II — REPRESENTATIONS AND CERTIFICATIONS

Section 2.01 — Issuer Status and Authority The Issuer hereby represents and certifies as follows: (a) CSIA is a governmental instrumentality and public body corporate of the State of Washington, duly created, organized, and validly existing pursuant to Chapter 43.160A RCW. CSIA is not described in Section 501(c)(3) of the Code, and the Bonds are governmental bonds within the meaning of Section 141 of the Code and are

Section 2.02 — Description of the Bonds The Issuer hereby represents and certifies the following with respect to the Bonds: (a) Aggregate Principal Amount. The aggregate principal amount of the Bonds is $220,000,000. (b) Interest Rate. The Bonds bear interest at a fixed rate of 3.25% per annum (325 basis points), payable semiannually. (c) Maturity Date. The Bonds mature on October 1, 2053, representing a 30-year fina

Section 2.03 — Issue Price Certification The Issuer hereby represents and certifies the following with respect to the Issue Price of the Bonds: (a) The Bonds were offered to the public in a bona fide initial offering at an issue price of 99.25% of par value, reflecting an Original Issue discount of 0.75%, or $1,650,000. The Issue Price of the Bonds, as determined under Sections 1273 and 1274 of the Code and Treasury

Section 2.04 — Purpose of Bonds / Description of Project The Issuer hereby represents and certifies the following with respect to the purpose of the Bonds and the Project: (a) The proceeds of the Bonds will be used solely to finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility ("PSRAWTF" or the "Project"), as more particularly described in Exhibit B hereto.

Section 2.05 — Sources and Uses of Funds The Issuer hereby represents and certifies that the sources and uses of funds in connection with the issuance of the Bonds are as set forth in this Section 2.05 and as more particularly described in Exhibit A hereto. (a) Sources of Funds: (b) Uses of Funds: (c) Reconciliation: Net bond proceeds allocated to the Project Fund ($215,490,000) plus Costs of Issuance ($1,870,000) eq

Section 2.06 — No Prior Bonds Refunded The Issuer hereby represents and certifies that the Series 2023A Bonds are new-money bonds issued for the purpose of financing the Project. No prior bonds, notes, or other obligations of the Issuer or any other entity are being refunded, defeased, or retired with any portion of the proceeds of the Bonds. No proceeds of the Bonds will be used, directly or indirectly, to pay or re

ARTICLE III — PRIVATE ACTIVITY BOND LIMITATIONS

Section 3.01 — General Private Activity Bond Tests (§ 141) (a) The Bonds are not "private activity bonds" within the meaning of Section 141(a) of the Code. The Issuer represents and certifies that the Bonds satisfy both the private business use test and the private security or payment test set forth in Section 141(b) of the Code, as described in this Article III. (b) Under the private business use test of Section 141

Section 3.02 — Private Business Use Analysis The Issuer has undertaken the following analysis of the expected use of the bond-financed facilities with respect to the private business use test: (a) Ownership. The Project (PSRAWTF) will be owned by CSIA, a governmental instrumentality and public body corporate of the State of Washington. Title to all real property, improvements, and equipment constituting the Project w

Section 3.03 — Private Loan Limitation (§ 141(c)) (a) Under Section 141(c) of the Code, an issue is a private activity bond issue if the amount of proceeds of the issue that are to be used (directly or indirectly) to make or finance loans to persons other than governmental units exceeds the lesser of (i) 5% of such proceeds or (ii) $5,000,000. (b) The Issuer represents and certifies that no portion of the proceeds of

Section 3.04 — Change in Use; Remedial Actions (a) If at any time during the term of the Bonds the Issuer becomes aware that the actual or expected use of the bond-financed facilities has changed, or is reasonably expected to change, in a manner that would cause the private business use of such facilities to exceed 10% of the proceeds of the Bonds, or would cause the private loan financing limitation of Section 141(c

ARTICLE IV — ARBITRAGE AND YIELD RESTRICTION

Section 4.01 — Yield on the Bonds (a) The Yield on the Bonds shall be computed in accordance with Treasury Regulations Section 1.148-4, using the economic accrual method, and shall be the discount rate that, when used in computing the present value of all unconditionally payable payments of principal and interest on the Bonds (and all payments of qualified administrative costs treated as payments of interest), produc

Section 4.02 — General Arbitrage Certification (§ 148(a)) (a) The Issuer hereby certifies that, on the basis of the facts, estimates, and circumstances in existence on the date hereof, the Issuer reasonably expects that the proceeds of the Bonds will not be used, directly or indirectly, to acquire higher-yielding investments (i.e., investments with a yield materially higher than the Yield on the Bonds) except as perm

Section 4.03 — Temporary Period Exception — Construction Proceeds (§ 148(c)(2); Treas. Reg. § 1.148-2(e)(2)) (a) Available proceeds deposited in the Project Fund in the amount of $215,490,000 are eligible for the 3-year temporary period for construction proceeds under Treasury Regulations Section 1.148-2(e)(2). The temporary period commences on the Closing Date (October 24, 2023) and expires on October 24, 2026 (thre

Section 4.04 — Temporary Period — Costs of Issuance (a) Costs of issuance proceeds in the amount of $1,870,000, deposited in the Costs of Issuance Fund, are eligible for a 13-month temporary period under Treasury Regulations Section 1.148-2(e)(2)(i). (b) The Issuer reasonably expects that all amounts deposited in the Costs of Issuance Fund will be expended to pay Costs of Issuance of the Bonds within 13 months after

Section 4.05 — Temporary Period — Capitalized Interest Fund (a) Amounts deposited in the Capitalized Interest Fund in the amount of $4,510,000 qualify for the temporary period applicable to proceeds that are reasonably expected to be used to pay interest on the Bonds during the construction period, under Treasury Regulations Section 1.148-2(e)(2). (b) These amounts will be applied to pay interest on the Bonds during

Section 4.06 — Bona Fide Debt Service Fund Exception (a) Amounts on deposit in the Bond Fund (also referred to as the Debt Service Fund) established under Article V of the Indenture are reasonably expected to be used within 13 months after the date of deposit to pay debt service on the Bonds. The Bond Fund qualifies as a "bona fide debt service fund" under Treasury Regulations Section 1.148-1(b), because it is establ

Section 4.07 — Reasonably Required Reserve or Replacement Fund — Debt Service Reserve Fund (§ 148(d)) (a) The Debt Service Reserve Fund requirement under the Indenture is satisfied entirely by the Surety Policy (Policy No. OG-2023-MUN-4718) issued by Olympia Guaranty Insurance Corp. in the amount of $11,610,000. This amount is equal to the maximum annual debt service on the Series 2023A Bonds. (b) The Surety Policy i

Section 4.08 — Minor Portion Exception Under Treasury Regulations Section 1.148-2(g), the Issuer may invest an amount of Gross Proceeds not exceeding the "minor portion" at an unrestricted yield. The minor portion is equal to the lesser of (a) 5% of the sale proceeds of the Bonds and (b) $100,000. Because 5% of the sale proceeds ($217,360,000 × 5% = $10,868,000) exceeds $100,000, the minor portion is $100,000. The Is

Section 4.09 — Yield Restriction on Nonpurpose Investments After Temporary Periods (a) After the expiration of any applicable temporary period described in Sections 4.03, 4.04, or 4.05 hereof, amounts constituting Gross Proceeds of the Bonds that are invested in Nonpurpose Investments must be invested at a yield not exceeding the Yield on the Bonds plus one-eighth of one percentage point (1/8 of 1% or 12.5 basis poin

Section 4.10 — No Hedge Identification (a) As of the date hereof, the Issuer has not entered into, and does not expect to enter into, any interest-rate swap, cap, collar, floor, swaption, forward contract, or other contract that would constitute a "qualified hedge" or a "hedge" with respect to the Bonds under Treasury Regulations Section 1.148-4(h). (b) Because the Bonds bear a fixed rate of interest, the Issuer does

Section 5.01 — General Rebate Requirement (§ 148(f)) (a) The Issuer acknowledges its obligation under Section 148(f) of the Code and Treasury Regulations Section 1.148-3 to rebate to the United States of America any arbitrage profits earned on Nonpurpose Investments of Gross Proceeds of the Bonds in excess of the amount that would have been earned if such investments had been invested at a yield equal to the Yield on

Section 5.02 — Computation Dates The Rebate Amount shall be computed as of the following Computation Dates: (a) First Computation Date: October 24, 2028 (the fifth anniversary of the Closing Date). (b) Subsequent Computation Dates: October 24, 2033; October 24, 2038; October 24, 2043; October 24, 2048; and October 24, 2053 (each being the fifth anniversary of the preceding Computation Date). (c) Final Computation Dat

Section 5.03 — Spending Exceptions to Rebate The Issuer may qualify for one or more of the following spending exceptions to the arbitrage rebate requirement under Treasury Regulations Section 1.148-7: (a) 6-Month Spending Exception (§ 1.148-7(c)). Under this exception, no rebate is required if 100% of the Gross Proceeds of the Bonds are spent for their governmental purpose within six months of the Closing Date. The I

Section 5.04 — Rebate Fund (a) The Trustee shall establish and maintain a Rebate Fund under the Indenture for the purpose of accumulating and disbursing amounts necessary to satisfy the Issuer's obligation to pay the Rebate Amount to the United States. (b) The Issuer shall deposit, or cause to be deposited, amounts into the Rebate Fund from time to time as necessary to ensure that the Rebate Fund contains an amount a

Section 5.05 — Retention of Rebate Analyst (a) The Issuer shall engage a qualified rebate analyst to compute the Rebate Amount as of each Computation Date. The rebate analyst may be an independent certified public accounting firm, Bond Counsel, or a recognized arbitrage rebate specialist with experience in computing rebate amounts for tax-exempt bond issues. (b) As of the date hereof, the Issuer anticipates that it m

ARTICLE VI — USE OF PROCEEDS COVENANTS

Section 6.01 — Governmental Use Covenant (a) The Issuer covenants that 100% of the proceeds of the Bonds will be used for governmental purposes, specifically the design, construction, and commissioning of the PSRAWTF, which is a governmental water-treatment facility owned by CSIA and operated for the benefit of governmental entities (the 14 Participating Districts). (b) All facilities designed, constructed, acquired,

Section 6.02 — No Federal Guarantee (§ 149(b)) (a) The Bonds are not "federally guaranteed" within the meaning of Section 149(b) of the Code. No portion of the payment of principal of or interest on the Bonds is directly or indirectly guaranteed (in whole or in part) by the United States or any agency or instrumentality thereof, including, without limitation, the Federal Housing Administration, the Government Nationa