BOND INDENTURE
between
CASCADIA STATE INFRASTRUCTURE AUTHORITY
as Issuer
and
PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION
as Trustee
Dated as of October 24, 2023
Securing
Cascadia State Infrastructure Authority Water Treatment Revenue Bonds
Prepared by: Calderwood & Harkness LLP 1420 Fifth Avenue, Suite 3600 Seattle, WA 98101
CONFIDENTIAL — EXECUTION VERSION
TABLE OF CONTENTS
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BOND INDENTURE
THIS BOND INDENTURE (this "Indenture"), dated as of October 24, 2023, is by and between CASCADIA STATE INFRASTRUCTURE AUTHORITY, a governmental instrumentality and public body corporate of the State of Washington (the "Issuer" or "CSIA"), and PACIFIC NORTHWEST TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States (the "Trustee" or "PNTC").
RECITALS
WHEREAS, Cascadia State Infrastructure Authority ("CSIA" or the "Issuer") is a Washington State governmental instrumentality and public body corporate, duly created and existing under and pursuant to Chapter 43.160A of the Revised Code of Washington (the "Act"), with its principal office located at 1100 Capitol Way South, Suite 400, Olympia, Washington 98501, and has been vested with all powers necessary and convenient to carry out and effectuate the purposes and provisions of the Act, including the power to issue revenue bonds for the financing and refinancing of water treatment infrastructure improvements within the State of Washington; and
WHEREAS, the Act authorizes the Issuer to issue revenue bonds for the purpose of financing water treatment infrastructure improvements, including the acquisition, construction, equipping, and commissioning of water treatment facilities, and to pledge revenues derived from its water treatment system as security for the payment of such bonds; and
WHEREAS, the Board of Commissioners of the Issuer (the "Board"), chaired by Commissioner Lorraine Chu, duly adopted Resolution No. 2023-014 on May 9, 2023 (the "Resolution"), authorizing the issuance of revenue bonds in one or more series for the purpose of financing the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility, and authorizing the execution and delivery of this Bond Indenture and related documents in connection therewith; and
WHEREAS, the Issuer desires to issue its Cascadia State Infrastructure Authority Water Treatment Revenue Bonds (the "Bonds") in one or more series pursuant to this Indenture and one or more Supplemental Indentures, the first series of which shall be designated the "Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)" (the "Series 2023A Bonds"), in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000), for the purpose of providing funds sufficient, together with other available funds of the Issuer, to finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility and to pay costs of issuance associated with the Series 2023A Bonds; and
WHEREAS, Pacific Northwest Trust Company, National Association ("PNTC" or the "Trustee"), a national banking association organized and existing under the laws of the United States, with its principal corporate trust office located at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101, has agreed to accept the trusts created by this Indenture and to perform the duties and obligations of Trustee hereunder upon the terms and conditions set forth herein; and
WHEREAS, the Bonds will be secured by a pledge of Net Revenues (as defined herein) derived from the Issuer's water treatment system (the "System"), which pledge shall be on a parity basis with any Outstanding Parity Obligations, all in accordance with and subject to the terms and provisions of this Indenture and the Revenue Pledge Agreement dated as of October 24, 2023 between the Issuer and the Trustee; and
WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as provided in this Indenture, the valid and binding special, limited revenue obligations of the Issuer, entitled to the benefit of the trusts and security created by this Indenture, have been done and performed, and the creation, execution, and delivery of this Indenture and the issuance hereunder of the Bonds, subject to the terms hereof, have in all respects been duly authorized;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the holders thereof from time to time, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the payment of the principal of and premium, if any, and interest on the Bonds according to their tenor and effect, and to secure the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, the Issuer and the Trustee do hereby agree as follows:
GRANTING CLAUSES
The Issuer hereby irrevocably grants, pledges, assigns, and conveys to the Trustee, and its successors in trust, for the benefit and security of the holders from time to time of the Bonds issued and Outstanding under this Indenture, subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, the following (collectively, the "Trust Estate"):
GRANTING CLAUSE FIRST
All Net Revenues (as defined in Article I hereof) pledged pursuant to the Revenue Pledge Agreement dated as of October 24, 2023 between the Issuer and the Trustee, including but not limited to all Wholesale Water Treatment Service Charges, Connection Fees, and investment earnings on pledged funds, as and when received by the Issuer, subject to the prior payment of Operation and Maintenance Expenses as provided in Section 5.01 hereof.
GRANTING CLAUSE SECOND
All moneys and securities from time to time held in any of the following funds and accounts established hereunder, including all sub-accounts created therein, and all investment earnings thereon:
(1) the Revenue Fund established in Section 5.01;
(2) the Bond Fund, including the Interest Account and the Principal Account, established in Section 5.02;
(3) the Debt Service Reserve Fund established in Section 5.03;
(4) the Project Fund established in Section 5.04;
(5) the Capitalized Interest Fund established in Section 5.05; and
(6) such other funds and accounts as may be established pursuant to this Indenture or any Supplemental Indenture;
provided, however, that the Rebate Fund established in Section 5.07 and amounts held therein shall not be part of the Trust Estate and shall not be pledged to the holders of the Bonds.
GRANTING CLAUSE THIRD
All rights of the Issuer under this Indenture and under each Supplemental Indenture, including the right to receive all payments, revenues, and proceeds arising from the Trust Estate, subject to the provisions of this Indenture permitting application of funds for the purposes specified herein.
IN TRUST, nevertheless, upon the terms and trusts herein set forth, for the equal and ratable benefit and security of all present and future holders of Bonds from time to time issued and Outstanding under this Indenture and under any Supplemental Indenture, without privilege, priority, or distinction as to the lien or otherwise of any of the Bonds over any other of the Bonds, except as otherwise expressly provided herein.
PROVIDED, HOWEVER, that if the Issuer shall well and truly pay, or cause to be paid, the principal of and premium, if any, and interest on the Bonds due or to become due thereon, at the times and in the manner set forth therein and herein, according to the true intent and meaning thereof, or shall provide for the payment thereof as permitted by Article X hereof, and shall pay or cause to be paid all sums of money due or to become due to the Trustee hereunder in accordance with the terms and provisions hereof, then, upon such final payment or provision for payment, this Indenture and the rights hereby granted shall cease, determine, and become null and void; otherwise, this Indenture shall be and remain in full force and effect.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated, and delivered, and all of the Trust Estate is to be dealt with and disposed of, under, upon, and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses, and purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective holders from time to time of the Bonds, as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Definitions
In addition to terms defined elsewhere in this Indenture, the following terms shall have the meanings set forth below when used in this Indenture, unless the context clearly requires otherwise. Terms defined in the singular shall include the plural and vice versa.
"Act" means Chapter 43.160A of the Revised Code of Washington, as amended, supplemented, or superseded from time to time.
"Additional Bonds" means any Bonds issued pursuant to Article III hereof on a parity with the Series 2023A Bonds and all other Outstanding Parity Obligations.
"Authorized Denominations" means, with respect to the Series 2023A Bonds, denominations of Five Thousand Dollars ($5,000) or any integral multiple thereof, and with respect to any Series of Additional Bonds, such denominations as may be specified in the applicable Supplemental Indenture.
"Authorized Officer" means the Executive Director of the Issuer (currently Harold K. Nakamura) or the Chief Financial Officer of the Issuer (currently Denise R. Whitford), or any other officer or employee of the Issuer designated as an Authorized Officer by resolution of the Board for purposes of this Indenture.
"Board" means the Board of Commissioners of the Issuer, currently chaired by Commissioner Lorraine Chu, being the governing body of the Issuer.
"Bond Counsel" means Pryor Crestfield LLP, 999 Third Avenue, Suite 4800, Seattle, Washington 98104, and Calderwood & Harkness LLP, 1420 Fifth Avenue, Suite 3600, Seattle, Washington 98101, serving as Co-Bond Counsel, or such other nationally recognized bond counsel as may be selected by the Issuer with the approval of the Trustee.
"Bond Fund" means the fund of that name established in Section 5.02 hereof.
"Bond Purchase Agreement" means the Bond Purchase Agreement dated August 30, 2023 between the Issuer and Meridian Capital Partners LLC, as representative of the Underwriters, pursuant to which the Underwriters have agreed to purchase the Series 2023A Bonds.
"Bonds" means the revenue bonds authorized to be issued under this Indenture and any Supplemental Indenture, including the Series 2023A Bonds and any Additional Bonds.
"Book-Entry System" means the system of registration in which physical Bond certificates are immobilized and ownership of the Bonds is maintained in book-entry form by DTC and its Participants, with transfers of beneficial ownership effected on the records of DTC and the DTC Participants pursuant to rules and procedures established by DTC.
"Business Day" means any day other than (a) a Saturday, (b) a Sunday, (c) a legal holiday in the State of Washington, (d) a legal holiday in New York, New York, or (e) any day on which banking institutions in either the State of Washington or New York, New York, are authorized or required by law, executive order, or governmental decree to close.
"Capitalized Interest Fund" means the sub-account within the Project Fund established in Section 5.05 hereof for the purpose of paying interest on the Series 2023A Bonds during the construction period of the Project.
"Code" means the Internal Revenue Code of 1986, as amended, and all regulations, rulings, and interpretive guidance issued thereunder or with respect thereto by the United States Department of the Treasury or the Internal Revenue Service.
"Connection Fees" means all fees and charges imposed by the Issuer upon any person, entity, or political subdivision for connection to the System, including new connection fees, capacity charges, and system development charges.
"Consulting Engineer" means an independent engineer or engineering firm of national reputation experienced in the design, construction, operation, and maintenance of water treatment facilities, retained by the Issuer for the purpose of providing reports, certificates, or opinions required by or permitted under this Indenture.
"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of October 24, 2023 between the Issuer and the Trustee, acting as Dissemination Agent, entered into for the purpose of enabling the Underwriters to comply with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
"Costs of Issuance" means all costs, fees, and expenses incurred or to be incurred in connection with the authorization, sale, issuance, and delivery of any Series of Bonds, including but not limited to legal fees of Bond Counsel, Issuer's Counsel, and Underwriters' counsel, fees and expenses of the Trustee, fees of the Rating Agencies, fees of the Municipal Advisor, printing and engraving costs, CUSIP Bureau fees, costs of verification reports, costs of preparation of official statements, and all other costs, fees, and expenses of a similar nature. The estimated Costs of Issuance for the Series 2023A Bonds are One Million Eight Hundred Seventy Thousand Dollars ($1,870,000).
"Costs of Issuance Fund" means the fund of that name established in Section 5.06 hereof.
"CUSIP" means the Committee on Uniform Securities Identification Procedures and the CUSIP Service Bureau operated by Standard & Poor's Global Market intelligence on behalf of the American Bankers Association. The CUSIP Base Number assigned to the Series 2023A Bonds is 148392.
"Dated Date" means, with respect to the Series 2023A Bonds, October 24, 2023, and with respect to any Additional Bonds, the date specified in the applicable Supplemental Indenture.
"Debt Service Reserve Fund" means the fund of that name established in Section 5.03 hereof.
"Debt Service Reserve Requirement" means, with respect to any Series of Bonds, the least of: (i) Maximum Annual Debt Service on such Series; (ii) one hundred twenty-five percent (125%) of average annual debt service on such Series; or (iii) ten percent (10%) of the original aggregate principal amount of such Series. The Debt Service Reserve Requirement for the Series 2023A Bonds is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000). The Debt Service Reserve Requirement may be satisfied by cash, Permitted Investments, a qualifying surety bond, or a qualifying insurance policy, or any combination thereof, as provided in Section 5.03 hereof.
"Defeasance Securities" means direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which are not subject to call or redemption prior to maturity.
"Design-Build Contract" means GMP Contract No. CSIA-DB-2023-001, dated March 10, 2023, between the Issuer and Northtide Environmental Engineering, Inc., as Design-Build Contractor, establishing a Guaranteed Maximum Price of One Hundred Ninety-Three Million Five Hundred Thousand Dollars ($193,500,000) for the design and construction of the Project.
"DTC" means The Depository Trust Company, 55 Water Street, New York, New York 10041, a limited-purpose trust company organized under the laws of the State of New York, or any successor securities depository.
"Escrow Agent" means Pacific Northwest Trust Company, National Association, in its capacity as escrow agent under the Escrow Deposit Agreement, or any successor thereto.
"Event of Default" means any event described in Section 9.01 hereof as constituting an Event of Default.
"Fiscal Year" means the twelve-month period commencing July 1 of each calendar year and ending June 30 of the succeeding calendar year, or such other twelve-month period as the Issuer may hereafter designate as its fiscal year by written notice to the Trustee.
"Gross Revenues" means all income, receipts, revenues, and moneys derived by the Issuer from the ownership, operation, and use of the System, including without limitation (a) all Wholesale Water Treatment Service Charges collected from the Participating Districts, (b) all Connection Fees, (c) all investment earnings on funds and accounts pledged hereunder, (d) all insurance and condemnation proceeds received with respect to the System (to the extent not required to be applied to the repair, restoration, or replacement of the System), and (e) all other fees, charges, rents, and revenues of every kind and character derived from the System. For the Fiscal Year ended June 30, 2022, Gross Revenues were Four Hundred Eighty-Nine Million Three Hundred Thousand Dollars ($489,300,000).
"Indenture" means this Bond Indenture, dated as of October 24, 2023, between the Issuer and the Trustee, as it may be supplemented, modified, or amended from time to time in accordance with the provisions hereof.
"Independent Auditor" means Hargrove & Associates CPAs, PLLC (Victoria L. Fong, engagement partner), or such successor independent certified public accounting firm as may be appointed by the Issuer for the purpose of auditing the financial statements of the Issuer.
"Interest Payment Date" means April 1 and October 1 of each year, commencing April 1, 2024, and with respect to any Additional Bonds, such dates as may be specified in the applicable Supplemental Indenture.
"Issuer" means the Cascadia State Infrastructure Authority, a governmental instrumentality and public body corporate of the State of Washington, created and existing under and pursuant to the Act, and any successor thereto.
"Maximum Annual Debt Service" or "MADS" means, as of any date of calculation, the greatest amount of aggregate annual debt service (principal and interest) payable in any current or future Fiscal Year on all Outstanding Bonds. For the Series 2023A Bonds alone (assuming level debt service), Maximum Annual Debt Service is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000).
"Municipal Advisor" means Clearfield Municipal Advisors LLC, or any successor municipal advisor retained by the Issuer.
"Net Revenues" means, for any period of determination, Gross Revenues for such period minus Operation and Maintenance Expenses for such period. For the Fiscal Year ended June 30, 2022, Net Revenues were Four Hundred Twelve Million Six Hundred Thousand Dollars ($412,600,000).
"NPDES Permit" means National Pollutant Discharge Elimination System Permit No. WA-004837-2, as modified and approved on January 6, 2023 by the Washington State Department of Ecology, and as may be further modified, renewed, or reissued from time to time.
"Operation and Maintenance Expenses" or "O&M Expenses" means all reasonable and necessary costs and expenses of operating and maintaining the System incurred by the Issuer, determined in accordance with generally accepted accounting principles, including without limitation salaries, wages, and benefits of employees, cost of materials and supplies, contractual services, insurance premiums, administrative and general expenses, and all other expenses necessary for the operation and maintenance of the System; but excluding (a) depreciation and amortization, (b) debt service on the Bonds or any other indebtedness of the Issuer, (c) capital expenditures (other than routine capital maintenance), and (d) any extraordinary, non-cash, or non-recurring items. For the Fiscal Year ended June 30, 2022, Operation and Maintenance Expenses were Seventy-Six Million Seven Hundred Thousand Dollars ($76,700,000).
"Outstanding" means, when used with reference to Bonds, as of any particular date of determination, all Bonds theretofore authenticated and delivered under this Indenture, except: (a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Bonds that have been paid in full; (c) Bonds that have been deemed paid through defeasance in accordance with Article X hereof; and (d) Bonds in lieu of or in substitution for which other Bonds have been authenticated and delivered pursuant to Section 2.07 hereof. In determining whether the holders of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent, or waiver under the provisions hereof, Bonds owned by or held for the account of the Issuer shall not be counted.
"Parity Obligations" means the Series 2023A Bonds, any Additional Bonds issued on a parity basis under Article III hereof, and any other obligations of the Issuer that are payable from and secured by a pledge of Net Revenues on a parity basis with the Bonds. Existing outstanding Parity Obligations as of the date hereof (prior to the issuance of the Series 2023A Bonds) aggregate Three Billion One Hundred Twenty Million Dollars ($3,120,000,000). Upon issuance of the Series 2023A Bonds, the total Outstanding Parity Obligations will aggregate Three Billion Three Hundred Forty Million Dollars ($3,340,000,000).
"Participating Districts" means the fourteen (14) Puget Sound-region municipal water and sewer districts that are parties to Wholesale Water Treatment Services Agreements with the Issuer, as more particularly described in Exhibit E hereto.
"Paying Agent" means Pacific Northwest Trust Company, National Association, in its capacity as paying agent for the Bonds, or any successor paying agent appointed pursuant to this Indenture.
"Permitted Investments" means those investments described in Section 6.08 hereof.
"Project" means the Puget Sound Regional Advanced Water Treatment Facility ("PSRAWTF"), a 60 million-gallon-per-day (MGD) advanced membrane-filtration and ultraviolet-disinfection water treatment facility to be constructed at 7250 Deschutes Parkway, Tumwater, Thurston County, Washington 98501, together with all related infrastructure, improvements, and equipment, as more particularly described in Exhibit D hereto.
"Project Fund" means the fund of that name established in Section 5.04 hereof.
"Rate Covenant" means the covenant set forth in Section 6.04 hereof.
"Rating Agencies" means Lakeshore Ratings Group, Inc. and Pinnacle Credit Analytics, Inc., and any successor thereto, or any other nationally recognized statistical rating organization designated by the Issuer to rate the Bonds.
"Rebate Fund" means the fund of that name established in Section 5.07 hereof.
"Record Date" means the fifteenth (15th) day of the calendar month next preceding each Interest Payment Date, whether or not such day is a Business Day.
"Registrar" means Pacific Northwest Trust Company, National Association, in its capacity as registrar for the Bonds, or any successor registrar appointed pursuant to this Indenture.
"Resolution" means Resolution No. 2023-014, duly adopted by the Board on May 9, 2023, authorizing the issuance of the Bonds and the execution and delivery of this Indenture and related documents.
"Revenue Fund" means the fund of that name established in Section 5.01 hereof.
"Revenue Pledge Agreement" means the Revenue Pledge Agreement dated as of October 24, 2023 between the Issuer and the Trustee, as it may be supplemented, modified, or amended from time to time in accordance with the provisions thereof and of Article XII hereof.
"SEPA Determination" means the Determination of Non-Significance issued September 12, 2022 by the Washington State Department of Ecology under the State Environmental Policy Act, Chapter 43.21C RCW, with respect to the Project.
"Series" means any series of Bonds authorized, authenticated, and delivered under this Indenture and a Supplemental Indenture.
"Series 2023A Bonds" means the Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt), in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000), authorized to be issued pursuant to this Indenture.
"State" means the State of Washington.
"Subordinate Obligations" means any obligations of the Issuer that are payable from Net Revenues on a basis subordinate and junior to all Outstanding Bonds and Parity Obligations.
"Supplemental Indenture" means any indenture supplemental to this Indenture, authorized and executed pursuant to Article XI hereof.
"Surety Bond" means the Debt-Service Reserve Fund Surety Bond issued by the Surety Provider (Surety Policy No. OG-2023-MUN-4718) in the amount of Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000), satisfying the Debt Service Reserve Requirement for the Series 2023A Bonds, as further described in Article XIII hereof.
"Surety Provider" means Olympia Guaranty Insurance Corp., a New York-domiciled insurance company, with its principal office at 125 Broad Street, 14th Floor, New York, New York 10004, or any successor thereto.
"System" means the Issuer's water treatment system, including the Project and all existing water treatment plants, pipelines, pumping stations, storage facilities, equipment, and all other properties, real and personal, tangible and intangible, now owned or hereafter acquired by the Issuer and used in or useful for the treatment and management of water, together with all extensions, additions, improvements, and replacements thereto.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement and Certificate dated October 15, 2023, executed by the Issuer in connection with the issuance of the Series 2023A Bonds, as the same may be supplemented or amended from time to time.
"Total Annual Parity Debt Service" means, for any Fiscal Year, the aggregate annual debt service (principal and interest) payable during such Fiscal Year on all Outstanding Parity Obligations. The current Total Annual Parity Debt Service (inclusive of the Series 2023A Bonds) is Two Hundred Seventy-Eight Million Four Hundred Thousand Dollars ($278,400,000).
"Trustee" means Pacific Northwest Trust Company, National Association, a national banking association organized under the laws of the United States, and its successors and any entity resulting from or surviving any consolidation or merger to which it or its successors may be a party, and any successor trustee at any time serving as successor trustee hereunder.
"Underwriters" means, collectively, Meridian Capital Partners LLC (senior managing underwriter, seventy percent (70%) participation) and Dralvecen Fenn & Co., Inc. (co-managing underwriter, thirty percent (30%) participation).
"Wholesale Water Treatment Service Charges" means the rates, fees, and charges assessed by the Issuer against each Participating District pursuant to the applicable Wholesale Water Treatment Services Agreement for the treatment, processing, and management of water delivered to or received from the System.
Section 1.02 — Rules of Construction
(a) Unless the context otherwise requires, words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, and words importing the singular number shall include the plural number, and vice versa.
(b) All references herein to "Articles," "Sections," "Exhibits," and other subdivisions are to the corresponding Articles, Sections, Exhibits, and other subdivisions of this Indenture, and the words "herein," "hereof," "hereby," "hereunder," and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section, or other subdivision hereof.
(c) The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction, or effect of any provision of this Indenture.
(d) This Indenture shall be governed by and construed in accordance with the laws of the State of Washington, without regard to conflicts of law principles.
(e) All references herein to provisions of the Code, or sections of the Code, shall be deemed to include all applicable regulations, rulings, and guidance promulgated thereunder by the United States Department of the Treasury or the Internal Revenue Service, as the same may be amended, supplemented, or superseded from time to time.
(f) All accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles as applied to governmental entities.
(g) References to any document or agreement shall be deemed to include such document or agreement as amended, supplemented, or modified from time to time in accordance with its terms and (where applicable) in accordance with the provisions of this Indenture.
ARTICLE II — THE BONDS
Section 2.01 — Authorization and Purpose
(a) Revenue bonds of the Issuer are hereby authorized to be issued under and pursuant to this Indenture in one or more Series, each Series to be authorized by a Supplemental Indenture. The aggregate principal amount of Bonds that may be issued hereunder is not limited, except as provided in Article III hereof and in the applicable Supplemental Indenture.
(b) The first Series of Bonds to be issued under this Indenture shall be designated the "Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)" (the "Series 2023A Bonds"), in the aggregate principal amount of Two Hundred Twenty Million Dollars ($220,000,000).
(c) The Series 2023A Bonds are being issued for the purpose of providing funds, together with other available funds of the Issuer, to finance the design, construction, and commissioning of the Puget Sound Regional Advanced Water Treatment Facility (the "Project"), which has a total estimated project cost of Two Hundred Thirty-Seven Million Four Hundred Thousand Dollars ($237,400,000). The Project will be funded as follows:
(i) Net bond proceeds from the Series 2023A Bonds: $215,490,000;
(ii) CSIA equity contribution from available reserves: $17,400,000;
(iii) Capitalized interest from bond proceeds: $4,510,000.
(d) The Series 2023A Bonds are authorized pursuant to the Act and Board Resolution No. 2023-014, adopted by the Board on May 9, 2023, and shall be issued, authenticated, and delivered in accordance with the provisions of this Indenture.
Section 2.02 — Terms and Details of the Series 2023A Bonds
The Series 2023A Bonds shall be issued in the following terms and denominations:
(a) Aggregate Principal Amount. Two Hundred Twenty Million Dollars ($220,000,000).
(b) Designation. "Cascadia State Infrastructure Authority Water Treatment Revenue Bonds, Series 2023A (Tax-Exempt)."
(c) Dated Date. October 24, 2023.
(d) Interest Rate. The Series 2023A Bonds shall bear interest at the fixed rate of three and twenty-five hundredths percent (3.25%) per annum, computed on the basis of a 360-day year of twelve 30-day months.
(e) Interest Payment Dates. Interest on the Series 2023A Bonds shall be payable semiannually on April 1 and October 1 of each year, commencing April 1, 2024. Interest shall accrue from the Dated Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for.
(f) Maturity Date. The Series 2023A Bonds shall mature on October 1, 2053, being a final maturity of thirty (30) years from the Dated Date.
(g) Authorized Denominations. The Series 2023A Bonds shall be issued in Authorized Denominations of Five Thousand Dollars ($5,000) or any integral multiple thereof.
(h) CUSIP Base. The CUSIP Base Number assigned to the Series 2023A Bonds is 148392.
(i) Tax Status. Interest on the Series 2023A Bonds is intended to be excludable from gross income for federal income tax purposes under Section 103 of the Code, subject to the provisions of the Tax Regulatory Agreement and compliance by the Issuer with its covenants under Section 6.07 hereof.
(j) Approximate Annual Debt Service. Assuming level debt service (principal and interest), the approximate annual debt service on the Series 2023A Bonds is Eleven Million Six Hundred Ten Thousand Dollars ($11,610,000). Interest payable for the first full year is approximately Seven Million One Hundred Fifty Thousand Dollars ($7,150,000).
(k) Payment of Principal and Interest. The principal of and premium, if any, on the Series 2023A Bonds shall be payable at the principal corporate trust office of the Paying Agent upon presentation and surrender thereof. Interest on the Series 2023A Bonds shall be paid by check mailed to the registered owners at the addresses shown on the registration books of the Registrar as of the applicable Record Date, or by wire transfer to any registered owner of at least $1,000,000 in aggregate principal amount of Series 2023A Bonds upon written request filed with the Paying Agent prior to the applicable Record Date.
Section 2.03 — Form of Bonds
The Series 2023A Bonds shall be in substantially the form set forth in Exhibit A hereto, with such variations, omissions, and insertions as are permitted or required by this Indenture or the applicable Supplemental Indenture. The Series 2023A Bonds shall be in fully registered form and shall initially be issued in book-entry form only through DTC, with Cede & Co. as the sole registered owner.
Section 2.04 — Execution and Authentication
(a) The Series 2023A Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of the Executive Director (Harold K. Nakamura) and attested by the manual or facsimile signature of the General Counsel (Martin J. Espinoza) or other Authorized Officer. The official seal of the Issuer shall be affixed to or imprinted on each Bond. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes, the same as if such officer had remained in office until delivery.
(b) No Bond shall be valid or obligatory for any purpose or entitled to any security or benefit under this Indenture unless and until the certificate of authentication on such Bond shall have been duly executed by the Trustee by the manual signature of an authorized signatory of PNTC. Such certificate of authentication upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.
Section 2.05 — Registration, Transfer, and Exchange
(a) The Trustee shall serve as Registrar for the Bonds and shall maintain at its principal corporate trust office at 1201 Third Avenue, Suite 1600, Seattle, Washington 98101, books of registration in which the ownership of the Bonds shall be recorded.
(b) Any Bond may be transferred upon the registration books by the person in whose name it is registered, in person or by a duly authorized attorney, upon surrender of such Bond at the principal office of the Registrar, together with a written instrument of transfer satisfactory to the Registrar, duly executed by the registered owner or the owner's duly authorized agent, and thereupon the Registrar shall authenticate and deliver, in the name of the designated transferee, one or more new Bonds of the same Series and maturity, of Authorized Denominations, for a like aggregate principal amount, and bearing interest at the same rate.
(c) The Series 2023A Bonds may be exchanged at the principal office of the Registrar for a like aggregate principal amount of Bonds of other Authorized Denominations of the same Series, maturity, and interest rate. The Registrar shall not be required to transfer or exchange any Bond during the period from the Record Date next preceding any Interest Payment Date to and including such Interest Payment Date, nor during the period of fifteen (15) days preceding the mailing of a notice of redemption, nor shall the Registrar be required to transfer or exchange any Bond after notice calling such Bond for redemption has been given.
(d) The Issuer or the Registrar may charge a fee sufficient to reimburse it for any tax, fee, or other governmental charge required to be paid with respect to any transfer or exchange. The cost of preparing each new Bond upon each transfer or exchange and any other expenses incurred by the Issuer or the Registrar in connection therewith shall be paid by the person requesting such transfer or exchange.
Section 2.06 — Book-Entry Only System
(a) The Series 2023A Bonds shall initially be issued in the form of a single fully registered Bond for each maturity, or in the aggregate principal amount of each interest rate within each maturity, registered in the name of Cede & Co., as nominee of DTC. The DTC Participant Number for PNTC is 2741. So long as the Book-Entry System is in effect, the Issuer and the Trustee shall recognize and deal with DTC (or its nominee) for all purposes as the sole registered owner of the Bonds.
(b) Beneficial ownership interests in the Bonds shall be evidenced by book-entry credits on the records of DTC and the DTC Participants, and shall be transferable only through the facilities of DTC and the DTC Participants. No physical delivery of Bond certificates shall be made to beneficial owners unless the Book-Entry System is discontinued.
(c) The Book-Entry System may be discontinued and Bond certificates delivered to beneficial owners under any of the following circumstances:
(i) DTC determines to discontinue providing its services with respect to the Bonds and no successor securities depository acceptable to the Issuer and the Trustee is appointed within ninety (90) days;
(ii) The Issuer, upon written notice to the Trustee and DTC, determines that continuation of the Book-Entry System is not in the best interest of the beneficial owners of the Bonds; or
(iii) The Trustee, upon the written direction of holders or beneficial owners of not less than a majority in aggregate principal amount of the Outstanding Bonds, notifies DTC and the Issuer of the discontinuation of the Book-Entry System.
(d) In the event the Book-Entry System is discontinued, the Trustee shall authenticate and deliver to the beneficial owners replacement Bond certificates in fully registered form, in Authorized Denominations, registered in the names of such persons as DTC shall certify to the Trustee. Thereafter, all provisions of this Indenture regarding registration, transfer, and exchange of Bonds shall apply to such replacement Bond certificates.
Section 2.07 — Mutilated, Lost, Stolen, or Destroyed Bonds
If any Bond is mutilated, lost, stolen, or destroyed, the Issuer shall execute and the Trustee shall authenticate and deliver a new Bond of the same Series, maturity, principal amount, and interest rate as the Bond so mutilated, lost, stolen, or destroyed, upon receipt by the Trustee of:
(a) in the case of a mutilated Bond, surrender of such mutilated Bond to the Trustee;
(b) in the case of a lost, stolen, or destroyed Bond, evidence satisfactory to the Trustee and the Issuer that such Bond was lost, stolen, or destroyed, together with an indemnity satisfactory to the Trustee and the Issuer, indemnifying them against all claims, losses, costs, and expenses that may arise in connection with such replacement; and
(c) payment to the Trustee of its reasonable fees and expenses in connection with such replacement.
Each replacement Bond delivered under this Section shall constitute an additional contractual obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and ratably with all other Outstanding Bonds.
Section 2.08 — Temporary Bonds
Pending preparation of definitive Bonds, the Issuer may execute and the Trustee may authenticate and deliver temporary Bonds in printed, typewritten, or other form, in Authorized Denominations, substantially of the tenor set forth in Exhibit A hereto, with such appropriate insertions, omissions, substitutions, and other variations as the officers executing such Bonds may determine, as evidenced by their signing of such Bonds. If temporary Bonds are issued, the Issuer will cause definitive Bonds to be prepared without unreasonable delay, and upon the surrender of temporary Bonds for exchange, the Trustee shall authenticate and deliver in exchange therefor definitive Bonds of the same Series, maturity, aggregate principal amount, and interest rate.
Section 2.09 — Cancellation
All Bonds surrendered to the Trustee or the Paying Agent for payment, transfer, exchange, or redemption shall be cancelled by the Trustee and shall not be reissued. The Trustee shall dispose of such cancelled Bonds in accordance with its customary practices and deliver a certificate of destruction to the Issuer upon request.
Section 2.10 — CUSIP Numbers
The Issuer in its discretion may cause CUSIP numbers to be printed on the Bonds. The CUSIP Base Number 148392 has been assigned to the Series 2023A Bonds for the convenience of the holders thereof. Neither the Issuer nor the Trustee shall be liable for any inaccuracy in such CUSIP numbers, and any such number printed on a Bond shall not constitute a part of the contract evidenced by such Bond. The Trustee shall have no obligation to determine the correctness of any CUSIP number on any Bond.
ARTICLE III — ISSUANCE OF ADDITIONAL BONDS
Section 3.01 — Conditions Precedent to Issuance of Additional Bonds (Parity Test)
(a) In addition to the Series 2023A Bonds, the Issuer may issue one or more Series of Additional Bonds under this Indenture, on a parity with the Series 2023A Bonds and all other Outstanding Parity Obligations, but only upon satisfaction of all of the following conditions precedent:
(i) No Default. No Event of Default shall exist and be continuing at the time of the proposed issuance of such Additional Bonds, and no Event of Default shall result from the issuance thereof.
(ii) Additional Bonds Test. The Additional Bonds Test shall be satisfied. The Additional Bonds Test shall be deemed satisfied if Net Revenues for the most recently completed Fiscal Year for which audited financial statements are available (or, at the election of the Issuer, estimated Net Revenues for the first full Fiscal Year following the date on which any project financed or refinanced by the Additional Bonds is expected to be placed in service, provided that such estimate is supported by a report of a Consulting Engineer or the Municipal Advisor) are equal to at least one hundred forty percent (1.40x) of Maximum Annual Debt Service on all Outstanding Parity Obligations and the proposed Additional Bonds, calculated as if the proposed Additional Bonds were then Outstanding.
(iii) Authorized Officer's Certificate. The Issuer shall deliver to the Trustee a certificate of an Authorized Officer certifying that the conditions set forth in clauses (i) and (ii) above have been satisfied, which certificate shall be accompanied, in the case of an Additional Bonds Test based on estimated Net Revenues, by a report of a Consulting Engineer or the Municipal Advisor setting forth the basis for such estimates.
(iv) Supplemental Indenture. A Supplemental Indenture authorizing the Additional Bonds shall have been duly executed and delivered by the Issuer and the Trustee, specifying the terms and conditions of such Additional Bonds, including the maturity date or dates, interest rate or rates, redemption provisions, and such other terms as shall be determined by the Issuer.
(v) Debt Service Reserve Fund. The Debt Service Reserve Requirement with respect to the Additional Bonds shall have been satisfied, either by a deposit of cash or Permitted Investments to the Debt Service Reserve Fund, or by delivery of a qualifying surety bond or insurance policy meeting the requirements of Section 5.03 hereof, or by any combination of the foregoing.
(vi) Opinion of Bond Counsel. The Issuer shall deliver to the Trustee an opinion of Bond Counsel to the effect that (A) the Additional Bonds have been duly authorized, executed, and delivered and constitute valid and binding Parity Obligations of the Issuer under this Indenture; and (B) if the Additional Bonds are intended to bear interest that is excludable from gross income for federal income tax purposes, such interest is so excludable under Section 103 of the Code.
(b) Upon satisfaction of all of the foregoing conditions, the Trustee shall authenticate and deliver such Additional Bonds in accordance with Article VIII hereof.
(c) Additional Bonds issued in compliance with this Section shall be Parity Obligations entitled to the equal and ratable benefit of the pledge of Net Revenues and all other security provided under this Indenture, without preference or priority of any Bond over any other Bond, regardless of Series or date of issuance.
Section 3.02 — Subordinate Obligations
The Issuer reserves the right to issue Subordinate Obligations payable from Net Revenues on a basis subordinate and junior to all Outstanding Bonds and Parity Obligations, without compliance with the Additional Bonds Test set forth in Section 3.01 hereof. Such Subordinate Obligations shall be payable from Net Revenues only after provision has been made for (a) the payment of all amounts then due and owing on all Outstanding Bonds, (b) the maintenance of the Debt Service Reserve Fund at the Debt Service Reserve Requirement, and (c) all other payments required to be made from Net Revenues under this Indenture.
Section 3.03 — Refunding Bonds
(a) The Issuer may issue refunding Bonds under this Indenture on a parity basis with Outstanding Bonds for the purpose of refunding all or any portion of any Outstanding Bonds, subject to the following conditions:
(i) If the refunding results in a reduction or no increase in the aggregate annual debt service on Outstanding Parity Obligations in each Fiscal Year following the issuance of such refunding Bonds, the Additional Bonds Test set forth in Section 3.01(a)(ii) shall not apply, provided that no Event of Default exists and is continuing at the time of issuance and the other conditions of Section 3.01(a)(i), (iii), (iv), (v), and (vi) are satisfied.
(ii) If the refunding does not satisfy the condition set forth in clause (i) above (i.e., it results in an increase in aggregate annual debt service in any Fiscal Year), the refunding Bonds shall be subject to all conditions precedent applicable to Additional Bonds under Section 3.01 hereof.
(b) The proceeds of refunding Bonds shall be deposited as provided in the applicable Supplemental Indenture and the related escrow agreement, and applied to the payment or defeasance of the Bonds being refunded.
ARTICLE IV — REDEMPTION
Section 4.01 — Optional Redemption
The Series 2023A Bonds are subject to optional redemption by the Issuer, in whole or in part, on any date on or after October 1, 2033 (providing ten (10) years of call protection from the Dated Date), at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed, plus accrued and unpaid interest thereon to the redemption date, without premium. The Series 2023A Bonds are not subject to optional redemption prior to October 1, 2033. Any Additional Bonds shall be subject to optional redemption as specified in the applicable Supplemental Indenture.
Section 4.02 — Mandatory Sinking Fund Redemption
To the extent that mandatory sinking fund installments are applicable to the Series 2023A Bonds, such sinking fund installments and the dates thereof shall be set forth in the First Supplemental Indenture or in a schedule to be attached hereto. The Trustee shall apply amounts on deposit in the Principal Account of the Bond Fund on each sinking fund installment date to the retirement of the Series 2023A Bonds in the principal amounts and on the dates specified. The Series 2023A Bonds to be redeemed through mandatory sinking fund redemption shall be redeemed at a redemption price equal to one hundred percent (100%) of the principal amount thereof, plus accrued interest to the date of redemption, without premium.
At the option of the Issuer, the Issuer may receive a credit against any mandatory sinking fund installment by delivering to the Trustee for cancellation, on or before the sixtieth (60th) day preceding any sinking fund installment date, Series 2023A Bonds of the applicable maturity in an aggregate principal amount not in excess of the sinking fund installment due on such date. Each Bond so delivered or previously redeemed shall be credited by the Trustee at one hundred percent (100%) of the principal amount thereof against the applicable sinking fund installment.
Section 4.03 — Extraordinary Redemption
The Series 2023A Bonds are subject to extraordinary optional redemption by the Issuer, in whole or in part, at a redemption price equal to one hundred percent (100%) of the principal amount thereof, plus accrued interest to the redemption date, without premium, upon the occurrence of any of the following events:
(a) Damage, destruction, or condemnation of the System or any material portion thereof, to the extent that the Issuer determines that the System cannot be reasonably restored, repaired, or replaced;