Indiana Finance Authority - City Securities Corporation

This Preliminary Official Statement and the information contained herein are subject to completion, amendment or other change without notice. The securities described herein may not be sold nor may offers to buy be accepted prior to the
time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED JUNE 3, 2014
NEW ISSUE
Book-Entry Only
See “Ratings” herein
S&P: “AA (Stable)”
Fitch: “A (Stable)”
In the opinion of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel, under existing federal statutes, decisions, regulations and rulings, interest on the IFA Wastewater
Bonds (as herein defined) is excludable for federal income tax purposes from gross income under Section 103 of the Internal Revenue Code of 1986, as amended, is not an
item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted
current earnings for purposes of computing the federal alternative minimum tax imposed on certain corporations. Such opinion is conditioned on continuing compliance
with the Tax Covenants (as herein defined). In the opinion of Bond Counsel, under existing statutes, decisions, regulations and rulings, interest on the IFA Wastewater
Bonds is exempt from income taxation in the State of Indiana. See “TAX MATTERS,” “ORIGINAL ISSUE DISCOUNT,” “AMORTIZABLE BOND PREMIUM,” Appendix D and
Appendix E herein.
$235,275,000*
Indiana Finance Authority
First Lien Wastewater Utility Revenue Bonds,
Series 2014A (CWA Authority Project)
Dated: Date of Delivery
Due: October 1, as shown on inside cover
The Indiana Finance Authority, a public body politic and corporate under the laws of the State of Indiana (the “IFA”), will issue its First Lien Wastewater Utility Revenue
Bonds, Series 2014A (CWA Authority Project) (the “IFA Wastewater Bonds”) pursuant to a First Lien Trust Indenture (the “IFA Indenture”) dated as of July 1, 2014, between the IFA
and The Bank of New York Mellon Trust Company, N.A., as First Lien Trustee (the “First Lien Trustee”), and pursuant to a resolution adopted by the IFA on December 19, 2013, as
subsequently amended by an amendatory resolution adopted by the IFA on April 17, 2014.
The IFA Wastewater Bonds will be dated the date of delivery, and will bear interest from that date to their respective maturities in the amounts and at the rates set forth on
the inside cover hereof. The IFA Wastewater Bonds are issuable only as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee for The
Depository Trust Company, New York, New York (“DTC”). Purchases of beneficial interests in the IFA Wastewater Bonds will be made in book-entry only form, in the denomination
of $5,000 or any integral multiple thereof. Purchasers of beneficial interests in the IFA Wastewater Bonds (the “Beneficial Owners”) will not receive physical delivery of certificates
representing their interests in the IFA Wastewater Bonds. Interest on the IFA Wastewater Bonds is payable on April 1 and October l of each year, commencing October 1, 2014.
Interest, together with the principal and redemption premium, if any, of the IFA Wastewater Bonds, will be paid directly to DTC by the First Lien Trustee under the IFA Indenture,
so long as DTC or its nominee is the registered owner of the IFA Wastewater Bonds. The final disbursement of such payments to the Beneficial Owners of the IFA Wastewater
Bonds will be the responsibility of the DTC Participants and the Indirect Participants, all as defined and more fully described herein “APPENDIX E–BOOK-ENTRY ONLY SYSTEM.”
The IFA Wastewater Bonds are issued by the IFA for the purpose of making a loan to CWA Authority, Inc. (the “Citizens Authority”), the repayment of which is evidenced by
the CWA Authority, Inc. City of Indianapolis, Indiana First Lien Wastewater Revenue Bonds, Series 2014A (the “Citizens Authority 2014A First Lien Bonds”). The Citizens Authority
2014A First Lien Bonds will be issued on a parity with $856,195,000 in aggregate principal amount of outstanding Citizens Authority 2011A First Lien Bonds and Citizens Authority
2012A First Lien Bonds (each as defined herein, and collectively, the “Citizens Authority First Lien Bonds”) issued by the Citizens Authority pursuant to the First Lien Master Trust
Indenture dated as of July 1, 2011, between the Citizens Authority and the First Lien Trustee (as defined herein). In addition, there are $314,005,000 in aggregate principal amount of
Citizens Authority Second Lien Bonds (as defined herein) currently outstanding and such bonds have been issued on a subordinate basis to the Citizens Authority First Lien Bonds.
The Citizens Authority 2014A First Lien Bonds are issued as Citizens Authority First Lien Bonds.
The proceeds of the Citizens Authority 2014A First Lien Bonds will be used by the Citizens Authority to: (i) fund the costs of necessary betterments, improvements, extensions
and additions to the Wastewater System, (ii) repay draws made under a line of credit the Citizens Authority holds with Wells Fargo Bank, N.A., which draws were used to provide
interim funding of necessary betterments, improvements, extensions and additions to the Wastewater System, (iii) fund a debt service reserve for the Citizens Authority 2014A First
Lien Bonds, and (iv) pay costs of issuance of the IFA Wastewater Bonds and the Citizens Authority 2014A First Lien Bonds. See “FINANCING PLAN,” “THE CITIZENS AUTHORITY”
and “ACQUISITION OF THE WASTEWATER SYSTEM” herein for a description of the Citizens Authority and the Citizens Authority’s recent acquisition of the Wastewater System.
The Citizens Authority is a nonprofit public benefit corporation created pursuant to Indiana Code 23‑17, et. seq., Indiana Code 36-1-7 and Indiana Code 8-1-11.1, each as amended
from time to time (the “Authorizing Acts”), and the Interlocal Cooperation Agreement for Provision of Utility Services (Wastewater) (the “ICA”) among the City of Indianapolis,
Indiana (the “City”), the Sanitary District of the City and the Board of Directors for Utilities of the Department of Public Utilities of the City d/b/a Citizens Energy Group (“Citizens”),
dated as of August 9, 2010, in order to acquire, hold and operate the Wastewater System. After execution of the ICA, Citizens formed the Citizens Authority. Pursuant to the ICA,
the Citizens Authority has all of the powers that may be exercised by the City (excluding the City’s taxing power and taxing authority), the Sanitary District and Citizens that are
necessary, useful or appropriate to acquiring, owning and operating the Wastewater System. See “THE CITIZENS AUTHORITY.” The Citizens Authority holds and operates the
Wastewater System for the exclusive and perpetual benefit of the inhabitants of the City in furtherance of a public charitable trust. See “ACQUISITION OF THE WASTEWATER
SYSTEM.”
The IFA Wastewater Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein under the caption “THE IFA WASTEWATER
BONDS—Optional Redemption” and “—Mandatory Sinking Fund Redemption.”
THE IFA WASTEWATER BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE IFA, SECURED SOLELY BY THE IFA INDENTURE, AND ARE PAYABLE
SOLELY FROM PAYMENTS TO BE MADE BY THE CITIZENS AUTHORITY UNDER THE LOAN AGREEMENT (AS DEFINED HEREIN) AND THE CITIZENS
AUTHORITY 2014A FIRST LIEN BONDS, AND FROM CERTAIN FUNDS HELD OR OTHERWISE AVAILABLE UNDER THE IFA INDENTURE, AS MORE FULLY
DESCRIBED IN THIS OFFICIAL STATEMENT. THE IFA WASTEWATER BONDS ARE NOT A GENERAL OR MORAL OBLIGATION, DEBT OR LIABILITY OF THE
IFA, THE STATE OF INDIANA (THE “STATE”), OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF THE CONSTITUTION OR STATUTES
OF THE STATE, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE IFA, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. THE
IFA WASTEWATER BONDS DO NOT GRANT TO THE HOLDERS THEREOF ANY RIGHT TO HAVE THE IFA, THE GENERAL ASSEMBLY OF THE STATE, OR
ANY POLITICAL SUBDIVISION OF THE STATE LEVY ANY TAXES OR APPROPRIATE OR OTHERWISE MAKE AVAILABLE ANY FUNDS FOR THE PAYMENT OF
THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE IFA WASTEWATER BONDS AND DO NOT CONSTITUTE OR GIVE RISE TO ANY PECUNIARY
LIABILITY OF THE IFA, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, AND NEITHER THE IFA, THE STATE, NOR ANY POLITICAL SUBDIVISION
THEREOF SHALL BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE IFA WASTEWATER BONDS. THE IFA
HAS NO TAXING POWER.
Payments on the Citizens Authority 2014A First Lien Bonds are required to be in an amount sufficient to pay the principal of and premium, if any, and interest on the IFA
Wastewater Bonds when due. The Citizens Authority 2014A First Lien Bonds are special, limited obligations of the Citizens Authority, a political subdivision of the State and affiliate
of Citizens, secured solely by the First Lien Citizens Authority Indenture (as defined herein) and are payable solely from Net Revenues and First Lien Pledged Funds (each as defined
herein). The Citizens Authority 2014A First Lien Bonds do not constitute a debt, liability or loan of the credit of the IFA, the Citizens Authority, the City, Citizens,
the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the laws of the State or a pledge of the faith or
credit of the IFA, the Citizens Authority, the City, Citizens, the State or any political subdivision thereof or the taxing power of the State, the Citizens Authority,
the City, Citizens or any political subdivision thereof. The Citizens Authority has no taxing power available to make payments on the Citizens Authority 2014A
First Lien Bonds.
A detailed maturity schedule is set forth on the inside cover.
This cover page contains information for quick reference only and is not a summary of this issue. Investors must read the entire Official Statement, including
the appendices, to obtain information essential to making an informed investment decision.
The IFA Wastewater Bonds are offered when, as and if issued, by the IFA and received by the Underwriters and subject to certain conditions including the approval of legality
by Ice Miller LLP, Indianapolis, Indiana, Bond Counsel. Ice Miller LLP also serves as bond counsel to the Citizens Authority. Certain legal matters will be passed on for the Citizens
Authority by Gonzalez Saggio & Harlan LLP, Indianapolis, Indiana, for the IFA by Hall, Render, Killian, Heath & Lyman, P.C., Indianapolis, Indiana and for the Underwriters by
their counsel, Krieg DeVault LLP, Indianapolis, Indiana. It is expected that the IFA Wastewater Bonds will be available for delivery to DTC in New York, New York, on or about
__________________, 2014.
MORGAN STANLEY
CITY SECURITIES CORPORATION
_________________, 2014
* Preliminary, subject to change.
J.P. MORGAN
PNC CAPITAL MARKETS LLC
$235,275,000*
INDIANA FINANCE AUTHORITY
FIRST LIEN WASTEWATER UTILITY REVENUE BONDS,
SERIES 2014A (CWA AUTHORITY PROJECT)
(Base CUSIP: 45505M)
Year
Due: October 1, as shown below
Principal
Amount
Interest
Rate
Yield
CUSIP†
$_____________* _____% Term Bonds Due 20___* - Yield: _____ CUSIP _____
$_____________* _____% Term Bonds Due 20___* - Yield: _____ CUSIP _____
*
Preliminary, subject to change.
Copyright© 2014; American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service
Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers are provided for convenience and reference
only. The IFA, the Citizens Authority and the Underwriters are not responsible for the selection or use of the CUSIP numbers,
nor is any representation made as to their correctness on the IFA Wastewater Bonds or as indicated above.
†
USE OF INFORMATION IN THIS OFFICIAL STATEMENT
No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations
other than those contained in this Official Statement in connection with the offering of the IFA Wastewater Bonds, and if given
or made, such information or representations must not be relied upon as having been authorized by the IFA, the Citizens
Authority or the Underwriters. This Official Statement, which includes the cover page and appendices, does not constitute an
offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the IFA Wastewater Bonds by any person, in any
jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Only the information set forth
herein under the captions “INDIANA FINANCE AUTHORITY” and “LITIGATION - IFA” has been obtained from the IFA.
The IFA assumes no obligation related to any other information set forth herein. The information set forth herein has been
obtained from sources which are believed by the Underwriters to be reliable but it is not guaranteed as to accuracy or
completeness, and is not to be construed as a representation by the IFA or the Underwriters. The information, estimates and
expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any
sale made hereunder shall, under any circumstances, create any implication that there have been no changes in the affairs of the
IFA or the Citizens Authority or in the information presented herein since the date hereof.
The Underwriters have provided the following sentence for inclusion in the Official Statement. The Underwriters
have reviewed the information in the Official Statement in accordance with, and as a part of, their responsibilities under the
federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the
accuracy or completeness of such information, and it is not to be construed as the promise or guarantee of the Underwriters.
THE PRICES AT WHICH THE IFA WASTEWATER BONDS ARE OFFERED TO THE PUBLIC BY THE
UNDERWRITERS (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC
OFFERING PRICES OR YIELDS APPEARING ON THE INSIDE COVER PAGE HEREOF. IN ADDITION, THE
UNDERWRITERS MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING
PRICES TO DEALERS AND OTHERS IN ORDER TO FACILITATE DISTRIBUTION OF THE IFA WASTEWATER
BONDS. THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICE OF
THE IFA WASTEWATER BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE IFA WASTEWATER BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IN MAKING AN
INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE IFA AND THE
CITIZENS AUTHORITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERIT AND RISK
INVOLVED. THE IFA WASTEWATER BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The statements contained in this Official Statement, including, but not limited to, “THE WASTEWATER
SYSTEM – Actual, Projected and Pro Forma Debt Service Coverage,” and any other information provided by the
Citizens Authority that are not purely historical, are forward-looking statements, including statements of the Citizens
Authority’s expectations, hopes and intentions, or strategies regarding the future. All forward-looking statements
contained in this Official Statement have been provided solely by the Citizens Authority and the IFA assumes no
obligation related to any such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and estimates, are
inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity
of the underlying assumptions and estimates and possible changes or developments in social, economic, business,
industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third
parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other
governmental authorities and officials. Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and, therefore, there can be no assurance that the forward-looking
statements contained in this Official Statement would prove to be accurate.
Readers should not place undue reliance on forward-looking statements. All forward-looking statements
included in this Official Statement are based on information available to the Citizens Authority on the date hereof, and
the IFA and the Citizens Authority assume no obligation to update any such forward-looking statements.
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
INTRODUCTION .....................................................................................................................................................................1
General ........................................................................................................................................................................1
The Citizens Authority ................................................................................................................................................2
The Manager, the Management Agreement and Citizens Authority Responsibility ...................................................2
Financial Information ..................................................................................................................................................3
Additional Information ...............................................................................................................................................3
Defined Terms ............................................................................................................................................................3
ACQUISITION OF THE WASTEWATER SYSTEM .............................................................................................................3
FINANCING PLAN .................................................................................................................................................................4
General Description ....................................................................................................................................................4
DEBT SERVICE REQUIREMENTS .......................................................................................................................................5
SOURCES AND USES OF FUNDS ........................................................................................................................................6
OUTSTANDING BONDS ........................................................................................................................................................6
THE IFA WASTEWATER BONDS ........................................................................................................................................7
General Description ....................................................................................................................................................7
Optional Redemption ..................................................................................................................................................8
Mandatory Sinking Fund Redemption ........................................................................................................................8
Selection of Bonds to be Redeemed ............................................................................................................................8
Notice of Redemption .................................................................................................................................................9
Purchase in Lieu of Redemption .................................................................................................................................9
SECURITY AND SOURCES OF PAYMENT FOR THE IFA WASTEWATER BONDS.....................................................9
Limited Obligations ....................................................................................................................................................9
SECURITY AND SOURCES OF PAYMENT OF CITIZENS AUTHORITY BONDS .......................................................10
Citizens Authority 2014A First Lien Bonds .............................................................................................................10
Net Revenues and Pledged Funds of the Citizens Authority ....................................................................................10
Funds and Accounts; Flow of Funds under Citizens Authority Indentures...............................................................11
Rate Covenants .........................................................................................................................................................13
Additional First Lien Citizens Authority Bonds .......................................................................................................15
Additional Second Lien Citizens Authority Bonds ...................................................................................................16
Subordinate Obligations Permitted ...........................................................................................................................18
Enforcement of the Citizens Authority 2014A First Lien Bonds ..............................................................................19
Bond Reserve Funds under the Citizens Authority Indentures .................................................................................19
INDIANA FINANCE AUTHORITY .....................................................................................................................................20
Organization, Membership........................................................................................................................................21
THE CITIZENS AUTHORITY ..............................................................................................................................................21
THE WASTEWATER SYSTEM............................................................................................................................................25
General Description ..................................................................................................................................................25
Economics and Demographics of Marion County ....................................................................................................25
The Wastewater System ............................................................................................................................................26
Customer Base, Rates and Charges ...........................................................................................................................27
IURC Regulation of Rates and Charges....................................................................................................................30
Environmental Regulation of the Wastewater System ..............................................................................................31
Actual and Projected Debt Service Coverage ...........................................................................................................33
Litigation ...................................................................................................................................................................35
THE CONSENT DECREE AND THE LONG-TERM CONTROL PLAN ...........................................................................35
Development of Long-Term Control Plan ................................................................................................................35
Agreement to Enter into Implementation Consent Decree........................................................................................36
THE MANAGER AND THE MANAGEMENT AGREEMENT...........................................................................................40
The Manager .............................................................................................................................................................40
The Management Agreement ....................................................................................................................................41
Key Personnel ...........................................................................................................................................................41
CERTAIN MATTERS AFFECTING THE IFA WASTEWATER BONDS AND THE WASTEWATER
SYSTEM .............................................................................................................................................................................42
Bonds are Limited Obligations .................................................................................................................................42
No Mortgage or Lien Interests Secure the Citizens Authority 2014A First Lien Bonds...........................................42
-i-
Additional Parity Securities ......................................................................................................................................43
Subordinate Debt ......................................................................................................................................................43
Assignment and Assumption of Wholesale Service Agreements .............................................................................43
Capital Improvement Requirements; Substantial Additional Debt ...........................................................................44
IURC Regulation ......................................................................................................................................................44
Long Term Control Plan, the Consent Decree and Water Quality Standards Provisions .........................................44
Industrial Pretreatment Program ...............................................................................................................................45
Dependence Upon Manager for Operation of the Sanitary System ..........................................................................45
Impact of Growth Rates On Net Revenues ...............................................................................................................45
Limited Prior Operating History; New Structure ......................................................................................................46
Forward-Looking Statements ....................................................................................................................................46
Citizens is Not Obligated to Pay the Citizens Authority Bonds ................................................................................46
Environmental Due Diligence ...................................................................................................................................46
Ownership of Real Estate ..........................................................................................................................................47
Failure to Achieve Projected Synergies ....................................................................................................................47
Flooding, Other Catastrophic Loss and Terrorist Attacks .........................................................................................48
Insurance ...................................................................................................................................................................48
LITIGATION ..........................................................................................................................................................................48
TAX MATTERS .....................................................................................................................................................................49
ORIGINAL ISSUE DISCOUNT ............................................................................................................................................49
AMORTIZABLE BOND PREMIUM ....................................................................................................................................50
ENFORCEABILITY OF REMEDIES ....................................................................................................................................51
APPROVAL OF LEGAL PROCEEDINGS ...........................................................................................................................51
RATINGS ...............................................................................................................................................................................51
UNDERWRITING ..................................................................................................................................................................52
AVAILABILITY OF DOCUMENTS AND FINANCIAL INFORMATION ........................................................................52
CONTINUING DISCLOSURE ..............................................................................................................................................53
MISCELLANEOUS................................................................................................................................................................53
APPENDIX A
APPENDIX B
CITIZENS ENERGY GROUP ................................................................................................................ A-1
SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND DEFINITIONS
APPENDIX B1
APPENDIX B2
APPENDIX B3
SUMMARY OF CERTAIN PROVISIONS OF THE IFA INDENTURE AND
LOAN AGREEMENT ....................................................................................................................................B1-1
SUMMARY OF CERTAIN PROVISIONS OF THE CITIZENS AUTHORITY INDENTURES ................B2-1
DEFINITIONS ................................................................................................................................................B3-1
APPENDIX C
FORM OF IFA BOND COUNSEL OPINION.........................................................................................C-1
APPENDIX D
FORM OF CITIZENS AUTHORITY BOND COUNSEL OPINION ............................................................. D-1
APPENDIX E
APPENDIX F
APPENDIX G
APPENDIX H
APPENDIX I
BOOK-ENTRY ONLY SYSTEM ............................................................................................................ E-1
FORM OF CONTINUING DISCLOSURE UNDERTAKING AGREEMENT ...................................... F-1
DESCRIPTION OF CONSENT DECREE PROJECTS.......................................................................... G-1
SCHEDULE OF PILOTS PAYABLE TO THE CITY OF INDIANAPOLIS ........................................ H-1
SCHEDULE OF PAYMENTS DUE TO THE CITY OF INDIANAPOLIS FOR
THE SANITARY DISTRICT’S GENERAL OBLIGATION BONDS..................................................... I-1
SUMMARY OF THE MANAGEMENT AGREEMENT ......................................................................... J-1
APPENDIX J
Inside Back Cover – Map of the Wastewater System
- ii -
OFFICIAL STATEMENT
$235,275,000∗
INDIANA FINANCE AUTHORITY
FIRST LIEN WASTEWATER UTILITY REVENUE BONDS,
SERIES 2014A (CWA AUTHORITY PROJECT)
INTRODUCTION
General
The purpose of this Official Statement, including the cover page, inside cover page, preliminary pages and appendices, is to
set forth certain information concerning the issuance and sale by the Indiana Finance Authority (the “IFA”) of its First Lien
Wastewater Utility Revenue Bonds, Series 2014A (CWA Authority Project) (the “IFA Wastewater Bonds”). The IFA Wastewater
Bonds are issued pursuant to the provisions of a First Lien Trust Indenture dated as of July 1, 2014 (the “IFA Indenture”), between the
IFA and The Bank of New York Mellon Trust Company, N.A., as trustee (the “First Lien Trustee”), and pursuant to the laws of the
State of Indiana (the “State”), including particularly Indiana Code 4-4-10.9 and -11 (as from time to time amended, the “Act”) and a
resolution of the IFA adopted on December 19, 2013, as subsequently amended by an amendatory resolution adopted by the IFA on
April 17, 2014.
The IFA Wastewater Bonds are issued by the IFA for the purpose of making a loan to the CWA Authority, Inc. (the “Citizens
Authority”), the repayment of which is evidenced by the CWA Authority, Inc. City of Indianapolis, Indiana, First Lien Wastewater
Revenue Bonds, Series 2014A (the “Citizens Authority 2014A First Lien Bonds”). The Citizens Authority 2014A First Lien Bonds
are issued pursuant to the Authorizing Acts (as defined herein) and the Citizens Authority Indentures. The Citizens Authority 2014A
First Lien Bonds are Citizens Authority First Lien Bonds, as defined herein.
The IFA is a public body politic and corporate, not a state agency, but an independent public instrumentality under the Act.
Though separate from the State, the exercise by the IFA of its powers constitutes an essential public function. The IFA has no taxing
power, and any bonds issued by the IFA do not constitute indebtedness of the State within the meaning or application of any
constitutional provisions or limitation.
The IFA has authorized the issuance of the IFA Wastewater Bonds herein described for the benefit of the Citizens Authority.
The IFA makes no representations whatsoever concerning the Citizens Authority.
THE IFA WASTEWATER BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE IFA, SECURED SOLELY
BY THE IFA INDENTURE, AND ARE PAYABLE SOLELY FROM PAYMENTS TO BE MADE BY THE CITIZENS
AUTHORITY UNDER THE LOAN AGREEMENT (AS DEFINED HEREIN) AND THE CITIZENS AUTHORITY 2014A
FIRST LIEN BONDS, AND FROM CERTAIN FUNDS HELD OR OTHERWISE AVAILABLE UNDER THE IFA
INDENTURE, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. THE IFA WASTEWATER BONDS
ARE NOT A GENERAL OR MORAL OBLIGATION, DEBT OR LIABILITY OF THE IFA, THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF THE CONSTITUTION OR STATUTES OF THE
STATE, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE IFA, THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF. THE IFA WASTEWATER BONDS DO NOT GRANT TO THE HOLDERS
THEREOF ANY RIGHT TO HAVE THE IFA, THE GENERAL ASSEMBLY OF THE STATE, OR ANY POLITICAL
SUBDIVISION OF THE STATE LEVY ANY TAXES OR APPROPRIATE OR OTHERWISE MAKE AVAILABLE ANY
FUNDS FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE IFA
WASTEWATER BONDS AND DO NOT CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE IFA,
THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, AND NEITHER THE IFA, THE STATE, NOR ANY
POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF,
PREMIUM, IF ANY, OR INTEREST ON THE IFA WASTEWATER BONDS. THE IFA HAS NO TAXING POWER.
The offering of the IFA Wastewater Bonds is made only by way of this Official Statement, and no other information or
materials are to be used in connection with the offer or sale of the IFA Wastewater Bonds. The following introductory material is only
a brief description of and is qualified by the more complete information contained throughout this Official Statement. A full review
should be made of the entire Official Statement, including the cover page, inside cover page, preliminary pages and appendices, and
∗
Preliminary, subject to change.
the documents summarized or described herein. Detachment or other use of this “INTRODUCTION” without the entire Official
Statement, including the cover page, inside cover page, other preliminary pages and appendices, is unauthorized.
The information contained in this Official Statement has been compiled by the Citizens Authority from official and other
sources deemed by the Citizens Authority to be reliable, and while not guaranteed as to completeness or accuracy, is believed by the
Citizens Authority to be correct as of this date. Only the information set forth herein under the captions “INDIANA FINANCE
AUTHORITY” and “LITIGATION - IFA” has been obtained from IFA. IFA assumes no obligation related to any other information
set forth herein.
The Citizens Authority
The Citizens Authority is a nonprofit public benefit corporation created pursuant to Indiana Code 23-17, et. seq., Indiana
Code 23-1-7 and Indiana Code 8-1-11.1, each as amended from time to time (the “Authorizing Acts”) and the Interlocal Cooperation
Agreement for the Provision of Utility Services (Wastewater) (the “ICA”) among the City of Indianapolis, Indiana (the “City”), the
Sanitary District of the City, acting by and through the Board of Public Works (the “Sanitary District”) and the Board of Directors for
Utilities of the Department of Public Utilities of the City d/b/a Citizens Energy Group (“Citizens”) dated as of August 9, 2010. See
“THE CITIZENS AUTHORITY.” The Citizens Authority owns and operates the Wastewater System (as defined herein) pursuant to
the Authorizing Acts for the exclusive and perpetual benefit of the inhabitants of the City in furtherance of a public charitable trust for
the Wastewater System. See “RECENT ACQUISITION OF THE WASTEWATER SYSTEM.” The Citizens Authority operates the
assets of the Wastewater System in the nature of a public charitable trust which is separate from the trusts relating to the assets of the
systems owned and operated by Citizens. The assets of the Wastewater System owned by the Citizens Authority are subject to an
indenture which is separate and distinct from those of the other assets owned and operated by Citizens.
The Citizens Authority was organized by Citizens as provided in the ICA and operates as an affiliate of Citizens. In order to
provide for the most efficient operation of the Wastewater System, at the same time that Citizens operates the other utility properties
owned and operated by Citizens, Citizens manages the Wastewater System for the Citizens Authority. The board of directors of the
Citizens Authority consists of the same individuals shown in “APPENDIX A–CITIZENS ENERGY GROUP” who are appointed to
serve as the board of directors for Citizens. See “THE CITIZENS AUTHORITY.” The day-to-day operations of the Wastewater
System are managed for the Citizens Authority by United Water Services Indiana LLC (the “Manager”), the Manager previously
engaged by the Sanitary District since 1997 to operate the Wastewater System while the Wastewater System was owned and operated
by the City and the Sanitary District. The Manager operates the Wastewater System pursuant to a Management Agreement more fully
described herein. See “THE MANAGER AND THE MANAGEMENT AGREEMENT.” In addition, to the extent that the Manager
is not obligated to operate the Wastewater System, the management team of Citizens shown under “THE CITIZENS AUTHORITY”
and APPENDIX A – CITIZENS ENERGY GROUP and Citizens’ employees under the supervision of such management team operate
the Wastewater System for the Citizens Authority under an agreement between the two entities.
The Manager, the Management Agreement and Citizens Authority Responsibility
The City entered into an Agreement for the Operation and Maintenance of the Advanced Wastewater Treatment Plants dated
October 11, 2007, effective January 1, 2008 and with an initial term of nine (9) years, subject to early termination, with the Manager,
which was amended and clarified pursuant to the Management Agreement MOU (as defined herein) and the Agreement Pertaining to
the Management Agreement (as defined herein) which was assigned as amended to the Citizens Authority as part of the Acquisition
(the “Management Agreement”). Under the Management Agreement, the Manager is generally responsible to operate and manage the
Wastewater System for the Citizens Authority in the same manner as the Manager performed for the City and the Sanitary District, as
more fully described in APPENDIX J-”SUMMARY OF THE MANAGEMENT AGREEMENT.” The Manager also continues to
manage and operate the Stormwater System. See “ACQUISITION OF THE WASTEWATER SYSTEM – Stormwater System
Management.” The Management Agreement provides that the Citizens Authority is responsible for certain capital improvements to
the extent such obligations under the Management Agreement are not discharged by the Manager. Citizens provides those employees,
staffing and financial operations of the Citizens Authority pursuant to a management agreement and the ICA, as part of its integrated
utility system, to the extent required for the Wastewater System and not otherwise the responsibility of the Manager. The Citizens
Authority does not have any direct employees. Citizens allocates a portion of Corporate Shared Services and Shared Field Services
costs to the Citizens Authority for the management of the Wastewater System by Citizens. These costs include back office, field
functions that are common across all of Citizens’ utilities and the Wastewater System, including the cost of labor, benefits, pension
and other post-employment benefits costs. In the event the Management Agreement is terminated or lapses, the Citizens Authority
will either select another manager or manage and operate the Wastewater System itself. See “THE MANAGER AND THE
MANAGEMENT AGREEMENT.”
-2-
Financial Information
The
Citizens
Authority’s
most
recent
annual
financial
information
is
located
at
http://www.citizensenergygroup.com/pdf/2013AnnualReport_Financials.pdf. The Citizens Authority’s most recent interim financial
information is located at http://www.citizensenergygroup.com/pdf/Q22014Report.pdf. In addition, the Citizens Authority’s most
recent annual financial information and interim financial information are available to the public on the Electronic Municipal Markets
Access System of the Municipal Securities Rulemaking Board found at www.emma.msrb.org. The Citizens Authority prepares its
financial statements on an accrual basis. Therefore, revenues represent charges billed to the customers and expenses are recorded as
incurred. Neither the Citizens Authority’s independent auditors, nor any other independent accountants have compiled, examined or
performed any procedures with respect to the financial information contained herein, including any prospective information, nor has
the Citizens Authority requested its independent auditors, nor any other independent accountants, to update any financial information
contained herein. The Citizens Authority has not requested that its independent auditors, nor any other independent accountants, agree
to the use of such financial information in this Official Statement.
Additional Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.
The information contained in this Official Statement has been compiled by the Citizens Authority from official and other
sources deemed by the Citizens Authority to be reliable, and while not guaranteed as to completeness or accuracy, is believed by
Citizens Authority to be correct as of this date. Only the information set forth herein under the captions “INDIANA FINANCE
AUTHORITY” and “LITIGATION - IFA” has been obtained from the IFA. The IFA assumes no obligation related to any other
information set forth herein.
The information contained in this Introduction is qualified by reference to this entire Official Statement (including the
appendices). This Introduction is only a brief description and a full review should be made of this entire Official Statement (including
the appendices), as well as the documents summarized or described in this Official Statement. The summaries of and references to all
documents, statutes and other instruments referred to in this Official Statement do not purport to be complete and are qualified in their
entirety by reference to the full text of each such document, statute or instrument. This Official Statement speaks only as of its date
and the information contained herein is subject to change. Summaries of certain provisions of the IFA Indenture and the Citizens
Authority Indentures and definitions of certain capitalized terms used in this Official Statement are set forth in “APPENDIX B—
SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND DEFINITIONS.”
Information contained in this Official Statement with respect to the IFA may be obtained from the IFA through the Public
Finance Director of the State of Indiana at (317) 233-4332 or at One North Capitol Avenue, Suite 900, Indianapolis, Indiana 46204.
Information contained in this Official Statement with respect to the Citizens Authority and copies of the IFA Indenture and the
Citizens Authority Indentures may be obtained from the Citizens Authority at 2020 North Meridian Street, Indianapolis, Indiana
46202. The Citizens Authority’s telephone number is (317) 924-3341.
Defined Terms
Certain capitalized terms are defined in “APPENDIX B – SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND
DEFINITIONS.”
ACQUISITION OF THE WASTEWATER SYSTEM
The Citizens Authority holds and operates the Wastewater System for the exclusive and perpetual benefit of the inhabitants
of the City in furtherance of a public charitable trust created separately from the public charitable trust for Citizens’ historical utilities
and the separate public charitable trust of Citizens created for the Water System. Obligations related to the Wastewater System are not
payable from the revenues of any utility held by Citizens.
Upon satisfaction of certain conditions in the Wastewater Asset Purchase Agreement among the City of Indianapolis,
Citizens Energy Group and the Department of Public Works of the City of Indianapolis (the "Wastewater Asset Purchase Agreement"
or the "Asset Purchase Agreement"), the Citizens Authority acquired the Wastewater System on August 26, 2011. Prior to the
Acquisition, the Wastewater System had been owned by the City and the Sanitary District together with the Stormwater System. The
Citizens Authority did not acquire certain assets as part of the Acquisition related to the maintenance and operation of the Stormwater
System.
Pursuant to the Wastewater Asset Purchase Agreement, the Citizens Authority assumed the City’s obligations under the
Consent Decree (as defined herein) and is liable to the City for all damages resulting from the failure of the Citizens Authority to meet
-3-
the requirements and obligations of the Consent Decree required after the date of the Acquisition. In 2013, the Citizens Authority was
named as a party to the Consent Decree. See “THE CONSENT DECREE AND THE LONG-TERM CONTROL PLAN” and
“APPENDIX G – DESCRIPTION OF CONSENT DECREE PROJECTS.” As of this date, Citizens Authority pursuant to the
Wastewater Asset Purchase Agreement has financed, constructed, implemented and completed certain of the City’s Septic Tank
Elimination Program (“STEP”) projects as set forth in the Wastewater Asset Purchase Agreement. Further, under the Wastewater
Asset Purchase Agreement, the Citizens Authority is obligated to continue to make the payment of PILOTs the Sanitary District was
obligated to make to the City under an ordinance of the City’s legislative body. The annual amount of the PILOTs is shown in
“APPENDIX H – SCHEDULE OF PILOTS PAYABLE TO THE CITY OF INDIANAPOLIS.” In addition, the Citizens Authority is
obligated to make semiannual payments to the City in an amount equal to the interest and remaining principal obligations under the
City’s outstanding general obligation bonds associated with the Wastewater System. Such general obligation bonds were outstanding
in the principal amount of $28,345,000 as of June 1, 2014, and the required payments are described in “APPENDIX I – SCHEDULE
OF PAYMENTS DUE TO THE CITY OF INDIANAPOLIS FOR THE SANITARY DISTRICT’S GENERAL OBLIGATION
BONDS.” Such payments by the Citizens Authority on the City’s general obligation bonds and the payment of PILOTs are unsecured
and are subordinate to payments on the Citizens Authority Bonds (as defined herein).
Pursuant to an agreement between the Citizens Authority and Citizens, Citizens provides all staff and administrative support
for the Wastewater System beyond that which is provided by the Manager. Although the Citizens Authority did not acquire the
Stormwater System from the City, pursuant to an agreement with the City, the Citizens Authority is obligated, directly or through the
Manager, to manage certain functions of the Stormwater System for the City through December 31, 2016.
Stormwater System Management. The City continues to own the Stormwater System but the Management Agreement with
the Manager, which covers the management and operation of both the Wastewater System and the Stormwater System, has been
assigned to and assumed by the Citizens Authority. The Manager has performed certain functions for the Wastewater System and the
Stormwater System for the City since 1997. Under an arrangement between the Manager, the City and the Citizens Authority, the
Manager has, since the Acquisition, continued to perform certain operation and maintenance, technical and regulatory compliance
services for the Citizens Authority for the benefit of the City with respect to the Stormwater System. In addition, the Manager
provides certain minor capital improvements. Under this arrangement, the City compensates the Citizens Authority approximately
$5.45 million annually (including up to $1.5 million in capital improvements), of which approximately $4.6 million is the amount the
Citizens Authority is obligated to compensate the Manager for services rendered for the Stormwater System. The Citizens Authority,
through the Manager, provides management services to the City with respect to the Stormwater System.
Expected Synergies. Citizens’ operation of the Wastewater System on behalf of the Citizens Authority, in combination with
its operation of the central Indiana gas, steam and chilled water systems and its operation of the Water System, has, since the date of
the Acquisition, resulted in substantial operating and capital project synergies to date. Citizens Energy Group has aligned and
continues to align its activities along functional lines in order to create the greatest opportunities to realize cost efficiencies. Citizens
Energy Group’s officer team oversees all utilities, providing common leadership and decision-making across each utility. Backoffice, field service and customer interfacing functions which are common across all utilities have been combined. The Wastewater
System's billing, operations and engineering functions have been fully integrated with the same functions of the other Citizens
utilities. This functional operating model has provided a platform to realize significant savings that will accrue to each utility. The
Citizens Authority expects significant synergies and efficiencies will be realized. These synergies are realized both as direct savings
to the various utilities with regard to direct costs, as well as in the form of allocated savings with regard to allocated costs. Through its
first two full fiscal years of owning the Indianapolis Water and Wastewater assets, Citizens realized $180.6 million of aggregate
savings for all utilities owned or managed by Citizens. Citizens Authority cannot guarantee that or predict if such synergies will
continue to exist.
FINANCING PLAN
General Description
The proceeds from the sale of the IFA Wastewater Bonds will be used to purchase the Citizens Authority 2014A First Lien
Bonds. The proceeds of the Citizens Authority 2014A First Lien Bonds will be used to: (i) fund the costs of necessary betterments,
improvements, extensions and additions to the Wastewater System, (ii) repay draws made on the Wells Line, which draws were used
to provide interim financing of necessary betterments, improvements, extensions and additions to the Wastewater System, (iii) fund a
debt service reserve for the Citizens Authority 2014A First Lien Bonds, and (iv) pay costs of issuance of the IFA Wastewater Bonds
and the Citizens Authority 2014A First Lien Bonds.
The tables below show the debt service requirements of the outstanding Citizens Authority First Lien Bonds, including the
Citizens Authority 2014A First Lien Bonds and the outstanding Citizens Authority Second Lien Bonds.
-4-
DEBT SERVICE REQUIREMENTS1
Total
2014A First
Lien
Debt Service
Fiscal Year
Ending
September 30
2014
Outstanding
First Lien
Debt Service
57,385,363
2015
57,388,363
19,484,488
2016
57,389,963
65,471,988
2017
57,388,313
18,103,038
2018
57,387,563
18,106,288
2019
57,391,413
18,106,288
2020
57,387,163
18,102,538
2021
57,387,663
18,104,538
2022
57,390,313
18,106,288
2023
57,386,838
18,105,325
2024
57,391,975
18,105,988
2025
57,387,338
18,102,225
2026
57,390,325
18,103,250
2027
57,392,300
18,102,750
2028
57,389,875
18,104,675
2029
57,384,675
18,102,713
2030
57,388,063
18,105,813
2031
57,390,625
18,103,138
2032
57,388,188
18,104,500
2033
57,386,600
18,103,750
2034
57,386,175
18,105,250
2035
57,391,975
18,102,500
2036
57,393,538
18,104,250
2037
57,385,663
18,103,750
2038
57,388,150
18,104,500
2039
57,394,050
18,104,750
2040
57,394,100
18,102,750
2041
57,389,800
18,096,750
2042
2014A First
Lien Principal
2014A First
Lien Interest
Total
Second Lien
Debt Service*
19,485,738
Total
Debt
Service
12,110,800
1,619,007,163
*
Total
First Lien
Debt Service
557,039,813
Includes $45,990,000 of the bullet maturity of the Citizens Authority 2011C Second Lien Bonds, which the Citizens Authority expects to refinance prior to such maturity.
1
Debt service in the table above shows the monthly deposits the Citizens Authority is obligated to make into the respective Account of the First Lien Bond Interest and Principal Fund during the applicable
Fiscal Year ending September 30.
-5-
SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the issuance of the Citizens Authority 2014A First
Lien Bonds are summarized in the following table:
Sources of Funds
Principal Amount
Original Issue Premium/Discount
$______________________
______________________
Total Sources:
$______________________
Uses of Funds
Capital Improvements to Wastewater System
Repayment of Draws on Wells Line
Deposit to 2014A First Lien Reserve
Costs of Issuance1
$______________________
______________________
______________________
______________________
Total Uses:
$______________________
(1)
Including estimated underwriters’ discount, rating agency, legal, accounting, printing, financial advisor and other miscellaneous expenses.
OUTSTANDING BONDS
As of June 1, 2014, the CWA Authority, Inc. City of Indianapolis, Indiana Wastewater System First Lien Revenue
Bonds, Series 2011A and Series 2012A were the only Citizens Authority First Lien Bonds outstanding under the Citizens
Authority First Lien Master Trust Indenture dated as of July 1, 2011 (the “Citizens Authority First Lien Master Indenture”),
between the Citizens Authority and the First Lien Trustee, in the combined aggregate principal amount of $856,195,000.
As of June 1, 2014, the CWA Authority, Inc. City of Indianapolis, Indiana Water System Second Lien Revenue Bonds,
Series 2011B and Series 2011C are the only Citizens Authority Second Lien Bonds outstanding in the combined aggregate
principal amount of $314,005,000. Pursuant to the Wastewater Asset Purchase Agreement, the Citizens Authority is
obligated to make semiannual payments to the City in an amount equal to the interest and remaining principal obligations
under the City’s outstanding general obligation bonds associated with the Wastewater System. See “ACQUISITION OF
THE WASTEWATER SYSTEM” and “APPENDIX I – SCHEDULE OF PAYMENTS DUE TO THE CITY OF
INDIANAPOLIS FOR THE SANITARY DISTRICT’S GENERAL OBLIGATION BONDS.” Such payments are
unsecured and subordinate to the payments on the Citizens Authority Bonds.
Series 2011A
Series 2012A
Citizens Authority First Lien Bonds
Original
$ 678,480,000
192,125,000
Outstanding
$ 664,070,000
192,125,000
$ 870,605,000
$ 856,195,000
Citizens Authority Second Lien Bonds
Original
$ 268,015,000
45,990,000
Outstanding
$ 268,015,000
45,990,000
$ 314,005,000
$ 314,005,000
Total
Series 2011B
Series 2011C
Total
-6-
THE IFA WASTEWATER BONDS
General Description
The IFA Wastewater Bonds are issuable as fully registered bonds in denominations of $5,000 or any integral
multiple thereof. The IFA Wastewater Bonds will be dated as of the date of delivery.
Interest on the IFA Wastewater Bonds will be payable on April 1 and October 1 of each year, commencing
October 1, 2014 (each an “Interest Payment Date”). The IFA Wastewater Bonds will bear interest (calculated on the basis
of a 30-day month and a 360-day year) at the rates and will mature on the dates and in the principal amounts set forth on the
inside cover page of this Official Statement. Each IFA Wastewater Bond will bear interest from and including the date of
issuance thereof until payment of the principal or redemption price thereof shall have been made or provided for in
accordance with the IFA Indenture, whether at maturity, upon redemption or otherwise.
When issued, all IFA Wastewater Bonds will be registered in the name of and held by Cede & Co., as nominee for
DTC. Purchases of beneficial interests from DTC in the IFA Wastewater Bonds will be made in book-entry only form
(without certificates) in the denomination of $5,000 or any integral multiple thereof so long as DTC or its nominee is the
registered owner of the IFA Wastewater Bonds, payments of the principal of and interest on the IFA Wastewater Bonds
will be made directly by the First Lien Trustee by wire transfer of funds to Cede & Co., as nominee for DTC.
Disbursement of such payments to the participants of DTC (the “DTC Participants”) will be the sole responsibility of DTC,
and the ultimate disbursement of such payments to the Beneficial Owners, as defined herein, of the IFA Wastewater Bonds
will be the responsibility of the DTC Participants and the Indirect Participants, as defined herein. SEE “APPENDIX E –
BOOK-ENTRY ONLY SYSTEM.”
If DTC or its nominee is not the registered Owner of the IFA Wastewater Bonds, principal of and premium, if any,
on all of the IFA Wastewater Bonds will be payable upon presentation thereof at the corporate trust operations office of the
First Lien Trustee. Payment of the interest on any IFA Wastewater Bond shall be made to the person appearing on the
bond registration books of the Bond Registrar as the Bondholder thereof on the date that is the fifteenth day of the month
prior to an Interest Payment Date (a “Record Date”), such interest to be paid by the First Lien Trustee to such Bondholder
(i) by check mailed on the Interest Payment Date to such Bondholder’s address as it appears on the registration books, or at
such other address as has been furnished to the First Lien Trustee as provided below in writing by such Bondholder not
later than the Record Date, or (ii) upon written request at least three Business Days prior to the applicable Record Date of a
Bondholder of IFA Wastewater Bonds of such series aggregating not less than $1,000,000 in principal amount, by wire
transfer in immediately available funds at an account maintained in the United States at such wire address as such
Bondholder shall specify in its written request (any such written request shall remain in effect until rescinded in writing by
such Bondholder); except, in each case, that, if and to the extent that there shall be a default in the payment of the interest
due on such Interest Payment Date, such defaulted interest rate shall be the rate on the IFA Wastewater Bonds on the day
before such default occurred, and such defaulted interest shall be paid to the Bondholder in whose name any such IFA
Wastewater Bonds are registered at the close of business on the fifth Business Day next preceding the date of payment of
such defaulted interest.
Except as provided in “APPENDIX E—BOOK-ENTRY ONLY SYSTEM,” in all cases in which the privilege of
exchanging or transferring IFA Wastewater Bonds is exercised, the IFA will execute and the First Lien Trustee will deliver
IFA Wastewater Bonds in accordance with the provisions of the IFA Indenture. The IFA Wastewater Bonds will be
exchanged or transferred at the principal corporate trust office of the First Lien Trustee only for IFA Wastewater Bonds of
the same series, the same maturity and for a like aggregate principal amount. In connection with any transfer or exchange
of IFA Wastewater Bonds, the IFA or the First Lien Trustee may impose a charge for any applicable tax, or other
governmental charge incurred in connection with such transfer or exchange, which sums are payable by the person
requesting such transfer or exchange.
The ownership of registered IFA Wastewater Bonds shall be proved by the bond registration books held by the
First Lien Trustee. The First Lien Trustee and the IFA may conclusively assume that such ownership continues until
written notice to the contrary is served upon the First Lien Trustee.
-7-
Optional Redemption
The IFA shall not call the IFA Wastewater Bonds for optional redemption and the First Lien Trustee shall not give
notice of any such redemption, unless the Citizens Authority has so directed in writing by providing notice that the related
Citizens Authority 2014A First Lien Bonds shall be redeemed on a specific date in a like amount and like maturities.
The IFA Wastewater Bonds maturing on or after October 1, 20___ are subject to optional redemption prior to their
maturity on October 1, 20____, or any date thereafter, on not less than thirty (30) days’ and not more than sixty (60) days’
notice, in whole or in part, at face value, plus interest accrued to the date fixed for redemption.
Mandatory Sinking Fund Redemption
The IFA Wastewater Bonds maturing October 1, 20___, and October 1, 20___ (the “IFA Term Bonds”) are
subject to mandatory sinking fund redemption prior to maturity at a price equal to the principal amount thereof, plus
accrued interest to the redemption date, without premium, on October 1 in the years and in the principal amounts indicated
below:
20___ IFA Term Bonds
Year
Principal Amount
$
*
20___ IFA Term Bonds
Year
Principal Amount
*
$
_____________
*Final Maturity
The First Lien Trustee will credit against the sinking fund redemption requirement for the IFA Term Bonds in the
order determined by the IFA, any IFA Term Bonds of such maturity which have previously been redeemed (otherwise than
as a result of a previous mandatory redemption requirement) or delivered to the First Lien Trustee for cancellation or
purchased for cancellation by the First Lien Trustee and cancelled by the First Lien Trustee and not theretofore applied as a
credit against any redemption obligation. Each IFA Term Bond subject to mandatory sinking fund redemption of such
maturity so delivered or cancelled shall be credited by the First Lien Trustee at one hundred percent (100%) of the principal
amount thereof against the mandatory sinking fund obligation on such mandatory redemption date, and any excess of such
amount shall be credited to future redemption obligations as designated by the Citizens Authority, and the principal amount
of such IFA Term Bond of such maturity to be redeemed by operation of the mandatory sinking fund requirements shall be
accordingly reduced; provided however, that the First Lien Trustee shall credit such IFA Term Bond only to the extent such
are received on or before forty-five (45) days preceding the applicable mandatory redemption date as set forth above.
Selection of Bonds to be Redeemed
Whenever less than all of the Citizens Authority 2014A First Lien Bonds are subject to redemption, the IFA
Wastewater Bonds corresponding to such Citizens Authority 2014A First Lien Bonds shall be redeemed. Redemption shall
be done so that each IFA Wastewater Bond, if any, shall remain outstanding in an amount that is an Authorized
Denomination. Where a portion of the IFA Wastewater Bonds of a specific maturity will be redeemed, the First Lien
-8-
Trustee shall select the IFA Wastewater Bonds to be redeemed by lot as directed by the IFA, but only in Authorized
Denominations. See APPENDIX E for information regarding DTC’s customary procedures and practices for selecting
book-entry bonds for redemption.
Notice of Redemption
Notice of redemption shall be mailed by first class mail not less than 30 days nor more than 60 days before such
redemption date, to the respective holders of any IFA Wastewater Bonds designated for redemption at their addresses on
the registration books maintained by the First Lien Trustee. Neither failure to receive such notice nor any defect therein
shall affect the sufficiency of such redemption. With respect to any notice of optional redemption of IFA Wastewater
Bonds at the specific written direction of the Citizens Authority, unless upon the giving of such notice IFA Wastewater
Bonds shall be deemed to have been paid within the meaning of the IFA Indenture, such notice may state (if so directed by
the Citizens Authority in writing to the First Lien Trustee) that such redemption shall be conditional upon the receipt by the
First Lien Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, and
premium, if any, and interest on, such IFA Wastewater Bonds to be redeemed, and that if such moneys shall not have been
so received said notice shall be of no further force and effect and the IFA shall not be required to redeem such IFA
Wastewater Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so
received, the redemption shall not be made and the First Lien Trustee shall promptly thereafter give notice to such holders,
in the manner in which the notice of redemption was given, that such moneys were not so received.
Purchase in Lieu of Redemption
The IFA shall have the option to cause the IFA Wastewater Bonds to be purchased in lieu of redemption pursuant
to the IFA Indenture. Such option shall be exercised by the IFA (at the direction and sole expense of the Citizens
Authority) by delivering to the First Lien Trustee on or prior to the Business Day preceding the redemption date a written
direction of the IFA specifying that the IFA Wastewater Bonds shall not be redeemed, but instead shall be subject to
purchase pursuant to the IFA Indenture. Upon delivery of such notice, the IFA Wastewater Bonds shall not be redeemed
but shall instead be subject to mandatory tender for purchase at a purchase price equal to the redemption price at which the
IFA Wastewater Bonds would have been redeemed under the IFA Indenture on a purchase date (the date that would have
been the redemption date); provided that funds in an amount equal to the purchase price shall be made available to the First
Lien Trustee by the Citizens Authority on or prior to the purchase date.
SECURITY AND SOURCES OF PAYMENT
FOR THE IFA WASTEWATER BONDS
Limited Obligations
The IFA Wastewater Bonds are payable solely from the pledge of repayments on the Citizens Authority 2014A
First Lien Bonds (the “2014A First Lien Repayments”) due to the IFA or the First Lien Trustee with respect to the Loan
Agreement.
THE IFA WASTEWATER BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE IFA, SECURED
SOLELY BY THE IFA INDENTURE, AND ARE PAYABLE SOLELY FROM PAYMENTS TO BE MADE BY
THE CITIZENS AUTHORITY UNDER THE LOAN AGREEMENT AND THE CITIZENS AUTHORITY 2014A
FIRST LIEN BONDS, AND FROM CERTAIN FUNDS HELD OR OTHERWISE AVAILABLE UNDER THE IFA
INDENTURE, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. THE IFA WASTEWATER
BONDS ARE NOT A GENERAL OR MORAL OBLIGATION, DEBT OR LIABILITY OF THE IFA, THE
STATE, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF THE CONSTITUTION
OR STATUTES OF THE STATE, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF
THE IFA, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. THE IFA WASTEWATER BONDS
DO NOT GRANT TO THE HOLDERS THEREOF ANY RIGHT TO HAVE THE IFA, THE GENERAL
ASSEMBLY OF THE STATE, OR ANY POLITICAL SUBDIVISION OF THE STATE LEVY ANY TAXES OR
APPROPRIATE OR OTHERWISE MAKE AVAILABLE ANY FUNDS FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE IFA WASTEWATER BONDS AND DO NOT
CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE IFA, THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF, AND NEITHER THE IFA, THE STATE, NOR ANY POLITICAL
-9-
SUBDIVISION THEREOF SHALL BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST ON THE IFA WASTEWATER BONDS. THE IFA HAS NO TAXING POWER.
The sources of payment of, and security for, the IFA Wastewater Bonds are more fully described below.
SECURITY AND SOURCES OF PAYMENT OF
CITIZENS AUTHORITY BONDS
Citizens Authority 2014A First Lien Bonds
The Citizens Authority 2014A First Lien Bonds will be issued in an aggregate principal amount equal to the
aggregate principal amount of the IFA Wastewater Bonds and will be dated as of their date of delivery. The Citizens
Authority 2014A First Lien Bonds will mature in the same amounts and on the same maturity dates as the IFA Wastewater
Bonds, and will bear interest payable on each Interest Payment Date, and at the same interest rates per annum as the IFA
Wastewater Bonds. Interest on the Citizens Authority 2014A First Lien Bonds will be paid to the First Lien Trustee under
the IFA Indenture. Principal of and premium, if any, on the Citizens Authority 2014A First Lien Bonds will be paid
directly to the First Lien Trustee (for the account of the IFA under the IFA Indenture).
The Citizens Authority 2014A First Lien Bonds are limited obligations of the Citizens Authority, payable solely
out of the Net Revenues and the First Lien Pledged Funds, after the payment of the Operation and Maintenance Expenses.
The Citizens Authority 2014A First Lien Bonds together with all other First Lien Parity Obligations outstanding and
hereafter issued as described in the First Lien Citizens Authority Master Indenture, are issued on a parity basis and are
senior to the Second Lien Parity Obligations and the Subordinate Securities (as defined herein). The Second Lien Citizens
Authority Bonds together with all other Second Lien Parity Obligations outstanding and hereafter issued as described in the
Second Lien Master Citizens Authority Indenture, are issued on a parity basis, are subordinate to First Lien Parity
Obligations and are senior to the Subordinate Securities. The Citizens Authority Bonds do not constitute a charge against
the general credit or taxing power of the Citizens Authority, the City, its utility district as a special taxing district or the
State or any political subdivision thereof. The Citizens Authority has no taxing power available to pay the Citizens
Authority 2014A First Lien Bonds. The sources of payment of, and security for, the Citizens Authority 2014A First Lien
Bonds are more fully described below.
As of June 1, 2014, there were two (2) series of Citizens Authority First Lien Bonds outstanding in the combined
aggregate principal amount of $856,195,000.
Net Revenues and Pledged Funds of the Citizens Authority
Under the Citizens Authority First Lien Master Indenture, the Citizens Authority 2014A First Lien Bonds
constitute special obligations of the Citizens Authority payable from and equally and ratably secured by the First Lien
Pledged Funds and a first priority lien and security interest on the Net Revenues on a parity with all First Lien Parity
Obligations. Under the Citizens Authority Second Lien Master Indenture, the Second Lien Citizens Authority Bonds
constitute special obligations of the Citizens Authority payable from and equally and ratably secured by the Second Lien
Pledged Funds and a second lien and security interest on the Net Revenues subordinate to the First Lien Parity Obligations
on parity with all other Citizens Authority Second Lien Parity Obligations. “Net Revenues” is defined in the Citizens
Authority Indentures as Gross Revenues less Operation and Maintenance Expenses. “Gross Revenues” is defined in the
Citizens Authority Indentures as all revenues and income from the Wastewater System, including but not limited to charges
and user charges, but excluding (a) extraordinary items; and (b) income accrued on any First Lien Escrow Securities and
income accrued on any Second Lien Escrow Securities or escrow securities for Subordinate Securities (each as defined in
APPENDIX B hereto). “Operation and Maintenance Expenses” is defined in the Citizens Authority Indentures as all
necessary and proper expenses of the Citizens Authority paid or accrued in the ownership, operation, maintenance and
repair of the Wastewater System, whether incurred by the Citizens Authority or Citizens, including fees owed to the
applicable trustee under the Citizens Authority Indentures; but excluding interest paid (other than interest on customers’
deposits), any allowance for depreciation or amortization, any non-current unfunded pension, retirement, health and
hospitalization obligations, any investment in capital assets, any payments on debt incurred or assumed by the Citizens
Authority, payments or obligations on related First Lien and Second Lien Derivative Agreements (as defined herein), First
Lien and Second Lien Repayment Obligations (as defined herein) (including fees due to the Credit Provider (as defined
herein)), First Lien Citizens Authority Bonds, Second Lien Citizens Authority Bonds, Subordinate Securities, payments on
PILOTs or other payments in lieu of taxes, the obligations or payments to fund or replenish the First Lien and Second Lien
- 10 -
Bond Reserve Fund or any bond reserve fund for Subordinate Securities, contractual obligations with respect to amounts
owed on general obligation indebtedness of the City pursuant to the Wastewater Asset Purchase Agreement or any
operation and maintenance expenses paid from sources other than Gross Revenues (each as defined in APPENDIX B
hereto).
“First Lien Pledged Funds” is defined in the First Lien Master Citizens Authority Indenture as all of the funds and
accounts established in the First Lien Master Citizens Authority Indenture, including the General Fund and the Rate
Stabilization Fund (each as defined herein), and all proceeds and other money held therein or investment earnings derived
therefrom, provided that moneys held in the Series 2014A Bond Account of the First Lien Bond Interest and Principal Fund
(as defined herein), the Series 2014A Reserve Fund and the Series 2014A Account of the First Lien Construction Fund (as
defined herein) are solely for the benefit of and pledged only to the Citizens Authority 2014A First Lien Bonds. First Lien
Pledged Funds shall not include any bond interest and principal fund, construction fund or reserve fund for any Second
Lien Citizens Authority Bonds or Subordinate Securities. See “SECURITY AND SOURCES OF PAYMENT FOR THE
IFA WASTEWATER BONDS” and “APPENDIX B — SUMMARY OF PRINCIPAL FINANCIAL DOCUMENTS AND
DEFINITIONS.”
“Second Lien Pledged Funds” is defined in the Second Lien Master Citizens Authority Indenture as the General
Fund and the Rate Stabilization Fund on a basis subordinate to the First Lien Parity Obligations, all of the funds and
accounts established in the Second Lien Master Citizens Authority Indenture and all proceeds and other money held therein
or investment earnings derived therefrom, provided that the moneys held in an account of the Bond Account of the Second
Lien Bond Interest and Principal Fund (as defined herein), an account of the Second Lien Construction Fund (as defined
herein) and an account of the Second Lien Reserve Fund which are pledged pursuant to the Second Lien Master Citizens
Authority Indenture and a Supplemental Indenture thereto to secure the payment of only one or more series of Citizens
Authority Second Lien Bonds are solely for the benefit of and pledged only to such Citizens Authority Second Lien Bonds.
Second Lien Pledged Funds shall not include any bond interest and principal fund, construction fund or reserve fund for
any First Lien Citizens Authority Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE IFA
WASTEWATER BONDS” and “APPENDIX B—SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND
DEFINITIONS.”
Under Indiana Code 5-1-14-4, such pledges are valid and binding from and after the date of delivery of the
Citizens Authority 2014A First Lien Bonds.
Funds and Accounts; Flow of Funds under Citizens Authority Indentures
Funds and Accounts. The Citizens Authority Indentures create numerous funds and accounts for the collection
and disbursement of Gross Revenues. Each of the funds and accounts is described in further detail in “APPENDIX B SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND DEFINITIONS – Summary of Certain Provisions of the
Citizens Authority Indentures.”
Flow of Funds. All Gross Revenues and moneys transferred from the Rate Stabilization Fund shall be deposited as
received into the General Fund. The Citizens Authority shall also deposit into the General Fund all extraordinary items
excluded from the definition of Gross Revenues, including payments received under First Lien and Second Lien Derivative
Agreements (except for regular payments received thereunder, which shall be deposited into the appropriate account of the
Bond Interest and Principal Fund) and any other assets, revenues, rights, interests or property pledged under a Supplemental
Indenture to secure First Lien Parity Obligations or Second Lien Parity Obligations. Moneys from time to time credited to
the General Fund shall be applied in the following order of priority:
(i)
First, as necessary, there will be applied sufficient amounts to pay Operation and Maintenance Expenses,
as directed by or under the supervision of the Chief Financial Officer of the Citizens Authority. The Citizens
Authority shall be permitted, before applying Net Revenues in the manner provided by the Citizens Authority
Indentures during a First Lien Event of Default or Second Lien Event of Default, to maintain sufficient Net
Revenues in the General Fund, as provided in the Citizens Authority Indentures, in the amount reasonably
determined to be necessary by the Chief Financial Officer to provide for the payment of Operation and
Maintenance Expenses for a period not exceeding two months. SEE “APPENDIX B2—SUMMARY OF
PRINCIPAL FINANCING DOCUMENTS AND DEFINITIONS – Summary of Certain Provisions of the Citizens
Authority Indentures.”
- 11 -
(ii)
Second, on or before the last Business Day of each month so long as any First Lien Citizens Authority
Bonds remain Outstanding, there will be transferred into the First Lien Bond Interest and Principal Fund (or any
Account thereof) from the General Fund (a) the interest on all Outstanding First Lien Citizens Authority Bonds (or
related interest component of the Parity Portion of the related First Lien Repayment Obligation) that is due or has
accrued in such month, or such other amount as shall be specified in a First Lien Supplemental Indenture or Credit
Facility relating to First Lien Citizens Authority Bonds; (b) the principal of all Outstanding First Lien Citizens
Authority Bonds (or the principal component of the Parity Portion of the related First Lien Repayment
Obligations, to the extent permitted by a Supplemental Indenture) that is due or has accrued in such month or such
other amount as shall be specified in a First Lien Supplemental Indenture or First Lien Credit Facility; and (c) any
First Lien Regular Payments (as defined herein) due or accrued in such month from the Citizens Authority on any
First Lien Qualified Derivative Agreement entered into in connection with First Lien Citizens Authority Bonds for
which the Citizens Authority has determined to provide the same priority; provided, that in the alternative, the
Citizens Authority may provide in a Supplemental Indenture that such First Lien Regular Payments or Parity
Portion are subordinate to the payments on the First Lien Citizens Authority Bonds.
(iii)
Third, after the transfers described above, all amounts required to be transferred to the First Lien Bond
Reserve Fund required by any First Lien Supplemental Indenture.
(iv)
Fourth, after the transfers described above, on or before the last Business Day of each month so long as
any Second Lien Citizens Authority Bonds remain Outstanding, there will be transferred into the Second Lien
Bond Interest and Principal Fund (or any Account thereof) from the General Fund (a) the interest on all
Outstanding Second Lien Citizens Authority Bonds (or related interest component of the Parity Portion of the
related Second Lien Repayment Obligation) that is due or has accrued in such month, or such other amount as
shall be specified in a Second Lien Supplemental Indenture or Credit Facility relating to Second Lien Citizens
Authority Bonds; (b) the principal of all Outstanding Second Lien Citizens Authority Bonds (or the principal
component of the Parity Portion of the related Second Lien Repayment Obligations, to the extent permitted by a
Supplemental Indenture) that is due or has accrued in such month or such other amount as shall be specified in a
Second Lien Supplemental Indenture or Second Lien Credit Facility; and (c) any Second Lien Regular Payments
due or accrued in such month from the Citizens Authority on any Second Lien Qualified Derivative Agreement
entered into in connection with Second Lien Citizens Authority Bonds for which the Citizens Authority has
determined to provide such priority; provided, that in the alternative, the Citizens Authority may provide in a
Supplemental Indenture that such Second Lien Regular Payments or Parity Portion are subordinate to the
payments on the Second Lien Citizens Authority Bonds.
(v)
Fifth, after the transfers described above, all amounts required to be transferred to the Second Lien Bond
Reserve Fund required by any Second Lien Supplemental Indenture.
(vi)
Sixth, subject to the application of Net Revenues, First Lien Pledged Funds and Second Lien Pledged
Funds under the applicable Citizens Authority Indenture, the Citizens Authority may apply any remaining Net
Revenues, all extraordinary items excluded from the definition of Gross Revenues, and payments received on
Derivative Agreements (except as provided in the Citizens Authority Indentures) as follows: first, to the payment
of debt service on Subordinate Securities, deposits to be made for a reserve account created for Subordinate
Securities, any reimbursement obligations due to the provider of a credit facility therefor arising from the payment
by the provider of the credit facility of the principal or interest due on such obligation and any regular payments on
a derivative agreement related to Subordinate Securities; second, to the payment of amounts owed by the Citizens
Authority on general obligation bonds of the City pursuant to the Wastewater Asset Purchase Agreement; third, to
pay PILOTs or any other payments in lieu of taxes, to pay capital improvements to the Wastewater System, to pay
costs of replacing any depreciable property or equipment of the Wastewater System, to pay costs of any major
extraordinary repairs, replacements or renewals of the Wastewater System, to fund payments to be made by the
Citizens Authority on a First Lien or Second Lien Derivative Agreement or a derivative agreement related to
Subordinate Securities, including any obligation to post collateral, pay penalties, make-ups, fees and termination
payments with respect thereto, to pay the remaining amounts owed on First Lien Repayment Obligations, Second
Lien Repayment Obligations and repayment obligations with respect to Subordinate Securities, to acquire land or
any interest therein, to pay any lease or other contractual obligations, to fund the Rate Stabilization Fund as
provided in the Citizens Authority Indentures; and fourth, to any other lawful purpose of the Wastewater System.
- 12 -
Rate Stabilization Fund: The Citizens Authority may transfer any amount to the Rate Stabilization Fund from the
General Fund after the transfers or deposits described in (i) – (v) above and in (vi) first and second above. Amounts held in
the Rate Stabilization Fund shall be used first, to fund any shortfall in any other Fund or Account created for the First Lien
Citizens Authority Bonds and second, to fund any shortfall in any Fund or Account created for Second Lien Citizens
Authority Bonds or Subordinate Securities, if any, and thereafter may be used from time to time for any lawful purpose or
purposes of the Citizens Authority pertaining to the Wastewater System, at the direction of the Chief Financial Officer of
the Citizens Authority, including but not limited to the following: (a) to provide for shortfall of revenues resulting from
usage of the Wastewater System, (b) to pay any item described in (vi) above related to the Wastewater System, (c) to make
transfers to the General Fund or (d) to satisfy any rate covenant applicable to First Lien Citizens Authority Bonds, Second
Lien Citizens Authority Bonds or Subordinate Securities. Any limitation on the amount of a transfer from the Rate
Stabilization Fund for the purpose of satisfying a rate covenant applicable to Second Lien Citizens Authority Bonds or
Subordinate Securities shall be as specified in the authorizing indenture therefor. Upon a First Lien Event of Default or a
Second Lien Event of Default under the Citizens Authority Indentures or an event of default occurring with respect to
Subordinate Securities, the amounts held in the Rate Stabilization Fund will be deposited in the General Fund.
Bond Reserve Fund. The Citizens Authority is authorized to specify in any Supplemental Indenture authorizing a
series of Citizens Authority Bonds that one or more accounts of the Bond Reserve Funds created under the Citizens
Authority Indentures may be maintained for such Citizens Authority Bonds (and any other series of Citizens Authority
Bonds the Citizens Authority shall determine) and the provisions with respect thereto or that no account of the Bond
Reserve Funds is being created for such Citizens Authority Bonds. If the Citizens Authority authorizes the maintenance of
one or more accounts of the Bond Reserve Funds in a Supplemental Indenture, any deposit required to be made to such
Account shall be funded after making the transfers or deposits required above with respect to payment of the Citizens
Authority Bonds of such series. Each Account of the Bond Reserve Fund shall secure only those Citizens Authority Bonds
identified in the applicable Supplemental Indenture. The applicable Trustee shall (a) first fully apply Net Revenues in the
manner provided above and from the Rate Stabilization Fund to the applicable Bond Interest and Principal Fund in order to
pay all Citizens Authority Bonds of such series on parity with each other prior to transferring funds in the specific Account
of the Bond Reserve Fund for any series of Citizens Authority Bonds, if any, and then (b) transfer any amounts held in the
applicable Account of the applicable Bond Reserve Fund to the applicable Account of the applicable Bond Interest and
Principal Fund solely for the timely payment of the Citizens Authority Bonds to which such Account is pledged.
Rate Covenants
First Lien. In the First Lien Master Citizens Authority Indenture, the Citizens Authority has covenanted to fix,
charge, impose and collect rates, fees, and other charges for the use of, and services provided by, the Wastewater System
and, to the extent it legally may do so, revise the same as may be necessary or appropriate in order that in each Fiscal Year
(the “Tested Fiscal Year”) the Net Revenues (together with the amounts deposited into the General Fund from the Rate
Stabilization Fund as provided below less any amounts deposited to the Rate Stabilization Fund from the General Fund for
the Tested Fiscal Year) will at all times be at least sufficient to equal the greater of either:
(i)
an amount not less than 120% of all amounts required to be transferred in the Tested Fiscal Year to the
First Lien Bond Interest and Principal Fund for the timely payment of actual interest and principal payable on First
Lien Citizens Authority Bonds during the Tested Fiscal Year as adjusted as described below; or
(ii)
all amounts required to be transferred in the Tested Fiscal Year: (1) to the First Lien Bond Interest and
Principal Fund for timely payment of actual interest (less regular payments received on First Lien Qualified
Derivative Agreements for the Tested Fiscal Year), principal and other obligations payable on First Lien Parity
Obligations; and (2) to the First Lien Bond Reserve Fund for timely payment of the establishment of or any
deficiency in an Account therein, including to repay a Reserve Policy draw.
For purposes of satisfying the rate covenant set forth above (the “First Lien Rate Covenant”), the Citizens
Authority may transfer funds in the Rate Stabilization Fund, if any, to the General Fund in any Tested Fiscal Year. The
amount so transferred shall be treated as Net Revenues for the Tested Fiscal Year for purposes of calculating the First Lien
Rate Covenant; provided, the amount of any such transfer treated as Net Revenues for the Tested Fiscal Year for purposes
of the First Lien Rate Covenant shall not exceed 20% of the First Lien Debt Service Requirements for the Tested Fiscal
Year.
- 13 -
“First Lien Debt Service Requirements” is defined in APPENDIX B3 – SUMMARY OF PRINCIPAL
FINANCING DOCUMENTS AND DEFINITIONS – Definitions.
Second Lien. In the Second Lien Master Citizens Authority Indenture, the Citizens Authority has covenanted to
fix, charge, impose and collect rates, fees, and other charges for use of the Wastewater System and, to the extent it legally
may do so, revise the same as may be necessary or appropriate in order that in each Tested Fiscal Year the Net Revenues
(together with the amounts deposited into the General Fund from the Rate Stabilization Fund as provided below less any
amounts deposited to the Rate Stabilization Fund from the General Fund for the Tested Fiscal Year) less all amounts
required to be transferred in the Tested Fiscal Year to the First Lien Bond Interest and Principal Fund for the timely
payment of actual interest and principal and other obligations payable on First Lien Parity Obligations and all amounts
required to be transferred to the First Lien Citizens Authority Bond Reserve Fund for timely payment of the establishment
of or any deficiency in an Account therein, including to repay a Reserve Policy draw during the Tested Fiscal Year will at
all times be at least sufficient to equal the greater of either:
(i)
an amount not less than 110% of all amounts required to be transferred in the Tested Fiscal Year to the
Second Lien Bond Interest and Principal Fund for the timely payment of actual interest and principal payable on
Second Lien Citizens Authority Bonds during the Tested Fiscal Year as adjusted as described below; or
(ii)
all amounts required to be transferred in the Tested Fiscal Year: (1) to the Second Lien Bond Interest and
Principal Fund for timely payment of the actual interest (less regular payments received on Second Lien Qualified
Derivative Agreements for the Tested Fiscal Year), principal and other obligations payable on Second Lien Parity
Obligations; and (2) to the Second Lien Bond Reserve Fund for timely payment of the establishment of or any
deficiency in an Account therein, including to repay a Reserve Policy draw.
For purposes of satisfying the rate covenant set forth above (the “Second Lien Rate Covenant,” and with the First
Lien Rate Covenant, the “Rate Covenants”), the Citizens Authority may transfer funds in the Rate Stabilization Fund, if
any, to the General Fund in any Fiscal Year. The amount so transferred shall be treated as Net Revenues for the Tested
Fiscal Year for purposes of calculating the foregoing Second Lien Rate Covenant; provided, the amount of any such
transfer treated as Net Revenues for the Tested Fiscal Year for purposes of the Second Lien Rate Covenant shall not exceed
10% of the Second Lien Debt Service Requirements for the Tested Fiscal Year.
Procedures for Testing. The Citizens Authority shall test for compliance with the Rate Covenants within 150 days
after the end of each Fiscal Year. If, subject to the provisions of the Citizens Authority Indentures described below, the Net
Revenues (together with the amounts deposited into the General Fund from the Rate Stabilization Fund as provided below
less any amounts deposited to the Rate Stabilization Fund from the General Fund for the Tested Fiscal Year) are less than
the greater of the amounts specified in the Rate Covenants above, the Citizens Authority must take appropriate action under
the law and within its powers to revise the Citizens Authority’s rates, fees and other charges or the method of operation of
the Wastewater System in order to satisfy the applicable Rate Covenant in the next Fiscal Year following the Tested Fiscal
Year (the “Current Fiscal Year”). Actions which may be taken include, but are not limited to the filing of a proceeding
seeking additional revenues or other relief before the Indiana Utility Regulatory Commission (the "IURC" or the
"Commission") which would increase Gross Revenues of the Wastewater System in the Current Fiscal Year. If any of such
actions require or permit reasonable administrative or judicial review under the laws of the State of Indiana or the United
States of America, such review shall be taken; provided, however, that additional filings seeking increased revenues or
other relief before the IURC shall not be required so long as an issue of law or fact substantially the same to that which
would be raised by such additional filing is then pending or has been decided pursuant to a non-appealable order that
prevents raising such issue in subsequent proceedings on appeal or such an issue of law or fact was previously determined
adversely on appeal. The Citizens Authority shall report such actions to the Trustees within 150 days after the conclusion
of the Tested Fiscal Year.
The Citizens Authority shall not be required to implement the procedures set forth above if the Net Revenues the
Citizens Authority would have received in the Tested Fiscal Year would have been sufficient to meet the requirements of
the Rate Covenants if the Gross Revenues for the Tested Fiscal Year were determined by giving effect for the entire Tested
Fiscal Year to any increase or decrease in rates, fees, rentals or other charges which are authorized by an order of the IURC
issued by the date that is within 120 days after the end of the Tested Fiscal Year. So long as the Citizens Authority
substantially complies in a timely fashion with the actions described in this paragraph and the paragraph above, the Citizens
Authority will not be deemed to have defaulted in the performance of its duties under the applicable Rate Covenants even if
- 14 -
the resulting Net Revenues are not sufficient to be in compliance with the Rate Covenants in the Current Fiscal Year, so
long as there is no other Event of Default under the applicable Citizens Authority Indenture.
For purposes of satisfying the Rate Covenants, the Citizens Authority may exclude from the principal and interest
due on any First Lien Citizens Authority Bonds or Second Lien Citizens Authority Bonds any amounts for which the
Citizens Authority has already set aside First Lien or Second Lien Pledged Funds, as applicable, at the start of the Tested
Fiscal Year for the payment of such Citizens Authority Bonds.
Additional First Lien Citizens Authority Bonds
Superior Obligations Prohibited. The Citizens Authority has covenanted in the First Lien Master Citizens
Authority Indenture not to grant or agree to any lien, mortgage, security interest or claim against the real or personal
property of the Citizens Authority, now and hereafter owned which is prior to any lien and/or security interest against the
Net Revenues and First Lien Pledged Funds as granted by the Citizens Authority Indenture for First Lien Parity Obligations
pursuant to Indiana Code 5-1-14-4.
Additional First Lien Citizens Authority Bonds Test. Under the First Lien Master Citizens Authority Indenture, the
Citizens Authority has reserved the right to issue (and shall only cause to be issued) one or more series of First Lien
Citizens Authority Bonds (the “Proposed First Lien Citizens Authority Bonds”) payable from and secured by a first priority
lien and security interest on the Net Revenues and First Lien Pledged Funds on parity with any Outstanding First Lien
Citizens Authority Bonds upon meeting the requirements set forth below:
(a)
No Default. An Authorized Officer of the Citizens Authority shall certify that, upon the issuance of the
Proposed First Lien Citizens Authority Bonds, the Citizens Authority will not be in default under any term or
provision of any First Lien Citizens Authority Bonds then Outstanding, the First Lien Master Citizens Authority
Indenture or any Supplemental Indenture pursuant to which any First Lien Citizens Authority Bonds were issued.
(b)
Coverage on First Lien Citizens Authority Bonds.
(1)
Historical. The Chief Financial Officer shall certify that for either the Citizens Authority’s most
recent complete Fiscal Year or for any consecutive 12 out of the most recent 18 months preceding the
issuance of the Proposed First Lien Citizens Authority Bonds, the Net Revenues of the Wastewater
System, as adjusted in the manner described in (f) below, were equal to at least 120% of the maximum
annual First Lien Debt Service Requirements for all existing First Lien Citizens Authority Bonds and the
Proposed First Lien Citizens Authority Bonds for any subsequent Fiscal Year while the existing First
Lien Citizens Authority Bonds are Outstanding; or
(2)
Projected. The Chief Financial Officer shall certify that the estimated Net Revenues of the
Wastewater System, as adjusted in the manner described in (f) below, for each of three (3) consecutive
Fiscal Years beginning in the first Fiscal Year in which the Citizens Authority will have any scheduled
payments of interest on or principal of the Proposed First Lien Citizens Authority Bonds (for the payment
of which provision has not been made as indicated in such report from proceeds of the Proposed First
Lien Citizens Authority Bonds), investment income thereon or from other appropriated sources
(excluding Net Revenues)), are equal to at least (A) 125% of the First Lien Debt Service Requirements
for all existing First Lien Parity Obligations and the Proposed First Lien Citizens Authority Bonds and
(B) all amounts of Net Revenues required to be transferred to the First Lien Bond Reserve Fund for
timely payment of the establishment of or any deficiency in an Account therein, including to repay a First
Lien Reserve Policy draw, during each such respective Fiscal Year.
“First Lien Debt Service Requirements” is defined in APPENDIX B3 – SUMMARY OF PRINCIPAL
FINANCING DOCUMENTS AND DEFINITIONS – Definitions.
(c)
First Lien Repayment Obligations. The Citizens Authority shall be permitted to enter into First Lien
Repayment Obligations without complying with paragraph (b) above so long as the corresponding Covered Bonds
comply with such provision at the time such First Lien Citizens Authority Bonds were issued.
- 15 -
(d)
Bond Indenture Requirements. Provision is made in the applicable Supplemental Indenture for
(i) additional payments into the First Lien Citizens Authority Bond Interest and Principal Fund sufficient to
provide for any principal and interest requirements resulting from the issuance of the Proposed First Lien Citizens
Authority Bonds, (ii) satisfaction of the applicable First Lien Debt Service Reserve Requirement by not later than
the date required by the applicable Supplemental Indenture, if required, and (iii) provisions required pursuant to
the First Lien Master Citizens Authority Indenture for deposits into or for the administration of the First Lien
Citizens Authority Bond Interest and Principal Fund in order to assure the parity status of all First Lien Citizens
Authority Bonds.
(e)
Refunding First Lien Citizens Authority Bonds. If the Proposed First Lien Citizens Authority Bonds are
being issued for the purpose of refunding all or a portion of previously issued First Lien Citizens Authority Bonds
(the “Refunded First Lien Citizens Authority Bonds”), none of the certifications described in paragraph (b) above
are required so long as for each Fiscal Year during which existing First Lien Citizens Authority Bonds will be
Outstanding, the First Lien Debt Service Requirements, including Regular Payments on First Lien Qualified
Derivative Agreements and First Lien Repayment Obligations, for the Proposed First Lien Citizens Authority
Bonds in such Fiscal Years will not exceed the First Lien Debt Service Requirements, including Regular Payments
on First Lien Qualified Derivative Agreements and First Lien Repayment Obligations, for the Refunded First Lien
Citizens Authority Bonds in such Fiscal Year (prior to giving effect to the refunding).
(f)
Adjustments. For purposes of the determination of the Net Revenues of the Wastewater System for
purposes of paragraph (b) above, the Citizens Authority shall be permitted to include the full pro forma effect of
any increases or decreases in rates, fees, rentals or other charges (including those resulting from any new facilities
of the Wastewater System having been acquired or placed into use and operation subsequent to the
commencement of the applicable period and prior to the date of issuance of the Proposed First Lien Citizens
Authority Bonds) which are authorized by an order of the IURC issued prior to the date of issuance of the
Proposed First Lien Citizens Authority Bonds.
(g)
Certain Provisions of First Lien Master Indenture Pertaining to Second Lien Citizens Authority Bonds
and Subordinate Securities.
(1)
The Citizens Authority shall not become obligated with respect to a First Lien Repayment
Obligation for which acceleration of the payment of such First Lien Repayment Obligation is permitted
upon an event of default unless the First Lien Master Citizens Authority Indenture is amended to allow
for acceleration of First Lien Citizens Authority Bonds at such time.
(2)
The Citizens Authority shall only be authorized to issue Second Lien Citizens Authority Bonds
or Subordinate Securities under provisions which, in the judgment of the Citizens Authority, assure that:
(A)
no deposit to the accounts created for the payment of Second Lien Citizens Authority Bonds or
Subordinate Securities will be made on the dates required in the Second Lien Master Indenture
or the Subordinate Securities until Net Revenues are first deposited into the First Lien Bond
Interest and Principal Fund for payment of the interest and principal due on First Lien Citizens
Authority Bonds on such dates and deposited in the First Lien Bond Reserve Fund to satisfy any
deficiency therein on such dates in order to assure the first priority lien and interest to which the
First Lien Citizens Authority Bonds are entitled over Second Lien Citizens Authority Bonds and
Subordinate Securities; and
(B)
the payment of the Second Lien Citizens Authority Bonds or Subordinate Securities may not be
accelerated unless the First Lien Master Citizens Authority Indenture is amended to allow for
acceleration of First Lien Citizens Authority Bonds.
Additional Second Lien Citizens Authority Bonds
Superior Obligations and Subordinate Obligations Permitted. The Citizens Authority has covenanted in the
Second Lien Master Citizens Authority Indenture not to grant or agree to any lien, mortgage, security interest or claim
against the real or personal property of the Citizens Authority, now and hereafter owned which is prior to any lien and/or
security interest against the Net Revenues and Second Lien Pledged Funds as granted by the Second Lien Master Indenture
- 16 -
for Second Lien Parity Obligations pursuant to Indiana Code 5-1-14-4, except for the lien granted by the First Lien Citizens
Authority Indenture.
Additional Second Lien Citizens Authority Bonds Test. Under the Second Lien Master Citizens Authority
Indenture, the Citizens Authority has reserved the right to issue (and shall only cause to be issued) one or more series of
Second Lien Citizens Authority Bonds (the “Proposed Second Lien Citizens Authority Bonds”) payable from and secured
by a lien and security interest on the Net Revenues and Second Lien Pledged Funds on parity with any Outstanding Second
Lien Citizens Authority Bonds upon meeting the requirements set forth below:
(a)
No Default. An Authorized Officer of the Citizens Authority shall certify that, upon the issuance of the
Proposed Second Lien Citizens Authority Bonds, the Citizens Authority will not be in default under any term or
provision of any First Lien Citizens Authority Bonds then Outstanding or Second Lien Citizens Authority Bonds
then Outstanding, the First Lien Master Citizens Authority Indenture or any Supplemental Indenture pursuant to
which any First Lien Citizens Authority Bonds were issued, the Second Lien Master Citizens Authority Indenture
or any Supplemental Indenture pursuant to which any Second Lien Citizens Authority Bonds were issued.
(b)
Coverage on Second Lien Citizens Authority Bonds.
(1)
Historical. The Chief Financial Officer shall certify that for either the Citizens Authority’s most
recent complete Fiscal Year or for any consecutive 12 out of the most recent 18 months preceding the
issuance of the Proposed Second Lien Citizens Authority Bonds, the Net Revenues of the Wastewater
System, as adjusted in the manner described in (f) below, were equal to at least 110% of the maximum
annual First Lien Debt Service Requirements and Second Lien Debt Service Requirements, for all
existing First Lien Citizens Authority Bonds and Second Lien Citizens Authority Bonds and the Proposed
Second Lien Citizens Authority Bonds for any subsequent Fiscal Year while the existing Second Lien
Citizens Authority Bonds are Outstanding; or
(2)
Projected. The Chief Financial Officer shall certify that the estimated Net Revenues of the
Wastewater System, as adjusted in the manner described in (f) below, for each of three (3) consecutive
Fiscal Years beginning in the first Fiscal Year in which the Citizens Authority will have any scheduled
payments of interest on or principal of the Proposed Second Lien Citizens Authority Bonds (for the
payment of which provision has not been made as indicated in such report from proceeds of the Proposed
Second Lien Citizens Authority Bonds, investment income thereon or from other appropriated sources
(excluding Net Revenues)) are equal to at least (A) 115% of the annual First Lien Debt Service
Requirements and the Second Lien Debt Service Requirements for all existing First Lien Parity
Obligations and Second Lien Parity Obligations and the Proposed Second Lien Citizens Authority Bonds
and (B) all amounts of Net Revenues required to be transferred to the First Lien Bond Reserve Fund and
the Second Lien Bond Reserve Fund for timely payment of the establishment of or any deficiency in an
Account therein, including to repay a First Lien Reserve Policy draw or a Second Lien Reserve Policy
draw, during each such respective Fiscal Year.
“Second Lien Debt Service Requirements” is defined in APPENDIX B3 – SUMMARY OF PRINCIPAL
FINANCING DOCUMENTS AND DEFINITIONS – Definitions.
(c)
Second Lien Repayment Obligations. The Citizens Authority shall be permitted to enter into Second
Lien Repayment Obligations without complying with paragraph (b) above so long as the corresponding Covered
Bonds comply with such provision at the time such Second Lien Citizens Authority Bonds were issued.
(d)
Bond Indenture Requirements. Provision is made in the applicable Supplemental Indenture for
(i) additional payments into the Second Lien Bond Interest and Principal Fund sufficient to provide for any
principal and interest requirements resulting from the issuance of the Proposed Second Lien Citizens Authority
Bonds, (ii) satisfaction of the applicable Second Lien Debt Service Reserve Requirement by not later than the date
required by the applicable Supplemental Indenture, if required, and (iii) provisions required pursuant to the Second
Lien Master Citizens Authority Indenture for deposits into or for the administration of the Second Lien Bond
Interest and Principal Fund in order to assure the parity status of all Second Lien Citizens Authority Bonds.
- 17 -
(e)
Refunding Second Lien Citizens Authority Bonds. (1) If the Proposed Second Lien Citizens Authority
Bonds are being issued for the purpose of refunding all or a portion of previously issued Second Lien Citizens
Authority Bonds (the “Refunded Second Lien Citizens Authority Bonds”), none of the certifications described in
(b) above are required so long as for each Fiscal Year during which existing Second Lien Citizens Authority
Bonds will be Outstanding, the Second Lien Debt Service Requirements for the Proposed Second Lien Citizens
Authority Bonds in such Fiscal Years will not exceed the Second Lien Debt Service Requirements for the
Refunded Second Lien Citizens Authority Bonds in such Fiscal Year (prior to giving effect to the refunding); and
(2) if the Proposed Second Lien Citizens Authority Bonds are being issued for the purpose of refunding all or a
portion of previously issued First Lien Citizens Authority Bonds none of the certifications described in (b) above
are required so long as for each Fiscal Year during which existing First Lien Citizens Authority Bonds will be
Outstanding and existing Second Lien Citizens Authority Bonds will be Outstanding, the First Lien Debt Service
Requirements plus the Second Lien Debt Service Requirements (taking into account the Proposed Second Lien
Citizens Authority Bonds) will not exceed the First Lien Debt Service Requirements and the Second Lien Debt
Service Requirements were such refunding not to occur.
(f)
Adjustments. For purposes of the determination of the Net Revenues of the Wastewater System for
purposes of paragraph (b) above, the Citizens Authority shall be permitted to include the full pro forma effect of
any increases or decreases in rates, fees, rentals or other charges (including those resulting from any new facilities
of the Wastewater System having been acquired or placed into use and operation subsequent to the
commencement of the applicable period and prior to the date of issuance of the Proposed Second Lien Citizens
Authority Bonds) which are authorized by an order of the IURC issued prior to the date of issuance of the
Proposed Second Lien Citizens Authority Bonds.
(g)
Provisions of Second Lien Master Indenture Pertaining to Repayment Obligations; Subordinate
Securities.
(1)
The Citizens Authority shall not become obligated with respect to a Second Lien Repayment
Obligation for which acceleration of the payment of such Second Lien Repayment Obligation is
permitted upon an event of default unless the Second Lien Master Citizens Authority Indenture is
amended to allow for acceleration of Second Lien Citizens Authority Bonds at such time.
(2)
The Citizens Authority shall only be authorized to issue Subordinate Securities under provisions
which, in the judgment of the Citizens Authority, assure that:
(A)
no deposit to the accounts created for the payment of Second Lien Citizens Authority Bonds or
Subordinate Securities will be made on the dates required in the Second Lien Master Indenture
or the Subordinate Securities until Net Revenues are first deposited into the First Lien Bond
Interest and Principal Fund for payment of the interest and principal due on First Lien Citizens
Authority Bonds on such dates and deposited in the Bond Reserve Fund to satisfy any deficiency
therein on such dates in order to assure the first priority lien and interest to which the First Lien
Citizens Authority Bonds are entitled; and
(B)
the payment of the Subordinate Securities may not be accelerated unless at the same time the
Second Lien Citizens Authority Master Trust Indenture is amended to allow for acceleration of
Second Lien Bonds.
Subordinate Obligations Permitted
The Citizens Authority may grant or agree to any lien, security interest or claim against Net Revenues and First
Lien Pledged Funds and Second Lien Pledged Funds which are in all respects subordinate and junior to the claim of Second
Lien Parity Obligations. As of June 1, 2014, the Citizens Authority had $90 million outstanding on the Wells Line, which
is a Subordinate Security under the Citizens Authority Indentures. Following the issuance and sale of the Citizens
Authority 2014A First Lien Bonds, there will be no draws outstanding under the Wells Line. Further, under the
Wastewater Asset Purchase Agreement, the Citizens Authority is obligated to continue to make the payment of PILOTs the
Sanitary District was obligated to make to the City. See “APPENDIX H – SCHEDULE OF PILOTS PAYABLE TO THE
CITY OF INDIANAPOLIS.” In addition, the Citizens Authority is obligated to make semiannual payments to the City in
an amount equal to the interest and remaining principal obligations under the City’s outstanding general obligation bonds
- 18 -
associated with the Wastewater System. Such general obligation bonds were outstanding in the principal amount of
$28,345,000 as of June 1, 2014, and the required payments are described in “APPENDIX I – SCHEDULE OF
PAYMENTS DUE TO THE CITY OF INDIANAPOLIS FOR THE SANITARY DISTRICT’S GENERAL OBLIGATION
BONDS.”
Enforcement of the Citizens Authority 2014A First Lien Bonds
As owner of the Citizens Authority 2014A Bonds, the IFA has available to it all remedies available to owners or
holders of securities issued by the Citizens Authority.
The IFA may cooperate with the Citizens Authority, from time to time, with regard to the action determined by the
Citizens Authority to preserve the exclusion of the interest on the Citizens Authority 2014A First Lien Bonds from the
gross income of the holders of the Citizens Authority 2014A First Lien Bonds. See the caption “TAX MATTERS” and
“APPENDIX B1 – SUMMARY OF PRINCIPAL FINANCIAL DOCUMENTS AND DEFINITIONS – SUMMARY OF
CERTAIN PROVISIONS OF THE IFA INDENTURE AND LOAN AGREEMENT.”
The First Lien Trustee will monitor the compliance and consult regularly with the Citizens Authority with respect
to its requirements under the Citizens Authority 2014A First Lien Bonds, including the making of payments under the Loan
Agreement.
Bond Reserve Funds under the Citizens Authority Indentures
2014A Bond Reserve. Pursuant to the First Lien Master Citizens Authority Indenture, the Citizens Authority is
authorized to specify in a Supplemental Indenture that one or more Accounts of the First Lien Bond Reserve Fund may be
maintained for one or more series of Citizens Authority First Lien Bonds and the provisions with respect thereto or that no
such Account will be created. Pursuant to the Series 2014A Supplemental Trust Indenture dated as of June 1, 2014 (the
“2014A First Lien Citizens Authority Supplemental Indenture”), between the Citizens Authority and the First Lien Trustee,
the Citizens Authority has established the Series 2014A Account of the First Lien Bond Reserve Fund (the “2014A First
Lien Reserve”). The moneys in the 2014A First Lien Reserve will be used solely to pay current principal and interest due
on the Citizens Authority 2014A First Lien Bonds to the extent that moneys in the Series 2014A Bond Account of the First
Lien Bond Interest and Principal Fund are insufficient for that purpose after required transfers thereto. See “SECURITY
AND SOURCES OF PAYMENT OF CITIZENS AUTHORITY BONDS – Funds and Accounts; Flow of Funds under
Citizens Authority Indentures” herein. Such moneys in the 2014A First Lien Reserve are not available to pay principal and
interest on the Citizens Authority Second Lien Bonds. No other obligations of the Citizens Authority shall be paid or
payable from the 2014A First Lien Reserve, except as permitted by the First Lien Citizens Authority Indenture. The 2014A
Reserve Requirement shall be an amount equal to the least of (i) the maximum annual required deposits to the First Lien
Bond Principal and Interest Fund for the Citizens Authority 2014A First Lien Bonds, (ii) 125% of average annual required
deposits to the First Lien Bond Principal and Interest Fund for the Citizens Authority 2014A First Lien Bonds or (iii) 10%
of the principal amount of the Citizens Authority 2014A First Lien Bonds. Upon issuance of the Citizens Authority 2014A
First Lien Bonds, the 2014A First Lien Reserve will be fully funded in an amount of $________________ from proceeds of
the Citizens Authority 2014A First Lien Bonds.
Any deficiency in the balance maintained in the 2014A First Lien Reserve, including in the event that money in
the 2014A First Lien Reserve is transferred to the Series 2014A Bond Account of the First Lien Bond Interest and Principal
Fund to pay principal and interest on the Citizens Authority 2014A First Lien Bonds, shall be made up from the next
available Net Revenues remaining after credits into the First Lien Bond Interest and Principal Fund on a parity with all
other First Lien Reserves. Any monies in the 2014A First Lien Reserve in excess of the 2014A Reserve Requirement may
be transferred to any other Fund or Account of the Citizens Authority in accordance with the First Lien Master Citizens
Authority Indenture.
In addition, the Citizens Authority has previously authorized (i) the Series 2011A Account of the First Lien Bond
Reserve Fund in the amount of $45,281,037.50 which secures the Citizens Authority 2011A First Lien Bonds and (ii) the
Series 2012A Account of the First Lien Bond Reserve Fund in the amount of $12,114,600 which secures the Citizens
Authority 2012A First Lien Bonds.
Second Lien Bond Reserve. Upon the issuance of Second Lien Citizens Authority Bonds, the Citizens Authority
shall determine, in its discretion, whether or not such Second Lien Citizens Authority Bonds shall have a claim for payment
- 19 -
of principal and interest on the Second Lien Reserve Account or any subaccount thereof. If the Citizens Authority
determines that such Second Lien Citizens Authority Bonds shall have a claim for payment on the Second Lien Bonds
Common Reserve Subaccount for payment of principal of and interest on such Second Lien Citizens Authority Bonds, then
the Citizens Authority shall calculate the amount of the Second Lien Bonds Common Reserve Requirement to reflect the
issuance of such Second Lien Citizens Authority Bonds. Any resulting increase in the amount of the Second Lien Bonds
Common Reserve Requirement may be funded in whole or in part by the deposit of cash, a Second Lien Reserve Account
Credit Facility or through monthly deposits as described below. If the Citizens Authority determines that the Second Lien
Citizens Authority Bonds shall not have a claim for payment on the Second Lien Bonds Common Reserve Subaccount the
Citizens Authority may determine to create a Second Lien Series Reserve Subaccount for such Second Lien Citizens
Authority Bonds and establish a related Second Lien Series Reserve Requirement or to secure such series of Second Lien
Citizens Authority Bonds with an existing Second Lien Series Reserve Account. Such Second Lien Series Reserve
Subaccount will be funded in an amount and manner to be set forth in the Second Lien Supplemental Indenture authorizing
the issuance of such Second Lien Citizens Authority Bonds. In such event, such Second Lien Citizens Authority Bonds
shall have a claim for payment on such Second Lien Series Reserve Subaccount as set forth therein. Such Second Lien
Series Reserve Subaccount may be established for the benefit of one or more series of Second Lien Citizens Authority
Bonds. In addition, the Citizens Authority may determine that a series of Second Lien Citizens Authority Bonds shall have
no claim on any subaccount of the Second Lien Reserve Account for the payment of principal of and interest thereon. All
or any portion of any increase in the Second Lien Bonds Common Reserve Requirement or any Second Lien Series Reserve
Requirement following the issuance of Second Lien Citizens Authority Bonds to be secured thereby, may be satisfied by
providing in a Second Lien Supplemental Indenture that deposits of Net Revenues shall be made, in any specified manner,
into the applicable subaccount of the Reserve Account following the issuance of said Second Lien Citizens Authority
Bonds. In funding an increase in the Second Lien Bonds Common Reserve Requirement, such deposits for a series of
Second Lien Citizens Authority Bonds shall commence on the first day of the month following the date on which such
series of Second Lien Citizens Authority Bonds are issued and shall continue monthly thereafter for a period of 60 months
or such lesser number of months as specified in the Second Lien Supplemental Indenture. In funding a Second Lien Series
Reserve Subaccount, such deposits related to a series of Second Lien Citizens Authority Bonds shall commence and shall
continue thereafter as provided in the Second Lien Supplemental Indenture pursuant to which such Second Lien Series
Reserve Subaccount is established. In either case, such deposits shall equal, after taking into account any Second Lien
Reserve Account Credit Facility and other cash deposited in the applicable subaccount of the Second Lien Reserve Account
on the date of delivery of such Second Lien Citizens Authority Bonds, an amount equal to the applicable unfunded Second
Lien Reserve Requirement divided by the total number of deposits to be made.
For purposes of establishing the amount held in the applicable subaccount of any Second Lien Reserve Account,
the Second Lien Trustee shall include an amount equal to the available principal amount which could be drawn by the
Second Lien Trustee on any applicable Second Lien Reserve Account Credit Facility. Any cash held in a subaccount of the
Second Lien Reserve Account in excess of the applicable Second Lien Reserve Requirement (as determined under the
Second Lien Master Citizens Authority Indenture) shall be transferred from time to time by the Second Lien Trustee to the
Second Lien Revenue Fund at the direction of the Citizens Authority.
In addition, the Citizens Authority has previously authorized the Series 2011B Account of the Second Lien Bond
Reserve Fund in the amount of $18,106,287.50 which secures the Citizens Authority 2011B Second Lien Bonds. The
Citizens Authority did not authorize an account of the Second Lien Bond Reserve Fund for the Citizens Authority Series
2011C Second Lien Bonds.
INDIANA FINANCE AUTHORITY
The IFA is a public body politic and corporate, not a state agency, but an independent public instrumentality under
Indiana Code 4-4-10.9 and -11. Though separate from the State, the exercise by the IFA of its powers constitutes an
essential public function. The IFA has no taxing power, and any bonds issued by the IFA do not constitute indebtedness of
the State within the meaning or application of any constitutional provision or limitation.
The IFA has authorized the issuance of the IFA Wastewater Bonds herein described for the benefit of the Citizens
Authority. The IFA makes no representations whatsoever concerning the Citizens Authority or any matters related to the
Wastewater System.
- 20 -
Organization, Membership
The IFA board of directors consists of the State Budget Director (or the State Budget Director’s designee), who
serves as Chairman of the IFA, the Treasurer of the State (or the Treasurer of State’s designee), and three members
appointed by the Governor. No more than two of the Governor’s appointees may be members of the same political party.
In addition, the Governor’s appointees must be residents of the State, serve for terms of four years and until their successors
are appointed and qualified and may be reappointed by the Governor. The members of the IFA elect one of the members to
serve as Vice Chairman and other officers as they may determine. Members are entitled to reimbursement for travel
expenses and other expenses actually incurred in connection with their duties as provided by law, but are not entitled to any
salary per diem while performing their duties.
Any three members of the IFA constitute a quorum and the affirmative votes of at least three members are
necessary for action to be taken by the IFA.
The following persons comprise the IFA:
Christopher D. Atkins*, Chairman of the IFA. Residence: Indianapolis, Indiana. Principal occupation: Director of
Indiana’s Office of Management and Budget.
Richard E. Mourdock, Treasurer of State. Residence: Evansville, Indiana. Principal occupation: Treasurer of
State.
Harry F. McNaught, Jr., appointed member; term expired May 15, 2011**.
Principal occupation: President and CEO, Denison Properties.
Residence: Carmel, Indiana.
Owen B. Melton, Jr., appointed member; term expired May 15, 2014. Residence: Carmel, Indiana. Principal
occupation: Retired (former Chief Executive Officer of First Indiana Bank, N.A.). **
Kerry M. Stemler, appointed member; term expires May 15, 2016. Residence: Sellersburg, Indiana. Principal
occupation: President and CEO, KM Stemler Co. Inc. and KM Stemler Trucking Inc.
The financial affairs of the IFA, including the issuance of bonds, are managed by the Public Finance Director of
the State and employees of the IFA. Kendra W. York is the Public Finance Director of the State.
* Under the IFA Act, the State Budget Director or the State Budget Director's designee is the Chairman of the
Indiana Finance Authority. Christopher D. Atkins has been designated by the State Budget Director to serve as the
Chairman of the Indiana Finance Authority for all purposes.
** Pursuant to the Act, an IFA member continues to serve in such capacity until a successor member is appointed.
THE CITIZENS AUTHORITY
The Citizens Authority owns and operates the Wastewater System for the exclusive and perpetual benefit of the
inhabitants of the City in furtherance of a public charitable trust for the Wastewater System.
The Citizens Authority is a nonprofit public benefit corporation created pursuant to the Authorizing Acts and the
ICA. The Citizens Authority was incorporated on August 10, 2010. Pursuant to the ICA, the Citizens Authority has all of
the powers of an Indiana nonprofit corporation and all of the powers that may be exercised by the City (excluding the
City’s taxing power and taxing authority), the Sanitary District and Citizens that are necessary, useful or appropriate to
acquiring, owning and operating the Wastewater System.
The Citizens Authority is exempt from federal, state and local income property taxes and has the ability to issue
tax-exempt debt. The Citizens Authority utilizes a September 30 fiscal year, just as Citizens does. The Citizens
Authority’s first fiscal year ended September 30, 2011. The financial information pertaining to the Citizens Authority and
the Wastewater System is reported separately from the Citizens’ information.
The Citizens Authority is governed by a board (the “Authority Board”) which consists of the nine (9) members
selected by a self-perpetuating Board of Trustees for Utilities who serve as the board of directors of Citizens. The
- 21 -
Authority Board members are the members of the Board of Directors for Utilities. See “APPENDIX A – CITIZENS
ENERGY GROUP.” The members of the Authority Board are shown below:
Members of the
Board of Directors for Utilities and Citizens Authority Board
Daniel C. Appel
President/Chairman of
the Board
President
Gregory & Appel
Insurance
Moira Carlstedt
Secretary of the Board
President, Indianapolis
Neighborhood
Housing Partnership
Christia Hicks
Director
Vice President,
Human Resources,
Eskenazi Health
Services
Anne Nobles
Vice President/Vice
Chairwoman of the
Board
Retired Vice
President, Eli Lilly
& Co.
Phillip A. Terry
Director
CEO, Monarch
Beverage
J.A. Lacy
Director
President and Chief
Operating Officer,
LDI, Ltd.
Jeffrey E. Good
Treasurer of the
Board
Managing Director
Milestone Advisors,
LLC
Anita J. Harden
Director
Retired President,
Community
Hospital East,
Community Health
Network
Joseph E. Whitsett
Director
Member,
The Whitsett Group
The principal function of the Board of Trustees for Utilities is to appoint the Board of Directors for Utilities and,
pursuant to the ICA, the Authority Board. The Authority Board and its committees conduct regular monthly meetings at
which policy decisions are made.
Citizens and the Citizens Authority have agreed that personnel needed to manage and operate the Wastewater
System (i.e., those not provided by the Manager) will be supplied by Citizens. The policy decisions will then be carried out
by a professional management team employed by Citizens. The Citizens Authority shares personnel and support functions
with Citizens. The Management Team of Citizens is described below:
Carey B. Lykins has been President & Chief Executive Officer of Citizens since 2005 and serves in the same
capacity for the Citizens Authority. Mr. Lykins is responsible for the strategic direction of the Citizens Authority and
reports directly to the Citizens Authority Board of Directors. He joined Citizens in 1973 as a cashier and worked his way
up through various positions of increasing responsibility including Director of Budget and Rates; Vice President of
Customer Services and Rates; Chief Financial Officer; and Executive Vice President and Chief Operating Officer.
Mr. Lykins has a bachelor’s degree in finance, an MBA from Indiana University and is a Certified Public Accountant.
William A. Tracy has been Senior Vice President, Operations of Citizens since 2005 and serves in the same
capacity for the Citizens Authority. Mr. Tracy is responsible for the Citizens Authority’s operations, as well as
Engineering, Strategic Growth Initiatives and Sales and Marketing. He has more than 40 years of utility industry
experience, beginning his career with Indianapolis Power & Light Co. (“IPL”) in 1967. With IPL, Mr. Tracy held various
positions of increasing responsibility including Vice President, Mid America Energy Resources; Vice President, Thermal
Systems; and President, Cleveland Energy Resources.
John R. Brehm has been Senior Vice President and Chief Financial Officer of Citizens since 2005 and serves in the
same capacity for the Citizens Authority. Mr. Brehm is responsible for the financial integrity of the Citizens Authority,
including strategic financial planning and execution. Prior to joining Citizens, he advanced through positions of increasing
- 22 -
responsibility during his 26 years with IPALCO Enterprises and IPL. Mr. Brehm joined IPL in 1975 as an accountant and
progressed through several positions including Director of General Accounting, Assistant Controller, Treasurer and Chief
Financial Officer. Mr. Brehm holds a bachelor’s degree in accounting from Indiana State University and is also a Certified
Public Accountant.
M. Jean Richcreek has been Senior Vice President and Chief Administrative Officer for Citizens since 2000 and
serves in the same capacity for the Citizens Authority. Ms. Richcreek is responsible for corporate support service functions
at the Citizens Authority, including Customer Services, Human Resources, Information Services, Purchasing, and Health
and Safety. She joined Citizens in 1991 as Vice President, Human Resources. She also has served Citizens as Vice
President, Gas Operations and Vice President, Customer Relationships. Ms. Richcreek holds a bachelor’s degree from
Indiana University.
Jennett Hill came to Citizens and the Citizens Authority as Vice President and General Counsel on February 1,
2013. She was named Senior Vice President and General Counsel in January 2014. Prior to joining Citizens, Ms. Hill was
a partner at Faegre Baker Daniels LLP. Ms. Hill’s practices have included nonprofit and tax-exempt law, representing
clients such as private foundations, colleges, universities, churches, charities, business leagues, museums and other groups.
Ms. Hill has also provided corporate and individual clients with legal and business guidance in the areas of corporate
governance, intellectual property, and the Internet and privacy matters. Ms. Hill provided legal counsel for Citizens Energy
Group’s Community Redevelopment efforts for a number of years. Before joining Faegre Baker Daniels, Ms. Hill gained
experience in the corporate setting with International Business Machine’s Midwestern operations.
Michael D. Strohl has been Senior Vice President, Customer Relationships and Corporate Affairs for Citizens
since 2013 and serves in the same capacity for the Citizens Authority. In this role, Mr. Strohl oversees Customer
Relationships, which includes Customer Services, Customer Billing, Revenue Assurance and Business to Business
Relationships. Additionally, he is responsible for Corporate Affairs and Communications as well as leading the Strategic
Planning for the Citizens Authority. Mr. Strohl joined Citizens in 2000 as Director of Finance for Citizens Resources and
served as Controller in 2005 and as Treasurer through 2008. Prior to joining Citizens, Mr. Strohl served in various
positions, including Manager of Financial Analysis for Magnequench International and Vice President of Corporate
Finance for City Securities Corporation. Mr. Strohl has a bachelor’s degree in economics from Illinois State University and
an MBA from Indiana University.
Jeffrey A. Harrison is Senior Vice President, Engineering and Sustainability for Citizens and serves in the same
capacity for the Citizens Authority. Previously, Mr. Harrison was Vice President, Capital Programs and Engineering. Prior
to then, Mr. Harrison was Vice President, Engineering and Facilities Management for Citizens. Mr. Harrison is responsible
for engineering and capital planning including execution of projects related to the Consent Decree for the Citizens
Authority. He joined Citizens in 2003 as Director, Market Development and was promoted to Vice President,
Manufacturing in 2004. Prior to joining Citizens, Mr. Harrison served in positions of increasing responsibility at IPL,
including Director, Steam Distribution; Project Coordinator, Business Development; and Team Leader, Engineering. Mr.
Harrison earned a bachelor’s degree in electrical engineering from Rose-Hulman Institute of Technology, an MBA from
Indiana University and holds a Professional Engineer Certification.
John Lucas has been Vice President, Information Technology for Citizens since 2009 and serves in the same
capacity for the Citizens Authority. Mr. Lucas joined Citizens after seven years as Vice President and Chief Information
Officer at Harley-Davidson Financial Services. Prior to his tenure with Harley Davidson, Mr. Lucas was Vice President of
Information Services for Linc Anthem Corporation and IBM CS Systems. Mr. Lucas holds a bachelor’s degree in
mechanical engineering from the University of Illinois and an MBA from the University of Chicago.
Jodi Underwood has been Vice President, Human Resources since 2013, and serves in the same role for the
Citizens Authority. Ms. Underwood came to Citizens Energy Group in 2000 and previously served as a Customer
Relations Supervisor and Manager. Prior to joining Citizens, Ms. Underwood was a Director for the Indianapolis Business
Journal and Indianapolis Star. Ms. Underwood has a bachelor’s degree in Business Management and Human Resources
from Indiana University and an MBA from the University of Indianapolis. Ms. Underwood recently received her Senior
Human Resources Professional (SPHR) certification. Ms. Underwood has also served on the various boards including
Connect2Help and the Citizens Warm Heart Warm Home Foundation.
Lindsay C. Lindgren became Vice President, Water Operations in August 2011 with the acquisition of the
Indianapolis water and wastewater utilities. Mr. Lindgren brings more than 30 years of utility management experience to
- 23 -
his current position in which he is responsible for all aspects of water and wastewater operations. Mr. Lindgren had been
Vice President, Gas & Steam Operations for Citizens Energy Group since 2007. In this position, Mr. Lindgren had been
responsible for the Citizens Gas system serving more than 265,000 customers, and Citizens Thermal which provides district
steam and chilled water for heating and cooling of large buildings in the downtown area. Mr. Lindgren joined Citizens in
1981 serving in positions of increasing responsibility including Manager, Field Operations; Director, Engineering; and Vice
President, Gas Operations. Mr. Lindgren holds a bachelor’s degree in mechanical engineering from Purdue University, an
MBA from University of Indianapolis, and is a Registered Professional Engineer in the State of Indiana.
Yvonne Perkins has been Vice President of Corporate Communications and Chief Diversity Officer for Citizens
since 2013 and serves in the same capacity for the Citizens Authority. Prior to her current position, Ms. Perkins was Vice
President, Community Relations. Ms. Perkins is responsible for Citizens’ and Citizens Authority’s employee and internal
communications strategies, brand management, public relations programs, neighborhood redevelopment initiatives,
corporate philanthropy, and establishing improvement strategies for diversity management. During her 42 years with the
company, Ms. Perkins has served in positions of increasing responsibility including Director, Economic Development and
Community Affairs; and Director of Corporate Affairs. Ms. Perkins holds a bachelor’s degree in accounting from Butler
University, an MBA from Indiana Wesleyan University and is also a Certified Public Accountant.
Aaron D. Johnson is Vice President, Corporate Development for Citizens and serves in the same capacity for the
Citizens Authority. From 2010 until 2012, Mr. Johnson served as Vice President, Integration, and was responsible for the
integration of the Waterworks and Wastewater Systems into the Citizens family of companies. Prior to his current position,
Mr. Johnson served in positions of increasing responsibility within Citizens including Associate Counsel, Senior
Accountant, Associate Tax Counsel, and Treasurer. Prior to joining Citizens in 1996, Mr. Johnson served as an accountant
at Conseco, Inc. primarily in the subsidiary investments and corporate finance divisions. Mr. Johnson holds a bachelor’s
degree in accounting from Indiana University Kelley School of Business, an MBA in finance from Indiana University
Kelley School of Business, and a Juris Doctorate cum laude from Indiana University. In addition, Mr. Johnson is a
Certified Public Accountant and is licensed to practice law in Indiana.
LaTona Prentice was named Citizens’ Vice President, Regulatory Affairs in 2011 and serves in the same capacity
for the Citizens Authority. In her current position, Ms. Prentice is responsible for all regulatory aspects of the gas, water,
wastewater, and steam utilities. Ms. Prentice had been Executive Director, Regulatory Affairs since 2005. Over the past 28
years, Ms. Prentice has served in positions of increasing responsibility including Director of Rates, Director of Budget &
Rates, and Rates Manager. Ms. Prentice joined Citizens in 1984 as an accountant. Ms. Prentice is a graduate of Ball State
University with a bachelor’s degree in accounting.
Christopher H. Braun is Vice President, Energy Operations, for Citizens and serves in the same capacity for the
Citizens Authority. Prior to being named Vice President, Energy Operations on August 26, 2011, Mr. Braun was the
General Manager of Gas Operations from 2007 through 2011. Prior to that, he was the Director of Distribution Operations,
Superintendent of Utilization and Maintenance, Manager of Standards and Measurement, Manager of Fleet and Plant
Services, Technical Administrator, Project Engineer, Standards and Measurement Engineer, and Junior Engineer. Mr.
Braun graduated from Purdue University in West Lafayette, Indiana with a Bachelor of Science Degree in Mechanical
Engineering. He also received a Master of Business Administration Degree from the University of Indianapolis. Mr.
Braun is a Registered Professional Engineer in the State of Indiana.
Curtis Popp was named Vice President, Shared Field Services for Citizens in January 2013 and serves in the same
capacity for the Citizens Authority. Mr. Popp had been the Director of Treasury of Citizens since 2008. Prior to that, Mr.
Popp was Director, Shared Field Services. Mr. Popp is responsible for overall corporate cash management and financing
strategy of the company and reports directly to the Chief Financial Officer. Mr. Popp joined Citizens in 1985 as a Project
Engineer and worked his way up through various positions of increasing responsibility including Delivery Service Support
Manager, Manager of Gas Control, and Manager of Midstream Assets.
Blaire Dougherty was promoted to Vice President and Controller for Citizens, effective January 1, 2013 and
serves in the same capacity for the Citizens Authority. Ms. Dougherty has made numerous contributions to upholding the
financial integrity of Citizens in her various roles including Budget and Operations Analyst, Budget and Financial Plans
Manager, and Director of Finance. Ms. Dougherty has led the Controllership group through many transitions over the years
– including financial systems implementations and upgrades, business process improvements, and business acquisitions
including both Thermal and Water/Wastewater.
- 24 -
Sara Mamuska-Morris is Director of Treasury for Citizens and serves in the same capacity for the Citizens
Authority. Ms. Mamuska-Morris was promoted to this position on March 31, 2014. Ms. Mamuska-Morris joined Citizens
and the Citizens Authority in 2001 and has worked in engineering, operations, and business development capacities prior to
her current role. Prior to joining Citizens Energy Group, Ms. Mamuska-Morris worked with several different utilities in
regulatory, consulting, engineering and operations capacities. Ms. Mamuska-Morris holds bachelor’s degrees in mechanical
engineering and materials engineering from the University of Connecticut and an MBA in finance from the Indiana
University Kelley School of Business. Ms. Mamuska-Morris is a registered Professional Engineer in the State of Indiana.
In addition to the above listed management team members, the directors and members of the Citizens Authority
operations team each individually have over 20 years of experience on average.
SEE “APPENDIX A – CITIZENS ENERGY GROUP.”
THE WASTEWATER SYSTEM
General Description
The Wastewater System serves nearly all of the territory of the consolidated City, providing sanitary sewer service
to approximately 225,000 customer accounts, including the following seven (7) wholesale customers in neighboring
communities: the City of Beech Grove, the City of Lawrence, Ben Davis Conservancy District, South Whitestown Utilities,
Tri-County Conservancy District, the City of Greenwood, and Hamilton Southeastern Utilities.
Economics and Demographics of Marion County
Indianapolis is Indiana’s largest city and is also the State’s capital. The depth and diversity of economic activity
has contributed to the area’s steady growth over the past 30 years and is the hub for much of the State’s economy. Since
1980, Marion County has experienced consistent population growth, increasing from 765,233 persons in 1980 to 903,393 in
the 2010 U.S. Census, or 18.05% during the period (making Indianapolis the 12th largest city in the United States based on
population). Located at roughly the geographic center of the State, Indianapolis is the crossroads for more major interstate
highways than any other city in the United States. Based on 2000 Census data, over half of the U.S. and Canadian
population lives within 650 miles of Indianapolis. As a transportation center, Indianapolis’ airport is ranked 8th in North
America and 22nd in the world for cargo shipments. (Source: The Indianapolis Airport Authority)
Per capita income in Marion County was $40,132 in 2012, exceeding the State’s average of $38,119 but below the
United States average of $43,735, which is based on data published by the Bureau of Economic Analysis, 2013.
Historically, the County has had a higher level of per capita income than the State of Indiana. For the ten year period of
2003-2012, Marion County per capita income grew 19.4%, versus 29.0% for Indiana and 33.8% for the United States based
on data published by the Bureau of Economic Analysis, 2013. Although manufacturing is an important source of high
wage jobs, especially in the pharmaceutical and automotive sectors, Indianapolis has a broad-based economy. This
diversity has traditionally mitigated the effects of particular sector downturns on the overall economy and typically results
in lower unemployment rates than those experienced at the national level.
- 25 -
The table below sets forth the largest employers in the County as of December 5, 2013.
Employer
Industry
Number of Employees
Indiana University Health (all
hospitals)
Medical & Surgical Hospitals
20,292
St. Vincent Hospitals & Health
Services
Medical & Surgical Hospitals
11,075
Eli Lilly and Company
Pharmaceutical Manufacturing
10,500
Community Health Network
Health Services
8,100
FedEx Express
Couriers
6,000
Franciscan St. Francis Health
Medical & Surgical Hospitals
5,576
IUPUI
Colleges and Universities
5,100
Eskenazi Health Services
Hospitals/Healthcare
4,825
Source: The Indy Partnership website. Excludes state and local government, retail and hotel establishments, with the exception of
headquarters of these companies.
The Wastewater System
The Wastewater System serves approximately 225,000 customers in Marion County, Indiana and is supported by
mains and laterals which generally converge through a partially combined storm and wastewater collection system prior to
interconnection with two treatment plants. In addition, 7 satellite customers have contracts with the Citizens Authority for
sending waste for treatment through their own collection systems. Each satellite system is responsible for their collection
system and do not directly pay for Consent Decree upgrades and costs. The satellite customers are Hamilton Southeastern
Utilities, City of Lawrence, South Whitestown Utilities, City of Greenwood, Tri-County Conservancy District, City of
Beech Grove, and Ben Davis Conservancy District. The separate sanitary sewers within the City cover approximately 222
square miles while the combined sewer system covers approximately 555 square miles within the City. Of the
approximately 3,400 miles of collection system, approximately 1,400 miles are combined storm and wastewater, while the
remaining are separate storm and wastewater collection systems. Pursuant to the Consent Decree, wet weather flows to the
combined sewer system will be captured and treated at the wastewater treatment plants as described in the Long Term
Control Plan (the “LTCP”). (See “APPENDIX H – DESCRIPTION OF CONSENT DECREE PROJECTS”). Treatment is
provided through two wastewater treatment plants, known collectively as the Advanced Wastewater Treatment (“AWT”)
facilities, consisting of the Belmont Advanced Wastewater Treatment Plant (including the Belmont Solids Handling
Facilities) and the Southport Advanced Wastewater Treatment Plant. In December 2012, the Citizens Authority completed
an increase in capacity at the Belmont AWT from 300 MGD to 450 MGD. The AWT facilities utilize a treatment process
with a total average treatment capacity of 245 million gallons per day (“MGD”) and a peak capacity of 450 MGD. The
AWT facilities include preliminary treatment, primary clarification, and biological treatment via air nitrification and
oxygen nitrification, followed by secondary clarification, effluent filtration and disinfection prior to effluent discharge to
the White River. Solids handling facilities include thickening, dewatering and incineration.
The Wastewater System’s wastewater collection system is made up of:
•
•
•
•
•
•
•
•
approximately 14.5 million lineal feet of sewers up to 24 inches in diameter,
approximately 2 million lineal feet of sewers greater than 24 inches in diameter and up to 36 inches in
diameter,
approximately 1.5 million lineal feet of sewers greater than 36 inches in diameter,
approximately 64,000 combined/sanitary manholes,
approximately 300 lift stations, 8 of which are considered major lift stations, and associated force mains,
approximately 160 diversions/outfalls,
approximately 50 siphons, and
approximately 60 installed flow meters, approximately 25 rain gauges, and related equipment and inventory.
- 26 -
The average treated daily flow in 2013 was 174 MGD and the dry sludge processed daily was 126 tons at 22%
solids. Approximately 14% of the flow is from industrial sources.
Operation and management of the wastewater collection system and the AWT facilities will continue to be
managed under the Management Agreement. See “THE MANAGER AND THE MANAGEMENT AGREEMENT.”
The boundaries of the territory served by the Wastewater System are shown on the map set forth in the inside back
cover page.
Customer Base, Rates and Charges
The Citizens Authority provides sewer service to most of the developed area within the City and to certain areas
outside the City’s boundaries. The Wastewater System treats wastewater from approximately 225,000 customer accounts,
including households, seven (7) wholesale customers and approximately 17,700 commercial, industrial and institutional
customers. SEE “APPENDIX C – SELECTED INFORMATION OF THE WASTEWATER SYSTEM” for historical
customer information.
Non-Industrial Users. The Wastewater System’s retail customers are split into two major user rate categories,
industrial and non-industrial. The non-industrial group includes residential, commercial, institutional and governmental.
Non-industrial customers are charged a fixed monthly base fee plus a treatment charge per thousand gallons of metered
water usage. The treatment charge is two-tiered with a higher rate for all gallons over 7,500 gallons per month. The
combined monthly bill is subject to a minimum charge, which is equal to the base fee and approximately 3,000 gallons of
usage.
The monthly residential sewer rates of the Wastewater System and for residential customers of comparable cities
located in nearby states, as well as municipalities located in the State, are shown in the following table:
Municipality
Monthly Rate ($)
Effective Date
(assuming 5,000 gallons a month)
Indianapolis, IN
St. Louis, MO
Louisville, KY
Evansville, IN
Fort Wayne, IN
Columbus, OH
Cincinnati, OH
38.35
31.52
43.09
43.15
35.24
33.42
63.14
May 1, 2014
July, 2014
August, 2013
January, 2014
July, 2013
January, 2014
January, 2014
Source: Sanitary sewer utilities of the respective cities listed.
Industrial Users. Industrial customers pay the same fixed base fee per connection as the non-industrial users. The
industrial treatment charge is per thousand gallons and includes a component for the additional cost of the industrial
surveillance program. The combined monthly bill is subject to a minimum charge equal to the base fee and 3,600 gallons
usage at the industrial treatment rate. In addition, based upon the character of their waste, industrial users may be assessed
excessive strength surcharges for biochemical oxygen demand, suspended solids and ammonia.
Wholesale Customers. The Wastewater System has wholesale service agreements with seven (7) neighboring
communities and/or utility service territories, which are referred to as “Wholesale Customers” or “Satellite Customers.”
The Citizens Authority has assumed/agreed to perform these agreements with Tri-County Conservancy District, the City of
Beech Grove, the Ben Davis Conservancy District, Boone County Utilities, LLC, the City of Greenwood, Hamilton
Southeastern Utilities, Inc. and the City of Lawrence. Each wholesale agreement originally had a fixed charge component
that related to specific capital projects attributable to that wholesale user’s contracted capacity allocation. Therefore,
regardless of actual usage volumes, the “fixed revenue” payments were set until the contracted allocated capital costs were
fully repaid. Currently, only four such customers have a “fixed revenue” payment. The variable revenue component is
based on metered flow reported by each Wholesale Customer. Fixed revenues from the wholesale agreements for 2013
amounted to less than 1.5% of the total billed revenue of the Wastewater System, while variable revenues are expected to
- 27 -
account for nearly 3.9% of total billed revenues. Satellite Customers pay their fixed charges whether or not they continue
to contract with the Citizens Authority for wastewater treatment.
Audited billed revenue received from and the billed flow of the customers of the Wastewater System for the
fiscal year ended September 30, 2013, was as follows:
Accounts And Revenues By Category – FY 2013
Category
Residential
Commercial/Institutional
Industrial
Industrial Surcharge
Satellite Variable
Satellite Fixed
Miscellaneous
Total Consumption/Billed
Revenue
Other Receipts
Connection Charges
Treatment
Gallons
(000's)
10,876,020
12,157,360
4,911,163
0
6,619,457
0
0
34,564,000
Percentage of
Total Accounts
31.47%
35.17
14.21
0.00
19.15
0.00
0.00
100.00%
Fiscal 2013
Revenues ($)
Percentage of
Total Revenue
$68,009,816
43,931,848
25,838,021
8,634,381
5,945,266
2,016,495
1,788,478
$156,164,305
43.55%
28.13
16.54
5.53
3.81
1.29
1.15
100.00%
$5,899,495
Largest Wastewater System Customers - FY 2013
The following table provides audited billed revenue and consumption data for the Wastewater System’s ten
(10) largest customers for the fiscal year ended September 30, 2013:
Customer Name
Revenue ($)
Ingredion, Inc.
Eli Lilly
Vertullus Specialties
Quaker Oats Co/SVC
Indianapolis Airport Authority
Indiana University/Purdue
University Indianapolis
Clarian Health
Citizens Thermal
Crossroad Farms Dairy
Harlan Bakeries, Inc.
Total Billed Revenue
and Consumption
$10,630,387
3,130,568
1,939,101
1,840,735
1,291,192
1,223,257
% of Total
(All Customers)
6.90%
2.03%
1.26%
1.19%
0.84%
0.79%
1,088,324
927,699
896,255
718,442
$23,685,960
0.71%
0.60%
0.58%
0.47%
15.37%
Consumption
100 Cu Ft
1,151,813
654,130
282,129
324,978
270,995
393,969
% of Total
(All Customers)
2.53%
1.44%
0.62%
0.71%
0.59%
0.86%
309,717
290,813
99,992
66,635
3,845,171
0.68%
0.64%
0.22%
0.15%
8.44%
In fiscal year 2013, the ten (10) largest customers of the Wastewater System accounted for 15.37% of the Wastewater
System’s billed revenue and 8.44% of the total consumption.
IURC Approved Rates and Charges. On April 23, 2014, the IURC issued its order in Cause No. 44305 (the “2014
Order”) authorizing the Citizens Authority to adopt rates and charges that became effective May 1, 2014. See “—IURC
Regulation of Rates and Charges.” Those rates and charges are set forth on the following page:
- 28 -
5/1/2014
NON-INDUSTRIAL
Metered Monthly Rates
Minimum Charge (per month)
Base Charge (per month)
10/1/2014
$28.54
$13.82
$31.02
$15.62
$4.9063
$5.5763
$5.1336
$5.8551
$26.90
$13.82
$28.87
$15.62
Treatment Charges / 1,000 Gallons
Industrial Surveillance Rate - Per 1,000 Gallons
$4.1614
$0.1982
$4.2133
$0.2022
Total Treatment & Surveillance Rate / 1,000 Gallons
$4.3596
$4.4155
Excessive Strength Surcharges (Per lb)
BOD in excess of 250 mg/l
TSS in excess of 300 mg/l
NH^3 in excess of 20 mg/l
$0.3614
$0.1588
$0.2936
$0.3811
$0.1673
$0.3088
Septic Hauler Rates
Septic: Per 1,000 Gallons
Grease Waste: Per 1,000 Gallons
$38.94
$422.08
$41.05
$422.08
$30.00
$30.00
Treatment Charges / 1,000 Gallons
First 7,500 Gallons
Over 7,500 Gallons
INDUSTRIAL
Metered Monthly Rates
Minimum Charge (per month)
Base Charge (per month)
FOG-Licensed Food - Cooking Facilities
All Licensed Food/Cooking Facilities - Monthly Charge
Connection Fee. In 2005, the City-County Council of the City also established a connection fee of $2,500 per
equivalent dwelling unit (“EDU”) pursuant to Ordinance No. 107 2005 (the “Rate Ordinance”). Effective in 2009, the
Connection Fee was subject to an automatic rate increase based upon the change in the Consumer Price Index; the current
rate is $2,530, which will be the connection fee charged by the Citizens Authority until a change is authorized by the IURC.
The Rate Ordinance defines one EDU as being equal to 310 gallons per day of average wastewater generation, or the
equivalent of a single-family residence. At the time of establishing the connection fee, the Sanitary District discontinued
the practice of utilizing assessments to finance connections to the Wastewater System for homes formerly utilizing Septic
Systems. Under the STEP as provided in the Wastewater Asset Purchase Agreement, the Citizens Authority pays for all
sewer construction costs on public property, and property owners are responsible for paying the one-time connection fee
and costs to abandon their septic tank and their lateral connection to the Wastewater System.
Billing and Collections. Customers are billed monthly, based on either actual or estimated consumption.
Estimated bills are subject to true-up based on actual usage. Bills are considered delinquent seventeen (17) days after
billing, subject to late penalty charges. Under Indiana law, disconnection of service for non-payment is permitted only after
notifying customers in writing at least seven (7) days prior to disconnection. The Citizens Authority will typically notify
customers of pending disconnection fourteen (14) days prior to disconnection. Disconnections may be postponed in certain
circumstances.
- 29 -
Between 2002 and 2010, the Sanitary District had an average collection rate of 96.8% on its billed fees, which
includes subsequent recoveries through property liens. I.C. 36-9-25-11 provides the Sanitary District with the authority to
place liens on customer properties to satisfy unpaid fees, and under the ICA, the Citizens Authority has the same authority.
Since the Citizens Authority acquired the Wastewater System in August 2011, it has experienced a collection rate on
wastewater accounts of 98.8% (fiscal year 2012 through the end of the 2013 fiscal year).
IURC Regulation of Rates and Charges
General. The Citizens Authority’s rates and charges and terms and conditions for services are subject to the
approval of the IURC and the Authority Board under the terms of IC 8-1-11.1-3 and IC 8-1.5-3-8 (the “IURC Statute”).
The Citizens Authority’s rates and charges for wastewater service must be nondiscriminatory, reasonable and just, and will
be reviewed by the IURC in accordance with the IURC Statute. Reasonable and just rates and charges are defined by the
IURC Statute to mean rates and charges that produce sufficient revenue to (i) pay all the legal and other necessary expenses
incident to the operation of the Wastewater System, including (a) maintenance costs, (b) operating charges, (c) upkeep, (d)
repairs, (e) depreciation and (f) interest charges on bonds or other obligations, including leases; (ii) provide a sinking fund
for the liquidation of bonds or other obligations, including leases; (iii) provide a debt service reserve for bonds or other
obligations, including leases, in an amount not to exceed the maximum annual debt service on the bonds or obligations or
the maximum annual lease rentals; (iv) provide adequate money for working capital; (v) provide adequate money for
making extensions and replacements to the extent not provided through depreciation; and (vi) provide money for the
payment of taxes that may be assessed against the Wastewater System. It is the intent of the IURC Statute that the Citizens
Authority’s rates and charges produce an income sufficient to maintain the Wastewater System in a sound physical and
financial condition to render adequate and efficient service. Rates and charges too low to meet these requirements are
unlawful under the IURC Statute.
On July 13, 2011, the IURC issued its order in Cause No. 43936 (the "2011 Order") approving the Settlement
Agreement and authorizing the Citizens Authority to implement (i) the rates and charges in effect for the Wastewater
System at the time of the Acquisition, including implementation of annual increases of 10.75% to the rates and charges in
calendar years 2012 and 2013; (ii) the terms and conditions for services proposed by the Citizens Authority in its evidence;
and (iii) the Citizens Authority’s Environmental Compliance Plan (“ECP”) to comply with the Consent Decree, including
the LTCP projects. The Authority Board adopted a resolution in 2011 to implement the rates approved in the IURC Order.
In compliance with the IURC Order, the Citizens Authority petitioned the IURC seeking formal approval of the specific
provisions for the ECP Recovery Mechanism (the “ECP Mechanism”) as discussed in more detail under “Environmental
Compliance Plan” below and the IURC approved the ECP Mechanism on June 14, 2012 in Cause No. 44053. Pursuant to
the IURC Order, the Citizens Authority was required to file a general rate case for the Wastewater System no earlier than
one (1) full year following its commencement of operations and no later than January 1, 2014. The Citizens Authority filed
testimony with the IURC for a general rate case on February 22, 2013. As part of that filing and in compliance with the
IURC Order, the Citizens Authority filed a cost-of-service study and discussed with the Industrial Group and the OUCC the
preliminary results of such study. As part of that cost-of-service study, the Citizens Authority included an explanation of
how the City and the Citizens Authority have allocated the ownership responsibilities and costs to wastewater and
stormwater functions to ensure that neither utility’s ratepayers are subsidizing the other utility’s costs.
On February 22, 2013, Citizens Authority filed testimony with the IURC for a general rate increase in two (2)
steps. On October 11, 2013, the OUCC and Citizens Authority filed a Stipulation and Settlement Agreement on Revenue
Requirements (the “Revenue Requirements Agreement”) resolving issues between the parties related to revenue
requirement and the stipulated step 1 and step 2 increases. Additionally, on October 30, 2013, the OUCC and Industrial
Group filed a Stipulation and Settlement Agreement on Allocation Issues (the “Allocation Agreement”) resolving issues
related to the allocation of costs among customer classes. In the 2014 Order the IURC approved a rate increase in two (2)
steps, the material aspects of the Revenue Requirements Agreement making minor adjustments to the amounts of the
stipulated step 1 and step 2 increases and the Allocation Agreement. The IURC authorized the step 1 rate increase of
21.08% or $38.3 million annual revenue increase and authorized the step 2 rate increase of 5.61% or $12.3 million annual
revenue increase with a rate structure intended to provide funding of $46.0 million of annual extensions and replacements
through rates (paygo). There can be no assurance that actual results will meet the intention of the rate structure. The
Authority Board adopted a resolution in May 2014 to implement the rates approved in the 2014 Order. The step 1 increase
was implemented effective May 1, 2014 and the step 2 increase is to be implemented on October 1, 2014. The 2014 Order
specified that within 30 days of closing on any Citizens Authority Bonds, Citizens Authority must file revised rate
- 30 -
schedules and a true-up report containing information regarding Citizens Authority’s precise actual debt service, among
other information, with the IURC and provide a copy to the OUCC.
In addition, the Citizens Authority must report to the IURC each year the difference between the amount of PILOT
payments and the amount of property tax that would have been levied and the IURC has reserved the right to consider
additional action should scheduled PILOT payments ever exceed the amount of property tax that would have otherwise
been levied.
Environmental Compliance Plan. The 2011 Order approved the Citizens Authority’s ECP, as discussed above,
including approval of the estimated costs that will be incurred to comply with the order of the United States District Court
for the Southern District of Indiana (the “Court”) dated December 19, 2006, among the United States Environmental
Protection Agency (the “EPA”), Indiana Department of Environmental Management (“IDEM”), and the City, as amended
(the “Consent Decree”). The 2011 Order also endorsed the use of the ECP Mechanism to facilitate recovery between rate
cases of debt service costs that will be incurred to implement the ECP. On July 29, 2011, the Citizens Authority filed a
docketed proceeding seeking establishment of the processes and procedures that will be used to administer the ECP
Mechanism. On June 14, 2012, the IURC formally approved the details and processes and procedures of the ECP
Mechanism. The Citizens Authority assumed the City’s obligations under the Consent Decree pursuant to the terms of the
Wastewater Asset Purchase Agreement. Beginning in 2013, to the extent debt service is not included in base rates filed for
in general rate cases, the Citizens Authority may make ECP Mechanism filings with the IURC to provide revenues
beginning in 2014 to cover debt service plus related reserves and costs of issuance on the capital projects mandated under
the Consent Decree. Upon approval of an ECP Mechanism filing, wastewater rates will be adjusted for new debt service on
the first of the month following the debt issue. The ECP also provides for recovery of interest costs associated with shortterm debt used to fund Consent Decree projects in anticipation of issuing bonds. The order also calls for an annual
reconciliation process for rates to be adjusted based upon a reconciliation of the revenues produced from the ECP
Mechanism and the actual debt service costs for the same period. See “THE WASTEWATER SYSTEM – Capital
Improvement Plan.” See “APPENDIX H – DESCRIPTION OF CONSENT DECREE PROJECTS.”
Future Rate Increases. As discussed above, the Citizens Authority filed testimony with the IURC for a general
rate increase on February 22, 2013. The 2014 Order authorized the Citizens Authority to increase rates in two (2) steps.
The step 1 increase is 21.08% effective May 1, 2014 and the step 2 increase of 5.61% is to be implemented October 1,
2014. Following implementation of the step 2 increase, the Citizens Authority plans for rates to increase each succeeding
year through new general rate increases or through the ECP Mechanism as the costs of the Wastewater System increase.
Recent Legislative Developments. In 2013, the Indiana General Assembly passed Senate Bill 560, which provides
for an IURC order within 300 days of the utility filing its case in chief. Pursuant to the new law, failure to act within this
window will result in 50% of the rate request becoming effective immediately, subject to refund if the final order authorizes
less than 50% of the requested increase. The IURC has indicated its desire to finalize rate cases within the 300 day
requirement. The new law will also make it easier for utilities to utilize forward-looking test years when setting new rates.
The law was passed to help mitigate the effects of regulatory lag in the rate setting process.
Further, in February 2014, the Indiana General Assembly passed House Bill 1132, providing that a public utility
that provides water or wastewater service may petition the IURC for an adjustment of its basic rates and charges for
recovery of eligible infrastructure improvement costs. Such eligible costs include replacement and upgrade costs to the
Wastewater System, but exclude costs of extensions thereto.
Environmental Regulation of the Wastewater System
The Wastewater System is subject to wastewater collection and treatment requirements under both federal and
State law. Those requirements are contained in a National Pollutant Discharge Elimination System (“NPDES”) permit.
Both EPA and IDEM have jurisdiction over the Wastewater System. As authorized by the Clean Water Act, the NPDES
permit program controls water pollution by regulating point sources that discharge pollutants into waters of the United
States. The General Pretreatment Regulations establish responsibilities of Federal, State, and local government, industry
and the public to implement Pretreatment Standards to control pollutants from the industrial users which may pass through
or interfere with Publicly-Owned Treatment Works (“POTW”) treatment processes or which may contaminate sewage
sludge.
- 31 -
Capital Improvement Plan
The Citizens Authority has a Capital Improvement Plan (the “Capital Improvement Plan”) to meet guidelines of
the Consent Decree and the overall needs of the Wastewater System. See “THE CONSENT DECREE AND THE LONGTERM CONTROL PLAN.” The improvements (i.e. projects, or Control Measurers) related to the Consent Decree and the
LTCP have been planned and scheduled out through 2025. The ECP Mechanism approved by the IURC is designed to
automatically cover the cost of debt service related to Consent Decree capital projects to the extent debt service is not
included in the base rates filed for in general rate cases. See “ – IURC Regulation of Rates and Charges.” The Citizens
Authority expects that debt service associated with funding Consent Decree capital projects in Fiscal Years 2014 through
2015 will be recovered through base rates because recovery of debt service for all planned financing through fiscal year
2015 was included in the 2014 Order. See “—IURC Regulation of Rates and Charges.” In 2016-2018, Consent Decree
capital projects are projected to comprise approximately $425 million or 65% of the Capital Improvement Plan (see table
below) and debt service related to funding such projects could potentially be recovered through the ECP mechanism to the
extent not included in base rates.
The Capital Improvement Plan also includes STEP projects and other improvements to and expansion of the
Wastewater System, including normal extensions and replacements. Under City and Sanitary District control of the
Wastewater System, the City identified, as high priority, STEP for approximately 18,000 residences with failing septic
systems. The Capital Improvement Plan includes completion of the connection of approximately 7,000 residences to the
Wastewater System committed to under the Asset Purchase Agreement. The extent to which the STEP projects are
completed beyond 2015 depends in large part upon the rate increases approved by the IURC in the future and the economic
justification of the STEP projects. In the IURC Order, the IURC found the cumulative effects of the program provides
benefits for the Citizens Authority’s customers and for the residents of the City in general. Therefore, the continued
funding of STEP was approved for 2014 and 2015. Citizens Authority is required under the IURC Order to within sixty
(60) days of the effective date of the IURC Order, file a report with the IURC that includes a detailed, prioritized list of the
planned STEP projects. Additionally, beginning thirteen (13) months after the effective date of the IURC Order, Citizen
Authority must file an annual report with the IURC that includes any updates or changes to the list of STEP projects
previously filed with the IURC and a list of all STEP projects completed, including costs, for the twelve-month period
ending one month prior to the date of the report. Citizens Authority must file this annual report so long as the STEP
program continues.
Further, under the Capital Improvement Plan, the Citizens Authority plans to expand capacity at the Southport
AWT to 250 MGD from the current capacity of 150 MGD. The expansion of the Southport AWT is expected to achieve
full operation by December, 2017.
The table below provides the Citizens Authority’s historical and five-year Capital Improvement Plan for fiscal
years 2014-2018. The Citizens Authority 2014A First Lien Bonds are expected to finance a portion of the capital
expenditures shown in the table below. The Capital Improvement Plan is expected to be funded primarily with the
proceeds of future Citizens Authority First Lien Bonds.
CWA
Historical and Forecasted
Capital Expenditures
Consent Decree
Septic Tank Elimination Program
System Improvements
Other
Total
Historical
(000s)
2012
2013
Total
$ 100,384
63,791
18,886
7,171
$ 190,234
$ 112,214
31,357
25,024
1,434
$ 170,031
$212,599
95,149
43,911
8,606
$360,266
- 32 -
Consent Decree
Septic Tank Elimination Program
System Improvements
Other
Total
2014
2015
Forecasted
(000s)
2016
$116,224
24,397
61,502
2,663
$204,786
$135,413
20,000
60,301
1,077
$216,791
$128,942
20,000
53,209
758
$202,909
2017
2018
$144,891
20,000
54,747
1,054
$220,692
$151,034
20,000
58,730
1,157
$230,921
Total
$676,504
104,397
288,489
7,763
$1,069,390
The Citizens Authority continually evaluates the Consent Decree projects, including the sequencing of the
projects, in order to identify potential savings and value engineering opportunities. As such opportunities are identified, the
timing of certain capital expenditures may change, potentially significantly impacting capital spending in specific years.
Actual and Projected Debt Service Coverage
Shown below for fiscal years 2012 and 2013 are the actual results of the Citizens Authority. Information is also
provided indicating the projected results of the Citizens Authority for fiscal years 2014 through fiscal year 2015. The
projected coverages are set forth on the following page:
- 33 -
CWA
Historical
Projected
Historical and Projected Debt Service Coverage
(000's)
FY 2012
Utility Operating Revenues
FY 2013
FY 2014
$156,516
$156,164
$186,938
60,969
52,019
64,861
56,043
69,161
55,639
Operations and Maintenance Costs2,3
Depreciation & Amortization
PILOTs
FY 2015
1
$221,568
71,328
57,965
14,699
14,875
14,491
17,168
$127,687
$135,779
$139,291
$146,461
Total Operating Income
28,829
20,385
47,647
75,107
Other Income/(Expense)
169
315
228
228
41,949
49,152
54,963
68,954
($12,951)
($28,452)
($7,088)
$6,381
Total Operating Expenses
Interest Charges
Net Income
Adjustments:
Add Connection Fees
5,214
6,396
3,825
3,443
Add PILOT Expense
14,699
14,875
14,491
17,168
Add Depreciation and Amortization
52,019
56,043
55,639
57,965
Add Interest Charges
41,947
49,152
54,963
68,954
$100,928
$98,014
$121,830
$153,911
Series 2011A
39,715
42,109
45,275
45,277
Series 2012A
-
9,161
12,111
12,111
Series 2014A
-
-
6,991
16,777
Future First Lien Bonds Debt Service
-
-
-
12,169
$39,715
$51,270
$64,377
$86,334
2.54x
1.91x
1.89x
1.78x
Series 2011B
13,581
13,581
18,106
18,105
Series 2011C
1,380
1,380
1,380
1,380
$14,961
$14,961
$19,486
$19,485
1.85x
1.48x
1.45x
1.45x
Total Net Income Available for Debt Service
First Lien Bonds:
Total First Lien Debt Service
First Lien Debt Service Coverage
Second Lien Bonds:
Total Second Lien Debt Service
First and Second Lien Debt Service Coverage
1) Based on actual 12 months ended April 30, 2014 revenue adjusted for the impact of the $38.3 million step 1 rate increase effective
May 1, 2014, and the $12.3 million step 2 rate increase effective October 1, 2014.
2) Citizens allocates Corporate Support Services and Shared Field Services costs to the Citizens Authority. For the fiscal year 2013, the
total amount of Corporate Support Services and Shared Field Services costs allocated to the Citizens Authority was $10.1 million.
3) FY 2014 assumes budget and FY 2015 assumes a rate of inflation of 3%.
- 34 -
1
The Citizens Authority does not as a matter of course make public projections as to future sales, earnings, or other
results. However, the management of the Citizens Authority has prepared the prospective financial information set forth
above to present certain debt coverage levels. The above prospective financial information was not prepared with a view
toward public disclosure or with a view toward complying with the guidelines established by the American Institute of
Certified Public Accountants with respect to prospective financial information, but, in the view of Citizens Authority’s
management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and
presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial
performance of the Citizens Authority. However, this information is not fact and should not be relied upon as being
necessarily indicative of future results, and readers of this Official Statement are cautioned not to place undue reliance on
the prospective financial information.
Neither the Citizens Authority’s independent auditors, nor any other independent accountants, have compiled,
examined, or performed any procedures with respect to the prospective financial information contained above, nor have
they expressed any opinion or any other form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, the prospective financial information.
Litigation
The Citizens Authority has assumed liability for and is currently defending various suits arising out of the normal
course of the Wastewater System business. The Citizens Authority intends to regularly analyze current information and, as
necessary, provide accruals for probable liabilities on the eventual disposition of such matters. Although the outcome of
any litigation matter is uncertain and cannot be predicted, after consultation with counsel, the Citizens Authority reasonably
believes none of the foregoing litigation matters will have a material adverse impact on the financial position of the Citizens
Authority or its ability to operate the Wastewater System.
THE CONSENT DECREE AND THE LONG-TERM CONTROL PLAN
Development of Long-Term Control Plan
As was the common practice during the early 1900s, the older portion of the Wastewater System was designed to
carry both stormwater and sanitary waste. In dry weather, these combined sewers carry sewage to Citizens Authority’s
AWT Plants. However, when it rains or when snow melts, the capacity of the combined portion of the Wastewater System
can become overloaded. The Combined Sewer Overflows (“CSOs”) discharge to various Indianapolis waterways because
they were constructed as relief points to prevent sewage from backing up into homes, businesses and streets. The
Wastewater System has approximately 134 CSO outfalls many of which discharge with as little as a quarter inch of rain.
The EPA issued a CSO Policy in 1994 that established a phased strategy for addressing CSOs. The CSO Policy
requires evaluation of CSO-impacted waterways and sewer collection and treatment systems. Communities are required to
implement specific minimum controls that are non-capital related and to also develop and implement a long term control
plan to reduce CSOs by separating sewers or maximizing the capacity to address CSOs.
The wastewater collection and treatment requirements for the Wastewater System under both federal and State law
are contained in an NPDES permit issued by IDEM. From 1985 to 2001, the City operated under NPDES permits that
predated the CSO Policy and, therefore, did not contain CSO control requirements. However, the City has complied with
the federal CSO Policy since it was issued in 1994 even though the NPDES permits did not require it to do so.
IDEM issued new NPDES permits in 2001 that contained CSO-related requirements to develop a long term
control plan and meet Clean Water Act standards. In April 2001, prior to the issuance of the permits, the City submitted a
long term control plan to IDEM and EPA for review. From 2001 to 2006, the City met with EPA and IDEM to discuss
their comments on the plan. During that time, the City spent over $200 million implementing early action projects which
EPA and IDEM agreed would be part of any approved long term control plan. The meetings among the City, State and
federal officials led to the development of the current LTCP, which has been approved by IDEM with EPA’s concurrence.
The plan establishes a twenty (20) year schedule, through 2025, for Wastewater System improvements that address CSOs
as described in more detail below. This plan was established and approved based in part on the financial capabilities
assessment (the “FCA”) prepared by the City that included the evaluation for the ability of City’s residential customers to
bear the costs associated with the LTCP. The LTCP must be reviewed and updated as necessary every five (5) years. The
next scheduled time for the LTCP to be reviewed and updated is 2015. Since 2006, this LTCP has been amended three
- 35 -
times. In 2008 and 2009, two amendments were executed that eliminated some of the control measures and included credit
for projects that were not originally consent decree projects but enhanced water quality. The third amendment named the
Citizens Authority as a party to the consent decree and was fully executed and signed by the court in 2013.
Through implementation of the LTCP, the Citizens Authority will seek to restore beneficial uses of streams and to
mitigate sewer overflows from waterways when people are most likely to use them. The Citizens Authority’s goals
include:
•
•
•
•
Reducing sewer overflows;
Improving water quality in streams to support fish and other aquatic wildlife;
Improving the quality of life in neighborhoods by reducing odors and capturing the unsightly materials found
in overflowing sewers; and
Complying with State and Federal Clean Water Act permit requirements.
To fulfill its goals, the Citizens Authority is building storage and conveyance facilities designed to capture ninetyseven (97%) percent of wet-weather combined sewer flows and result in no more than two overflow events per typical year
in the Fall Creek watershed and ninety-five (95%) percent of wet-weather combined sewer flows and result in no more than
four overflow events per typical year in the White River, Pogue’s Run, Pleasant Run, Eagle Creek and Bean Creek
watersheds. Major components of the LTCP include completion of the following projects:
•
•
•
•
•
•
•
•
•
Deep, underground tunnels starting at the Southport AWT plant and generally running along White River, Fall
Creek, Pogue’s Run and Pleasant Run, to capture, store and convey sewage to the Citizens Authority’s
wastewater treatment plants;
New, larger sewers and storage facilities along Pogue’s Run, Pleasant Run, Bean Creek, and parts of Fall
Creek and White River;
A new sewer along Eagle Creek that will carry wet weather flows to a Citizens Authority AWT plant;
An underground self-cleaning storage tank near Spades Park that captures and stores overflows from upper
Pogue’s Run;
Upgrades to an existing storage facility at Riviera Club to capture, store and disinfect overflows from the
upper White River;
Inflatable dams and pinch valves at key points in the Wastewater System to use existing lines to maximize insystem storage and conveyance to contain and reduce raw sewage overflows;
Local sewer separation projects to eliminate isolated overflows on White River, State Ditch, Lick Creek and
the upstream ends of Fall Creek, Pogue’s Run, and Bean Creek;
Significant improvements to both Belmont and Southport AWT plants to increase their ability to store and
treat incoming flows during wet weather; and
A new relief interceptor sewer referred to as the Belmont North Interceptor that will relieve capacity issues in
the Belmont Interceptor System and carry flows to the Belmont AWT plant.
SEE APPENDIX G for a more complete description of the LTCP.
Agreement to Enter into Implementation Consent Decree
It has been EPA’s position that if a CSO long term control plan will take longer than five (5) years to implement,
the plan should be included in an enforceable order, or, for large communities, an enforceable judicial order. Because the
LTCP will take twenty (20) years to implement, EPA required the City to enter into the Consent Decree or face an
enforcement action in federal court.
Although the City did not agree that the Consent Decree was either warranted or necessary given the City’s
positive compliance record, the City agreed to negotiate the Consent Decree based upon EPA’s assurance that it would be
an “implementation” consent decree and that it would be non-adversarial. An implementation consent decree is one that
requires a community to implement an approved LTCP. An implementation consent decree sets forth the required financial
commitments and project schedule and will help ensure full compliance with the law and NPDES permits.
The EPA also wanted to address sanitary sewer discharge (“SSD”) issues in the consent decree. SSDs, which are
discharges of wastewater from the sanitary portion of the system that reach the waters of the State, are viewed by EPA as
being strictly prohibited by federal and State law. The City had previously developed operation and maintenance
- 36 -
procedures to address SSDs and a program to ensure adequate sewer capacity. The Citizens Authority will continue these
procedures. Therefore, the Consent Decree includes relatively few SSD-related requirements. As of October 2013, the
SSD portion of the Consent Decree has been completed.
The final Consent Decree was lodged in the U.S. District Court for the Southern District of Indiana on October 4,
2006, and entered by the Court on December 19, 2006. The Consent Decree was subsequently amended three times to
modify specific control measures but keep the overall LTCP performance criteria and the final Consent Decree completion
schedule the same. At the closing of the Acquisition the Citizens Authority became a Successor in Interest to the City’s
obligations under the Consent Decree, and in 2013 was added as a party to the Consent Decree in a third amendment
thereto.
A
copy
of
the
LTCP
and
the
Consent
Decree
http://www.citizensenergygroup.com/Wastewater/LongTermControlPlan.aspx.
can
be
obtained
at
Overview of Consent Decree Requirements. Under the Consent Decree, the City agreed to invest and as the
successor in interest to obligations under the Consent Decree, the Citizens Authority will:
•
•
Implement thirty-two (32) CSO control measures along five (5) waterways designed to significantly reduce
raw or combined sewage overflows from the combined Sewer System and achieve full operational status of
those control measures by December 31, 2025; and
By December 31, 2015, eliminate chronic overflows (SSDs) from seven (7) locations in the separated
sanitary Wastewater System. This portion of the Consent Decree is now complete.
When expressed in nominal dollars, the Citizens Authority estimates that the projected cost of the Consent Decree,
as amended, including capital and operation and maintenance costs, is approximately $1.9 billion (2012 dollars). A more
detailed description of the projects required by the Consent Decree can be found in “APPENDIX H — DESCRIPTION OF
CONSENT DECREE PROJECTS.”
As of the six-month status report dated April 11, 2014 (Report No. 154), the Citizens Authority is in full
compliance with the Consent Decree. 52 of the 64 milestone dates in the CSO portion of the Consent Decree had been met.
The SSD portions of the Consent Decree are complete and the Supplemental Environmental Projects (“SEP”) requirements
of the Consent Decree are complete.
The Citizens Authority will continue implementing EPA’s nine (9) minimum control requirements for CSOs and
the Citizens Authority’s Capacity Management, Operations and Maintenance program.
Upon completion of the LTCP, CSO control measures must meet design and performance criteria specified in
Section 8 of the LTCP. Performance against the Consent Decree requirements will be determined using computer
modeling that accounts for the numerous factors that influence performance.
Upon achievement of full operation for all control measures, any remaining CSO discharges must comply with the
NPDES permits issued to the Citizens Authority and any requirements of State water quality standards. For each of the
seven (7) sanitary sewer discharge (SSD) locations listed in APPENDIX G, the Citizens Authority will be in compliance
with the NPDES permits only if it does not have any discharges from those locations.
Risks Associated with the Consent Decree. The City negotiated an implementation Consent Decree in order to
define as precisely as possible the financial and project schedule requirements and obligations. However, the LTCP
developed by the City and approved by IDEM with concurrence by EPA is premised upon a revision to the State’s water
quality standards. If the State’s water quality standards are not revised to be consistent with the approved LTCP, the
Citizens Authority will not be in compliance with its NPDES permits or federal or State law even if it implements all of the
requirements of the LTCP.
•
Water Quality Standards Revision
A water quality standard is made up of a designated use for the waterway (e.g., aquatic life, recreation, or
drinking water) and the pollutant criteria to protect that use. The State has designated all waterways in the State
- 37 -
for the full body contact recreational use, and has established criteria to protect that use, including limits on E. coli
bacteria.
Although the LTCP will achieve an extremely high level of control, a few CSO events are expected to
occur during large storms each year. Because of the presence of sewage, any CSO discharge will exceed the
State’s current E. coli limits. Therefore, a revision to water quality standards is necessary if the Citizens Authority
is to be in compliance with its NPDES permits and federal and State law after full implementation of the LTCP.
Water quality standards can only be revised through a use attainability analysis (“UAA”), which must be
approved by IDEM and EPA. The City performed a UAA, which was included in the LTCP, and requested that
the current water quality standard be revised to provide a “CSO wet weather limited use subcategory” that would
be applicable during and after large storms that cause CSO discharges. This subcategory is permitted under State
law for waterways affected by CSOs after implementation of an approved long term control plan and successful
completion of UAA requirements.
Under the Consent Decree, IDEM originally agreed to issue a decision on the City’s UAA within 270
days of its written notice to the City that it deems the UAA and supporting information to be complete. If IDEM
had approved the request, had it been submitted, it would have initiated a rule-making to establish the CSO wet
weather limited use subcategory. The water quality standard revision would then have been submitted to EPA for
approval.
The Consent Decree originally contemplated that if either IDEM or EPA did not approve the water
quality standard revision, the City would be required to submit a work plan to revise the LTCP within ninety (90)
days of a final, non-appealable decision. Within ninety (90) days of approval of a work plan, if submitted, the City
must submit a report on revising the LTCP. The revision to the LTCP must be sufficient to ensure compliance
with NDPES permit requirements and federal and State law after full implementation of the LTCP.
The Consent Decree originally contemplated that the State’s UAA decision would be received before the
City began construction of control measures 15-31 (there are currently 32 numbered control measures). Therefore,
the Consent Decree contains a safeguard providing that if IDEM fails to act on the City’s request within five (5)
years of entry of the Consent Decree, the City may seek a modification of the implementation schedule for control
measures that are dependent upon the water quality standards.
However, in light of the changes to the LTCP and many of the financial assumptions that had been in
place in 2006, and also given the Acquisition, EPA and IDEM took the position that there was not adequate
information in the administrative record to allow a water quality standards revision by October 4, 2011. EPA has
acknowledged that it may take several years before the financial benefits of the Acquisition can be sufficiently
assessed and allocated, such that those benefits can be meaningfully taken into account by the City, the public, and
the state and federal governments, in evaluating whether a revision to water quality standards is warranted for
socioeconomic reasons. However, EPA recognizes that the Citizens Authority will in the meantime be continuing
with the design and construction of CSO Control Measures requiring significant capital costs and increased
operation and maintenance costs as new and expanded facilities come on line.
After discussions between the City and EPA, the City opted to refrain from immediately proceeding with
its current request for a revision to water quality standards based on the socioeconomic factor, in light of EPA’s
concerns regarding the sufficiency of the information in the administrative record to support the current request.
EPA stresses, however, that notwithstanding EPA’s concerns, the City or its successors or assigns to the
Wastewater System is free to pursue its current request or make future requests for revisions to water quality
standards, in accordance with state and federal law. In particular, in light of financial uncertainties, the City or its
successors or assigns may choose to request revisions to water quality standards based on non-socioeconomic
factors.
The City, prior to the Acquisition, expressed concern regarding the fact that the water quality standards
revision process would not be completed by October 4, 2011, the date on which EPA had discretionary authority
under Paragraph 8(a) of the Consent Decree to require the City to develop and implement a Revised CSO Control
Measures Plan to achieve a higher level of control than the Performance Criteria specified in Exhibit 1 to the
Consent Decree. Specifically, the City was concerned that if EPA asserted this discretionary authority, it would
- 38 -
cause the City significant uncertainty as it invested hundreds of millions of dollars to design and construct its CSO
Control Measures in accordance with the Design and Performance Criteria specified in APPENDIX G.
To provide the City with greater certainty, EPA verbally agreed that, as long as the City (or its successors
or assigns) is implementing its CSO Control Measures in compliance with all aspects of Section VII of the
Consent Decree, EPA does not intend to exercise its authority under Paragraph 8(a) to require the City (or its
successors or assigns) to develop and implement a Revised CSO Control Measures Plan. This non-binding
agreement was memorialized in a letter dated August 5, 2011, from the EPA to the City.
However, if the City (or its successors or assigns) is no longer in compliance with its implementation
obligations, or chooses to proceed with a request for a revision to water quality standards and EPA has reason to
believe, due to failure to satisfy at least one of the factors enumerated in 40 C.F.R. § 131.10(g), that the City’s
request might not be approved, then EPA may consider exercising its discretionary authority under Paragraph 8(a)
to require the City to develop and implement a Revised CSO Control Measures Plan.
An additional implementation risk posed by the Consent Decree is the Citizens Authority’s potential liability for
stipulated penalties if the Citizens Authority is unable to comply with every Consent Decree milestone or requirement.
These penalties typically accrue for each day the Citizens Authority is in violation and, if incurred, could be substantial.
•
Stipulated Penalties
The Citizens Authority intends to comply with every requirement and milestone contained in the Consent
Decree. The Consent Decree includes stipulated penalties ranging from $500 to $5,000 per day if the Citizens
Authority is not able to comply with all requirements and milestones over the duration of the Consent Decree.
Consent Decree Safeguards. The Consent Decree includes certain safeguards to provide relief from milestone
dates and requirements if unforeseen events occur, including the following:
•
Extension of Deadlines Due to Increased Costs
The original estimate for the Consent Decree projects at the time of the 2006 agreement was that the
projects would cost $1.688 billion in 2004 dollars. As a result of two amendments modifying the original Consent
Decree, the cost of the Consent Decree portion of the LTCP was revised downward to $1.4 billion in 2004 dollars.
At least every five (5) years, the Citizens Authority will report to EPA and IDEM on the actual costs compared to
the estimated costs, and if the Citizens Authority determines that the costs will exceed $2.325 billion (in 2005
dollars), the Citizens Authority may request an extension of one or more of the deadlines contained in the Consent
Decree, subject to EPA and IDEM approval. Due to the update of the costs during the Enhancement Plan process
(as described in the Consent Decree), the City, the EPA and IDEM have all agreed that the costs of the Consent
Decree have been updated adequately to meet the cost update requirement of the Consent Decree for this five-year
period.
•
Modifications to Reflect Significant Adverse Changes to Financial Circumstances, NPDES Permit
Proceedings or Agency Inaction on Revising Water Quality Standards
The City (or its successors or assigns) may request a modification of Consent Decree requirements in
connection with any significant adverse changes to its financial circumstances, delays in NPDES permit
proceedings or, as described above, IDEM’s lack of action on revising the water quality standards. If EPA or
IDEM do not agree to the requested modification, the Citizens Authority may seek a modification from the Court
under Rule 60(b) of the Federal Rules of Civil Procedure.
•
Modification of Performance Criteria
If, after implementation of all CSO control measures, the Citizens Authority determines through postconstruction monitoring that the performance criteria set forth in the Consent Decree have not been and cannot be
achieved without remedial measures that would be cost-prohibitive, infeasible or otherwise inappropriate, the City
(or its successors or assigns) may request a modification of the performance criteria, subject to EPA and IDEM
approval.
- 39 -
•
Force Majeure Events
Force majeure events are those beyond the Citizens Authority’s control that could affect the Citizens
Authority’s ability to meet a Consent Decree requirement or deadline. The deadline for a Consent Decree
requirement will be extended for a period equal to the delay caused by the force majeure event if the Citizens
Authority gives the required notice to EPA and IDEM and provides the required documentation to substantiate the
existence of a force majeure event.
•
Dispute Resolution
Disputes among EPA, IDEM and the City regarding the meaning, application, implementation of
modification of certain Consent Decree requirements or provisions may be submitted to the Court for resolution.
Management of Consent Decree Compliance. The Citizens Authority is approaching implementation of the
Consent Decree with commitments and resources to ensure compliance with its requirements and milestones. Citizens has
educated its staff, which serves as the Citizens Authority staff, and consultants about the specific requirements imposed by
the Consent Decree and about the importance of compliance with those requirements. The Citizens Authority will continue
to coordinate efforts and monitor compliance through a Consent Decree Implementation Team, a Consent Decree Project
“Watch List” to track mandated deadlines, and progress reports required by the Consent Decree to be submitted to EPA
every six (6) months.
Industrial Pretreatment Program. The Industrial Pretreatment Program prevents the discharge of pollutants to
POTWs, which will interfere with the operation of the POTW or its use and disposal of municipal biosolids. In addition,
the Industrial Pretreatment Program prevents the introduction of pollutants to POTWs that may pass through into rivers,
lakes and streams causing toxicity or other impacts. Implementation of the Industrial Pretreatment Program is governed by
40 CFR Part 403. These regulations describe the responsibility of the EPA, states, POTWs and industrial users in
protecting the POTWs, sewer systems, biosolids, receiving waters, and worker health and safety. The City is the Control
Authority pursuant to an approved program by the EPA, but implementation of the program transferred to the Citizens
Authority at closing of the Acquisition, under an agreement approved by IDEM, as well as by the City-County Council
with supporting authorities acknowledged in the underlying ordinances of the City-County Council. On November 30,
2012, the Citizens Authority applied to EPA seeking approval of its Industrial Pretreatment Program to name the Citizens
Authority as the Control Authority under a delegated Industrial Pretreatment Program. Currently, the EPA is still
reviewing this request.
THE MANAGER AND THE MANAGEMENT AGREEMENT
The Manager
The City entered into an Agreement for the Operation and Maintenance of the Advanced Wastewater Treatment
Plants and Wastewater Collection System (the “Management Agreement”) with the Manager dated October 11, 2007, as
amended and clarified pursuant to the Management Agreement MOU and the Agreement Pertaining to the Management
Agreement, which was assigned to the Citizens Authority at the closing of the Acquisition. SEE “APPENDIX J –
SUMMARY OF THE MANAGEMENT AGREEMENT.” The Management Agreement’s initial term expires on
January 1, 2017, after which it can be renewed or terminated in accordance with its terms.
The Manager is headquartered in Indianapolis, Indiana. The Manager is a wholly-owned subsidiary of United
Water Environmental Services Inc. The parent company for United Water Environmental Services Inc. is United Water
Inc., and ultimately SUEZ ENVIRONNEMENT COMPANY SA, a French public company. SUEZ ENVIRONNEMENT
COMPANY SA is one of the largest environmental services companies in the world and is listed on the Paris and Brussels
stock exchanges. United Water Environmental Services Inc. is an environmental service provider, specializing in water and
wastewater system and utility management for municipalities across the United States. United Water Environmental
Services Inc., directly or through its subsidiaries, operates approximately 100 water and wastewater utilities in the United
States, including Springfield, Massachusetts; Huber Heights, Ohio; and Burbank, California.
The information contained under this heading “-The Manager” concerning the Manager and SUEZ
ENVIRONNEMENT COMPANY SA has been obtained from the Manager, but none of the IFA, the Citizens Authority or
the Underwriters take any responsibility for the accuracy thereof.
- 40 -
The Management Agreement
The Management Agreement provides for the Manager to perform the day-to-day operation, maintenance, repair
and management of the Wastewater System. The Management Agreement provides that capital improvements to the
Wastewater System over $2 million annually are the responsibility of the Citizens Authority. The initial term of the
Management Agreement is through January 1, 2017, subject to extension and early termination. The Management
Agreement can be terminated by either the Citizens Authority or the Manager upon 60 days’ notice. Pursuant to the terms
of the Management Agreement, a 180-day transition period would follow any such termination, during which the Manager
would continue to perform its duties under the Management Agreement. Further, the Manager would receive a termination
payment between $2.3 million and $5.6 million depending on the date of termination. Such termination payment would be
made by the City pursuant to the terms of the Wastewater Asset Purchase Agreement to the extent there are still sufficient
funds in the escrow account established pursuant to the Wastewater Asset Purchase Agreement. Otherwise, the Citizens
Authority would bear this obligation.
The Citizens Authority retains title to all assets of the Wastewater System and retains and exercises broad
oversight responsibility over the Wastewater System through its own staff and employees, which are provided by Citizens.
The Citizens Authority exercises control over the operation of the Wastewater System through specific standards for
performance contained in the Management Agreement. The Manager is required to operate and manage the Wastewater
System so as to comply with applicable law and performance guarantees set forth in the Management Agreement. The
failure of the Manager to operate and manage the Wastewater System in accordance with the terms and conditions of the
Management Agreement constitutes an event of default. The Citizens Authority may terminate the Management
Agreement for such an event of default.
Under the Management Agreement, the Manager receives an annual fee which is comprised of a service fee and a
performance incentive fee. The approximate annual fixed fee paid in 2013 was $31,920,353. The fee may be adjusted for
flow and loadings or for regulatory changes. The Manager is paid for services performed under the Management
Agreement, including for planning assistance, capital improvements and other services. The components of the Manager’s
fee are described in more detail on APPENDIX J.
Except as described above, the Manager is required to provide all operation expenses and all predictive,
preventative and routine maintenance under the Management Agreement and the Citizens Authority maintains
responsibility for corrective maintenance and for capital improvements. The Citizens Authority also retains control over
approval of the Capital Improvement Plan, rate setting procedures, including seeking approval of any rate changes from the
IURC, the right to appeal any property tax assessments or to initiate eminent domain proceedings, bond financings and the
right to negotiate all intergovernmental agreements and wholesale agreements.
See “CERTAIN MATTERS AFFECTING THE IFA WASTEWATER BONDS AND THE WASTEWATER
SYSTEM—Dependence Upon Manager for Operation of the Sanitary System” and “APPENDIX J-SUMMARY OF THE
MANAGEMENT AGREEMENT” for a description of the Management Agreement. Copies of the Management Agreement
are available from the Citizens Authority at 2020 N. Meridian Street, Indianapolis, Indiana 46202.
Key Personnel
Nadine Leslie is the President of United Water Services Indiana LLC. She oversees the operations and
management of the company’s contract services businesses nationwide. Her primary focus is on public-private partnerships
affiliated with municipal water and wastewater systems including three of the nation’s largest contracts: Indianapolis, IN;
Jersey City, NJ; and Springfield, MA. Ms. Leslie is also President of United Water Environmental Services Inc., and she
previously served as Director of Internal Audit of United Water Inc. She holds a B.S. in Civil Engineering from Faculte
des Sciences in Haiti.
Timothy Blagsvedt is the Project Manager of the Manager and directs the daily management, operations and
maintenance of two Advanced Wastewater Treatment (AWT) facilities, wastewater lift stations and collection systems at
the Manager’s Indianapolis project. He is a Registered Professional Engineer and holds an M.S. in Environmental
Engineering and a B.S. in Civil Engineering from North Dakota State University.
- 41 -
CERTAIN MATTERS AFFECTING THE IFA WASTEWATER BONDS AND
THE WASTEWATER SYSTEM
Bonds are Limited Obligations
THE IFA WASTEWATER BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE IFA, SECURED
SOLELY BY THE IFA INDENTURE, AND ARE PAYABLE SOLELY FROM PAYMENTS TO BE MADE BY
THE CITIZENS AUTHORITY UNDER THE LOAN AGREEMENT AND THE CITIZENS AUTHORITY 2014A
FIRST LIEN BONDS, AND FROM CERTAIN FUNDS HELD OR OTHERWISE AVAILABLE UNDER THE IFA
INDENTURE, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. THE IFA WASTEWATER
BONDS ARE NOT A GENERAL OR MORAL OBLIGATION, DEBT OR LIABILITY OF THE IFA, THE
STATE, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF THE CONSTITUTION
OR STATUTES OF THE STATE, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF
THE IFA, THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF. THE IFA WASTEWATER BONDS
DO NOT GRANT TO THE HOLDERS THEREOF ANY RIGHT TO HAVE THE IFA, THE GENERAL
ASSEMBLY OF THE STATE, OR ANY POLITICAL SUBDIVISION OF THE STATE LEVY ANY TAXES OR
APPROPRIATE OR OTHERWISE MAKE AVAILABLE ANY FUNDS FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE IFA WASTEWATER BONDS AND DO NOT
CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE IFA, THE STATE OR ANY
POLITICAL SUBDIVISION THEREOF, AND NEITHER THE IFA, THE STATE, NOR ANY POLITICAL
SUBDIVISION THEREOF SHALL BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST ON THE IFA WASTEWATER BONDS. THE IFA HAS NO TAXING POWER.
The Citizens Authority 2014A First Lien Bonds are limited obligations of the Citizens Authority payable
solely from the Net Revenues of the Citizens Authority solely with respect to the Wastewater System and the First
Lien Pledged Funds pledged therefor under the First Lien Master Citizens Authority Indenture. See “SECURITY
AND SOURCES OF PAYMENT FOR THE IFA WASTEWATER BONDS.”
Payment on the Citizens Authority First Lien 2014A Bonds is dependent upon the generation of sufficient Net
Revenues. If the Citizens Authority incurs unanticipated expenses or reduced revenues for any reason, the Citizens
Authority may be unable to generate adequate revenues from the Wastewater System to pay debt service on the Citizens
Authority First Lien 2014A Bonds, which is the exclusive means for the IFA to pay debt service on the IFA Wastewater
Bonds. The Wastewater System is held by the Citizens Authority subject to a public charitable trust which is separate from
the public charitable trusts of Citizens. Obligations related to the Wastewater System are not payable in any manner by
Citizens. See the caption “THE WASTEWATER SYSTEM,” and the other headings under this caption “CERTAIN
MATTERS AFFECTING THE IFA WASTEWATER BONDS AND THE WASTEWATER SYSTEM.”
Except for the 2014A First Lien Reserve (which is solely available for the Citizens Authority 2014A First Lien
Bonds), there is no fund which is required to contain amounts to make up for deficiencies in the event of one or more
defaults by the Citizens Authority in making payments on the Citizens Authority 2014A First Lien Bonds.
The First Lien Master Citizens Authority Indenture provides that only the holders of the Citizens Authority First
Lien Bonds have a security interest in the respective accounts of the First Lien Bond Fund, the First Lien Construction
Fund and the First Lien Bond Reserve Fund. Further, the Second Lien Master Citizens Authority Indenture provides that
only the holders of the Citizens Authority Second Lien Bonds have a security interest in the respective accounts of the
Second Lien Bond Fund, the Second Lien Construction Fund and the Second Lien Bond Reserve Fund.
No property taxes have been or are expected to be levied or are expected to be available to pay debt service on the
Citizens Authority 2014A First Lien Bonds.
No Mortgage or Lien Interests Secure the Citizens Authority 2014A First Lien Bonds
The Citizens Authority 2014A First Lien Bonds are not secured by a mortgage, lien, or security interest on or in
any of the funds, properties or other assets of the Citizens Authority other than the funds discussed above. The First Lien
Trustee may not look to any funds, properties or other assets of the Citizens Authority other than the Net Revenues and the
First Lien Pledged Funds held under the First Lien Citizens Authority Master Indenture, for payment of debt service on the
- 42 -
Citizens Authority 2014A First Lien Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE IFA
WASTEWATER BONDS – Limited Obligations.”
Additional Parity Securities
Under the Citizens Authority Indentures, the Citizens Authority is permitted to incur other debt payable from Net
Revenues and First Lien Pledged Funds or Second Lien Pledged Funds, as applicable, on a parity with the lien of the
existing First Lien Bonds and the Citizens Authority 2014A First Lien Bonds or the existing Second Lien Bonds. See
“SECURITY AND SOURCES OF PAYMENT FOR THE IFA WASTEWATER BONDS — Additional First Lien
Citizens Authority Bonds” and “—Additional Second Lien Citizens Authority Bonds” and “APPENDIX B2 —
SUMMARY OF PRINCIPAL FINANCIAL DOCUMENTS AND DEFINITIONS—Summary of Certain Provisions of the
Citizens Authority Indentures.” Debt service on all First Lien Citizens Authority Bonds is payable from Net Revenues on a
pro-rata basis. Debt Service on all Second Lien Citizens Authority Bonds is payable on a pro-rata basis from Net Revenues
after payment of First Lien Citizens Authority Bonds. Accordingly, to the extent that future obligations are issued on a
parity with the lien of the Citizens Authority 2014A First Lien Bonds, the security for the Citizens Authority 2014A First
Lien Bonds, and accordingly the IFA Wastewater Bonds, may be diluted.
Subordinate Debt
In addition to its ability to issue First Lien Citizens Authority Bonds and Second Lien Citizens Authority Bonds
under the Citizens Authority Indentures, the Citizens Authority may also issue Subordinate Securities without complying
with any additional financial test.
In addition, the Citizens Authority has entered into a line of credit with Wells Fargo Bank, National Association
(the “Wells Line”) with a borrowing capacity of $145 million as an interim source of funding for capital needs, which is
secured by a subordinate lien on the Net Revenues subordinate to the lien of the First Lien Master Indenture and the Second
Lien Master Indenture. As of June 1, 2014, there was $90 million outstanding under the Wells Line, which amounts will be
paid with proceeds of the Citizens Authority 2014A First Lien Bonds.
Further, the Citizens Authority is obligated to pay the PILOTs on an unsecured subordinate basis to the First Lien
Citizens Authority Bonds and Second Lien Citizens Authority Bonds pursuant to the Wastewater Asset Purchase
Agreement. The schedule of PILOTs due from the Citizens Authority through 2039 is shown in “APPENDIX I –
SCHEDULE OF PILOTS PAYABLE TO THE CITY OF INDIANAPOLIS.” The PILOTs that are due are the same
PILOTs that the Sanitary District owed to the City prior to the Acquisition. The PILOTs are designed to replace property
taxes that might be due if the Wastewater System were not exempt from property taxation. See “SECURITY AND
SOURCES OF PAYMENT OF CITIZENS AUTHORITY BONDS – Funds and Accounts; Flow of Funds Under the
Citizens Authority Indenture” and “CERTAIN MATTERS AFFECTING THE IFA WASTEWATER BONDS AND THE
WASTEWATER SYSTEM – IURC Regulation.”
In addition, the Citizens Authority is obligated pursuant to the Wastewater Asset Purchase Agreement to make
payments of principal and interest on the Sanitary District’s outstanding general obligation bond debt through January 1,
2018, as further described in “APPENDIX I – SCHEDULE OF PAYMENTS DUE TO THE CITY OF INDIANAPOLIS
FOR THE SANITARY DISTRICT’S GENERAL OBLIGATION BONDS.” Such payments are unsecured obligations of
the Citizens Authority and thus subordinate to the First Lien Citizens Authority Bonds and Second Lien Citizens Authority
Bonds.
Assignment and Assumption of Wholesale Service Agreements
The Citizens Authority has taken assignment of and assumed various third party contracts between the City and/or
the Sanitary District, including those with customers, vendors and other third parties. Among those contracts, wholesale
service agreements for wastewater transfer and treatment existed between the City and/or Whitestown, Boone County,
Greenwood, Hamilton Southeastern, Lawrence, Beech Grove, Tri-County and Ben Davis. The wholesale service
agreements with Boone County, Greenwood, Hamilton Southeastern and Lawrence provided that neither party will assign
or otherwise transfer the agreement without prior written consent of the other party. Based on the nature of the overall
Acquisition transaction and the approvals obtained therefor, among other things, the City and the Sanitary District did not
obtain and the parties do not believe formal written consents for assumption of these particular agreements was required for
their assignment to and assumption by the Citizens Authority. The counterparties may disagree with this position and may
- 43 -
assert claims under the agreements. However, none of the counterparties intervened in the IURC proceeding approving the
Acquisition and assignment of these contracts. Beech Grove is a member of the Indianapolis Service Advisory Board (the
“Service Advisory Board”), which intervened in the IURC proceeding. The Service Advisory Board is a signatory to the
Settlement Agreement filed on April 12, 2011 and approved by the IURC in the IURC Order. Regardless, the Citizens
Authority has accepted and assumed these agreements to the extent assignable, and provides service under them on the
same terms as the City and the Sanitary District did, as successor-in-interest, or such terms and conditions approved by the
IURC Order.
Capital Improvement Requirements; Substantial Additional Debt
A significant number of capital improvements to the Wastewater System are required in order for the Citizens
Authority to continue to meet normal renewals and replacements to the Wastewater System and to comply with
environmental and other regulatory requirements, including the LTCP and Consent Decree. The Citizens Authority
estimates capital improvements in the amount of approximately $1.7 billion will need to be made from 2014 through 2025
to comply with current regulatory requirements, including the LTCP and the Consent Decree (see “THE CONSENT
DECREE AND THE LONG TERM CONTROL PLAN”) requirements to implement the Citizens Authority’s
improvements to the Wastewater System necessary to reduce the number of CSO events. In addition to the LTCP and the
Consent Decree projects, the Citizens Authority’s Capital Improvement Plan contains other capital projects, including
STEP projects and expansion projects. See “THE WASTEWATER SYSTEM – Capital Improvement Plan.” As a result of
the Citizens Authority’s Capital Improvement Plan, the Citizens Authority expects to issue additional First Lien Citizens
Authority Bonds to fund a substantial portion of the capital expenditures. Additional increases to rates and charges
approved by the Citizens Authority Board and the IURC will be required to cover the increase to debt service costs of the
Citizens Authority from such additional debt. Although the IURC has approved the ECP, the issuance of additional debt
could result in lower debt service coverage or insufficient Net Revenues to pay such increased debt service costs.
IURC Regulation
In the ICA, Citizens delegated to the Citizens Authority its statutory powers to adopt rates and charges for the
provision of wastewater utility service under Indiana Code 8-1-11.1-3(c)(9). The statute provides that rules and rates for
utility service adopted by Citizens, and thus the Citizens Authority through the delegation in the ICA, shall be in effect only
after the rules and rates have been filed with and approved by the IURC and such approval shall be granted by the IURC
only after notice of hearing and hearing as provided by Indiana Code 8-1-1 and Indiana Code 8-1-2, and only after
determining compliance of the rates of service with Indiana Code 8-1.5-3-8 and Indiana Code 8-1.5-3-10.
As more thoroughly discussed in APPENDIX A, Citizens has been subject to the ratemaking jurisdiction of the
IURC for a number of years and has significant experience establishing rates and charges under Indiana Code 8-1.5-3-8.
However, any future changes in wastewater rates and charges or terms and conditions of service are subject to approval of
the IURC and the Board. On February 22, 2013, the Citizens Authority filed testimony requesting a rate increase and
received an order on April 23, 2014, providing for a rate increase in two (2) steps. Citizens Authority is authorized to
implement a rate increase of 21.08% or $38.3 million revenue increase, effective May 1, 2014; and a rate increase of 5.61%
or $12.3 million revenue increase, effective October 1, 2014. There is no assurance that the IURC will approve any future
increases to Citizens Authority’s base rates or in the precise amounts requested. See “THE WASTEWATER SYSTEM—
IURC Regulation of Rates and Charges.”
Long Term Control Plan, the Consent Decree and Water Quality Standards Provisions
The Citizens Authority is subject to numerous federal and State regulatory requirements. Those regulations are
subject to change at any time. The City entered into the Consent Decree approving the LTCP to reduce the number of CSO
events affecting the City’s waterways and the Citizens Authority has assumed the City’s obligations under the Consent
Decree. The LTCP measures approved in the Consent Decree are based in part on the FCA, which must be updated every
five years, as well as upon a revision of currently applicable water quality standards, which must be adopted by IDEM and
approved by EPA. Compliance with the Consent Decree and implementation of the LTCP are dependent upon future acts
of the Citizens Authority, the occurrence of which cannot be guaranteed. Failure to comply with the Consent Decree
potentially could lead to significant stipulated penalties imposed on and levied against the Citizens Authority that could
have a material adverse effect on the Citizens Authority, including the availability of the Net Revenues to pay debt service
on the Citizens Authority First Lien 2014A Bonds, and could negatively impact the ability of the IFA to pay debt service on
the IFA Wastewater Bonds. If the City or its successors or assigns is no longer in compliance with its implementation
- 44 -
obligations, or chooses to proceed with a request for a revision to water quality standards and EPA has reason to believe
that the request might not be approved, then EPA may consider exercising its discretionary authority under Paragraph 8(a)
of the Consent Decree to require the City (and therefore its successors and assigns) to develop and implement a Revised
CSO Control Measures Plan. A water quality standards revision will have to be addressed when the last of the Control
Measures is in full operation, as late as 2025. See “THE CONSENT DECREE AND THE LONG TERM CONTROL
PLAN.”
Industrial Pretreatment Program
The City’s NPDES permit transferred to the Citizens Authority as part of the Wastewater Purchase Agreement,
contains the regulatory provisions from the Industrial Pretreatment Program. The Citizens Authority is independently
implementing the Industrial Pretreatment Program on behalf of the City with approval from IDEM and the City-County
Council. However, the City remains the Control Authority as that term is defined by EPA until such time as the Citizens
Authority becomes a Control Authority by EPA’s approval of an Industrial Pretreatment Program for the Citizens
Authority. See “THE WASTEWATER SYSTEM - The Wastewater System.” The Citizens Authority has submitted its
application to the EPA for the Industrial Pretreatment Program to be delegated to the Citizens Authority. However, the
Citizens Authority cannot ensure delegation of an Industrial Pretreatment Program from EPA.
In May 2011, the City received the results of a Performance Compliance Inspection (the “PCI”) from the EPA
documenting the results of the PCI (the “PCI Report”). The PCI found deficiencies with the programmatic requirements
and implementation of the City’s Industrial Pretreatment Program. Therefore, EPA included the City on its quarterly noncompliance report (QNCR). The City corresponded with EPA and met with EPA to address the findings and the Citizens
Authority participated as an observer. EPA has asserted that any administrative order with EPA to address the PCI would
be among EPA, the City and the Citizens Authority, as operator of the City’s Industrial Pretreatment Program after the
Acquisition. Any penalties or fines, or any interest thereon, that may be assessed by EPA or IDEM by reason by any acts or
omissions of the City prior to the Acquisition alleged to be in violation of applicable law are considered Excluded
Liabilities as that term is defined under the Wastewater Asset Purchase Agreement. See “RECENT ACQUISITION OF
THE WASTEWATER SYSTEM.” An Order on Consent was executed by the parties in September 2012 to resolve the
allegations raised during the PCI.
Dependence Upon Manager for Operation of the Sanitary System
The Manager has responsibility for many of the management and operational functions of the Wastewater System,
and, accordingly, the material failure of the Manager to effectively operate and maintain the Wastewater System could
negatively impact the ability of the Citizens Authority to pay debt service on the Citizens Authority First Lien 2014A
Bonds, and ultimately negatively impact the ability of the IFA to pay debt service on the IFA Wastewater Bonds. The
Manager has been primarily responsible for the management and operation of the Wastewater System since 1997. Neither
the Citizens Authority nor Citizens have previously managed a wastewater system, although Citizens has extensive
experience managing and operating its existing utilities. The insolvency or bankruptcy of the Manager, or any future
manager of the Wastewater System (the “Future Manager”) could also adversely impact the ability of the Manager or
Future Manager to effectively operate and maintain the Wastewater System. The Management Agreement expires on
January 1, 2017, and is subject to early termination by either party at any time. The Citizens Authority may determine to
rescope the Management Agreement after the initial term thereof, may seek to engage a different manager or may choose to
undertake all duties of the Manager itself. In the event the Citizens Authority should determine to operate the Wastewater
System on its own, the Citizens Authority expects it could retain sufficient management and technical expertise as
necessary to operate and manage the Wastewater System. See “THE MANAGER AND MANAGEMENT
AGREEMENT.”
Impact of Growth Rates On Net Revenues
Based on available historic data, the Citizens Authority has assumed very limited growth in system revenues
attributable to additional new customers on the Wastewater System in its budgeting and forecasting. Since 2000, the annual
average increase in the number of residential billing sites has been less than 0.7% each year, increasing from 193,499
households in 2000 to 205,192 as of September 30, 2013. This is true despite the addition of 5,472 completed STEP
connections since 2006. This trend is consistent with U.S. Census data (2000-2010) which indicates that households
increased in Marion County by less than 0.40% and by less than 0.30% in the City.
- 45 -
The assumptions also are based upon STEP projects included in the Citizens Authority’s Capital Improvement
Plan. See “THE WASTEWATER SYSTEM – Capital Improvement Plan.”
In order to reach new customers, the Citizens Authority is required to make capital expenditures to construct
extensions and improvements to the existing Wastewater System. The Citizens Authority is required to have access to
funds (either through cash on hand or additional borrowing) in order to make such capital improvements. There may be
limits on the amount of additional indebtedness the Citizens Authority may incur in order to continue to satisfy the
requirements of the rate covenants and/or the additional bonds tests set forth in the Citizens Authority Indentures. See the
heading “Capital Improvement Requirements” under this caption and “SECURITY AND SOURCES OF PAYMENT FOR
THE IFA WASTEWATER BONDS – Rate Covenants.” Any failure to realize these projected growth assumptions could
negatively impact the availability of Net Revenues to pay debt service on the Citizens Authority Bonds, and could
ultimately negatively impact the ability of the IFA to pay debt service on the IFA Wastewater Bonds or issue additional
Citizens Authority Bonds.
Limited Prior Operating History; New Structure
The Citizens Authority was organized in August 2010, acquired the Wastewater System in September 2011 and
has engaged in only limited operational activities to date. Accordingly, the Citizens Authority has only limited financial
and operating history. The Citizens Authority is subject to a utility regulatory environment under the IURC that is different
from that of the Sanitary District under the City-County Council. Further, there is only a limited and short history with
respect to the process, manner and authority by which the Citizens Authority will own and operate the Wastewater System.
Forward-Looking Statements
This Official Statement and its appendices, including “THE WASTEWATER SYSTEM – Pro Forma Debt Service
Coverage,” contain statements relating to future results that are “forward-looking statements.” When used in this Official
Statement, the words “estimate,” “forecast,” “intend,” “expect,” “projected” and “pro forma” and similar expressions
identify forward-looking statements. Any forward-looking statement is subject to uncertainty. Accordingly, such
statements are subject to risks that could cause actual results to differ, possibly materially, from those contemplated in such
forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized,
or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be
differences between forward looking statements and actual results. Those differences could be material and those
differences could negatively impact the availability of Net Revenues to pay debt service on the Citizens Authority First
Lien 2014A Bonds, and ultimately could negatively impact the payments of debt service on the IFA Wastewater Bonds.
All forward-looking statements contained in this Official Statement have been provided solely by the Citizens Authority
and the IFA assumes no obligation related to any such forward-looking statements.
Citizens is Not Obligated to Pay the Citizens Authority Bonds
Citizens is under no obligation to make payments due on the Citizens Authority 2014A First Lien Bonds and it
cannot be expected that Citizens would make such payments.
Environmental Due Diligence
Environmental due diligence in connection with the Acquisition was completed by August Mack Environmental
on a representative number of sites of the Wastewater System which were selected based on property size; type of facility;
date of construction; location (urban, rural, industrial area, commercial area, etc.); and the likelihood for the assets to have a
regulatory status, based on prior knowledge of the assets of the Sanitary District. Five sites were selected for a preliminary
desktop review (“Desktop Review”). The Desktop Review consisted of a review of on-site and off-site regulatory records
and available historical information (aerial photographs and historical Sanborn Fire Insurance Maps). Based on the findings
from the Desktop Review, two sites were evaluated to determine if additional review was warranted.
Following the Desktop Review, both sites were selected for additional file review of publicly available documents
and a “windshield” inspection of the sites and based on the findings, both sites were selected for further environmental due
diligence consisting of Phase I Environmental Site Assessments (“ESA”) consistent with the All Appropriate Inquiries
(AAI) Final Rule and the ASTM E1527-05 Standard Practice for ESAs. The scope of work from the ASTM Phase I ESA
included on-site reconnaissance of each property, supplemented by interviews with the property owner (or its designated
- 46 -
representative) and persons knowledgeable about the site, and a review of environmental records concerning the property
and surrounding areas. The review of the environmental history of the property was conducted through a computerized
database search of the relevant sites maintained by state and federal regulatory agencies. In addition, historic aerial
photography or other historic records were reviewed to assist in documenting past usage of the sites. The ESA activities
were managed and overseen by an environmental professional. No Phase II ESAs were conducted. The principal
environmental issues identified in one of the two Phase I ESAs were historic and current use of the sites.
The Citizens Authority has obtained insurance to insure against Environmental Expenses (as defined in the
Wastewater Asset Purchase Agreement) related to the Wastewater System incurred by the Citizens Authority and such
insurance policy is the sole remedy of the Citizens Authority as against the Wastewater Sellers for any Environmental
Expenses covered by such policy.
Ownership of Real Estate
Environmental Public Health and Safety (“EHS”). The Citizens Authority is regulated by and required to comply
with numerous EHS laws and regulations applicable to the real estate used in the operation of the Wastewater System. In
addition, other EHS laws and regulations can limit the development of, and impose liability for, the disturbance of wetlands
or the habitats of threatened or endangered species. The Citizens Authority is likely to incur expenses in order to comply
with EHS laws and regulations applicable to the real estate owned in connection with the Wastewater System. There can be
no assurance that compliance with existing or future EHS laws and regulations will not require material expenditures by the
Citizens Authority or otherwise have an adverse effect on the Citizens Authority’s financial condition or operations. Actual
or alleged non-compliance with and/or liability arising under EHS laws and regulations could result in regulatory action,
third party claims and/or material expenditure by the Citizens Authority or otherwise have an adverse effect on the Citizens
Authority’s financial condition or operations.
Some of the improvements on the real estate the Citizens Authority purchased and now owns in connection with
the Wastewater System were constructed by other parties at various times in areas that have historically been the subject of
commercial or industrial use. As a result, hazardous or toxic substances within land or buildings (such as asbestos) may be
present at some of these properties. Various EHS laws and regulations in the jurisdictions in which the real estate is located
may impose liability on the Citizens Authority for the costs of management, removal, investigation or remediation of such
hazardous or toxic substances present on or in or migrating from real estate owned or leased by it. The Citizens Authority
could be responsible for the costs of this management, removal, investigation or remediation even if the presence of such
hazardous or toxic substances pre-dates the Citizens Authority’s ownership of the real estate. Development or
redevelopment of the real estate could also reveal the presence of such substances that require remediation. The costs of any
required management, removal, investigation or remediation of such substances could have an adverse effect on the
financial condition and/or operations of the Citizens Authority.
Title to some of the Real Estate used in Operations of Wastewater System is Unsettled. The real estate used in the
operation of the Wastewater System is comprised of hundreds of parcels that were acquired by the City over the course of
many years; thus, Citizens Authority’s title to the real estate used in the operation of the Wastewater System is comprised
of various legal interests, including fee simple ownership, leasehold interests, permanent use rights and public right-of-way.
Citizens Authority has been unable to ascertain the City; root title to some parcels of real estate that are used in the
operation of the Wastewater System (the “Title Deficient Areas”). The Citizens Authority may have to exercise its powers
of condemnation in order to resolve any issues that may arise in Title Deficient Areas if third parties challenge Citizens
Authority’s title to the Title Deficient Areas.
Failure to Achieve Projected Synergies
The Citizens Authority expected to realize the benefit of significant synergies from the joint operation by Citizens
of its central Indiana gas, steam and chilled water systems and the Water System, with its operation of the Wastewater
System on behalf of the Citizens Authority as described under “RECENT ACQUISITION OF THE WASTEWATER
SYSTEM.” These synergies are realized both as direct savings to the various utilities with regard to direct costs, as well as
in the form of allocated savings with regard to allocated costs. Such synergies and efficiencies are expected to result in
lower rates for customers of the Water System than would have resulted in the absence of the Acquisition. Through its first
two full fiscal years of owning the Indianapolis Water and Wastewater assets, Citizens realized $180.6 million of aggregate
savings for all utilities owned or managed by Citizens. There are no guaranties, however, that those synergies will
continued to be realized. To the extent that Citizens cannot achieve those synergies, either in the amount thereof or the
- 47 -
timing of the realization thereof, the operating expenses of the Wastewater System will be higher than anticipated, which
may result in the rates and charges for Wastewater service not being as low as the Citizens Authority would hope to
achieve.
Flooding, Other Catastrophic Loss and Terrorist Attacks
The Wastewater System is susceptible to a wide variety of risks, including natural disasters (e.g., flooding),
operator error, vandalism and other catastrophic loss with the consequences aggravated by the Wastewater System being a
potential source of environmental contamination and other harm to the public. Certain of these risks may be mitigated by
the purchase of insurance; however, it is not possible to predict at this time whether the insurance coverage would be
sufficient to pay all of the costs associated with the natural disaster, operator error, vandalism or other catastrophic event.
See “– Insurance” below. To the extent insurance coverage is not sufficient to compensate for facilities damaged by natural
disasters, vandalism, operator error or other catastrophic event (or to the extent damage caused by such events is excluded
from policy coverage), the Citizens Authority may be required to expend significant amounts to replace the damaged
facilities and operations may be negatively impacted to an extent that cannot be determined at this time.
Terrorist attacks, such as the attacks that occurred on September 11, 2001, and future risk of further terrorist
attacks, may have an impact on the operation of the Wastewater System. The specific impact on the Wastewater System
cannot be determined. However, the terrorist attacks could mean that public infrastructure facilities, including wastewater
collection, storage and treatment systems such as the Wastewater System could be direct targets, or indirect casualties of, an
act of terror. Any future attacks could lead to damage to one or more significant components of the Wastewater System
resulting in the inability of the Wastewater System to provide service to its customers. See “—Insurance” below.
Insurance
The Citizens Authority has obtained insurance coverage as required pursuant to the Citizens Authority Indentures.
The Wastewater System facilities are insured against certain catastrophic loss; however, it is not possible to determine
whether the level of such coverage will be sufficient to cover actual losses sustained as a result of catastrophic loss. In the
event the Wastewater System sustains damage rendering it unable to operate for any significant length of time, the
collection of Gross Revenues will be adversely impacted. In addition, the Citizens Authority may be required to pay the
capital costs necessary to repair the damage from funds other than insurance proceeds.
LITIGATION
IFA. There is not now pending (which the IFA has received notice of via proper service of process) or, to the
IFA’s knowledge, threatened any litigation restraining or enjoining the issuance, sale, execution or delivery of the IFA
Wastewater Bonds or the execution and delivery of, and performance by the parties to the IFA Indenture, prohibiting the
IFA from purchasing the Citizens Authority 2014A First Lien Bonds with the proceeds of the IFA Wastewater Bonds, in
any way contesting or affecting the validity of the IFA Wastewater Bonds or any proceedings of the IFA taken with respect
to the issuance or sale thereof, or the Pledges (as hereinafter defined under the caption “ENFORCEABILITY OF
REMEDIES”) related to the IFA Wastewater Bonds or application of any moneys or security provided for payment of the
IFA Wastewater Bonds pursuant to the IFA Indenture. Neither the creation, organization nor existence of the IFA nor the
title of any of the present directors or other officers of the IFA to their respective offices is being contested.
Citizens Authority. There is not now pending or, to the Citizens Authority’s knowledge, threatened any litigation
restraining or enjoining the issuance, sale, execution or delivery of the Citizens Authority 2014A First Lien Bonds or the
execution and delivery of, and performance by the respective parties to, the First Lien Citizens Authority Water Indentures,
prohibiting the IFA from purchasing the Citizens Authority 2014A First Lien Bonds with the proceeds of the IFA
Wastewater Bonds, in any way contesting or affecting the validity of the Citizens Authority 2014A First Lien Bonds or any
proceedings of the Citizens Authority taken with respect to the issuance or sale thereof, or the Pledges (as hereinafter
defined under the caption “ENFORCEABILITY OF REMEDIES”) or application of any moneys or security provided for
payment of the Citizens Authority 2014A First Lien Bonds. Neither the creation, organization nor existence of the Citizens
Authority nor the title of any of the present directors or other officers of the Citizens Authority to their respective offices is
being contested. The Citizens Authority is a defendant in various suits arising out of the normal course of its business in
which payments for damages are substantial, but cannot be determined. The Citizens Authority regularly analyzes current
information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters. The
- 48 -
Citizens Authority believes that these matters ultimately will be resolved in a manner which will not materially adversely
affect the financial position of the Citizens Authority.
TAX MATTERS
In the opinion of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel, under existing federal statues, decisions,
regulations and rulings, interest on the IFA Wastewater Bonds is excludable from gross income for purposes of federal
income taxation pursuant to Section 103 of the Code, is not an item of tax preference for purposes of the federal alternative
minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings
for purposes of computing the federal alternative minimum tax imposed on certain corporations. This opinion is
conditioned on continuing compliance by the IFA and the Citizens Authority with the Tax Covenants (hereinafter defined).
Failure to comply with the Tax Covenants could cause interest on the IFA Wastewater Bonds to lose the exclusion from
gross income for federal income tax purposes retroactive to the date of issue.
In the opinion of Ice Miller LLP, under existing laws, regulations, published rulings and judicial decisions, interest
on the IFA Wastewater Bonds is exempt from income taxation in the State. This opinion relates only to the exemption
from state income tax of interest on the IFA Wastewater Bonds. See “APPENDIX C—FORM OF IFA BOND COUNSEL
OPINION” and “APPENDIX D – FORM OF CITIZENS AUTHORITY BOND COUNSEL OPINION.”
The Code imposes certain requirements that must be met subsequent to the issuance of the IFA Wastewater Bonds
as a condition to the exclusion from gross income of interest on the IFA Wastewater Bonds for federal income tax
purposes. The IFA and the Citizens Authority will covenant not to take any action nor fail to take any action, within their
respective power and control, with respect to the IFA Wastewater Bonds that would result in the loss of the exclusion from
gross income for federal income tax purposes of interest on the IFA Wastewater Bonds pursuant to Section 103 of the Code
(collectively, the “Tax Covenants”). The IFA Indenture, the First Lien Master Citizens Authority Indenture, the Loan
Agreement and certain certificates and agreements to be delivered on the date of delivery of the IFA Wastewater Bonds
establish procedures under which compliance with the requirements of the Code can be met.
Indiana Code Section 6-5.5 imposes a franchise tax (as defined in Indiana Code Section 6-5.5) on certain taxpayers
which generally include all corporations that transact the business of a financial institution in the State. The franchise tax is
measured in part by interest excluded from gross income under Section 103 of the Code minus associated expenses
disallowed under Section 265 of the Code. Taxpayers should consult their own tax advisors regarding the impact of this
statute on their ownership of the IFA Wastewater Bonds.
Although Bond Counsel will render opinions in the forms attached as APPENDIX C and APPENDIX D hereto,
the accrual or receipt of interest on the IFA Wastewater Bonds may otherwise affect a Bondholder’s federal income tax or
state tax liability with respect to the IFA Wastewater Bonds. The nature and extent of these other tax consequences will
depend upon the Bondholder’s particular tax status and a Bondholder’s other items of income or deduction. Taxpayers who
may be affected by such other tax consequences include, without limitation, financial institutions, certain insurance
companies, S corporations, certain foreign corporations, individual recipients of Social Security or railroad retirement
benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the IFA
Wastewater Bonds. Bond Counsel expresses no opinion regarding any other tax consequences. Prospective purchasers of
the IFA Wastewater Bonds should consult their own tax advisors with regard to other consequences of owning the IFA
Wastewater Bonds.
Legislation affecting municipal bonds is considered from time to time by the United States Congress. There can
be no assurance that legislation enacted or proposed after the date of issuance of the IFA Wastewater Bonds will not have
an adverse effect on the tax-exempt status or market price of the IFA Wastewater Bonds.
ORIGINAL ISSUE DISCOUNT
The initial public offering prices of the IFA Wastewater Bonds maturing on __________________ (collectively,
the “Discount Bonds”), are less than the principal amounts payable at maturity, and as a result, the Discount Bonds will be
considered to be issued with original issue discount. The difference between the initial public offering price of the
Discount Bonds as set forth on the inside cover page of this Official Statement (assuming it is the first price at which a
substantial amount of that maturity is sold) (the “Issue Price” for such maturity), and the amounts payable at maturity of the
Discount Bonds will be treated as “original issue discount.” A taxpayer who purchases a Discount Bond in the initial
- 49 -
public offering at the Issue Price for such maturity and who holds such Discount Bond to maturity may treat the full amount
of original issue discount as interest which is excludable from the gross income of the owner of that Discount Bond for
federal income tax purposes and will not, under present federal income tax law, realize taxable capital gain upon payment
of the Discount Bond at maturity.
The original issue discount on each of the Discount Bonds is treated as accruing daily over the term of such
Discount Bonds on the basis of the yield to maturity determined on the basis of compounding at the end of each six month
period (or shorter period from the date of the original issue) ending April 1 and October 1 (with straight line interpolation
between compounding dates).
Section 1288 of the Code provides, with respect to tax exempt obligations such as the Discount Bonds, that the
amount of original issue discount accruing each period will be added to the owner’s tax basis for the Discount Bonds. Such
adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Discount Bonds (including sale,
redemption or payment at maturity). Owners of the Discount Bonds who dispose of Discount Bonds prior to maturity
should consult their tax advisors as to the amount of original issue discount accrued over the period held and the amount of
taxable gain or loss upon the sale or other disposition of such Discount Bonds prior to maturity.
As described under “TAX MATTERS,” the original issue discount that accrues in each year to an owner of a
Discount Bond may result in certain collateral federal income tax consequences. Owners of any Discount Bonds should be
aware that the accrual of original issue discount in each year may result in a tax liability from these collateral tax
consequences even though the owners of such Discount Bonds will not receive a corresponding cash payment until a later
year.
Owners who purchase Discount Bonds in the initial public offering but at a price different from the Issue Price for
such maturity should consult their own tax advisors with respect to the tax consequences of the ownership of the Discount
Bonds.
The Code contains certain provisions relating to the accrual of original issue discount in the case of subsequent
purchasers of bonds such as the Discount Bonds. Owners who do not purchase Discount Bonds in the initial public offering
should consult their own tax advisors with regard to the other tax consequences of owning the Discount Bonds.
Owners of Discount Bonds should consult their own tax advisors with respect to the state and local tax
consequences of owning Discount Bonds. It is possible under the applicable provisions governing the determination of
state and local income taxes that accrued interest on the Discount Bonds may be deemed to be received in the year of
accrual even though there will not be a corresponding cash payment until a later year.
AMORTIZABLE BOND PREMIUM
The IFA Wastewater Bond maturity schedules shown on the inside cover page of this Official Statement sets forth
the interest rates and yield to maturity (or yield to the par call date) for each maturity of the IFA Wastewater Bonds. Except
for the IFA Wastewater Bonds maturing on _______________, 20____, the IFA Wastewater Bonds have a yield to
maturity (or yield to the par call date) that is less than the stated interest rate (collectively, the “Premium Bonds”). The
initial offering price of the Premium Bonds is greater than the principal amount payable at maturity, and as a result, the
Premium Bonds will be considered to be issued with amortizable bond premium (the “Bond Premium”). An owner who
acquires a Premium Bond in the initial public offering of the IFA Wastewater Bonds will be required to adjust the owner’s
basis in the Premium Bond downward as a result of the Bond Premium, pursuant to Section 1016(a)(5) of the Code. Such
adjusted tax basis will be used to determine taxable gain or loss upon disposition of the Premium Bonds, including sale,
redemption or payment at maturity. The amount of amortizable Bond Premium will be computed on the basis of the
taxpayer’s yield to maturity, with compounding at the end of each accrual period. Rules for determining (1) the amount of
amortizable Bond Premium and (2) the amount amortizable in a particular year are set forth in Section 171(b) of the Code.
No income tax deduction for the amount of amortizable Bond Premium will be allowed pursuant to Section 171(a)(2) of the
Code, but amortization of Bond Premium may be taken into account as a reduction in the amount of tax exempt income for
purposes of determining other tax consequences of owning Premium Bonds. Owners of the Premium Bonds should consult
their tax advisors with respect to the precise determination for federal income tax purposes of the treatment of Bond
Premium upon the sale or other disposition of such Premium Bonds and with respect to the state and local tax consequences
of owning and disposing of Premium Bonds.
- 50 -
Special rules governing the treatment of Bond Premium, which are applicable to dealers in tax exempt securities,
are found at Section 75 of the Code. Dealers in tax exempt securities are urged to consult their tax advisors concerning
treatment of Bond Premium.
ENFORCEABILITY OF REMEDIES
The various legal opinions to be delivered concurrently with the delivery of the IFA Wastewater Bonds express the
professional judgment of the attorneys rendering the opinions on the legal issues explicitly addressed therein. By rendering
a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of
the transaction opined upon, or of the future performance of parties to such transaction. Nor does the rendering of an
opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
The remedies available to the First Lien Trustee or the bondholders of the IFA Wastewater Bonds upon a default
under the IFA Indenture, to the First Lien Trustee or the IFA under the Citizens Authority 2014A First Lien Bonds and the
Citizens Authority First Lien Indenture, or to any party seeking to enforce the pledges securing the IFA Wastewater Bonds
or the Citizens Authority 2014A First Lien Bonds described herein (collectively the “Pledges”), are in many respects
dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory
law and judicial decisions, including specifically Title 11 of the United States Code (the United States Bankruptcy Code),
the remedies provided in the IFA Indenture and the Citizens Authority First Lien Indenture, or to any party seeking to
enforce the Pledges, may not be readily available or may be limited. Under Federal and State environmental laws certain
liens may be imposed on property of the IFA or the Citizens Authority from time to time, but the IFA has no reason to
believe, under existing law, that any such lien would have priority over the lien on the payments of the Citizens Authority
2014A First Lien Bonds pledged to owners of the IFA Wastewater Bonds under the IFA Indenture or over the liens on the
Net Revenues and First Lien Pledged Funds pledged to the owner of the Citizens Authority 2014A First Lien Bonds under
the Citizens Authority First Lien Indenture.
The various legal opinions to be delivered concurrently with the delivery of the IFA Wastewater Bonds will be
qualified as to the enforceability of the various legal instruments by the valid exercise of the constitutional powers of the
IFA, the Citizens Authority, the City, the State and the United States of America and by bankruptcy, reorganization,
insolvency or other similar laws affecting the rights of creditors generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law). These exceptions would encompass any
exercise of the Federal, State or local police powers (including the police powers of the Citizens Authority and the City) in
a manner consistent with the public health and welfare. Enforceability of the IFA Indenture, the Citizens Authority First
Lien Indenture and the Pledges in a situation where such enforcement may adversely affect public health and welfare may
be subject to these police powers.
APPROVAL OF LEGAL PROCEEDINGS
Certain legal matters incident to the authorization, issuance, sale and delivery of the IFA Wastewater Bonds are
subject to the approval of Ice Miller LLP, Indianapolis, Indiana, Bond Counsel, whose approving legal opinion will be
delivered with the IFA Wastewater Bonds and Citizens Authority 2014A First Lien Bonds, substantially in the forms found
as APPENDICES C and D. Certain legal matters will be passed on by Gonzalez Saggio & Harlan, LLP, Indianapolis,
Indiana, counsel for the Citizens Authority, by Hall, Render, Killian, Heath & Lyman, P.C., Indianapolis, Indiana, counsel
for the IFA, and by Krieg DeVault LLP, Indianapolis, Indiana, counsel for the Underwriters. Ice Miller LLP also serves as
bond counsel to the Citizens Authority.
RATINGS
Standard & Poor’s Credit Market Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”) have assigned the IFA
Wastewater Bonds ratings of “AA” (Stable Outlook) and “A” (Stable Outlook), respectively on the basis of having assigned
the Citizens Authority 2014A First Lien Bonds such ratings. An explanation of the significance of the ratings given by
S&P may be obtained from S&P at 55 Water Street, New York, New York 10041. An explanation of the significance of
the ratings given by Fitch may be obtained from Fitch at One State Street Plaza, New York, New York 10004.
Such ratings reflect only the views of such rating agencies, and there is no assurance that any rating will continue
for any given period of time or that any rating will not be revised downward or withdrawn entirely by the applicable rating
agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an
- 51 -
adverse effect on the market price of the IFA Wastewater Bonds. Other than the reporting obligation of the Citizens
Authority pursuant to the Continuing Disclosure Undertaking (as defined herein), the IFA and the Citizens Authority have
not undertaken any responsibility to bring to the attention of the owners of the IFA Wastewater Bonds any proposed change
in or withdrawal of such ratings once received or to oppose any such proposed revision.
UNDERWRITING
The IFA Wastewater Bonds are being purchased by the Underwriters set forth on the cover page of this Official
Statement. The Underwriters have agreed to purchase the IFA Wastewater Bonds at an aggregate purchase price of
$_________________ which represents the par amount set forth on the cover hereof plus original issue premium of
$_________________, less an underwriting fee of $_________________, all pursuant to a bond purchase agreement
entered into by and among the IFA, the Citizens Authority and the Underwriters. Such bond purchase agreement provides
that the Underwriters will purchase all of the IFA Wastewater Bonds if they are purchased. The initial offering price may
be changed from time to time by the Underwriters.
The Underwriters have agreed to make a bona fide public offering of all of the IFA Wastewater Bonds at prices
not in excess of the initial public offering prices set forth or reflected on the inside cover page of this Official Statement.
The Underwriters may sell the IFA Wastewater Bonds to certain dealers (including dealers depositing IFA Wastewater
Bonds into investments trusts) and others at prices lower than the offering prices set forth inside the cover page hereof.
Morgan Stanley, parent company of Morgan Stanley & Co. LLC., an underwriter of the IFA Bonds, has entered
into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution
arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial
advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may
compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the IFA Bonds.
J.P. Morgan Securities LLC (“JPMS”), one of the underwriters of the IFA Wastewater Bonds, has entered into
negotiated dealer agreements (each, a “Dealer Agreement”) with each of UBS Financial Services Inc. (“UBSFS”) and
Charles Schwab & Co., Inc. (“CS&CO.”). Pursuant to each Dealer Agreement (if applicable to this transaction), each of
UBSFS and CS&CO. will purchase IFA Wastewater Bonds from JPMS at the original issue price less a negotiated portion
of the selling concession applicable to any IFA Wastewater Bonds that such firm sells.
The Underwriters and their affiliates together comprise full service financial institutions engaged in various
activities, which may include securities trading, commercial and investment banking, financial advisory, investment
management, principal investment, hedging, financing and brokerage civilities. The Underwriters and their affiliates may
have, from time to time, performed and may in the future perform, various investment banking services for the IFA or its
affiliates for which they received or will receive customary fees and expenses. In the ordinary course of their various
business activities, the Underwriters and their affiliates may make or hold a broad array of investments and actively trade
debt and equity securities (or related derivative securities and financial instruments which may include bank loans and/or
credit default swaps) their own account and for the accounts of their customers and may at any time hold long and short
positions in such securities and instruments. Such investment securities activities may involve securities and instruments of
the IFA or its affiliates.
AVAILABILITY OF DOCUMENTS AND FINANCIAL INFORMATION
Any statement contained in a document included or deemed to be included by reference herein shall be deemed to
be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any
other subsequently filed document which is also included or deemed to be included by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Official Statement.
Upon request, the Citizens Authority will make available any authorizing or governing instruments defining the
rights of the owners of the IFA Wastewater Bonds and available financial and statistical information regarding the Citizens
Authority. Requests for documents should be directed to the Chief Financial Officer of the Citizens Authority at (317) 9274450 or at 2020 North Meridian Street, Indianapolis, Indiana 46202.
- 52 -
CONTINUING DISCLOSURE
The Citizens Authority will execute a Continuing Disclosure Undertaking Agreement with The Bank of New York
Mellon Trust Company, N.A., as counterparty (the “Continuing Disclosure Undertaking”), at the time of the closing for the
IFA Wastewater Bonds. The Continuing Disclosure Undertaking will be executed for the benefit of the beneficial owners
of the IFA Wastewater Bonds. The Continuing Disclosure Undertaking will provide that so long as the IFA Wastewater
Bonds remain outstanding, the Citizens Authority will annually provide certain financial information and operating data to
the MSRB in accordance with Rule 15c2-12 of the SEC (the “Rule”) and will provide notice of certain material events to
the MSRB in compliance with the Continuing Disclosure Undertaking. Submissions to the MSRB will be made through its
EMMA system. The form of the Continuing Disclosure Undertaking is attached hereto as APPENDIX F.
In the previous five years, the Citizens Authority has complied, in all material respects, with any previous
undertakings in a written contract or agreement that it entered into pursuant to subsection (b)(5) of the Rule.
The Citizens Authority became an obligated person under a contract or agreement entered into pursuant to
subsection (b)(5) of the Rule with respect to only the Wastewater System in August 2011. Nevertheless, the Citizens
Authority recognizes that in the previous five years, Citizens has complied, in all material respects, with any previous
undertakings in a written contract or agreement that it entered into pursuant to subsection (b)(5) of the Rule, except that (1)
it filed audited financial statements for fiscal years 2009 and 2010 after the date required and operating data for fiscal years
2009 and 2010 after the date required; and (2) it filed an event notice with respect to a rating upgrade by S&P of its
Thermal Energy System Bonds, after the date required in 2010.
In limited instances over the last five years, Citizens did not file event notices in connection with certain
downgrades of ratings of Assured Guaranty Municipal Corp. and Municipal Bond Insurance Association, which are or were
providers of credit enhancement of certain issues of its bonds, one of which issues has been fully redeemed. All such
notices were subsequently filed with respect to all outstanding issues of such bonds.
MISCELLANEOUS
The references, excerpts, and summaries of all documents referred to herein do not purport to be complete
statements of the provisions of such documents, and reference is made to all such documents for full and complete
statements of all matters of fact relating to the IFA Wastewater Bonds, the security for the payment of the IFA Wastewater
Bonds and the rights of the owners thereof. During the period of the offering, copies of drafts of such documents may be
examined at the offices of the Underwriters; following delivery of the IFA Wastewater Bonds, copies of such documents
may be examined at the offices of the Citizens Authority.
The information contained in this Official Statement has been compiled by the Citizens Authority from official
and other sources deemed by the Citizens Authority to be reliable, and while not guaranteed as to completeness or accuracy,
is believed by Citizens Authority to be correct as of this date. Only the information set forth herein under the captions
“INDIANA FINANCE AUTHORITY” and “LITIGATION - IFA” has been obtained from IFA. IFA assumes no
obligation related to any other information set forth herein.
- 53 -
Any statements made in this Official Statement involving matters of opinions or estimates, whether or not
expressly so stated, are set forth as such and not as representations of fact, and no representation is made that any of the
estimates will be realized. The information and expressions of opinion herein are subject to change without notice and
neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the information presented herein since the date hereof. This Official Statement
is submitted in connection with the issuance and sale of the IFA Wastewater Bonds and may not be reproduced or used, in
whole or in part, for any other purpose. This Official Statement is not to be construed as a contract or agreement between
the IFA, the Citizens Authority, the First Lien Trustee or the Underwriters and the purchasers or owners of any IFA
Wastewater Bonds. The delivery of this Official Statement has been duly authorized by the board of directors of the IFA
and the Citizens Authority.
INDIANA FINANCE AUTHORITY
By:
Christopher D. Atkins, Chairman
CWA AUTHORITY, INC.
By:
John R. Brehm, Senior Vice President and Chief Financial
Officer
- 54 -
APPENDIX A
CITIZENS ENERGY GROUP
CITIZENS BOARD AND MANAGEMENT
Board of Trustees for Utilities
John L. Krauss
Vice President of the Board
Director
Indiana University Public Policy Institute
Daniel F. Evans, Jr.
President of the Board
President and CEO
Indiana University Health, Inc.
Dennis E. Bland, Esq.
Secretary of the Board
President
Center for Leadership Development
Jackie Nytes
Trustee
Trustee’s Professor
Indiana University School of Law
Brian Williams
Trustee
Senior Pastor at University
United Methodist Church
Board of Directors for Utilities
Daniel C. Appel
President/Chairman of the Board
President
Gregory & Appel Insurance
Moira M. Carlstedt
Secretary
President, Indianapolis Neighborhood
Housing Partnership
Anita J. Harden
Director
Retired President, Community Hospital East,
Community Health Network
Anne Nobles
Vice President/Vice Chairwoman
of the Board
Retired Vice President,
Eli Lilly & Co.
Jeffrey E. Good
Treasurer of the Board
Managing Director
Milestone Advisors, LLC
Phillip A. Terry
Director
CEO, Monarch Beverage
Joseph E. Whitsett
Director,
Member of
The Whitsett Group
Christia Hicks
Director
Vice President, Human Resources,
Eskenazi Health Services
J.A. Lacy
Director
President and Chief Operating Officer,
LDI, Ltd.
Citizens Management
Carey B. Lykins,
President and Chief Executive Officer
Senior Vice Presidents
William A. Tracy
Senior Vice President, Operations
John R. Brehm
Senior Vice President and
Chief Financial Officer
M. Jean Richcreek
Senior Vice President and
Chief Administrative Officer
Michael Strohl
Senior Vice President, Customer
Relationships and Corporate Affairs
Jennett M. Hill
Senior Vice President and General Counsel
Jeffrey Harrison
Senior Vice President,
Engineering & Sustainability
Vice Presidents
Lindsay C. Lindgren
Water Operations
John Lucas
Customer and Information Services
Jodi Whitney
Human Resources
Yvonne Perkins
Community Relations
Curtis Popp
Engineering and Shared Field Services
LaTona Prentice
Regulatory Affairs
Aaron D. Johnson
Corporate Development
Christopher Braun
Energy Operations
Mark Jacob
Major Capital
Blaire Dougherty
Controller
Director of Treasury
Sara Mamuska-Morris
A-1
CITIZENS
Introduction
Citizens is an executive department of the City of Indianapolis, Indiana. As described under History, the City of
Indianapolis is successor trustee of a public charitable trust to which the Gas Utility Distribution System and the Thermal
Energy System and other properties are subject. The Wastewater System is subject to a separate public charitable trust,
operated in substantially the same manner as Citizens’ original public charitable trust, but solely for the provision of
Wastewater services. The Water System is similarly owned and operated by Citizens as trustee of a public charitable trust
for the provision of water services. The Wastewater System’s public charitable trust is separate from that for the Water
System and Citizens’ other utilities.
Powers
Under the Citizens Act, Citizens is given “the exclusive government, management, regulation, and control of all
public utilities” acquired by Citizens for the service of the public, and has the duty and the power to furnish and sell service
and products of and “make all necessary construction, reconstruction, repairs, renewals, enlargements, extensions, or
additions” to the plant or property of any such utility. Citizens has the power to set gas, steam and water rates, subject to
IURC approval. In addition, Citizens has the power to condemn property, to contract for and construct extensions or
additions, to sell products or by-products and enter into contracts for such sale, to operate any such plant or plants, to
receive moneys, and to employ necessary personnel. Citizens has the power to issue revenue obligations, including longterm revenue bonds and short-term certificates of indebtedness.
Citizens is authorized by the Act to do all things necessary to cause Citizens Resources, a wholly-owned
subsidiary of Citizens (“Citizens Resources”) to carry on its operations efficiently and to conduct its business in the same
manner as if Citizens Resources’ stock were owned by private individuals. This authority includes organization of the
Affiliates.
History
In 1906, Citizens Gas Company began construction of a foundry coke oven battery because foundry coke was
more profitable to manufacture than other types of coke. Profits from Citizens Gas Company’s foundry coke sales were
used to reduce the cost of gas service, giving Citizens Gas Company an advantage in the Indianapolis gas market. In 1913,
the Indianapolis Gas Company leased its distribution system to Citizens Gas Company for 99 years. As a result, Citizens
Gas Company became the sole gas distributor in the City.
In 1929, the Indiana General Assembly enacted the Act, creating the Board. In 1935, all the assets of Citizens Gas
Company, including the 99-year lease of the competing gas company and the stock of the former Milburn By-Products
Coal Company — now Citizens Resources — were conveyed to the City of Indianapolis, as successor trustee. In 1942, the
City “bought out” the 99-year lease.
The assets that were conveyed to the City in 1935 are subject to a public charitable trust for which the City of
Indianapolis is successor trustee. The purposes of the public charitable trust are:
•
to establish and operate a gas utility that is not controlled by private ownership and
•
to provide light, heat and power to the City and its inhabitants;
The City of Indianapolis, as successor trustee, has two express duties:
•
to engage in the gas business and
•
to supply the City of Indianapolis and it inhabitants with light, heat and power.
The Gas Utility System, including the Gas Utility Distribution System, has been operated by Citizens since 1935
under the Citizens Gas & Coke Utility trade name until 2008, when Citizens renamed its operations Citizens Energy Group.
A-2
In 2000, Citizens acquired the Thermal Energy System to control and operate the steam assets and chilled water
assets and commenced operation of the Thermal Energy System as a separate system from the Gas Utility Distribution
System.
In 2007, Citizens discontinued operations of the Manufacturing Division consisting of the coke oven batteries and
related facilities.
In 2008, Citizens renamed its operating divisions under its new trade name Citizens Energy Group as follows:
Citizens Gas, Citizens Thermal and Citizens Resources.
In 2011, Citizens acquired the water assets previously owned by the City of Indianapolis and began operating, on
behalf of the Citizens Authority, as necessary, the Wastewater System.
Management
Members of the Board of Directors for Utilities are selected by a self-perpetuating Board of Trustees for Utilities.
The principal function of the Board of Trustees for Utilities is to appoint directors.
The Board or its statutory Executive Committee conduct regular monthly meetings at which policy decisions are
made. The policy decisions are carried out by a professional management team employed by the Board.
Taxes
Citizens pays payroll, Indiana property, Indiana utility receipts and other miscellaneous taxes, but does not pay
federal income taxes.
Insurance
Citizens currently maintains general liability insurance coverage and property insurance, primarily on a
replacement cost basis. Citizens believes the coverages and related deductibles are adequate and consistent with industry
practices.
Organization Structure
The chart below provides a diagram of the organization structure of Citizens Energy Group and CWA Authority,
Inc. (CWA). The organization structure is further described and explained below the chart.
Citizens Energy Group is the trade name in which the Department of Public Utilities of the City of Indianapolis,
Indiana (the “Department”) acting by and through its Board of Directors (the “Board”) for Utilities functions. The
A-3
Department was formed in 1929 pursuant to a state statute (now IC 8-1-11.1, the Act) adopted by the Indiana legislature to
provide the governance structure for the City of Indianapolis to act as a successor trustee of a public charitable trust (the
Energy Trust) providing natural gas utility services in the City of Indianapolis and to own and operate other utility systems
serving areas within and outside the City of Indianapolis. The Department is the governmental entity that owns the Energy
Trust and Water Trust assets described below. Each trust is not an entity, but rather defines the nature in which the assets
are held by the Department and the obligation imposed upon the Department to manage and operate those assets in
accordance with the trust purposes which include the obligations to operate the facilities in public trust for the benefit of the
inhabitants of Marion County, free from the influences of partisan political control or private interests. To preserve
freedom from partisan political control, the Act creates the Board of Trustees (the Trustees) as a self-perpetuating body
entrusted with the power to appoint the members of the Board annually. This two-board structure provides for oversight of
the Board by the Trustees. Further, the Act intentionally insulates the Department from political control by isolating the two
boards from the Mayor of Indianapolis or the City's legislative bodies.
The Gas Utility Distribution System, the Thermal Energy System, Citizens Resources and certain other properties
are subject to the Energy Trust. The Water System is subject to a separate public charitable trust (the Water Trust) that
operates in substantially the same manner as the Energy Trust.
The Wastewater System is owned by CWA, a separate nonprofit corporation, which, through an interlocal
agreement entered into between Citizens and the City of Indianapolis pursuant to Indiana Code 36-1-7, has the power to
exercise all rights and powers of the City, except the City’s taxing power, and Citizens in connection with the provision of
wastewater utility services. CWA’s board of directors comprises the same individuals who serve on the Board. The
Wastewater System is managed by employees of Citizens under an operating agreement between Citizens and CWA. CWA
is subject to a separate public charitable trust (the Wastewater Trust) that operates in substantially the same manner as the
Energy Trust and the Water Trust.
Separate indentures exist to issue debt obligations for the Gas Utility Distribution System, the Thermal Energy
System, the Water System and the Wastewater System. Each indenture captures only the revenues from the respective
System, pays the operating expenses of that System and then debt service on revenue bonds of that System. This structure
is designed to achieve the desired separation of each System from other Systems or business segments owned or operated
by Citizens and CWA. Each indenture permits Citizens or CWA, as applicable, authority to use residual revenues for other
purposes permitted by the language of the respective indenture. Citizens’ water indenture and CWA's wastewater
indenture, however, permit only the use of the excess revenues for the water and wastewater systems, respectively.
In addition as described above, each trust (i.e., the Energy Trust, the Water Trust and the Wastewater Trust) exists
separately from the other trusts. Thus, there are three separate public charitable trusts, each with a governmental entity
serving as the trustee (the Energy Trust and the Water Trust assets being owned by the Department and the Wastewater
Trust assets being owned by CWA). These separate trusts are designed to insulate one trust from liability for obligations of
another trust, based on basic trust principles that two separate trusts do not become jointly liable solely because the same
entity is the trustee of both.
The result of the foregoing is that Citizens and CWA have five cash flow sources in which debt is isolated: (1) the
Gas Utility Distribution System and the Gas Utility System1; (2) the Thermal Energy System; (3) the Water System; (4) the
Wastewater System; (collectively, the four Systems) and (5) Citizens Resources. The cash flow for the four Systems is
governed by the respective indentures for each System, which restricts the use of income and revenues of a respective
System to the payment of operating expenses and debt service of the respective System before allowing any other use of
funds by the System. The fifth source, Citizens Resources is a separate corporation whose stock is owned by the
Department in its capacity as trustee of the Energy Trust. The preservation of the corporate organization form of Citizens
Resources and its ability to operate for-profit businesses in furtherance of the Energy Trust purposes was specifically
authorized by the Act. The assets, liabilities and operations of Citizens Resources are by design isolated within the separate
1
The 1986 Gas Utility System (GUS) bonds are debt of the Gas Utility Distribution System (GUDS). Debt service on the GUS bonds is
included in the revenue requirements for determining the rates and charges of the GUDS by the IURC. The GUS Indenture is not used
for issuance of new debt. The bonds issued under the GUS Indenture are senior to the bonds issued under the GUDS Indenture.
Bondholder security for the GUS bonds includes the net revenues after payment of operating expenses of the GUDS, Oil and
Discontinued Operations as well as any dividends paid by Citizens Resources for so long as bonds are outstanding under that Indenture.
However, as explained below the corporate structure of Citizens Resources should limit the GUS exposure to liabilities of Citizens
Resources and its subsidiaries. The final principal payment on the 1986 GUS bonds will occur in 2018 at which point no Indenture of the
four Systems will include Oil, Discontinued Operations or Citizens Resources.
A-4
corporate structure of Citizens Resources, as a subsidiary corporation of Citizens, and each of the direct and indirect
subsidiaries of Citizens Resources is a limited liability company or corporation designed to limit the liability of the
immediate parent to its investment in the subsidiary2. Those structures do not insulate the parent from liability for an
express assumed contractual liability or guaranty or for the parent’s own acts or omissions. In addition to the separate
trusts for the Water System and the Wastewater System, those structures along with certain provisions the Operating
Agreements of such subsidiaries of Citizens Resources are the primary protection of Citizens' cash flow from any financial
losses in Citizens Resources or its subsidiaries and affiliates3. Profits of Citizens Resources may roll up to Citizens through
dividends declared by the board of Citizens Resources, but Citizens’ exposure to liabilities of Citizens Resources should be
limited by its corporate structure (and by that of its subsidiaries) and thus not imposed as a burden on the cash flows
available in any System. See below for a diagram of Citizens Resources’ organizational structure.
On January 10, 2014, Citizens Westfield Utilities, LLC was formed to serve as an intermediate holding company
for Westfield Gas and for Westfield Water and Wastewater upon their acquisition.
Recent Legislative Developments
In 2013, the Indiana General Assembly passed Senate Bill 560, which requires provides for an IURC order within
300 days of the utility filing its case in chief. Pursuant to the new law, failure to act within this window will result in 50%
of the rate request becoming effective immediately, subject to refund if the final order authorizes less than 50% of the
requested increase. The IURC has indicated its desire to finalize rate cases within the 300 day requirement. The new law
will also make it easier for utilities to utilize forward-looking test years when setting new rates. The law was passed to help
mitigate the effects of regulatory lag.
Further, in February 2014, the Indiana General Assembly passed House Bill 1132, providing that a public utility
that provides water or wastewater service may petition the IURC for an adjustment of its basic rates and charges for
2
Under public policy reflected in state law governing corporations and limited liability companies ("LLCs"), the parent stockholder of a
subsidiary corporation or the parent member of a subsidiary LLC is given substantial protection against liability for the acts or debts of
the subsidiary, subject to the established inherent limitations of these structures under such applicable state law.
3
Since Citizens includes the results of operations of Citizens Resources and its subsidiaries and affiliates in its combined financial
statements, an accounting loss within Citizens Resources will be reflected in Citizens' combined financial statements. This accounting
result, though, does not create the basis upon which the liabilities of Citizens Resources or its subsidiaries or affiliates can be imposed
upon Citizens or the cash flows held under any Indentures.
A-5
recovery of eligible infrastructure improvement costs. Such eligible costs include replacement and upgrade costs to the
Wastewater System, but exclude costs of extensions thereto.
Recent Developments
Pursuant to an Asset Purchase Agreement dated as November 16, 2012 (the “Westfield Water APA”), Citizens
Water of Westfield, LLC (“Citizens Westfield Water”) and the City of Westfield agreed to the purchase by Citizens
Westfield Water of the City of Westfield’s water system, subject to certain conditions in the Westfield Water APA (the
“Water Acquisition”). Citizens Westfield Water is an affiliate of Citizens Westfield Utilities, LLC, a wholly-owned
subsidiary of Citizens Energy Services Company, which is an affiliate of Citizens Resources. In addition, pursuant to an
Asset Purchase Agreement dated as of November 16, 2012 (the “Westfield Wastewater APA”) Citizens Wastewater of
Westfield, LLC (“Citizens Westfield Wastewater”) and the City of Westfield have agreed to the purchase by Citizens
Westfield Wastewater of the City of Westfield’s wastewater system, subject to certain conditions in the Westfield
Wastewater APA (the “Wastewater Acquisition” and together with the Water Acquisition, the “Westfield Acquisitions”).
Citizens Westfield Water and Citizens Westfield Wastewater are managed by the same team of professionals as Citizens
Energy Group. On November 25, 2013, the IURC approved the Westfield Acquisitions and made certain findings more
fully described herein in Cause No. 44273. The Westfield Acquisitions were completed on March 21, 2014. The assets
obtained in the Westfield Acquisitions (the “Westfield Systems”) are not part of the Wastewater System or the Water
System and none of the revenues of the Westfield Systems are available for payment of the Citizens Authority Bonds. The
assets comprising the Westfield Systems and the revenues therefrom are not pledged as security under the Citizens
Authority Indenture. Neither the Net Revenues of the Wastewater System nor the Water System are pledged to the
payment of any expenses or liabilities of the Westfield Systems. For additional information regarding the Westfield
Acquisitions, Citizens Westfield Water and Citizens Westfield Wastewater, see Note 2 of the combined second-quarter
financial statements found at www.citizensenergygroup.com/pdf/Q22014Report.pdf.
Financial Information
The annual financial information concerning Citizens for its fiscal year ending September 30, 2013, secondquarter financials and other related information can be found at www.citizensenergygroup.com.
A-6
APPENDIX B
SUMMARY OF PRINCIPAL FINANCING DOCUMENTS AND DEFINITIONS
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX B1
SUMMARY OF CERTAIN PROVISIONS OF THE IFA INDENTURE AND LOAN AGREEMENT
The following is a summary of certain provisions of the IFA Indenture. This summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the complete text
of such documents.
Events of Default and Remedies of Bondholders
Events of Default; Acceleration; Waiver of Default. Each of the following events which has occurred and is
continuing constitutes an “Event of Default” under the IFA Indenture: (A) default in the due and punctual payment of the
principal of, or premium (if any) on, any IFA Wastewater Bond, whether at maturity as therein expressed, by proceedings
for redemption, by declaration or otherwise; (B) default in the due and punctual payment of any installment of interest on
any IFA Wastewater Bond; (C) failure by the IFA to perform or observe any other of the covenants, agreements or
conditions on its part in the IFA Indenture or in the IFA Wastewater Bonds contained, and the continuation of such failure
for a period of 60 days after written notice thereof, specifying such default and requiring the same to be remedied, shall
have been given to the IFA and the Citizens Authority by the First Lien Trustee, or to the IFA, the Citizens Authority and
the First Lien Trustee by the Holders of not less than 25% in aggregate principal amount of the IFA Wastewater Bonds at
the time Outstanding; or (D) the occurrence and continuance of an Event of Default under the Loan Agreement.
No default specified in (C) above will constitute an Event of Default unless the IFA and the Citizens Authority
have failed to correct such default within the applicable period; provided, however, that if the default is such that it cannot
be corrected within such period, it will not constitute an Event of Default if corrective action is instituted by the IFA or the
Citizens Authority within the applicable period and diligently pursued.
Institution of Legal Proceedings By Applicable Trustee. If one or more of the Events of Default described above
shall happen and be continuing, the First Lien Trustee in its discretion may, and upon the written request of the Holders of a
majority in aggregate principal amount of the IFA Wastewater Bonds then Outstanding and upon being indemnified to its
satisfaction therefor pursuant to the IFA Indenture shall proceed to protect or enforce its rights or the rights of the Holders
of IFA Wastewater Bonds under the Act, under the IFA Indenture or under the Loan Agreement, or rights of a holder of the
Citizens Authority 2014A First Lien Bonds under the Citizens Authority First Lien Indenture, by a suit in equity or action
at law, either for the specific performance of any covenant or agreement contained in the IFA Indenture or therein, or in aid
of the execution of any power in the IFA Indenture or therein granted, or by mandamus or other appropriate proceeding for
the enforcement of any other legal or equitable remedy as the First Lien Trustee may deem necessary in support of any of
its rights or duties under the IFA Indenture or thereunder.
Application of Revenues and Other Funds After Default. During the continuance of an Event of Default under the
IFA Indenture, all Revenues and any other funds then held or thereafter received by the First Lien Trustee under any of the
provisions of the IFA Indenture (subject to the IFA Indenture), other than moneys received in respect of Unassigned
Authority Rights, will be promptly applied by the First Lien Trustee in the manner dictated in the Citizens Authority First
Lien Indenture for payment of the Citizens Authority 2014A First Lien Bonds.
Trustee to Represent Bondholders. The First Lien Trustee has been irrevocably appointed (and the successive
respective Holders of the IFA Wastewater Bonds, by taking and holding the same, shall be conclusively deemed to have so
appointed the First Lien Trustee) as First Lien Trustee and true and lawful attorney-in-fact of the Holders of the IFA
Wastewater Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be
available to such Holders under the provisions of the IFA Wastewater Bonds, the IFA Indenture, the Loan Agreement, the
Act and applicable provisions of any other law and as a holder of the Citizens Authority 2014A First Lien Bonds pursuant
to the Citizens Authority First Lien Indenture. Upon the occurrence and continuance of an Event of Default or other
occasion giving rise to a right in the First Lien Trustee to represent the Bondholders, the First Lien Trustee in its discretion
may, and upon the written request of the Holders of not less than a majority in aggregate principal amount of the IFA
Wastewater Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or
enforce its rights or the rights of the Holders by such appropriate action, suit, mandamus or other proceedings as it may
deem necessary to protect and enforce any such right, at law or in equity, either for the specific performance of any
B1-1
covenant or agreement contained in the IFA Indenture, or in aid of the execution of any power in the IFA Indenture granted,
or for the enforcement of any other appropriate legal or equitable right or remedy vested in the First Lien Trustee or in the
Holders under the IFA Indenture, the Loan Agreement, the Citizens Authority 2014A First Lien Bonds, the Citizens
Authority First Lien Indenture, the Act or any other law; and upon instituting such proceeding, the First Lien Trustee shall
be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under the IFA
Indenture, pending such proceedings. All rights of action under the IFA Indenture or the IFA Wastewater Bonds or
otherwise may be prosecuted and enforced by the First Lien Trustee without the possession of any of the IFA Wastewater
Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the
First Lien Trustee will be brought in the name of the First Lien Trustee for the benefit and protection of all the Holders of
the IFA Wastewater Bonds, subject to the provisions of the IFA Indenture.
Bondholders’ Direction of Proceedings. Anything in the IFA Indenture to the contrary notwithstanding, but
subject to certain provisions in the IFA Indenture, the Holders of a majority in aggregate principal amount of the IFA
Wastewater Bonds then Outstanding will have the right, by an instrument or concurrent instruments in writing executed and
delivered to the First Lien Trustee, to direct the method of conducting all remedial proceedings taken by the First Lien
Trustee under the IFA Indenture, provided that such direction shall not be otherwise than in accordance with law and the
provisions of the IFA Indenture, and that the First Lien Trustee shall have the right to decline to follow any such direction
which in the opinion of the First Lien Trustee would be unjustly prejudicial to Bondholders not parties to such direction or
for which it has not been provided indemnity reasonably satisfactory to it.
Limitation on Bondholders’ Right to Sue. Subject to the IFA Indenture, no Holder of any IFA Wastewater Bond
will have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any
right or remedy under the IFA Indenture, the Loan Agreement, the Citizens Authority 2014A First Lien Bonds, the Act or
any other applicable law with respect to such IFA Wastewater Bond, unless (1) such Holder shall have given to the First
Lien Trustee written notice of the occurrence of an Event of Default; (2) the Holders of not less than a majority in aggregate
principal amount of the IFA Wastewater Bonds then Outstanding shall have made written request upon the First Lien
Trustee to exercise the powers granted or to institute such suit, action or proceeding in its own name; (3) subject to the IFA
Indenture, such Holder or said Holders shall have tendered to the First Lien Trustee indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred in compliance with such request; and (4) the First Lien Trustee
shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been
received by, and said tender of indemnity shall have been made to, the First Lien Trustee.
Remedies Not Exclusive. No remedy in the IFA Indenture conferred upon or reserved to the First Lien Trustee or
to the Holders of the IFA Wastewater Bonds is intended to be exclusive of any other remedy or remedies, and each and
every such remedy, to the extent permitted by law, will be cumulative and in addition to any other remedy given under the
IFA Indenture or now or hereafter existing at law or in equity or otherwise.
Limitations
(A) Notwithstanding any provision of the IFA Indenture, the Loan Agreement or the Citizens Authority 2014A
First Lien Bonds to the contrary:
(1)
The IFA Wastewater Bonds are special, limited obligations of the IFA, payable solely from and
secured by the pledge of the Revenues as required by the IFA Indenture to be held in the Bond Fund. The IFA
Wastewater Bonds are not and never shall become general obligations of the IFA.
(2)
Neither the IFA, the State, nor any of its political subdivisions shall be directly, indirectly,
contingently or morally obligated to use any other moneys or assets to pay all or any portion of the debt service
due on the IFA Wastewater Bonds, to levy or to pledge any form of taxation whatsoever therefor or to make any
appropriation for their payment.
(3)
The State shall not in any event be liable for the performance of any pledge, obligation or
agreement of any kind whatsoever that may be undertaken or made by the IFA or the Citizens Authority. The IFA
shall not in any event be liable for the performance of any pledge, obligation or agreement of any kind whatsoever
undertaken or made by the Citizens Authority.
B1-2
(4)
The IFA Wastewater Bonds are not a pledge of the faith and credit of the IFA, the State or any
of its political subdivisions nor do they constitute indebtedness within the meaning of any constitutional or
statutory debt limitation. Neither the IFA Wastewater Bonds, the Loan Agreement, nor any of the agreements or
obligations of the IFA or the Citizens Authority shall be construed to (i) constitute an indebtedness or obligation,
general, moral or otherwise, of the State or the IFA within the meaning of any constitutional or statutory
provisions or (ii) give rise to any pecuniary liability on, or be a charge against, the general credit or taxing powers
of the State or the IFA.
(5)
The IFA shall not be liable for payment of the principal of, premium, if any, or interest on the
IFA Wastewater Bonds or any other costs, expenses, losses, damages, claims or actions of any conceivable kind on
any conceivable theory, under or by reason of or in connection with the IFA Indenture, the IFA Wastewater Bonds
or any other documents, except only to the extent amounts are received for Bond Payments from the Citizens
Authority under the Citizens Authority First Lien Indenture or the Loan Agreement.
(6)
Nothing in the IFA Indenture or the Loan Agreement shall prevent or restrict the IFA in its
discretion from investing in or holding any Citizens Authority First Lien Bonds, Citizens Authority Second Lien
Bonds or Subordinate Securities (regardless of whether such is held directly by the IFA for its own account or
under and pursuant to a trust instrument separate from the IFA Indenture) in addition to the Citizens Authority
2014A First Lien Bonds pledged pursuant to the IFA Indenture. Any exercise of the rights, remedies, duties and
privileges of the IFA, as the owner of any such Citizens Authority First Lien Bonds, Citizens Authority Second
Lien Bonds or Subordinate Securities (other than the Citizens Authority 2014A First Lien Bonds) (regardless of
whether such is held directly by the IFA for its own account or under and pursuant to a trust instrument separate
from the IFA Indenture), will be independent of any exercise of the rights, remedies, duties and privileges existing
with respect to the Citizens Authority 2014A First Lien Bonds by the First Lien Trustee under the IFA Indenture.
IFA shall be entitled to and may in its discretion exercise and enforce its rights as the owner of any such Citizens
Authority First Lien Bonds, Citizens Authority Second Lien Bonds or Subordinate Securities (other than the
Citizens Authority 2014A First Lien Bonds) (regardless of whether such is held directly by the IFA for its own
account or under and pursuant to a trust instrument separate from the IFA Indenture), without consideration of (a)
its status as an owner of the Citizens Authority 2014A First Lien Bonds under the IFA Indenture and/or (b) any
effects that such may have upon any rights, remedies, duties and privileges existing with respect to the Citizens
Authority 2014A First Lien Bonds that are held under the IFA Indenture.
(B)
Notwithstanding any provision of the IFA Indenture, the Loan Agreement or the Citizens Authority
2014A First Lien Bonds to the contrary:
(1)
No person executing the IFA Indenture, the IFA Wastewater Bonds, the Loan Agreement, any
certificate, statement, request, requisition or order of the IFA, or any other agreement or instrument of IFA (each
an “IFA Delivery”), is liable personally on or with respect to such IFA Delivery or otherwise subject to any
personal liability or accountability by reason thereof.
(2)
No recourse shall be had for the payment of the principal of, premium, if any, or the interest on
the IFA Wastewater Bonds or for any claim based thereon or any certification, obligation, covenant or agreement
in any IFA Delivery against any past, present or future member, officer, agent, attorney, employee, director,
trustee or other official of the IFA or any incorporator, member, officer, agent, attorney, employee, director,
trustee, other official or independent contractor of any successor corporation of the IFA or any person executing
the IFA Wastewater Bonds or any other IFA Delivery.
(3)
No covenant, stipulation, promise, certification, agreement or obligation contained in the IFA
Wastewater Bonds, the IFA Indenture, the Loan Agreement or any other IFA Delivery executed in connection
therewith shall be deemed to be the covenant, stipulation, promise, agreement or obligation of any present or
future member, director, trustee, officer, agent, attorney, employee or other official of the IFA in his or her
individual capacity, and neither any official of the IFA, nor any officers executing the IFA Wastewater Bonds,
shall be liable personally on the IFA Wastewater Bonds or be subject to any personal liability or accountability by
reason of the issuance of the IFA Wastewater Bonds unless such claim is based upon the willful dishonesty of or
intentionally violation of law by such person.
B1-3
By their purchase of each IFA Wastewater Bond, each Bondholder shall be deemed to have acknowledged and
agreed to the provisions of this section and that the IFA has no taxing power.
Modification or Amendment of the IFA Indentures and the Loan Agreement
Amendments Permitted.
(A)
Except as provided in (B) below, the IFA Indenture and the rights and obligations of the IFA and of the
Holders of the IFA Wastewater Bonds and of the First Lien Trustee may be modified or amended from time to time and at
any time by an indenture or indentures supplemental thereto, which the IFA and the First Lien Trustee may enter into when
the written consent of the Holders of a majority in aggregate principal amount of all applicable IFA Wastewater Bonds then
Outstanding (or, if such amendment only applies to one series of IFA Wastewater Bonds, only the consent of the Holders of
a majority in aggregate principal amount of all IFA Wastewater Bonds of such series then Outstanding) and an Approving
Opinion shall have been filed with the First Lien Trustee. No such modification or amendment shall (1) extend the fixed
maturity of any IFA Wastewater Bond, or reduce the amount of principal thereof, or change the rights of optional and
mandatory tender or extend the time of payment, or change the method of computing the rate of interest thereon or create a
privilege or priority of any IFA Wastewater Bond over any other IFA Wastewater Bond, or extend the time of payment of
interest thereon, without the consent of the Holder of each IFA Wastewater Bond so affected, or (2) reduce the aforesaid
percentage of applicable IFA Wastewater Bonds the consent of the Holders of which is required to effect any such
modification or amendment, or (3) permit the creation of any lien on the Revenues and other assets pledged under the IFA
Indenture prior to or on a parity with the lien created by the IFA Indenture, or (4) deprive the Holders of the IFA
Wastewater Bonds of the lien created by the IFA Indenture on such Revenues and other assets (except as expressly
provided in the IFA Indenture), without the consent of the Holders of all of the IFA Wastewater Bonds then Outstanding
and receipt by the First Lien Trustee of an Approving Opinion.
(B)
The IFA Indenture and the rights and obligations of the IFA, of the First Lien Trustee and of the Holders
of the IFA Wastewater Bonds may also be modified or amended from time to time and at any time by an indenture or
indentures supplemental thereto, which the IFA and the First Lien Trustee may enter into without the consent of any
Bondholders, and only to the extent permitted by law and after receipt of an Opinion of Counsel addressed to the First Lien
Trustee that the provisions of such Supplemental Indenture do not materially adversely affect the interests of the Holders of
the IFA Wastewater Bonds, including, without limitation, for any one or more of the following purposes: (1) to add to the
covenants and agreements of the IFA contained in the IFA Indenture other covenants and agreements thereafter to be
observed, to pledge or assign additional security for the IFA Wastewater Bonds, or to surrender any right or power reserved
to or conferred upon the IFA; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or
omission, or of curing or correcting any defective provision, contained in the IFA Indenture, or in regard to matters or
questions arising under the IFA Indenture, as the IFA, at the direction of the Citizens Authority, may deem necessary or
desirable and not inconsistent with the IFA Indenture; (3) to modify, amend or supplement the IFA Indenture in such
manner as to permit the qualification of the IFA Indenture under the Trust Indenture Act of 1939, as amended, or any
similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by
said act or similar federal statute; (4) to obtain a rating on the IFA Wastewater Bonds; and (5) to permit the issuance of
additional bonds under the IFA Indenture, as provided in the IFA Indenture.
(C)
Anything in the IFA Indenture to the contrary notwithstanding, a Supplemental Indenture will not become
effective unless and until the Citizens Authority has consented thereto in writing.
Amendment of Loan Agreement. Except as provided in the Loan Agreement, the IFA will not amend, modify or
terminate any of the terms of the Loan Agreement unless (1) in the Opinion of Counsel addressed to the IFA, such
amendment, modification or termination will not materially adversely affect the interests of the Bondholders or result in
any material impairment of the security given for the payment of the IFA Wastewater Bonds, (2) the First Lien Trustee first
obtains the written consent of the Holders of a majority in aggregate principal amount of the IFA Wastewater Bonds then
Outstanding (or, if such amendment only applies to a portion of IFA Wastewater Bonds, only the consent of the Holders of
a majority in aggregate principal amount of such IFA Wastewater Bonds) to such amendment, modification or termination,
or (3) such amendment, modification or termination is made in connection with the amendment of the IFA Indenture,
provided that no such amendment, modification or termination shall reduce the amount of Bond Payments to be made by
the Citizens Authority pursuant to the Loan Agreement, or shall extend the time for making such payments, without the
written consent of all of the Holders of the IFA Wastewater Bonds then Outstanding. The IFA shall be entitled to receive
B1-4
and may conclusively rely upon an Opinion of Counsel addressed to the IFA with respect to the effect of any amendments
to the Loan Agreement.
Amendment to Provide for the Issuance of Additional Bonds. If the IFA and the Citizens Authority desire to issue
additional bonds under the IFA Indenture in the future, the IFA Indenture may be amended, as necessary, to provide
provisions applicable to such additional bonds and no further consent will be required.
Amendment of Citizens Authority First Lien Indenture. The Citizens Authority First Lien Indenture provides that
the Citizens Authority First Lien Indenture may be amended or modified with the consent of, and the trustee thereunder
may be directed by, the holders of a requisite percentage of the holders of bonds issued under the Citizens Authority First
Lien Indenture. For purposes of exercising such rights under the Citizens Authority First Lien Indenture, the holders of the
IFA Wastewater Bonds shall be treated as the holders of the Citizens Authority 2014A First Lien Bonds.
Defeasance
Discharge of IFA Indenture. IFA Wastewater Bonds may be paid by the IFA in any of the following ways,
provided that the IFA also pays or causes to be paid any other sums payable under the IFA Indenture by the IFA: (A) by
paying or causing to be paid the principal of, and interest and premium, if any, on, the IFA Wastewater Bonds then
Outstanding as and when the same become due and payable; (B) by depositing with the First Lien Trustee, in trust, at or
before maturity or the redemption date thereof, money or securities in the necessary amount (as provided in the IFA
Indenture) to pay or redeem all IFA Wastewater Bonds then Outstanding; or (C) by delivering to the First Lien Trustee, for
cancellation by it, the IFA Wastewater Bonds then Outstanding.
If the IFA shall also pay or cause to be paid all other sums payable under the IFA Indenture by the IFA, then and
in that case, at the election of the IFA (evidenced by a Certificate of the IFA, filed with the First Lien Trustee, signifying
the intention of the IFA to discharge all such indebtedness and the IFA Indenture), and notwithstanding that any IFA
Wastewater Bonds shall not have been surrendered for payment, the IFA Indenture and the pledge of Revenues and other
assets made under the IFA Indenture and all covenants, agreements and other obligations of the IFA under the IFA
Indenture will cease, terminate, become void and be completely discharged and satisfied except only as provided in the
paragraph below.
Discharge of Liability on IFA Wastewater Bonds. Upon the deposit with the First Lien Trustee, in trust, at or
before maturity or redemption, as the case may be, of money or securities in the necessary amount (as provided in the IFA
Indenture) to pay or redeem any Outstanding IFA Wastewater Bond (whether upon or prior to its maturity or the
redemption date of such IFA Wastewater Bond), provided that, if such IFA Wastewater Bond is to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in the IFA Indenture or provision satisfactory to the
First Lien Trustee shall have been made for the giving of such notice, then all liability of the IFA in respect of such IFA
Wastewater Bond shall cease, terminate and be completely discharged, except only that the Holder thereof shall thereafter
be entitled to payment of the principal of, and premium, if any, and interest on, such IFA Wastewater Bond by the IFA, and
the IFA shall remain liable for such payment, but only out of such money or securities deposited with the First Lien Trustee
as aforesaid for their payment and such money or securities shall be pledged to such payment.
The IFA may at any time surrender to the First Lien Trustee for cancellation by it any IFA Wastewater Bonds
previously issued and delivered, which the IFA may have acquired in any manner whatsoever, and such IFA Wastewater
Bonds, upon such surrender and cancellation, will be deemed to be paid and retired.
Deposit of Money or Securities With Applicable Trustee. Whenever in the IFA Indenture it is provided or
permitted that there be deposited with or held in trust by the First Lien Trustee money or securities in the necessary amount
to pay or redeem any IFA Wastewater Bonds, the money or securities to be deposited or held may include money or
securities held by the First Lien Trustee in the funds and accounts established pursuant to the IFA Indenture and shall be
any combination of:
(A)
moneys in an equal amount to the principal amount of such IFA Wastewater Bonds, and all unpaid
interest thereon to maturity except that, in the case of IFA Wastewater Bonds which are to be redeemed prior to maturity
and in respect of which notice of such redemption shall have been given as provided in the IFA Indenture or provision
satisfactory to the First Lien Trustee shall have been made for the giving of such notice, the amount to be deposited or held
B1-5
shall be the principal amount or redemption price of such IFA Wastewater Bonds and all unpaid interest thereon to the
redemption date; or
(B)
Investment Securities which consist solely of securities described in clause (A) or (B) of the definition of
Investment Securities, the principal of and interest on which when due and without reinvestment will provide money
sufficient to pay the principal of, premium, if any, and all unpaid interest to maturity or to the redemption date on the IFA
Wastewater Bonds to be paid or redeemed, as such principal and interest become due, with maturities no longer than as
may be necessary to make the required payment on the IFA Wastewater Bonds, provided that, in the case of IFA
Wastewater Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given
as provided in the IFA Indenture or provision satisfactory to the First Lien Trustee shall have been made for the giving of
such notice;
provided, in each case, that the First Lien Trustee shall have been irrevocably instructed (by the terms of the IFA
Indenture or by written request of the IFA) to apply such money or Investment Securities to the payment of such principal,
premium, if any, and interest with respect to such IFA Wastewater Bonds and provided further that each Rating Agency
then rating such IFA Wastewater Bonds and the First Lien Trustee shall have received a report of an Accountant that the
moneys or Investment Securities on deposit are sufficient to pay the principal, premium, if any, and interest on the IFA
Wastewater Bonds to maturity or the redemption date.
Payment of IFA Wastewater Bonds After Discharge of IFA Indenture Obligation. Notwithstanding any provisions
of the IFA Indenture, any moneys deposited with the First Lien Trustee in trust for the payment of the principal of, or
interest or premium on, any IFA Wastewater Bonds remaining unclaimed after the principal of any IFA Wastewater Bond
has become due and payable (whether at maturity or upon call for redemption or by declaration as provided in the IFA
Indenture), shall be disposed of as provided by law and the Holders of such IFA Wastewater Bonds shall thereafter be
entitled to look only to the transferee of such moneys for payment thereof.
SUMMARY OF THE LOAN AGREEMENT
Unconditional Obligation
The obligations of the Citizens Authority to make the Bond Payments and the other payments required by the
Loan Agreement and the IFA Indenture and to perform and observe the other agreements on its part contained in the Loan
Agreement is absolute and unconditional, irrespective of any defense or any rights of set-off, recoupment or counterclaim it
might otherwise have against the IFA, and during the term of the Loan Agreement, the Citizens Authority shall pay all
payments required to be made on account of the Loan Agreement and all other payments required under the Loan
Agreement, free of any deductions and without abatement, diminution or set-off. Until such time as the principal of,
premium, if any, and interest on, the IFA Wastewater Bonds shall have been fully paid, or provision for the payment
thereof shall have been made as required by the IFA Indenture, the Citizens Authority (i) will not suspend or discontinue
any payments provided for in the Loan Agreement; (ii) will perform and observe all of its other covenants contained in the
Loan Agreement; and (iii) except as provided in the Loan Agreement, will not terminate the Loan Agreement for any cause,
including, without limitation, the occurrence of any act or circumstances that may constitute failure of consideration,
destruction of or damage to all or a portion of those facilities or equipment comprising the Wastewater System, commercial
frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political
subdivision of either of these, or any failure of the IFA or the First Lien Trustee to perform and observe any covenant,
whether express or implied, or any duty, liability or obligation arising out of or connected with the Loan Agreement or the
IFA Indenture, except to the extent permitted by the Loan Agreement.
CWA Bond Defaults and Remedies
Any one of the following which occurs and continues will constitute a CWA Bond Default: (A) failure of the
Citizens Authority to make any Bond Payment required by the Loan Agreement when due; or (B) failure of the Citizens
Authority to observe and perform any covenant, condition or agreement on its part required to be observed or performed by
the Loan Agreement (other than (i) agreements contained in the Loan Agreement regarding continuing disclosure, or (ii) as
provided in clause (A) above), which continues for a period of 30 days after written notice delivered by the IFA or the First
Lien Trustee to the Citizens Authority, which notice must specify such failure and request that it be remedied, unless the
IFA and the First Lien Trustee shall agree in writing to an extension of such time; provided, however, that if the failure
stated in the notice cannot be corrected within such period, the IFA and the First Lien Trustee will not unreasonably
B1-6
withhold their consent to an extension of such time if corrective action is instituted within such period and diligently
pursued in good faith until the default is corrected; or (C) the existence of an “Event of Default” (as defined therein) under
the Citizens Authority First Lien Indenture.
Whenever any CWA Bond Default shall have occurred and shall be continuing, (A) the First Lien Trustee may
have access to and may inspect, examine and make copies of the books and records and any and all accounts, data and
federal income tax and other tax returns of the Citizens Authority, and (B) the IFA or the First Lien Trustee, as the holders
of the Citizens Authority 2014A First Lien Bonds under the Citizens Authority First Lien Indenture, may take whatever
action at law or in equity as may be necessary or desirable to collect the payments and other amounts then due and
thereafter to become due or to enforce performance and observance of any obligation, agreement or covenant of the
Citizens Authority under the Loan Agreement, the Citizens Authority 2014A First Lien Bonds or the Citizens Authority
First Lien Indenture.
DEFINITIONS RELATING TO THE IFA WASTEWATER BONDS
“Accountant” means any firm of independent certified public accountants selected by the Citizens Authority, the
IFA or the First Lien Trustee.
“Approving Opinion” means an opinion of Bond Counsel, acceptable to the IFA, that an action being taken (i) is
authorized by applicable law and the IFA Indenture, and (ii) will not adversely affect the tax-exempt status of interest on
the IFA Wastewater Bonds.
“Bond Payments” means the repayments on the Citizens Authority 2014A First Lien Bonds required to be made
by the Citizens Authority pursuant to the terms of the Citizens Authority 2014A First Lien Bonds and the Loan Agreement.
“Bondholder” means “Holder.”
“Certificate,” “Statement,” “Request,” “Requisition” or “Order” of the IFA or the Citizens Authority means,
respectively, a written certificate, statement, request, requisition or order signed in the name of the IFA by an Authorized
Representative of the IFA, in the name of the Citizens Authority by an Authorized Representative of the Citizens Authority.
Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and
construed as a single instrument. If and to the extent required by the IFA Indenture, each such instrument shall include the
statements provided for in the IFA Indenture.
“Continuing Disclosure Agreement” means any Continuing Disclosure Agreement entered into by the Citizens
Authority relating to the IFA Wastewater Bonds or the Citizens Authority 2014A First Lien Bonds, as originally executed
and as it may be amended from time to time in accordance with the terms thereof.
“Costs of Issuance” means costs or expenses directly or indirectly payable by or reimbursable to the IFA or the
Citizens Authority and related to the authorization, issuance, sale and delivery of the IFA Wastewater Bonds, whether
deducted from the proceeds of the initial sale of the IFA Wastewater Bonds or otherwise paid by the Citizens Authority.
“CWA Bond Default” means any non-payment of principal of or interest on the Citizens Authority 2014A First
Lien Bonds when due or any other Event of Default under the Citizens Authority First Lien Indenture.
"Fitch" means Fitch Ratings Ltd.
“Government Obligations” means the following:
(a)
bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations
of, or obligations on which the full and timely payment of principal and interest is fully and
unconditionally guaranteed by, the United States of America; and
(b)
evidences of direct ownership of a proportionate or individual interest in future interest or principal
payments on specified direct obligations of, or obligations for which the full and timely payment of the
principal of and interest is unconditionally guaranteed by, the United States of America, which
obligations are held by a bank or trust company organized and existing under the laws of the United
B1-7
States of America or any state thereof in the capacity of custodian in form and substance satisfactory to
the Trustee.
“Holder” or “Bondholder” or “Owner,” whenever used with respect to an IFA Wastewater Bond, means the person
in whose name such IFA Wastewater Bond is registered.
“Investment Securities” means any securities selected by the Citizens Authority in writing to the First Lien
Trustee, including any of the following securities (other than those issued by the IFA or the Citizens Authority):
(A)
Government Obligations;
(B)
bonds, notes or other obligations of any state of the United States or any political subdivision of any state,
which at the time of their purchase are rated in either of the two highest long-term rating categories by a nationally
recognized rating service;
(C)
certificates of deposit or time or demand deposits constituting direct obligations of any bank, bank
holding company, savings and loan association or trust company organized under the laws of the United States or any state
thereof (including the First Lien Trustee or any of its affiliates), except that investments may be made only in certificates of
deposit or time or demand deposits which are:
(1)
insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation, or any other similar United States Government deposit insurance program then in
existence; or
(2)
continuously and fully secured by Government Obligations, which have a market value,
exclusive of accrued interest, at all times at least equal to the principal amount of such certificates of deposit or
time or demand deposits; or
(3)
issued by a bank, bank holding company, savings and loan association or trust company under
the laws of the United States or any state thereof (including the First Lien Trustee or any of its affiliates) whose
outstanding unsecured long-term debt is rated at the time of issuance in either of the two highest rating categories
by a Rating Agency;
(D)
repurchase agreements with any bank, bank holding company, savings and loan association, trust
company or other financial institution organized under the laws of the United States of America or any state thereof
(including the First Lien Trustee or any of its affiliates), that are continuously and fully secured by Government Obligations
and that have a market value, exclusive of accrued interest, at all times at least equal to the principal amount of such
repurchase agreements, provided that each such repurchase agreement conforms to current industry standards as to form
and time, is in commercially reasonable form, is for a commercially reasonable period, results in transfer of legal title to
identified Government Obligations that are segregated in a custodial or trust account for the benefit of the First Lien
Trustee, and further provided that Government Obligations acquired pursuant to such repurchase agreements shall be
valued at the lower of the then current market value thereof or the repurchase price thereof set forth in the applicable
repurchase agreement;
(E)
investment agreements constituting an obligation of a bank, bank holding company, savings and loan
association, trust company, insurance company or other financial institution whose outstanding unsecured short-term debt is
rated at the time of such agreement in the highest rating category (without regard to modifiers) by a Rating Agency or
whose outstanding unsecured long-term debt is rated at the time of such agreement in either of the two highest rating
categories (without regard to modifiers) by a Rating Agency;
(F)
short term discount obligations of the Federal National Mortgage Association and the Government
National Mortgage Association;
(G)
Money market funds registered under the Federal Investment Company Act of 1940, whose shares are
registered under the Federal Securities Act of 1933, and having a rating by Standard & Poor’s Ratings Group (“S&P”) of
AAAm-G, AAA-m, or AA-m and if rated by Moody’s Investors Services (“Moody’s”) rated Aaa, Aa1 or Aa2 including
any such fund to which the Trustee or any of its affiliates provides services as an investment advisor of custodian; and
B1-8
(H)
commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating
(without regard to modifiers) as provided for by Moody’s, S&P, or Fitch, Inc. (“Fitch”), provided that the issuer of the
commercial paper shall be organized and operating within the United States, shall have total assets in excess of
$500,000,000, and shall issue debt, other than commercial paper that is rated “A” or higher by Moody’s, S&P, or Fitch, and
provided further that such commercial paper shall have a maximum maturity of 270 days or less.
“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the
State of Delaware, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by
the Citizens Authority, with the approval of the IFA.
“Opinion of Counsel” means a written opinion of counsel (who may be counsel for the Citizens Authority)
selected by the Citizens Authority.
“Outstanding,” when used as of any particular time with reference to IFA Wastewater Bonds, means (subject to
the provisions of the IFA Indenture) all IFA Wastewater Bonds theretofore, or thereupon being, authenticated and delivered
by the First Lien Trustee under the IFA Indenture except (1) IFA Wastewater Bonds theretofore canceled by the First Lien
Trustee or surrendered to the First Lien Trustee for cancellation; (2) IFA Wastewater Bonds with respect to which liability
of the IFA shall have been discharged in accordance with the IFA Indenture, including IFA Wastewater Bonds (or portions
of IFA Wastewater Bonds) referred to in the IFA Indenture; and (3) IFA Wastewater Bonds for the transfer or exchange of
or in lieu of or in substitution for which other IFA Wastewater Bonds shall have been authenticated and delivered by the
First Lien Trustee pursuant to the IFA Indenture.
“Person” means an individual, corporation, firm, association, limited liability company, partnership, trust, or other
legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.
“Rating Agency” means Fitch, if Fitch is then rating the IFA Wastewater Bonds, and S&P, if S&P is then rating
the IFA Wastewater Bonds, or any other nationally recognized securities rating agency selected by the Citizens Authority,
with the approval of the IFA.
“Revenues” means all amounts received by the IFA or the First Lien Trustee for the account of the IFA pursuant
or with respect to the Loan Agreement including, without limiting the generality of the foregoing, Bond Payments
(including both timely and delinquent payments and any late charges paid from whatever source), prepayments, and all
interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to the
IFA Indenture, but not including Administrative Fees and Expenses (as defined in the IFA Indenture) and Additional
Payments (as defined in the Loan Agreement) to the IFA or the First Lien Trustee.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., its successors
and their assigns, or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, any other nationally recognized securities rating agency designated by the Citizens Authority, with the
approval of the IFA.
“Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the IFA and the
First Lien Trustee, supplementing, modifying or amending the IFA Indenture; but only if and to the extent that such
Supplemental Indenture is specifically authorized under the IFA Indenture.
“Tax Representation Certificate” means the Tax Representation and Arbitrage Certificate of the Citizens
Authority, the Arbitrage Certificate of the IFA, the IRS Form 8038-G filed related to the IFA Wastewater Bonds and any
other related certificate or papers pertaining to the foregoing, each as of and dated the date of issuance of the IFA
Wastewater Bonds.
“Unassigned Authority Rights” means all the rights of the IFA under the Loan Agreement (i) to receive Additional
Payments (as defined in the Loan Agreement) in accordance with the Loan Agreement; (ii) to be held harmless and
indemnified in accordance with the Loan Agreement; (iii) to be reimbursed for fees and expenses upon enforcement of the
Loan Agreement in accordance with the Loan Agreement; (iv) to receive notices in accordance with the Loan Agreement;
and (v) to give and withhold consent to amendments, changes, modifications and alterations of the Loan Agreement under
the Loan Agreement, and in each case, its right to enforce such rights.
B1-9
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX B2
SUMMARY OF CERTAIN PROVISIONS OF THE CITIZENS AUTHORITY INDENTURES
The following is a summary of certain provisions of the Citizens Authority Indentures. This summary does not
purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the
complete text of such documents.
Funds in the First Lien Master Citizens Authority Indenture
The following Funds have been established in the First Lien Master Citizens Authority Indenture: (a) General
Fund; (b) Bond Interest and Principal Fund, including any Capitalized Interest Account therein; (c) Bond Reserve Fund; (d)
Rate Stabilization Fund; and (e) Construction Fund.
The Citizens Authority may, without the consent of any Owner of a First Lien Bond, amend the First Lien Master
Citizens Authority in any manner (except for the limitations on the amount that may be held in or transferred from the Rate
Stabilization Fund in any Tested Fiscal Year) with respect to the Rate Stabilization Fund.
The General Fund, the Construction Fund and the Rate Stabilization Fund will be maintained as separate funds on
the books of the Citizens Authority by the Citizens Authority Board and all amounts credited to such Funds will be
maintained in an official depository bank of the Citizens Authority subject to the First Lien Master Citizens Authority
Indenture.
The Citizens Authority may create separate funds and accounts pursuant to separate authorizing indentures for the
payment of Citizens Authority Second Lien Bonds or Subordinate Securities and for any lawful purpose of the Citizens
Authority in connection with the Wastewater System.
Funds in the Second Lien Master Citizens Authority Indenture
The following Funds have been established in the Second Lien Master Citizens Authority Indenture: (a) Second
Lien Bond Interest and Principal Fund, including any Capitalized Interest Account therein; (b) Second Lien Bond Reserve
Fund and (c) Second Lien Construction Fund.
The Citizens Authority may, without the consent of any Owner of a Second Lien Bond, amend the Citizens
Authority Indentures in any manner (except for the limitations on the amount that may be held in or transferred from the
Rate Stabilization Fund in any Tested Fiscal Year) with respect to the Rate Stabilization Fund.
The General Fund, the Rate Stabilization Fund and the Second Lien Construction Fund will be maintained as
separate funds on the books of the Citizens Authority by the Citizens Authority Board and all amounts credited to such
Funds will be maintained in an official depository bank of the Citizens Authority subject to the First Lien Citizens
Authority Master Indenture (if Citizens Authority First Lien Bonds are outstanding) or the Second Lien Master Citizens
Authority Indenture. Further, the Citizens Authority has covenanted and agreed that the General Fund and the Rate
Stabilization Fund shall be continued for so long as any Second Lien Bonds are Outstanding.
Investment of Funds: Transfer of Investment Income
(a)
Monies in all Funds shall, at the option and written direction of the Citizens Authority, be invested and
secured in Permitted Investments and in the manner required by law for public funds, provided that all
such deposits and investments of the Bond Interest and Principal Fund, any Account of the Construction
Fund and any Account of the Bond Reserve Fund shall be made in such manner that the money required
to be expended from such Fund is available on the applicable Interest Payment Date or Principal Payment
Date. For purposes of maximizing investment returns, money in such Funds may be invested, together
with money in other Funds or with other money of the Citizens Authority, in common investments of the
kind described above, or in a common pool of such investments maintained by the Citizens Authority
which shall be kept and held at an official depository of the Citizens Authority, which shall not be
deemed to be a loss of the segregation of such money or Funds provided that safekeeping receipts,
certificates of participation or other documents clearly evidencing the investment or investment pool in
B2-1
which such money is invested and the share thereof purchased with such money or owned by such Fund
are held by or on behalf of each such Fund. If and to the extent necessary, such investments or
participations therein shall be promptly sold to prevent any default.
(b)
All investments held in the First Lien Bond Reserve Fund and the Second Lien Bond Reserve Fund shall
be valued and all interest and income derived from deposits and investments credited to the First Lien
Bond Reserve Fund and the Second Lien Bond Reserve Fund in the manner provided in the Supplemental
Indenture authorizing the same.
(c)
All interest and income derived from deposits and investments of any amounts held in any Account of a
First Lien Construction Fund or a Second Lien Construction Fund shall remain in such Account of the
First Lien Construction Fund or the Second Lien Construction Fund for application to Project Costs until
the Projects for which such Citizens Authority Bonds were issued are complete, at which time all moneys
in the First Lien Construction Fund or the Second Lien Construction Fund shall be transferred to:
(i)
any account or fund as shall be provided in the Supplemental Indenture pursuant to which such
moneys were deposited into the applicable Account of the Construction Fund; and
(ii)
then to the General Fund or such other Fund as the Supplemental Indenture or the Citizens
Authority shall direct.
(d)
To the extent it is not otherwise provided for in (b) and (c) above or needed to eliminate a deficiency, all
interest and income derived from deposits and investments credited to the Funds shall be transferred or
credited monthly to the General Fund or such other Fund as the Citizens Authority shall direct.
(e)
Notwithstanding anything to the contrary contained in the Citizens Authority Indentures, any interest and
income derived from deposits and investments of any amounts credited to any Fund or Account may be
paid to the federal government if in the opinion of nationally recognized bond counsel such payment is
required in order to prevent interest on any Tax-Exempt Bonds from being includable within the gross
income of the Owners thereof for federal income tax purposes.
Covenants and Provisions Relating to the Citizens Authority
The Citizens Authority makes the following covenants in the Citizens Authority Indentures:
(a)
Punctual Payment of Parity Obligations. The Citizens Authority will punctually pay or cause to be paid
the interest on and principal of all First Lien Parity Obligations and Second Lien Parity Obligations prior
to payment of any other obligations of the Citizens Authority (except Operation and Maintenance
Expenses), and will faithfully do and perform, and at all times fully observe, any and all covenants,
undertakings, stipulations and provisions contained in Citizens Authority Indentures.
(b)
Operation and Maintenance of Wastewater System. The Citizens Authority will at all times maintain and
operate the Wastewater System, or cause the same to be maintained and operated, in good and serviceable
condition.
(c)
Insurance. The Citizens Authority will keep the Wastewater System insured with insurers of good
standing against risks, accidents or casualties against which and to the extent, and with deductible and
self-insurance provisions, to the extent that such insurance is commercially available, in such forms and
amounts and with such provisions as the Citizens Authority Board shall have determined as reasonable.
(d)
Accounts and Records. The Citizens Authority will maintain a proper and complete system of records
and accounts pertaining to the Gross Revenues, revenue and receipts other than Gross Revenues
pertaining to the Wastewater System, Operation and Maintenance Expenses, expenses and disbursements
other than Operation and Maintenance Expenses pertaining to the Wastewater System and the operation
of the Wastewater System in which full, true and proper entries will be made of all dealings, transactions,
business and affairs which in any way affect or pertain to the Gross Revenues, revenue and receipts other
than Gross Revenues pertaining to the Wastewater System, Operation and Maintenance Expenses,
B2-2
expenses and disbursements other than Operation and Maintenance Expenses pertaining to the
Wastewater System.
(e)
Tax Exemption. The Citizens Authority will not take, or omit to take, any acts, including without
limitation entering into any lease, operating agreement or other contract for the operation of all or any
portion of the Wastewater System or pledge to the payment of the Tax-Exempt Bonds any revenues or
fail to make any required payment or rebate of interest earnings if, in the opinion of nationally recognized
bond counsel, to do so would cause interest on any Tax-Exempt Bonds to be includable within the gross
income of the Owners thereof for federal income tax purposes.
(f)
Not to Render Free Service. Except as required by law and the Asset Purchase Agreement, the Citizens
Authority will not furnish or supply or permit the furnishing or supplying of wastewater service or any
other commodity furnished or supplied by or through or in connection with the operation of the
Wastewater System free of charge to any person within the service area of the Wastewater System as
such service area is now or may hereafter be defined.
Sale or Encumbrance of Wastewater System
(a)
Except as permitted in the Citizens Authority Indentures, neither all nor a substantial part of the
Wastewater System, or any property necessary to the operation and use of the Wastewater System, will
be sold, leased, mortgaged, pledged, encumbered, alienated, or otherwise disposed of. The Citizens
Authority has covenanted that it will at all times comply with all limitations imposed upon the sale
disposition, lease, transfer, mortgage or other encumbrance of the Wastewater System imposed by the
Asset Purchase Agreement.
(b)
The Citizens Authority may enter into a separate management contract in replacement of the
Management Agreement or in addition thereto or lease of all or substantially all of the Wastewater
System or any lesser part thereof on the condition that an opinion is received from nationally recognized
bond counsel that such contract or lease will not cause the interest of any Tax-Exempt Bonds to be
includable within the gross income of the Owners thereof for federal income tax purposes.
(c)
The Citizens Authority may also execute any leases, licenses, easements, or other agreements of any part
of the Wastewater System in connection with the operation of the Wastewater System by the Citizens
Authority.
(d)
The Citizens Authority may sell, lease or otherwise dispose of such assets or property, real or personal, of
the Wastewater System which shall be or shall have become unserviceable, inadequate, uneconomic,
obsolete, worn out, unfit or unadapted or property, real or personal, which is unnecessary, immaterial to,
unuseful, or unprofitable in the operation of the Wastewater System as determined by the Citizens
Authority Board or the Chief Financial Officer.
(e)
The Citizens Authority may sell, lease or otherwise dispose of any assets or property, real or personal, of
the Wastewater System to the extent permitted by law if the book value of such assets or property sold or
disposed of by the Citizens Authority during any Fiscal Year shall not exceed five percent of the
depreciated book value of the Wastewater System.
(f)
The Citizens Authority may sell or otherwise dispose of any assets or property, real or personal, of the
Wastewater System to the extent permitted by law if:
(i)
such sale or disposition will not impair or destroy the ability of the Citizens Authority to
continue to operate those assets and properties of the Wastewater System not sold or disposed of
in an efficient manner as determined by the Citizens Authority Board or the Chief Financial
Officer;
(ii)
the terms and conditions of such proposed sale or disposition are, in the judgment of the Citizens
Authority Board, fair and reasonable;
B2-3
(g)
(iii)
the sale or disposition is for cash or cash equivalent; and
(iv)
the estimated Net Revenues of the Wastewater System to be derived for the then current Fiscal
Year from the assets and properties of the Wastewater System remaining after such sale or
disposition, after taking into consideration the use by the Citizens Authority of the proceeds of
such proposed sale or disposition, will be sufficient to enable the Citizens Authority to comply
with all covenants and conditions of the Citizens Authority Indentures, as shall be established by
a certificate of an independent, certified engineer.
The Citizens Authority may sell, lease or otherwise dispose of any assets or property of the Wastewater
System to the extent permitted by law if:
(i)
such sale, lease or disposition will not impair or destroy the ability of the Citizens Authority to
continue to operate the assets and properties of the Wastewater System remaining after such
sale, lease or disposition in an efficient manner as determined by the Citizens Authority Board or
the Chief Financial Officer;
(ii)
the terms and conditions of such proposed sale, lease or disposition are, in the judgment of the
Citizens Authority Board, fair and reasonable; and
(iii)
(A)
the estimated Net Revenues of the Wastewater System to be derived for the current and
the next three succeeding Fiscal Years from the assets and properties of the Wastewater System
remaining after such sale, lease or disposition will be sufficient to enable the Citizens Authority
to comply with all the covenants and conditions in the Citizens Authority Indentures, all as shall
be established by a certificate of an independent, certified engineer; provided, however, that no
consideration shall be given to the application of the proceeds of the proposed sale, lease or
disposition other than those proceeds received by the Citizens Authority in cash or cash
equivalents contemporaneous with the effective date of such sale, lease or disposition; or
(B)
(1)
the estimated Net Revenues of the Wastewater System to be derived for the
current and next three succeeding Fiscal Years from the assets and properties of the
Wastewater System remaining after such sale, lease or disposition, after taking into
account the use by the Citizens Authority of the proceeds of such proposed sale, lease
or disposition will be sufficient to enable the Citizens Authority to comply with all
covenants and conditions in the Citizens Authority Indentures, as shall be established
by a certificate of an independent, certified engineer;
(2)
all payments required to be made to or for the account of the Citizens
Authority under such sale, lease or other disposition shall be a prior charge and lien
upon the Gross Revenues to be derived from the operation of the assets and properties
to be sold, leased or disposed of; and
(3)
the Trustee may, in its name or in the name of the Citizens Authority, enforce
the obligations of the parties to any such lease, sale or disposition to the same extent
that such obligations may be enforced by the Citizens Authority, in the event reasonable
enforcement actions have not been taken by the Citizens Authority.
(h)
The Citizens Authority shall be authorized to sell, dispose or transfer from the Wastewater System any
assets or properties which the Commission or a court has ordered to be excluded from utility plant used
and useful to provide services under the jurisdiction of the Commission.
(i)
Compliance with subsections (b)-(h) shall be evidenced by a certificate of the Citizens Authority
delivered to the Trustee prior to the effective date of any such sale, lease or disposition.
(j)
(i)
The Citizens Authority may transfer the Wastewater System in whole and its obligations under
the Citizens Authority Indentures and all Outstanding Citizens Authority Bonds to the Board, if
the Board acquires the Wastewater System and succeeds by action of the Citizens Authority
B2-4
Board to the duties, privileges, powers, liabilities, disabilities, immunities, and rights of the
Citizens Authority under the Citizens Authority Indentures and the Outstanding Citizens
Authority Bonds; and either (1) (A) (I) the Board assumes such obligations, duties, privileges,
powers, liabilities, disabilities, immunities and rights under the Citizens Authority Indentures
and the Citizens Authority Bonds and becomes the “Citizens Authority” under the Citizens
Authority Indentures and under the Outstanding Citizens Authority Bonds or (II) the Board
becomes obligated under Substitute Obligations and Agreements to operate and maintain the
Wastewater System and to fix and collect Net Revenues in a manner substantially equivalent, as
determined by the Citizens Authority Board, to the manner provided in the Citizens Authority
Indentures and the Outstanding Citizens Authority Bonds so that the security interests and rights
of any holder of the Outstanding Citizens Authority Bonds are protected by the provisions of the
Substitute Obligations and Agreements and (B) the Citizens Authority shall provide the Trustee
with either (I) a report of a Certifier that demonstrates that in the first full Fiscal Year following
such assumption or succession by the Board that the applicable rate covenant in the Citizens
Authority Indentures shall be satisfied after giving effect to such succession or (II) evidence that
the ratings on the Outstanding Citizens Authority Bonds, without regard to credit enhancement,
by each Rating Agency will not be lowered as a result of the assumption or succession by the
Board or (2) the holders of a majority in principal amount of Outstanding Citizens Authority
Bonds shall agree to accept (A) the assumption by the Board of the obligations, duties,
privileges, powers, liabilities, disabilities, immunities and rights under the Citizens Authority
Indentures and the Citizens Authority Bonds or (B) such Substitute Obligations and Agreements
in full replacement and satisfaction of the Citizens Authority Indentures and the Outstanding
Citizens Authority Bonds.
(ii)
(k)
All of the covenants, stipulations, obligations, and agreements by or on behalf of and other
provisions for the benefit of the Citizens Authority or the Citizens Authority Board contained in
the Citizens Authority Indentures shall then bind and inure to the benefit of the Board to whom
or to which there shall be transferred by or in accordance with law any right, power, or duty of
the Citizens Authority or the Citizens Authority Board or of their respective successors, if any,
the possession of which is necessary or appropriate in order to comply with any such covenants,
stipulations, obligations, agreements, or other provisions of the Citizens Authority Indentures.
Notwithstanding anything in this subsection to the contrary, no sale, lease, or disposition of such assets or
properties of the Wastewater System which shall constitute more than 10 percent of the depreciated book
value of the Wastewater System shall be permitted without prior notice to the Trustees, and the Citizens
Authority shall furnish to the Trustees an opinion of nationally recognized bond counsel to the effect that
such sale, lease or disposition does not adversely affect the exclusion of the interest income on the TaxExempt Citizens Authority Bonds Outstanding for federal income tax purposes.
Bonds for Emergencies
The Citizens Authority may authorize, execute and issue Citizens Authority Bonds from time to time if, the
Citizens Authority has found, as evidenced by a certificate of the Chief Financial Officer filed with the Trustee, it is
necessary to repair any damage or loss to the Wastewater System to the extent that the Wastewater System has been
destroyed or damaged by disaster to such an extent that it cannot be operated or such repair is necessary for the proper
conduct of the operations of the Wastewater System; provided, however, that the proceeds of any Citizens Authority Bonds
issued for such purpose may only be used to return the Wastewater System substantially to its former operating capacity;
and provided further that such Citizens Authority Bonds may be issued only to the extent that insurance proceeds from such
damage or loss are insufficient for the accomplishment of such purpose or only for the period that the Citizens Authority
determines is necessary prior to receipt of insurance proceeds. Such Citizens Authority Bonds may be issued without
complying with the requirements in the Citizens Authority Indentures regarding additional bonds.
Events of Default and Remedies
An Event of Default is one or more of the following: (a) a default shall be made in the due and punctual payment
of the principal or redemption price of any Citizens Authority Bond; (b) a default shall be made in the due and punctual
payment of any installment of interest on any Citizens Authority Bond; (c) a default shall be made in the due and punctual
B2-5
payment of any Regular Payments due on a Qualified Derivative Agreement or any Parity Portion, in accordance with its
terms; (d) a default shall be made by the Citizens Authority in the performance or observance of any other of the covenants,
agreements or conditions on its part in the Citizens Authority Indentures or in the Citizens Authority Bonds contained, and
such default shall have continued for a period of 90 days after written notice specifying such default and requiring that it
shall have been remedied is given to the Citizens Authority by the Trustee; provided that, if such failure can be corrected
but not within such 90 days period, it shall not constitute an Event of Default if corrective action is instituted within such
period and such corrective action is diligently pursued until the failure is corrected, provided that if such corrective action
includes legal action such legal action shall be diligently pursued until either the failure is corrected or such failure shall be
determined by a court of final and competent jurisdiction as not correctable as a matter of law; (e) a court having
jurisdiction enters a decree or order providing for relief in respect of the Citizens Authority in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Citizens Authority or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in
effect for a period of ninety (90) days; (f) the Citizens Authority commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of the Citizens Authority or for any substantial part of its
property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they
become due or shall take any action in furtherance of the foregoing; or (g) for the Second Lien Citizens Authority Bonds,
the occurrence of an Event of Default under the First Lien Master Citizens Authority Indenture.
If an Event of Default has not have been remedied, the Trustee or the Owners of not less than 25% in principal
amount of the Citizens Authority Bonds Outstanding (by notice in writing to the Citizens Authority), may declare that an
Event of Default has occurred.
The Owners of not less than 25% in aggregate principal amount of Outstanding Bonds shall have the right to apply
in an appropriate proceeding for the appointment of a receiver of the Wastewater System.
In the event that the principal amount of any Second Lien Bond or Subordinate Securities has been accelerated in a
manner which in the judgment of the Trustee jeopardizes the priority status of the First Lien Citizens Authority Bonds, then
the Trustee will be permitted to the extent appropriate to preserve the priority status of the First Lien Citizens Authority
Bonds to accelerate the principal amount of the First Lien Citizens Authority Bonds. In the event that the principal amount
of any Subordinate Securities has been accelerated in a manner which in the judgment of the Trustee jeopardizes the
priority status of the Second Lien Citizens Authority Bonds, then the Trustee will be permitted to the extent appropriate to
preserve the priority status of the Second Lien Citizens Authority Bonds to accelerate the principal amount of the Second
Lien Citizens Authority Bonds.
No remedy by the terms of the Citizens Authority Indentures conferred upon or reserved to the Trustee or the
Owners of Citizens Authority Bonds as described in the Citizens Authority Indentures is intended to be exclusive of any
other remedy.
Amendments of Citizens Authority Indentures
Amendment of Master Indenture Without Consent. The Citizens Authority and the First Lien Trustee may,
without the consent of or notice to any of the Owners of the Citizens Authority Bonds, amend or supplement the Citizens
Authority Indentures by executing a Supplemental Indenture for any one or more of the following purposes: (a) to cure any
ambiguity, defect, omission, mistake, manifest error or inconsistent provision in the Citizens Authority Indentures or in the
Citizens Authority Bonds as determined by the Citizens Authority Board; or to comply with any applicable provision of law
or regulation of Federal or State agencies; (b) to change the terms or provisions of the Citizens Authority Indentures to the
extent necessary to prevent the interest on Tax-Exempt Bonds from being includable within the gross income of the Owners
thereof for federal income tax purposes as determined by the Citizens Authority Board; (c) to grant to or confer upon the
Trustee or the Owners of the Citizens Authority Bonds any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Trustee or the Owners of the Citizens Authority Bonds; (d) to add to the
covenants and agreements of the Citizens Authority contained in Citizens Authority Indentures other covenants and
agreements of, or conditions or restrictions upon, the Citizens Authority or to surrender or eliminate any right or power
reserved to or conferred upon the Citizens Authority in Citizens Authority Indentures; (e) to subject to the lien and pledge
of the Citizens Authority Indentures additional pledged revenues which may include revenues, properties or other
B2-6
collateral; (f) to authorize Citizens Authority Bonds and in connection therewith specify the terms and conditions and all
other matters relating solely to such Citizens Authority Bonds; (g) to authorize any change or amendment in the Citizens
Authority Indentures which, in the judgment of the Citizens Authority as evidenced by a resolution of the Citizens
Authority Board, does not materially and adversely affect the rights or interests of the Owners of Outstanding Citizens
Authority Bonds and does not require unanimous consent of the Owners of Citizens Authority Bonds then Outstanding;
(h) except for the limitations on the amount that may be held in or transferred from the Rate Stabilization Fund in any
Tested Fiscal Year, to authorize any change or amendment in the Citizens Authority Indentures relating to deposits into or
balances in the General Fund or the Rate Stabilization Fund; but for the Second Lien Bonds only if no First Lien Bonds are
Outstanding; (i) to provide for the securitization of the Net Revenues; provided, however, that such action shall not
materially adversely affect the interests of the Owners of the applicable Citizens Authority Bonds as determined by the
Citizens Authority; (j) to authorize any change or amendment in the Citizens Authority Indentures which, as evidenced by a
certificate of the Chief Financial Officer of the Citizens Authority, will not result in a withdrawal or reduction in the ratings
assigned to the Citizens Authority Bonds.
Amendment of Master Indenture Requiring Consent. The Citizens Authority and the Trustee may at any time
enter into one or more Supplemental Indentures amending, modifying, adding to or eliminating any of the provisions of the
Citizens Authority Indentures but, if such Supplemental Indenture is not of the character described above, only with the
consent given in accordance with the Citizens Authority Indentures of the Owner or Owners of not less than a majority in
aggregate unpaid principal amount of the applicable Citizens Authority Bonds then Outstanding and affected by such
amendment, modification, addition or elimination; provided, however, that nothing in the Citizens Authority Indentures
shall permit (a) an extension of the maturity of the principal of or interest on any Citizens Authority Bond issued under the
Citizens Authority Indentures, or (b) a reduction in the principal amount of any Citizens Authority Bond or the rate of
interest on any Citizens Authority Bond, or (c) a privilege or priority of any Citizens Authority Bond or Citizens Authority
Bonds over any other Citizens Authority Bond or Citizens Authority Bonds, (d) the creation of the lien upon, or pledge of,
the Net Revenues ranking prior to or on parity with the Citizens Authority Bonds other than as permitted by the Citizens
Authority Indentures, or (e) a reduction in the aggregate principal amount of the Citizens Authority Bonds required for
consent to such amendment, unless as to the matters in (a) and (b) the consent of each Owner affected is obtained and as to
the matters in (c), (d) and (e) the consent of all Owners is obtained. If any such modification or amendment will not take
effect so long as a Citizens Authority Bond of any specified series remains Outstanding or will not affect such series of
Citizens Authority Bonds, consent of the holder of such Citizens Authority Bond of such series shall not be required and
such series of Citizens Authority Bonds shall not be Outstanding for purposes of any calculation of Outstanding Citizens
Authority Bonds.
Discharge By Deposit
The Citizens Authority may discharge its obligation to the Owners of any or all of the Citizens Authority Bonds to
pay principal, interest and redemption premium (if any) thereon by depositing with a national banking association with
capital and surplus in excess of $100,000,000 (the “Escrow Trustee”) cash in an amount equal to the principal amount and
redemption premium, if any, of such Citizens Authority Bonds plus interest thereon to the date of maturity or redemption,
or by depositing with the Escrow Trustee cash and/or Defeasance Obligations, in principal amounts and maturities and
bearing interest at rates sufficient to provide for the timely payment of the principal amount and redemption premium, if
any, of such Citizens Authority Bonds plus interest thereon to the date of maturity or redemption. Upon such deposit, such
Citizens Authority Bonds shall no longer be regarded to be Outstanding or unpaid. A deposit will not be deemed a payment
of Citizens Authority Bonds, if such Citizens Authority Bonds are to be paid or redeemed more than 90 days after the date
upon which such deposit is made, unless the Trustee shall have received a verification from an accountant or firm of
accountants appointed by the Citizens Authority and reasonably acceptable to such Trustee verifying the sufficiency of the
deposit to pay the principal, interest and redemption premium (if any) on such Citizens Authority Bonds to the due date,
whether such due date be by reason of maturity or upon redemption. In case any Citizens Authority Bonds are to be
redeemed on any date prior to their maturity, the Citizens Authority shall give to the Escrow Trustee irrevocable
instructions to give notice of redemption of such Citizens Authority Bonds to be so redeemed in the manner required in the
Supplemental Indenture or Indentures authorizing them. For any Citizens Authority Bonds not to be redeemed or paid in
full within the next succeeding sixty (60) days from the date of deposit provided for in this paragraph, the Citizens
Authority will give the Escrow Trustee in form satisfactory to it irrevocable instructions to mail, by certified mail, a notice
to the Owners of such Citizens Authority Bonds that the deposit required by the Citizens Authority Indentures has been
made and that said Citizens Authority Bonds are deemed paid in accordance with the Citizens Authority Indentures and
stating such maturity or redemption date upon which moneys are to be available for the payment of the principal amount
B2-7
and redemption premium if any on such Citizens Authority Bonds plus interest thereon to the date of maturity or
redemption. Any failure, error or delay in giving such notices shall not affect the defeasance of such Citizens Authority
Bonds.
B2-8
APPENDIX B3
DEFINITIONS
Certain capitalized terms used in the Official Statement and the appendices are defined as follows:
“Account” means an account established in any Fund created by the Citizens Authority Indentures.
“Accounting Principles” means accounting principles prescribed by the Commission and customarily used by
Citizens; provided that, if the Commission no longer prescribes accounting principles or, if such accounting principles are
not applicable to the Wastewater System, then “Accounting Principles” means accounting principles prescribed by Citizens.
“Accreted Value” shall mean, as of any date of computation with respect to any Capital Appreciation Bond, an
amount equal to the principal amount of such Citizens Authority Bond plus the interest accrued but unpaid on such Citizens
Authority Bond from the date of original issuance of such Citizens Authority Bond to the Periodic Compounding Date next
preceding the date of computation or the date of computation if a Periodic Compounding Date, such interest to accrue at the
interest rate per annum of the Capital Appreciation Bonds set forth in the Supplemental Indenture authorizing such Citizens
Authority Bonds, compounded periodically on each Periodic Compounding Date. Plus, if such date of computation shall
not be a Periodic Compounding Date, a portion of the difference between the Accreted Value as of the immediately
preceding Periodic Compounding Date (or the date of original issuance if the date of computation is prior to the first
Periodic Compounding Date succeeding the date of original issuance) and the Accreted Value as of the immediately
succeeding Periodic Compounding Date, shall be calculated based upon an assumption that, unless otherwise provided in
the Supplemental Indenture authorizing such Capital Appreciation Bonds, Accreted Value accrues in equal daily amounts
on the basis of a year consisting of twelve 30-day months.
“Additional First Lien Bonds” means Citizens Authority First Lien Bonds issued subsequent to the Citizens
Authority 2014A First Lien Bonds.
“Alternate Variable Rate Taxable Index” shall mean such index as, at the time, is in general use by taxable issuers
as a proxy for short-term interest rates on debt obligations of state and local governments the interest on which is not
excluded from gross income for federal income tax purposes, as determined by an Authorized Officer.
“Alternate Variable Rate Tax-Exempt Index” shall mean such index as, at the time, is in general use by tax-exempt
issuers as a proxy for short-term interest rates on debt obligations of state and local governments the interest on which is
excluded from gross income for federal income tax purposes, as determined by an Authorized Officer.
“Appreciated Value” shall mean, with respect to any Deferred Income Bond, (i) as of any date of computation
prior to the Current Interest Commencement Date, an amount equal to the principal amount of such Citizens Authority
Bond plus the interest accrued but unpaid on such Citizens Authority Bond from its date of original issuance to the Periodic
Compounding Date next preceding the date of computation or the date of computation if a Periodic Compounding Date,
such interest to accrue at the interest rate per annum of the Deferred Income Bonds set forth in the Supplemental Indenture
authorizing such Citizens Authority Bonds, compounded periodically on each Periodic Compounding Date as in such
Supplemental Indenture provided, plus, if such date of computation shall not be a Periodic Compounding Date, a portion of
the difference between the Appreciated Value as of the immediately preceding Periodic Compounding Date (or the date of
original issuance if the date of computation is prior to the first Periodic Compounding Date succeeding the date of original
issuance) and the Appreciated Value as of the immediately succeeding Periodic Compounding Date, shall be calculated
based upon an assumption that, unless otherwise provided in the Supplemental Indenture authorizing such Deferred Income
Bonds, Appreciated Value accrues in equal daily amounts on the basis of a year consisting of twelve 30-day months and
(ii) as of any date of computation on and after the Current Interest Commencement Date, the Appreciated Value on the
Current Interest Commencement Date.
“Authorizing Acts” means the Nonprofit Act, IC 36-9-25, the Interlocal Act and the Citizens Act, including all
laws supplemental thereto.
“Authorized Officer” means the Chair, Vice Chair, President, any Vice President, Treasurer or Assistant Treasurer,
Secretary or Assistant Secretary of the Citizens Authority or any other officer specifically authorized by the Citizens
Authority Board to act as an Authorized Officer under the Citizens Authority Indentures.
B3-1
“Board” means the Board of Directors for Utilities of the Department of Public Utilities of the City, whose
members, in accordance with the ICA, shall be the members of the Citizens Authority Board and its successors and assigns.
“Business Day” means any day other than a Saturday, Sunday or other day that banks in the City are permitted to
be closed.
“Capital Appreciation Bonds” shall mean any Citizens Authority Bonds issued under the Citizens Authority
Indentures as to which all or a portion of interest is (i) compounded on the Periodic Compounding Dates specified in the
Supplemental Indenture authorizing such Capital Appreciation Bonds and (ii) payable only at maturity, earlier redemption
or otherwise pursuant to the Citizens Authority Indentures or any Supplemental Indenture.
“Capitalized Interest Account” means any Capitalized Interest Account in the First Lien Bond Interest and
Principal Fund or the Second Lien Bond Interest and Principal Fund established pursuant to the Citizens Authority
Indentures.
“Certifier” means an independent certified public accountant or an independent financial or feasibility consultant
selected by the Citizens Authority qualified to provide the report described in the Citizens Authority Indentures.
“Certified Interest Rate” means
(i)
with respect to Citizens Authority Bonds that were or will be, at the date of the original issuance
thereof, the subject of a bond counsel’s opinion to the effect that the interest thereon is excluded
from gross income for federal income tax purposes pursuant to Section 103 of the Code, a rate of
interest equal to the average of the SIFMA Municipal Swap Index or, if such Index is no longer
available, the Alternate Variable Rate Tax-Exempt Index for the five (5) years preceding such
date of determination; and
(ii)
with respect to Citizens Authority Bonds that were not and will not be, at the date of the original
issuance thereof, the subject of a bond counsel’s opinion to the effect that the interest thereon is
excluded from gross income for federal income tax purposes pursuant to Section 103 of the
Code, a rate of interest equal to the average of the One-Month LIBOR Rate or, if such Index is
no longer available, the Alternate Variable Rate Taxable Index for the five (5) years preceding
such date of determination.
“Chief Financial Officer” means the person appointed by the Citizens Authority Board to hold such title at the
Citizens Authority.
“Citizens” means the Board of Directors for Utilities of the Department of Public Utilities of the City, d/b/a
Citizens Energy Group pursuant to a public charitable trust, and its successors and assigns.
“Citizens Act” means Indiana Code 8-1-11.1 and 11.2 et. seq., as amended from time to time.
“Citizens Authority” means the CWA Authority, Inc., a nonprofit public benefit corporation created pursuant to
the Authorizing Acts, acting pursuant to a public charitable trust for the Wastewater System, and its successors and assigns,
including specifically Citizens pursuant to the Citizens Authority Indentures.
“Citizens Authority Board” means the Board of Directors of the Citizens Authority, whose members shall be the
members of the Board in accordance with the Authorizing Acts and the Interlocal Agreement.
“Citizens Authority Bonds” means Citizens Authority First Lien Bonds and Citizens Authority Second Lien
Bonds.
"Citizens Authority Indentures" means the First Lien Master Citizens Authority Indenture and the Second Lien
Master Citizens Authority Indenture, each as supplemented and amended.
“Citizens Authority 2014A First Lien Bonds” means the CWA Authority, Inc. City of Indianapolis, Indiana First
Lien Wastewater Revenue Bonds, Series 2014A.
B3-2
“Citizens Authority Second Lien Bonds” means the CWA Authority, Inc. City of Indianapolis, Indiana Second
Lien Wastewater Revenue Bonds issued pursuant to the Second Lien Master Citizens Authority Trust Indenture, as
supplemented and amended.
“City” means the Consolidated City of Indianapolis, Indiana.
“Code” means, for each series of Citizens Authority Bonds, the Internal Revenue Code of 1986, as in effect on the
date of issuance of those Citizens Authority Bonds and the applicable judicial decisions or published rulings, or any
applicable regulations promulgated or proposed thereunder.
“Commission” means the Indiana Utility Regulatory Commission or if the Commission shall be abolished or some
part of its functions assumed by some other governmental agency, the board, body or commission succeeding to or sharing
the functions thereof.
“Consent Decree” means the order of the United States District Court for the Southern District of Indiana dated
December 19, 2006, among the United States Environmental Protection Agency, Indiana Department of Environmental
Management and the City, as amended.
“Covered Bonds” means Citizens Authority Bonds benefited by a Credit Facility.
“Credit Facility” means a credit facility, a guaranty, a letter of credit (whether direct pay or standby), a line of
credit, a liquidity facility, a municipal bond insurance policy, a standby bond purchase agreement, a surety bond or any
other related or similar agreement or document or any combination of agreements or documents described in this definition
and issued by a Credit Provider; provided however, that a Reserve Policy is not a Credit Facility. A Credit Facility gives
rise to Repayment Obligations which, if specified in a Supplemental Indenture may be evidenced by Citizens Authority
Bonds, and which may be secured under the Citizens Authority Indentures on a parity basis with the Covered Bonds to
which such Credit Facility relates. A Credit Facility may also give rise to obligations that are not payable on a parity basis
with Covered Bonds, if so specified in a Supplemental Indenture.
“Credit Provider” means a bank, a financial institution, a guarantor, an insurance company, a surety or any other
credit enhancer or liquidity provider which issues a Credit Facility for all or a part of a series of Citizens Authority Bonds.
“Current Interest Commencement Date” shall mean, with respect to any particular Deferred Income Bonds, the
date specified in the Supplemental Indenture authorizing such Deferred Income Bonds (which date must be prior to the
maturity date for such Deferred Income Bonds) after which interest accruing on such Deferred Income Bonds shall be
payable periodically on dates specified in such Supplemental Indenture with the first such payment date being the first such
periodic date immediately succeeding such Current Interest Commencement Date.
“Debt Service Reserve Requirement” means the required amount, if any, to be held in the First Lien Bond Reserve
Fund or Second Lien Bond Reserve Fund or any Account thereof for one or more series of the respective Citizens Authority
Bonds in accordance with the applicable Supplemental Indenture.
“Defeasance Obligations” means with respect to any particular series of Citizens Authority Bonds, any security
specified by the Citizens Authority in a Supplemental Indenture as a Defeasance Obligation in connection with the sale of
such Citizens Authority Bonds by the Citizens Authority, the deposit of which is adequate to cause such Citizens Authority
Bonds to no longer be Outstanding when the conditions for defeasance of Citizens Authority Bonds under the applicable
Citizens Authority Indenture are met.
“Deferred Income Bonds” shall mean any Citizens Authority Bonds as to which interest accruing prior to the
Current Interest Commencement Date is (i) compounded periodically on the dates specified in the Supplemental Indenture
authorizing such Deferred Income Bonds and (ii) payable only at redemption or other payment thereof pursuant to such
Supplemental Indenture.
“Derivative Agreement” means an agreement or contract executed by the Citizens Authority in a transaction
entered into in connection with any Citizens Authority Bonds in which the Citizens Authority and a counterparty agree to
exchange payments in the future, including, without limitation, transactions commonly called swap agreements, cap and
floor agreements and interest rate swap agreements.
B3-3
“ECP” means the Environmental Compliance Plan.
“ECP Mechanism” means the ECP Recovery Mechanism.
“Escrow Deposit Agreement” means an escrow deposit agreement executed by the Citizens Authority with respect
to the defeasance of any Citizens Authority Bonds provided in the Citizens Authority Indentures.
“Event of Default” means, as the context requires, a First Lien Event of Default, a Second Lien of Default, or both.
“Fiduciary” means the Trustee and any Registrar or Paying Agent, or any successor to any thereof, appointed and
serving in such capacity pursuant to the provisions of the Citizens Authority Indentures and any Trustee, registrar, paying
agent, remarketing agent or similar party for any First Lien Citizens Authority Bond, Second Lien Citizens Authority Bond
or any other bond issued to purchase a First Lien Citizens Authority Bond or Second Lien Citizens Authority Bond.
“First Lien Bond Interest and Principal Fund” means the Bond Interest and Principal Fund established by the First
Lien Master Citizens Authority Indenture for the First Lien Citizens Authority Bonds.
“First Lien Bond Reserve Fund” means the Bond Reserve Fund established by the First Lien Master Citizens
Authority Indenture for certain of the First Lien Citizens Authority Bonds.
“First Lien Citizens Authority Bonds” means each series of bonds, notes, certificates of indebtedness or other
obligations issued pursuant to the First Lien Citizens Authority Indenture and any Supplemental Indenture, whether or not
such Citizens Authority Bonds are Tax-Exempt Bonds, including the Citizens Authority 2014A First Lien Bonds.
“First Lien Construction Fund” means the Construction Fund established by the First Lien Master Citizens
Authority Indenture and any separate Accounts established by a Supplemental Indenture for any particular series of First
Lien Citizens Authority Bonds.
“First Lien Debt Service Requirement” means, unless the Citizens Authority shall specify the First Lien Debt
Service Requirement in the Supplemental Indenture authorizing a series of First Lien Citizens Authority Bonds or unless
the Citizens Authority elects to apply one of the following rules for the computation of First Lien Debt Service
Requirements, the annual amount required for payment of principal and interest, but excluding interest which has been
funded by First Lien Citizens Authority Bond proceeds, on all Outstanding First Lien Citizens Authority Bonds, whether by
maturity or by mandatory sinking fund redemptions:
(i)
For any series of First Lien Citizens Authority Bonds issued pursuant to a commercial paper,
variable rate demand note or similar program for which the principal amortization is not yet
known, except as provided in subparagraph (ix) hereof, First Lien Debt Service Requirements
shall be computed on the assumption that the principal amount shall continuously be refinanced
under such program and remain outstanding, until the first Fiscal Year for which interest on such
First Lien Citizens Authority Bonds has not been capitalized or otherwise funded or provided
for, at which time (which shall not be beyond the term of such program) it shall be assumed that
the outstanding principal amount thereof shall be refinanced with a series of First Lien Citizens
Authority Bonds which shall be deemed to be amortized on a level debt service basis over a
period not to exceed 30 years, and shall be assumed to bear interest at a fixed interest rate
estimated by the Citizens Authority’s financial advisor or underwriter to be the interest rate such
series of First Lien Citizens Authority Bonds would bear if issued on such terms on the date of
such estimate.
(ii)
For any series of First Lien Citizens Authority Bonds bearing interest at a variable or adjustable
rate or a rate to be negotiated or revised from time to time such that the actual future rate of
interest thereon cannot be ascertained at the time of calculation, but for which the principal
amortization is known, except as provided in subparagraph (iv) hereof, it shall be assumed that
such First Lien Citizens Authority Bonds will bear interest as follows: (a) for any series of First
Lien Citizens Authority Bonds then Outstanding, at the rate of interest which is the weighted
average rate of interest for such First Lien Citizens Authority Bonds during the preceding
12-month period or such shorter period from the date of issue of such First Lien Citizens
B3-4
Authority Bonds, and (b) for any series of First Lien Citizens Authority Bonds then proposed to
be issued, at the Certified Interest Rate.
(iii)
First Lien Debt Service Requirements shall be calculated on the assumption that no First Lien
Citizens Authority Bonds Outstanding at the date of calculation will cease to be Outstanding
except by reason of the payment of scheduled principal maturities or scheduled mandatory
redemptions of such First Lien Citizens Authority Bonds; except as provided in subparagraphs
(i) or (ix).
(iv)
If the Citizens Authority shall have Outstanding any variable or adjustable rate First Lien
Citizens Authority Bonds with respect to which the Citizens Authority has executed any First
Lien Qualified Derivative Agreement which remains in effect, the effect of which created or will
create, in whole or in part, the economic equivalent of a fixed rate First Lien Citizens Authority
Bond, the First Lien Debt Service Requirements with respect thereto shall be calculated by
reference to the effective fixed rate created by such transaction. If the effect of such First Lien
Qualified Derivative Agreement is to create a fixed rate transaction for only a portion of the term
or principal amount of the variable or adjustable rate First Lien Citizens Authority Bonds, the
First Lien Debt Service Requirements for the remaining term or principal amount of such
variable or adjustable rate First Lien Citizens Authority Bonds shall be determined by reference
to either the actual payments or such other subparagraphs hereof as the Citizens Authority shall
elect.
(v)
If the Citizens Authority has executed a First Lien Qualified Derivative Agreement which
remains in effect in connection with a series of fixed rate First Lien Citizens Authority Bonds the
effect of which created or will create, in whole or in part, the economic equivalent of a First Lien
Citizens Authority Bond bearing interest at a variable or adjustable rate or a rate to be negotiated
or revised from time to time, the First Lien Debt Service Requirement for such bonds shall be
calculated by reference to the greater of (A) the principal and interest due on such First Lien
Citizens Authority Bonds, without adjustment for the effect of such First Lien Qualified
Derivative Agreement or (B) by reference to the effective variable rate (taking into account such
First Lien Qualified Derivative Agreement) determined in accordance with subparagraph
(ii) hereof.
(vi)
If the Citizens Authority shall have deposited in escrow certain Defeasance Obligations the
principal and interest on which will be sufficient to pay any principal or interest due on
Outstanding First Lien Citizens Authority Bonds, Debt Service Requirements shall be calculated
by excluding such principal or interest due on such First Lien Citizens Authority Bonds,
notwithstanding the fact that the Citizens Authority has not fulfilled the requirements in the First
Lien Master Citizens Authority Indenture for the discharge of such First Lien Citizens Authority
Bonds.
(vii)
For any series of First Lien Citizens Authority Bonds issued as Tax Credit Bonds, the interest
amounts due on such First Lien Citizens Authority Bonds shall be assumed to be net of any
subsidy amount expected by the Chief Financial Officer to be received; provided that the
Internal Revenue Service has not challenged the eligibility of such First Lien Citizens Authority
Bonds to receive such subsidy payments, in which case such subsidy shall not be taken into
account.
(viii)
For Capital Appreciation Bonds or Deferred Income Bonds, the Accreted Value of Capital
Appreciation Bonds or the Appreciated Value of Deferred Income Bonds becoming due at
maturity or by virtue of a sinking fund installment shall be included in the calculations of
accrued and unpaid and accruing interest or principal installments made under the First Lien
Master Citizens Authority Indenture only from and after the date (the “Calculation Date”) which
is one year prior to the date on which such Accreted Value or Appreciated Value, as the case
may be, becomes so due, and the principal and interest portions of such Accreted Value or
Appreciated Value shall be deemed to accrue in equal daily installments from the Calculation
Date to such due date.
B3-5
(ix)
For Tender Indebtedness, the options or obligations of the holders of such First Lien Citizens
Authority Bonds to tender the same for purchase or payment prior to their stated maturity or
maturities shall be treated as principal on the first date on which such holders may or are
required to tender such First Lien Citizens Authority Bonds, except that any such option or
obligation shall not be treated as principal and shall instead be governed by subparagraph (i) if
such First Lien Citizens Authority Bonds are rated in at least one of the three highest long-term
rating categories or in the two highest short-term rating categories (without regard to any
gradations in such categories) by a Rating Agency.
(x)
With respect to First Lien Citizens Authority Bonds having a term of longer than 60 months and
25% or more of the principal of which matures on the same date and which portion of the
principal of such indebtedness is not required to be amortized by payment or redemption prior to
such date, such First Lien Citizens Authority Bonds shall be deemed to be amortized on a level
debt service basis over the term of 30 years assuming as the interest rate the 30-year revenue
bond index, or, at the option of the Citizens Authority if the actual term of such First Lien
Citizens Authority Bonds is less than 30 years, on a level debt service basis over such term,
assuming the interest rate shall be the Revenue Bond Index related to the actual term of (and
with the same rating as) such First Lien Citizens Authority Bonds published by The Bond Buyer
no more than two weeks prior to the date of calculation, or any similar index selected by the
Citizens Authority.
“First Lien Escrow Securities” means Defeasance Obligations held under an Escrow Deposit Agreement for the
First Lien Citizens Authority Bonds.
“First Lien Event of Default” means an Event of Default as defined in the First Lien Master Citizens Authority
Indenture.
“First Lien Master Citizens Authority Indenture” means the First Lien Master Trust Indenture dated as of July 1,
2011, between the Citizens Authority and the First Lien Trustee.
“First Lien Parity Obligation” means any First Lien Citizens Authority Bond, the Parity Portion of any First Lien
Repayment Obligation and First Lien Regular Payments described pursuant to any First Lien Qualified Derivative
Agreement, which shall all be payable on a parity basis with the First Lien Citizens Authority Bonds.
“First Lien Qualified Derivative Agreement” with respect to specific First Lien Citizens Authority Bonds, means a
Derivative Agreement that hedges interest rates on First Lien Citizens Authority Bonds (A) in which the counterparty to
such Derivative Agreement (or its guarantor or credit support provider or its collateral requirements) is rated in one of the
three highest Rating Categories as certified by the Chief Financial Officer or (B) with respect to which a letter is obtained
from any nationally recognized rating agency stating that entering into such Derivative Agreement with respect to such
First Lien Citizens Authority Bonds will not adversely affect the rating on those First Lien Citizens Authority Bonds.
“First Lien Regular Payments” means the original scheduled payments to be made by the Citizens Authority
pursuant to a First Lien Qualified Derivative Agreement, but does not include termination payments and obligations to
collateralize the Citizens Authority’s obligations under a First Lien Qualified Derivative Agreement or any other obligation
due pursuant to a First Lien Qualified Derivative Agreement not intended to be a Parity Obligation.
“First Lien Repayment Obligation” means an obligation arising under an agreement between the Citizens
Authority and a Credit Provider pursuant to which the Citizens Authority agrees to reimburse the Credit Provider for
amounts paid through a Credit Facility and used to pay debt service on or purchase price of any Covered Bonds and all
other amounts due and owing to a Credit Provider under a Credit Facility. First Lien Repayment Obligations may be
evidenced by First Lien Citizens Authority Bonds with the same priority held by the Covered Bonds (except as described in
the First Lien Master Citizens Authority Indenture) without meeting the requirements of the First Lien Master Citizens
Authority Indenture so long as the Covered Bond meets such requirements and, in such case, the First Lien Repayment
Obligation and the Covered Bonds shall both not be included for any subsequent calculation under the First Lien Master
Trust Indenture.
B3-6
“Fiscal Year” means the fiscal year of the Citizens Authority established by the Citizens Authority from time to
time for accounting purposes with respect to the Wastewater System.
“Fund” means any Fund established by a Citizens Authority Indenture or any Supplemental Indenture.
“Gas Utility Distribution System” means all assets and properties, including any and all interests therein, whether
real or personal or tangible or intangible, held or operated by Citizens in trust or otherwise and used directly to provide gas
utility service the rates and charges for which are subject to regulation by the Commission or, in the absence of
Commission regulation, under rates and changes established by Citizens pursuant to Indiana Code 8-1.5-3-8 or any
successor provision of law. The Gas Utility Distribution System is a Separate System for purposes of the Citizens
Authority Indentures.
“General Fund” means the fund to be maintained pursuant to the First Lien Master Citizens Authority Indenture
into which all Gross Revenues are to be deposited and from which all Operation and Maintenance Expenses are to be paid
and, if no First Lien Citizens Authority Bonds are outstanding under the First Lien Master Citizens Authority Indenture,
means the General Fund as maintained pursuant to the provisions of the Second Lien Master Citizens Authority Indenture.
“Gross Revenues” means all revenues and income from the Wastewater System, including but not limited to
charges and user charges, but excluding (a) extraordinary items; and (b) income accrued on any Escrow Securities and
income accrued on any escrow securities for Second Lien Citizens Authority Bonds or Subordinate Securities.
“Interest Payment Date” means, with respect to a series of Citizens Authority Bonds, any date designated by a
Supplemental Indenture as a date on which interest is due on such Citizens Authority Bonds.
“Interlocal Act” means Indiana Code 36-1-7, et. seq., as amended from time to time.
“LTCP” means the Long-Term Control Plan.
“Net Revenues” means Gross Revenues less Operation and Maintenance Expenses.
“Nonprofit Act” means the Indiana Nonprofit Corporation Act of 1991, as amended, Indiana Code 23-17, et. seq.
“One-Month LIBOR Rate” shall mean, as of any date of determination, the offered rate for deposits in U.S. dollars
for a one-month period which appears on the Telerate Page 3750 at approximately 11:00 A.M., London time, on such date,
or if such date is not a date on which dealings in U.S. dollars are transacted in the London interbank market, then on the
next preceding day on which such dealings were transacted in such market.
“Operation and Maintenance Expenses” means all necessary and proper expenses of the Citizens Authority paid or
accrued in the ownership, operation, maintenance and repair of the Wastewater System, whether incurred by the Citizens
Authority or Citizens including fees owed to the First Lien Trustee; but excluding interest paid (other than interest on
customers’ deposits), any allowance for depreciation or amortization, any non-current unfunded pension, retirement, health
and hospitalization obligations, any investment in capital assets, any payments on debt incurred or assumed by the Citizens
Authority, payments or obligations on related Derivative Agreements, Repayment Obligations (including fees due to the
Credit Provider), Citizens Authority Bonds, Subordinate Securities, payments on PILOTs or other payments in lieu of
taxes, the obligations or payments to fund or replenish the First Lien Bond Reserve Fund, the Second Lien Bond Reserve
Fund or any bond reserve fund for Subordinate Securities, or any operation and maintenance expenses paid from sources
other than Gross Revenues.
“Outstanding” means, as of a particular date, all such Citizens Authority Bonds theretofore and thereupon
delivered except: (a) any such Citizens Authority Bond canceled by or on behalf of the Citizens Authority at or before said
date; (b) any such Citizens Authority Bond defeased pursuant to the defeasance provisions of the Citizens Authority
Indentures or the Supplemental Indenture authorizing its issuance, or otherwise defeased as permitted by applicable law;
and (c) any such Citizens Authority Bond cancelled in lieu of or in substitution for which another Citizens Authority Bond
shall have been delivered pursuant to the Supplemental Indenture authorizing the issuance of such Citizens Authority
Bonds.
“Owner,” “Bondowner” or “Owner of Citizens Authority Bonds” means the registered owner of any Citizens
Authority Bond.
B3-7
“Parity Portion” means the interest due on a Repayment Obligation and that portion of the principal due on a
Repayment Obligation that equals the principal that would have been due on such date on the Covered Bonds had the
Covered Bonds been paid by the Citizens Authority in accordance with the terms thereof to the extent that the Citizens
Authority elects to provide for payment of that portion of the Repayment Obligation from the First Lien Citizens Authority
Bond Interest and Principal Fund or Second Lien Citizens Authority Bond Interest and Principal Fund on parity with the
Citizens Authority Bonds, as specified in the Supplemental Indenture authorizing such Covered Bonds and other amounts
due on a Repayment Obligation to the extent the Citizens Authority may elect to include such amounts as a Parity Portion,
as specified in a Supplemental Indenture or Credit Facility.
“Paying Agent” means any bank or trust company organized under the laws of any state of the United States or
any national banking association designated as Paying Agent or Co-Paying Agent for the Citizens Authority Bonds of any
Series and its successor or successors hereafter appointed in the manner provided in the Citizens Authority Indentures, and
shall include the Trustees unless and until a separate Paying Agent is appointed by the Citizens Authority.
“Periodic Compounding Date” means the periodic date specified in a Supplemental Indenture authorizing Capital
Appreciation Bonds or Deferred Income Bonds on which interest on such Citizens Authority Bonds is to be compounded.
“Permitted Investments” means and includes, subject to a Supplemental Indenture limiting such investments, any
of the following securities, if and to the extent the same are legal for investment of the Citizens Authority’s funds:
(a)
Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with
obligations described in paragraph (b) below).
(b)
Direct obligations of (including obligations issued or held in book entry form on the books of) the
Department of the Treasury of the United States of America (“Direct Obligations”).
(c)
Senior debt obligations of other government sponsored agencies (“GSAs”).
(d)
Obligations of any of the following federal agencies which obligations represent the full faith and credit
of the United States of America, including:
(e)
(i)
Export-Import Bank
(ii)
Farm Credit System Financial Assistance Corporation
(iii)
Rural Economic Community Development Administration (formerly the Farmers Home
Administration)
(iv)
General Services Administration
(v)
U.S. Maritime Administration
(vi)
Small Business Administration
(vii)
Government National Mortgage Association (GNMA)
(viii)
U.S. Department of Housing & Urban Development (PHA’s)
(ix)
Federal Housing Administration
(x)
Federal Financing Bank.
Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by
the full faith and credit of the United States of America:
(i)
Senior debt obligations rated “Aaa” by Moody’s and “AAA” by S&P issued by the Federal
National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation
(FHLMC)
B3-8
(ii)
Obligations of the Resolution Funding Corporation (REFCORP)
(iii)
Senior debt obligations of the Federal Home Loan Bank System.
(f)
U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic
commercial banks which have a rating on their short term certificates of deposit on the date of purchase
of “P-1” by Moody’s and “A-1” or “A-1+” by S&P and maturing no more than 360 calendar days after
the date of purchase. (The rating on a holding company is not considered to be the rating on the related
bank.)
(g)
Commercial paper which is rated at the time of purchase in the single highest classification, “P-1” by
Moody’s and “A-1+” by S&P and which matures not more than 270 calendar days after the date of
purchase.
(h)
Investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P or a U.S. Treasury
Obligation Money Market Fund.
(i)
“Pre-refunded Municipal Obligations” defined as follows: any obligations of any state of the United
States of America or of any agency, instrumentality or local governmental unit of any such state which
are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have
been given by the obligor to call on the date specified in the notice; and
(j)
(i)
which are rated, based on an irrevocable escrow account or fund (the “escrow”), in the highest
rating category of Moody’s and S&P; or
(ii)
(A) which are fully secured as to principal and interest and redemption premium, if any, by an
escrow consisting only of cash or obligations described in paragraph (b) above, which escrow
may be applied only to the payment of such principal of and interest and redemption premium, if
any, on such obligations on the maturity date or dates thereof or the specified redemption date or
dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is
sufficient, as verified by a nationally recognized independent certified public accountant, to pay
principal of and interest and redemption premium, if any, on the obligations described in this
paragraph on the maturity date or dates specified in the irrevocable instructions referred to
above, as appropriate.
Municipal obligations rated “Aa” by Moody’s and “AA” by S&P or general obligations of states with a
rating of at least “A2” or higher by Moody’s and “A” or higher by S&P.
The value of Permitted Investments shall be determined in accordance with the following sentence. “Value” shall
be determined as provided in the Citizens Authority Indentures as of the end of each month and means the value of
Permitted Investments calculated as follows:
For securities: (i) the closing bid price quoted by Interactive Data Systems, Inc.; (ii) a valuation performed by a
nationally recognized and accepted pricing service whose valuation method consists of the composite average of various
bid price quotes on the valuation date; or (iii) the lower of two dealer bids on the valuation date. The dealers or their parent
holding companies must be rated at least investment grade by Moody’s and S&P and must be market makers in the
securities being valued.
For certificates of deposit, investment contracts or agreements and bankers’ acceptances: the face amount thereof
plus accrued interest.
“PILOTS” means amounts owed to the City pursuant to Ordinance No. 5-2010 of the City addressing the payment
of such amounts through and until December 31, 2039, or any successor provisions thereon on or after December 31, 2039,
as more fully described in APPENDIX I hereto.
“Principal Payment Date” means, with respect to a series of Citizens Authority Bonds, any date designated by a
Supplemental Indenture as a date on which principal is due on such Citizens Authority Bonds.
B3-9
“Project” means, as it pertains to any particular issue of Citizens Authority Bonds, any assets of the Wastewater
System permitted to be financed or refinanced with proceeds of Citizens Authority Bonds under the Authorizing Acts, as
further described in any Supplemental Indenture.
“Project Costs” with respect to any Project means costs permitted under the Authorizing Acts including the
following:
(i)
obligations of the Citizens Authority and all contractors incurred for labor and materials in
connection with the construction, installation and equipping of the Project;
(ii)
the cost of bonds and insurance of all kinds that may be required or necessary during the
construction of the Project;
(iii)
all costs of architectural and engineering services, including the costs of the Citizens Authority
for test borings, surveys, estimates, plans and specifications and preliminary investigation
therefor, and for supervising construction, as well as for the performance of all other duties
required by or consequent upon the proper construction of the Project;
(iv)
all expenses incurred in connection with the issuance of Citizens Authority Bonds, including
without limitation, compensation and expenses of the Registrar and Paying Agents, expenses of
the Citizens Authority, legal and accounting expenses and fees, payments on a Qualified
Derivative Agreement, costs of printing and engraving, recording and filing fees, compensation
of underwriters, rating agency fees, costs of financial services, and interest;
(v)
all sums required to reimburse the Citizens Authority for advances made by it for any of the
above items or for any other costs incurred and for work done, whether before or after the
adoption of the Citizens Authority Indentures, which are properly chargeable to the Project;
(vi)
interest due on the Citizens Authority Bonds during the period of acquisition, construction and
installation of the Project; and
(vii)
all other components of cost of labor, materials, machinery and equipment, financing charges or
any other cost, purpose or use permitted by the Authorizing Acts.
“Qualified Derivative Agreement” means, as the context requires, a First Lien Qualified Derivative Agreement, a
Second Lien Qualified Derivative Agreement, or both.
“Rate Stabilization Fund” means the fund of that name to be maintained as provided in the First Lien Master
Citizens Authority Indenture and if no First Lien Citizens Authority Bonds are outstanding under the First Lien Master
Citizens Authority Indenture, means the Rate Stabilization Fund as maintained pursuant to the Second Lien Master Citizens
Authority Indenture.
“Rating Agencies” or “Rating Agency” means Fitch Ratings, Moody’s Investors Service and Standard & Poor’s
Ratings Services or any successors thereto and any other nationally recognized credit rating agency then maintaining a
rating on any Citizens Authority Bonds at the request of the Citizens Authority.
“Rating Category” means the long term rating categories of a Rating Agency, disregarding pluses, minuses, and
any numerical gradations.
“Record Date” means, with respect to any series of Citizens Authority Bonds, the date specified in the applicable
Supplemental Indenture.
“Registrar” means any bank or trust company organized under the laws of any state of the United States or any
national banking association designated as Registrar by the Citizens Authority to perform the duties set forth in the Citizens
Authority Indentures and shall initially be the Trustee.
“Regular Payments” means, as the context requires, First Lien Regular Payments, Second Lien Regular Payments,
or both.
B3-10
“Repayment Obligation” means, as the context requires, First Lien Repayment Obligations, Second Lien
Repayment Obligations, or both.
“Reserve Policy” means a surety bond or other similar instrument that may be delivered by the Citizens Authority
in satisfaction of the requirement to fund the applicable Bond Reserve Fund under the applicable Citizens Authority
Indenture as specified in a Supplemental Indenture authorizing Citizens Authority Bonds. Such Supplemental Indenture
shall also specify the method of repayment for any draws made upon such Reserve Policy in the manner consistent with the
Citizens Authority Indentures.
“Second Lien Bond Interest and Principal Fund” means the Second Lien Bond Interest and Principal Fund
established by the Second Lien Master Citizens Authority Indenture for the Second Lien Citizens Authority Bonds.
“Second Lien Bond Reserve Fund” means the Second Lien Bond Reserve Fund established by the Second Lien
Master Citizens Authority Indenture for certain of the Second Lien Citizens Authority Bonds.
“Second Lien Citizens Authority Bonds” means the second lien bonds, notes, certificates of indebtedness or other
obligations issued pursuant to the Second Lien Master Citizens Authority Indenture and any Supplemental Indenture,
whether or not such Second Lien Citizens Authority Bonds are Tax-Exempt Bonds, including the 2011 Second Lien
Citizens Authority Bonds.
“Second Lien Construction Fund” means the Second Lien Construction Fund established by the Second Lien
Master Citizens Authority Indenture and any separate Accounts established by a Supplemental Indenture for any particular
series of Second Lien Citizens Authority Bonds.
“Second Lien Debt Service Requirement” means, unless the Citizens Authority shall specify the Second Lien Debt
Service Requirement in the Supplemental Indenture authorizing a series of Second Lien Citizens Authority Bonds or unless
the Citizens Authority elects to apply one of the following rules for the computation of Second Lien Debt Service
Requirements, the annual amount required for payment of principal and interest, but excluding interest which has been
funded by Second Lien Citizens Authority Bond proceeds, on all Outstanding Second Lien Citizens Authority Bonds,
whether by maturity or by mandatory sinking fund redemptions:
(i)
For any series of Second Lien Citizens Authority Bonds issued pursuant to a commercial paper,
variable rate demand note or similar program for which the principal amortization is not yet
known, except as provided in subparagraph (ix) hereof, Debt Service Requirements shall be
computed on the assumption that the principal amount shall continuously be refinanced under
such program and remain outstanding, until the first Fiscal Year for which interest on such
Second Lien Citizens Authority Bonds has not been capitalized or otherwise funded or provided
for, at which time (which shall not be beyond the term of such program) it shall be assumed that
the outstanding principal amount thereof shall be refinanced with a series of Second Lien
Citizens Authority Bonds which shall be deemed to be amortized on a level debt service basis
over a period not to exceed 30 years, and shall be assumed to bear interest at a fixed interest rate
estimated by the Citizens Authority’s financial advisor or underwriter to be the interest rate such
series of Second Lien Citizens Authority Bonds would bear if issued on such terms on the date
of such estimate.
(ii)
For any series of Second Lien Citizens Authority Bonds bearing interest at a variable or
adjustable rate or a rate to be negotiated or revised from time to time such that the actual future
rate of interest thereon cannot be ascertained at the time of calculation, but for which the
principal amortization is known, except as provided in subparagraph (iv) hereof, it shall be
assumed that such Second Lien Citizens Authority Bonds will bear interest as follows: (a) for
any series of Second Lien Citizens Authority Bonds then Outstanding, at the rate of interest
which is the weighted average rate of interest for such Second Lien Citizens Authority Bonds
during the preceding 12-month period or such shorter period from the date of issue of such
Second Lien Citizens Authority Bonds, and (b) for any series of Second Lien Citizens Authority
Bonds then proposed to be issued, at the Certified Interest Rate.
B3-11
(iii)
Second Lien Debt Service Requirements shall be calculated on the assumption that no Second
Lien Citizens Authority Bonds Outstanding at the date of calculation will cease to be
Outstanding except by reason of the payment of scheduled principal maturities or scheduled
mandatory redemptions of such Second Lien Citizens Authority Bonds; except as provided in
subparagraphs (i) or (ix).
(iv)
If the Citizens Authority shall have Outstanding any variable or adjustable rate Second Lien
Citizens Authority Bonds with respect to which the Citizens Authority has executed any Second
Lien Qualified Derivative Agreement which remains in effect, the effect of which created or will
create, in whole or in part, the economic equivalent of a fixed rate Second Lien Citizens
Authority Bond, the Second Lien Debt Service Requirements with respect thereto shall be
calculated by reference to the effective fixed rate created by such transaction. If the effect of
such Second Lien Qualified Derivative Agreement is to create a fixed rate transaction for only a
portion of the term or principal amount of the variable or adjustable rate Second Lien Citizens
Authority Bonds, the Second Lien Debt Service Requirements for the remaining term or
principal amount of such variable or adjustable rate Second Lien Citizens Authority Bonds shall
be determined by reference to either the actual payments or such other subparagraphs hereof as
the Citizens Authority shall elect.
(v)
If the Citizens Authority has executed a Second Lien Qualified Derivative Agreement which
remains in effect in connection with a series of fixed rate Second Lien Citizens Authority Bonds
the effect of which created or will create, in whole or in part, the economic equivalent of a
Second Lien Citizens Authority Bond bearing interest at a variable or adjustable rate or a rate to
be negotiated or revised from time to time, the Second Lien Debt Service Requirement for such
bonds shall be calculated by reference to the greater of (A) the principal and interest due on such
Second Lien Citizens Authority Bonds, without adjustment for the effect of such Second Lien
Qualified Derivative Agreement or (B) by reference to the effective variable rate (taking into
account such Second Lien Qualified Derivative Agreement) determined in accordance with
subparagraph (ii) hereof.
(vi)
If the Citizens Authority shall have deposited in escrow certain Defeasance Obligations the
principal and interest on which will be sufficient to pay any principal or interest due on
Outstanding Second Lien Citizens Authority Bonds, Second Lien Debt Service Requirements
shall be calculated by excluding such principal or interest due on such Second Lien Citizens
Authority Bonds, notwithstanding the fact that the Citizens Authority has not fulfilled the
requirements in the Second Lien Master Citizens Authority Indenture for the discharge of such
Second Lien Citizens Authority Bonds.
(vii)
For any series of Second Lien Citizens Authority Bonds issued as Tax Credit Bonds, the interest
amounts due on such Second Lien Citizens Authority Bonds shall be assumed to be net of any
subsidy amount expected by the Chief Financial Officer to be received; provided that the
Internal Revenue Service has not challenged the eligibility of such Second Lien Citizens
Authority Bonds to receive such subsidy payments, in which case such subsidy shall not be
taken into account.
(viii)
For Capital Appreciation Bonds or Deferred Income Bonds, the Accreted Value of Capital
Appreciation Bonds or the Appreciated Value of Deferred Income Bonds becoming due at
maturity or by virtue of a sinking fund installment shall be included in the calculations of
accrued and unpaid and accruing interest or principal installments made hereunder only from
and after the date (the “Calculation Date”) which is one year prior to the date on which such
Accreted Value or Appreciated Value, as the case may be, becomes so due, and the principal and
interest portions of such Accreted Value or Appreciated Value shall be deemed to accrue in
equal daily installments from the Calculation Date to such due date.
(ix)
For Tender Indebtedness, the options or obligations of the holders of such Second Lien Citizens
Authority Bonds to tender the same for purchase or payment prior to their stated maturity or
maturities shall be treated as principal on the first date on which such holders may or are
B3-12
required to tender such Second Lien Citizens Authority Bonds, except that any such option or
obligation shall not be treated as principal and shall instead be governed by subparagraph (i) if
such Second Lien Citizens Authority Bonds are rated in at least one of the three highest
long-term rating categories or in the two highest short-term rating categories (without regard to
any gradations in such categories) by a Rating Agency.
(x)
With respect to Second Lien Citizens Authority Bonds having a term of longer than 24 months
and 25% or more of the principal of which matures on the same date and which portion of the
principal of such indebtedness is not required to be amortized by payment or redemption prior to
such date, such Second Lien Citizens Authority Bonds shall be deemed to be amortized on a
level debt service basis over the term of 30 years assuming as the interest rate the 30 year
Revenue Bond Index, or, at the option of the Citizens Authority, if the actual term of such
Second Lien Citizens Authority Bonds is less than 30 years, on a level debt service basis over
such term, assuming the interest rate shall be the revenue bond index related to the actual term of
(and with the same rating as) such Second Lien Citizens Authority Bonds published by The
Bond Buyer no more than two weeks prior to the date of calculation, or any similar index
selected by the Citizens Authority.
“Second Lien Escrow Securities” means Defeasance Obligations held under an Escrow Deposit Agreement for the
Second Lien Citizens Authority Bonds.
“Second Lien Event of Default” means an Event of Default as defined in the Second Lien Master Citizens
Authority Indenture.
“Second Lien Master Citizens Authority Indenture” means the Second Lien Master Trust Indenture dated as of
July 1, 2011, between the Citizens Authority and the Second Lien Trustee.
“Second Lien Parity Obligation” means Second Lien Citizens Authority Bonds, the Parity Portion of Second Lien
Repayment Obligations and Second Lien Regular Payments pursuant to Qualified Derivative Agreements, which shall all
be payable from the Net Revenues on a parity basis with the Second Lien Citizens Authority Bonds.
“Second Lien Qualified Derivative Agreement” with respect to specific Second Lien Citizens Authority Bonds,
means a Derivative Agreement that hedges interest rates on Second Lien Citizens Authority Bonds (A) in which the
counterparty to such Derivative Agreement (or its guarantor or credit support provider or its collateral requirements) is
rated in one of the three highest Rating Categories as certified by the Chief Financial Officer or (B) with respect to which a
letter is obtained from any nationally recognized rating agency stating that entering into such Derivative Agreement with
respect to such Second Lien Citizens Authority Bonds will not adversely affect the rating on those Second Lien Citizens
Authority Bonds.
“Second Lien Regular Payments” means the original scheduled payments to be made by the Citizens Authority
pursuant to a Qualified Derivative Agreement, but does not include termination payments and obligations to collateralize
the Citizens Authority’s obligations under a Qualified Derivative Agreement or any other obligation due pursuant to a
Qualified Derivative Agreement not intended to be a Second Lien Parity Obligation.
“Second Lien Repayment Obligation” means an obligation arising under a written agreement between the Citizens
Authority and a Credit Provider pursuant to which the Citizens Authority agrees to reimburse the Credit Provider for
amounts paid through a Credit Facility and used to pay debt service on or purchase price of any Covered Bonds and all
other amounts due and owing to a Credit Provider under a Credit Facility. Second Lien Repayment Obligations may be
evidenced by Second Lien Citizens Authority Bonds with the same priority held by the Covered Bonds (except as described
in the Second Lien Master Citizens Authority Indenture) without meeting the requirements of the Second Lien Master
Citizens Authority Indenture so long as the Covered Bond meets such requirements and, in such cases, the Repayment
Obligation and the Covered Bonds shall not both be included for any subsequent calculation under the Second Lien Master
Citizens Authority Indenture.
“Separate Systems” means any and all systems other than the Wastewater System, now or hereafter owned or
operated by or on behalf of the Citizens Authority or Citizens including, without limitation, the Gas Utility Distribution
System, Thermal Energy System and the Water System.
B3-13
“SIFMA Municipal Swap Index” shall mean the rate determined on the basis of an index based upon the weekly
interest rates of tax-exempt variable rate issues included in a database maintained by Municipal Market Data or any
successor indexing agent which meets specific criteria established by The Securities Industry and Financial Markets
Association.
“Subordinate Securities” means each series of bonds, notes, certificates of indebtedness or other obligations or
evidence of indebtedness permitted to be issued by the Citizens Authority pursuant to the Authorizing Acts and unsecured
or secured in whole or in part by liens on the Net Revenues and Pledged Funds that are junior and subordinate to the lien on
Net Revenues and Pledged Funds securing payment of First Lien Parity Obligations and Second Lien Parity Obligations.
“Substitute Obligations and Agreements” means the bonds or other obligations of the Board and the corresponding
bond resolution or indenture entered into by the Board as provided in the Citizens Authority Indentures.
“Supplemental Indenture” means each indenture adopted by the Citizens Authority to supplement the provisions of
the Citizens Authority Indentures for the issuance of Citizens Authority Bonds permitted under the respective Citizens
Authority Indenture or to otherwise amend a Citizens Authority Indenture.
“Tax Credit Bonds” means bonds issued by the Citizens Authority under laws which permit the Citizens Authority
to be reimbursed for the payment of principal or interest by the federal or state government.
“Tax-Exempt Bonds” means any Citizens Authority Bonds, the interest on which, when issued, is excludable from
gross income of the Owners thereof for federal income-tax purposes as provided in an opinion of nationally recognized
bond counsel.
“Tender Indebtedness” shall mean any Citizens Authority Bond a feature of which is an option or obligation on the
part of the Owners of such Citizens Authority Bond to tender all or a portion of such bond or bonds to a fiduciary for
purchase or redemption prior to the stated maturity date of such bond or bonds, which may include variable rate or
adjustable rate indebtedness with such a feature.
“Thermal Energy System” means Citizen’s Thermal Energy System, including the Steam Division and the Chilled
Water Division, which system is a Separate System for purposes of the Citizens Authority Indentures.
“Treasurer” means the Treasurer of the Citizens Authority Board.
“Trustee” means, as the context requires, the trustee named under the IFA Indenture, the First Lien Master
Citizens Authority Indenture or the Second Lien Master Citizens Authority Indenture.
“Wastewater System” means the sewage works system and all real estate and equipment purchased by the Citizens
Authority and thereafter owned by the Citizens Authority and used in connection therewith and appurtenances thereto, and
all extensions, additions and improvements thereto, and replacements thereof now or at any time hereafter constructed or
acquired; and all services provided or to be provided by the Citizens Authority therewith.
“Water System” means the right, title and interest in, under and to all of the assets, properties and rights used and
useful in the business of storing, supplying, distributing, and selling water to the public, and in providing ancillary services
thereto, as described in the Asset Purchase Agreement, the acquisition of which was approved by Citizens by resolution on
August 11, 2010, and consisting of all properties, real, personal, mixed, tangible, intangible or otherwise, now owned by
Citizens or hereafter acquired by Citizens through purchase, construction or otherwise, and used in connection with such
Water System of Citizens, and in any way pertaining thereto, all as located in or as necessary for or appropriate for or
supporting the operation of Citizens’ Water System, including, without limitation, machinery, apparatus, structures,
buildings and related or appurtenant furniture, fixtures and other equipment, as such Water System is from time to time
extended, bettered or otherwise improved, or any combination thereof. The Water System is a Separate System for
purposes of the Citizens Authority Indentures.
B3-14
APPENDIX C
FORM OF IFA BOND COUNSEL OPINION
[THIS PAGE INTENTIONALLY LEFT BLANK]
FORM OF IFA BOND COUNSEL OPINION
_______________, ___, 2014
Indiana Finance Authority, as Issuer
Indianapolis, Indiana
The Bank of New York Mellon Trust Company, N.A., as Trustee
Indianapolis, Indiana
Re:
Indiana Finance Authority First Lien Wastewater Utility Revenue Bonds, Series 2014A (CWA Authority
Project) in the aggregate principal of _______________________________________________________
Dollars ($______________________) (the “Bonds”) dated the date hereof, issued pursuant to a First Lien
Trust Indenture dated as of July 1, 2014 between the Issuer and the Trustee (the “Indenture”) and a First
Lien Loan Agreement dated as of July 1, 2014 between the Issuer and CWA Authority, Inc. (“Citizens
Authority”) (“Loan Agreement”).
Ladies and Gentlemen:
We have examined (a) a certified transcript containing the proceedings of the Issuer relating to the authorization,
issuance and sale of the Bonds and the approval and execution of the Indenture and Loan Agreement; (b) executed
counterparts of the Indenture and Loan Agreement; (c) the General Certificate of the Issuer dated the date hereof; (d) the
Certificate of the Issuer re: Arbitrage dated the date hereof (the “Arbitrage Certificate”); (f) the General Certificate of
Citizens Authority dated the date hereof; (g) the Tax Representation Certificate of Citizens Authority dated the date hereof
(the “Tax Representation Certificate”); (h) the Information Return for Tax-Exempt Governmental Obligations of the Issuer
dated the date hereof; (i) an opinion of Hall, Render, Killian, Heath & Lyman, P.C., Indianapolis, Indiana, counsel for the
Issuer; and (j) an opinion of Gonzalez Saggio & Harlan LLP, Indianapolis, Indiana, counsel for Citizens Authority.
In delivering our opinion, we have relied upon a certified transcript of proceedings and other certificates and
representations of Citizens Authority and the Issuer as set forth in the transcript, including but not limited to the Arbitrage
Certificate and the Tax Representation Certificate (collectively, the “Tax Covenants”), and have not undertaken to verify
any facts by independent investigation.
Based upon the foregoing and our review of such other information, papers, documents and statutes, regulations,
rulings and decisions as we believe necessary or advisable, we are of the opinion that:
1.
The Indenture and Loan Agreement have been duly authorized, executed and delivered by the Issuer and
are legal, valid and binding agreements of the Issuer, enforceable against the Issuer in accordance with their terms.
2.
The Bonds have been duly authorized, executed and issued and are legal, valid and binding obligations of
the Issuer, enforceable in accordance with their terms.
3.
Under statutes, decisions, regulations and rulings existing on this date, the interest on the Bonds is exempt
from income taxation in the State of Indiana. This opinion relates only to the tax exemption of interest from State of
Indiana income taxes.
4.
Under federal statutes, decisions, regulations and rulings existing on this date, the interest on the Bonds is
excludable from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue
Code of 1986, as in effect on the date hereof (the “Code”), is not an item of tax preference for purposes of the federal
alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current
earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations. This opinion
is conditioned on continuing compliance by Citizens Authority and the Issuer with the Tax Covenants. Failure to comply
with the Tax Covenants could cause interest on the Bonds to lose the exclusion from gross income for purposes of federal
income taxation retroactive to the date of issuance of the Bonds.
C-1
It is to be understood that the rights of the owners of the Bonds, the Issuer and Citizens Authority and the
enforceability of the Bonds, the Indenture and the Loan Agreement may be subject to the valid exercise of the constitutional
powers of the State of Indiana and the United States of America. It is to be further understood that the rights of the owners
of the Bonds, the Issuer and Citizens Authority and the enforceability of the terms of the Indenture, the Loan Agreement
and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws generally affecting
creditors’ rights heretofore or hereafter enacted and that the enforcement thereof may be subject to the exercise of judicial
discretion in accordance with general principles of equity.
This opinion may be relied upon by the addressees hereto, any holder of the Bonds and their respective successors
and assigns. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion
to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter
occur.
Very truly yours,
C-2
APPENDIX D
FORM OF CITIZENS AUTHORITY BOND COUNSEL OPINION
[THIS PAGE INTENTIONALLY LEFT BLANK]
FORM OF CITIZENS AUTHORITY BOND COUNSEL OPINION
____________________, 2014
Indiana Finance Authority
Indianapolis, Indiana
CWA Authority, Inc.
Indianapolis, Indiana
The Bank of New York Mellon Trust Company, N.A.,
as First Lien Trustee
Indianapolis, Indiana
Re:
$______________________ CWA Authority, Inc. City of Indianapolis, Indiana First Lien Wastewater
Revenue Bonds, Series 2014A, dated the date of this opinion letter (the “Series 2014A Bonds”); issued
under the First Lien Master Trust Indenture dated as of July 1, 2011, as supplemented by the Series
2014A First Lien Supplemental Trust Indenture, dated as of July 1, 2014 (collectively, the “First Lien
Indenture”), between CWA Authority, Inc. (the “Citizens Authority”), and The Bank of New York
Mellon Trust Company, N.A., as First Lien Trustee (the “First Lien Trustee”)
Ladies and Gentlemen:
We acted as bond counsel in connection with the issuance and sale of the Series 2014A Bonds and, as such,
examined (a) a transcript of proceedings of the Authority relating to the organization of the Citizens Authority and the
election of its present officers, as certified by an officer of the Citizens Authority; (b) a transcript of proceedings relating to
(1) the establishment and organization of the Citizens Authority and the election of its present officers, as certified by an
officer of the Citizens Authority, (2) the authorization, issuance and sale of the Series 2014A Bonds and (3) the
authorization and execution of the First Lien Indenture; (c) the General Certificate of the Citizens Authority dated the date
hereof; (d) the Arbitrage and Tax Representation Certificate of the Citizens Authority dated the date hereof (the “Tax
Representation Certificate”); (e) the Information Return for Tax-Exempt Governmental Obligations of the Issuer dated the
date hereof; (f) an opinion of Gonzalez Saggio & Harlan LLP, counsel for the Citizens Authority; and (g) the law and such
other papers as we deem necessary to render this opinion letter. We have relied upon such certified transcripts of
proceedings and certificates of public officials, including the tax covenants and representations of the Citizens Authority
(collectively, the “Tax Covenants”), and we have not undertaken to verify any facts by independent investigation.
Based upon our examination, we are of the opinion that:
1.
The First Lien Indenture has been duly authorized, executed and delivered by the Citizens Authority and
is a valid and binding agreement of the Citizens Authority enforceable in accordance with its terms, except insofar as the
enforcement thereof may be limited by any applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally. The First Lien Indenture creates the valid pledge and assignment which it purports to create of the Net Revenues
and Pledged Funds (as defined in the First Lien Indenture), subject to the provisions of the First Lien Indenture permitting
the application thereof for the purposes and on the terms set forth in the First Lien Indenture.
2.
The Series 2014A Bonds are the valid and binding obligations of the Citizens Authority enforceable in
accordance with the terms and provisions thereof and of the First Lien Indenture, except insofar as the enforcement thereof
may be limited by any applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally.
3.
Under statutes, decisions, regulations and rulings existing on this date, the interest on the Series 2014A
Bonds is exempt from income taxation in the State of Indiana. This opinion relates only to the tax exemption of interest
from State of Indiana income taxes.
D-1
4.
Under federal statutes, decisions, regulations and rulings existing on the date of this opinion letter,
interest on the Series 2014A Bonds is excludable from gross income for purposes of federal income taxation pursuant to
Section 103 of the Internal Revenue Code of 1986, as amended and in effect on the date of this opinion letter (the “Code”),
is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and
corporations, but is taken into account in determining adjusted current earnings for purposes of computing the federal
alternative minimum tax imposed on certain corporations. This opinion is conditioned upon continuing compliance by the
Citizens Authority with the Tax Covenants. Failure to comply with the Tax Covenants could cause interest on the Series
2014A Bonds to lose the exclusion from gross income for purposes of federal income taxation retroactive to the date of
issuance of the Series 2014A Bonds.
It is to be understood that the rights of the owners of the Series 2014A Bonds and the enforceability of the Series
2014A Bonds and the First Lien Indenture may be subject to the valid exercise of the constitutional powers of the State of
Indiana and the United States of America. It is to be further understood that the rights of the owners of the Series 2014A
Bonds and the enforceability of the Series 2014A Bonds and the First Lien Indenture may be subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting creditor’s rights heretofore or hereafter enacted and
that their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.
This opinion may be relied upon by the addressees hereto, any holder of the Series 2014A Bonds and their
respective successors and assigns. This opinion is given as of the date hereof, and we assume no obligation to revise or
supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in
law that may hereafter occur.
Very truly yours,
D-2
APPENDIX E
BOOK-ENTRY ONLY SYSTEM
[THIS PAGE INTENTIONALLY LEFT BLANK]
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the IFA
Wastewater Bonds. The IFA Wastewater Bonds will be issued as fully-registered securities registered in the name of Cede
& Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One
fully-registered IFA Wastewater Bonds will be issued for each maturity of the IFA Wastewater Bonds and will be deposited
with DTC.
SO LONG AS CEDE & CO, AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE IFA
WASTEWATER BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS (OR
THE OWNERS) WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking
Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency”
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset
servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money
market instruments from over 100 countries, that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also
facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This
eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations, and certain, other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a
number of Direct Participants of DTC and Members, of the National Securities Clearing Corporation, Fixed Income
Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC),
as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating:
AAA. The DTC Rules applicable to its Participants are on file with, the Securities and Exchange Commission. More
information about DTC can be found at www.dtcc.com.
Purchases of IFA Wastewater Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the IFA Wastewater Bonds on DTC’s records. The ownership interest of each actual
purchaser of each IFA Wastewater Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect
Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the IFA Wastewater Bonds are to be accomplished by entries made on the
books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in IFA Wastewater Bonds, except in the event that use of the book-entry
system for the IFA Wastewater Bonds is discontinued.
To facilitate subsequent transfers, all IFA Wastewater Bonds deposited by Direct Participants with DTC are
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an
authorized representative of DTC. The deposit of IFA Wastewater Bonds with DTC and their registration in the name of
Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the IFA Wastewater Bonds; DTC’s records reflect only the identity of the Direct Participants to
whose accounts such IFA Wastewater Bonds are credited, which may or may not be the Beneficial Owners. The Direct and
Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the IFA Wastewater Bonds are being redeemed,
DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
E-1
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the IFA
Wastewater Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the IFA as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the IFA Wastewater Bonds are
credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal of and interest payments on the IFA Wastewater Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’
accounts upon DTC’s receipt of funds and corresponding detail information from the IFA or the Trustee, on the payable
date in accordance with their respective holdings shown on DTC’s records. Payments by Direct and Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the case, with securities held for
the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant
and not of DTC (nor its nominee), the Trustee, any other Fiduciary or the IFA, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the responsibility of the IFA or the Trustee, or any
other Fiduciary disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursements
of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the IFA Wastewater Bonds at
any time by giving reasonable notice to the IFA or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, IFA Wastewater Bonds certificates are required to be printed and delivered to DTC.
The IFA may decide to discontinue use of the system of book-entry transfers through DTC (or a successor
securities depository). In that event, IFA Wastewater Bonds certificates will be printed and delivered.
The information contained in this section concerning DTC and DTC’s book-entry system has been obtained from
sources that the IFA believes to be reliable, but none of the IFA, the City, the Citizens Authority or the Underwriters take
any responsibility for the accuracy thereof, including any information contained on DTC’s website.
In the event that the book-entry system for the IFA Wastewater Bonds is discontinued, the Trustee will provide for
the registration of the IFA Wastewater Bonds in the name of the Beneficial Owners thereof. The IFA, the Trustee, the
Trustee and any other Fiduciary would treat the person in whose name any IFA Wastewater Bonds is registered as the
absolute owner of such IFA Wastewater Bonds for the purposes of making and receiving payment of the principal thereof
and interest thereon, and for all other purposes, and none of these parties would be bound by any notice or knowledge to the
contrary.
Revision of Book-Entry Only System
In the event that the IFA and the Trustee receive written notice from DTC to the effect that DTC is unable or
unwilling to discharge it responsibilities as a clearing agency for the IFA Wastewater Bonds or the IFA elects to
discontinue its use of DTC as a clearing agency for the IFA Wastewater Bonds, then the IFA and the Trustee, Trustee or
Registrar will do or perform or cause to be done or performed all acts or things, not adverse to the rights of the holders of
the IFA Wastewater Bonds, as are necessary or appropriate to discontinue use of DTC as a clearing agency for the IFA
Wastewater Bonds and to transfer the ownership of each of the IFA Wastewater Bonds to such person or persons, including
any other clearing agency, as the holder of such IFA Wastewater Bonds may direct in accordance with the Indenture. Any
expenses of such a discontinuation and transfer, including any expenses of printing new certificates to evidence the IFA
Wastewater Bonds will be paid by the IFA.
E-2
APPENDIX F
FORM OF CONTINUING DISCLOSURE UNDERTAKING AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
FORM OF CONTINUING DISCLOSURE UNDERTAKING AGREEMENT
CONTINUING DISCLOSURE UNDERTAKING AGREEMENT
$___________
INDIANA FINANCE AUTHORITY
FIRST LIEN WASTEWATER UTILITY REVENUE BONDS, SERIES 2014A
(CWA AUTHORITY PROJECT)
This CONTINUING DISCLOSURE UNDERTAKING AGREEMENT, dated as of ______________, 2014 (this
“Agreement”), is entered into between CWA Authority, Inc. (the “Obligor”) and The Bank of New York Trust Company,
N.A., as Counterparty (the “Counterparty”), for the purpose of permitting Morgan Stanley & Co. LLC, acting on behalf of
itself and the other underwriters (the “Underwriters”) named in the Bond Purchase Agreement dated ______________,
2014, to purchase the Bonds (as hereinafter defined) in compliance with the Securities and Exchange Commission (“SEC”)
Rule 15c2-12 (the “SEC Rule”), as published in the Federal Register on November 17, 1994, and as thereafter amended.
Section 1.
Definitions. The words and terms defined in this Agreement shall have the meanings herein
specified unless the context or use clearly indicates another or different meaning or intent. Those words and terms not
expressly defined herein and used herein with initial capitalization where rules of grammar do not otherwise require
capitalization, shall have the meanings assigned to them in the SEC Rule.
(1)
“Bondholder” or “holder” or any similar term, when used with reference to a Bond or Bonds, means any
person who shall be the registered owner of any outstanding Bond, including the holders of beneficial
interests in the Bonds.
(2)
“Final Official Statement” means the Official Statement dated ____________, 2014, relating to the
Bonds, including any document or set of documents included therein by specific reference which is
available to the public on the MSRB’s Internet Web site or filed with the SEC.
(3)
“MSRB” means the Municipal Securities Rulemaking Board.
(4)
“Obligated Person” means any person, including an issuer of municipal securities, which is either
generally or through an enterprise, fund or account of such person committed by contract or other
arrangement to support payment of the obligations on the Bonds (other than providers of municipal bond
insurance, letters of credit, or other liquidity facilities), for which Annual Information (as defined in
Section 5) is presented in the Official Statement. All Obligated Persons with respect to the Bonds are
identified in Section 4.
Section 2.
Bonds. This Agreement applies to the $_________, in aggregate principal amount of Indiana
Finance Authority (the “IFA”) First Lien Wastewater Utility Revenue Bonds, Series 2014A (CWA Authority Project) (the
“Bonds”).
Section 3.
Term. The term of this Agreement is from the date of delivery of the Bonds by the Obligor to
the earlier of (i) the date of the last payment of principal or redemption price, if any, of, and interest to accrue on, all the
Bonds; or (ii) the date the Bonds are defeased under the First Lien Trust Indenture, dated as of July 1, 2014 (the
“Indenture”) between the IFA and The Bank of New York Mellon Trust Company, N.A., as trustee.
Section 4.
Obligated Persons. The Obligor hereby represents and warrants as of the date hereof that it is
the only Obligated Person with respect to the Bonds. If the Obligor, at its sole discretion, determines that it is no longer an
Obligated Person, this Agreement shall no longer apply to the Obligor.
Section 5.
(a)
Provision of Annual Information.
The Obligor hereby undertakes to provide the following financial information:
(i)
To the MSRB in an electronic format as prescribed by the MSRB, when and if available, the
audited financial statements of the Obligor as examined by the Obligor’s independent auditors for each fiscal year
F-1
ending September 30, beginning with the fiscal year ending September 30, 2013, together with the opinion of such
accountants and all notes thereto, within sixty (60) days of receipt from such auditors; and
(ii)
To the MSRB in an electronic format as prescribed by the MSRB, within one hundred eighty
(180) days of each September 30, (A) beginning with the fiscal year ending September 30, 2013, unaudited annual
financial information for the Obligor for such fiscal year, if audited financial statements are not then available, and
(B) financial information or operating data of the type included under the following:
•
The information under the heading “THE WASTEWATER SYSTEM—The Wastewater
System,” “—Customer Base, Rates and Charges,” and “—Actual and Projected Debt Service Coverage” of the
Final Official Statement (collectively, the “Annual Information”).
(b)
If any Annual Information or audited financial statements relating to the Obligor referred to in paragraph
(a) of this Section 5 no longer can be generated because the operations to which they related have been materially changed
or discontinued a statement to that effect, provided by the Obligor to the MSRB, along with any other Annual Information
or audited financial statements required to be provided under this Agreement, shall satisfy the undertaking to provide such
Annual Information or audited financial statements. To the extent available, the Obligor shall cause to be filed along with
the other Annual Information or audited financial statements operating data similar to that, which can no longer be
provided.
(c)
The Obligor agrees to make a good faith effort to obtain Annual Information. However, failure to
provide audited financial statements or Annual Information because it is or they are not available to the Obligor shall not be
deemed to be a breach of this Agreement. The Obligor further agrees to supplement the Annual Information filing when
such data is available.
(d)
Annual Information or audited financial statements required to be provided pursuant to this Section may
be provided by a specific reference to documents available to the public on the MSRB’s Internet Web site or filed with the
SEC.
Section 6.
Accounting Principles. The financial information will be prepared by the Obligor. The audited
financial statements of the Obligor, as described in Section 5(a)(i), will be prepared by the Obligor’s independent auditors
in accordance with Accounting Principles as described in the Final Official Statement and defined in the Indenture.
Section 7.
Listed Events.
(a)
The Obligor hereby undertakes to provide for and on behalf of itself and each other Obligated Person,
either directly or indirectly through an indenture trustee or a designated agent, to provide the following to the MSRB in an
electronic format as prescribed by the MSRB and to the Counterparty within ten (10) Business Days of the occurrence of
any of the following events with respect to the Bonds, if material (which determination of materiality shall be made by the
Obligor in accordance with the standards established by federal securities laws):
(i) Non-payment related defaults;
(ii) Modifications to rights of Bondholders;
(iii) Bond calls (other than mandatory, scheduled redemptions, not otherwise contingent upon the
occurrence of an event, the terms of which redemptions are set forth
in detail in this Official Statement);
(iv) Release, substitution or sale of property securing repayment of the Bonds;
(v) The consummation of a merger, consolidation, or acquisition, or certain asset sales, involving the
Borrower, or entry into or termination of a definitive agreement relating to the foregoing; and
(vi) Appointment of a successor or additional trustee or the change of name of
a trustee.
F-2
(b)
The Obligor shall, either directly or indirectly through an indenture trustee or a designated agent, provide
the following to the MSRB in an electronic format as prescribed by the MSRB and the Counterparty within ten (10)
Business Days of the occurrence of any of the following events with respect to the Bonds, regardless of materiality:
(i) Principal and interest payment delinquencies;
(ii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iii) Unscheduled draws on credit enhancements reflecting financial difficulties;
(iv) Substitution of credit or liquidity providers, or their failure to perform;
(v) Adverse tax opinions or events affecting the tax-exempt status of the Bonds;
(vi) Defeasances;
(vii) Rating changes;
(viii) The issuance by the Internal Revenue Service of proposed or final determinations of taxability,
Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the
tax status of the Bonds;
(ix) Tender offers; and
(x) Bankruptcy, insolvency, receivership or similar events of the Obligor.
(c)
The Obligor may from time to time choose to provide notice of the occurrence of any other event, in
addition to those listed above, if, in the judgment of the Obligor, such other event is material with respect to the Bonds and
should be disclosed, but the Obligor does not commit to provide any such notice of the occurrence of any material event
except those events set forth above.
Section 8.
Notice to Counterparty. The Obligor hereby agrees to provide to the Counterparty, a copy of
any Annual Information, audited financial statements, material event notice or notice of failure to disclose Annual
Information which it files or causes to be filed pursuant to Sections 5, 7 and 10, respectively, concurrently with or prior to
such filing.
Section 9.
Use of Agent. The Obligor may, at its sole discretion, use an agent (the “Dissemination Agent”)
in connection with the dissemination of any information required to be provided by the Obligor pursuant to the SEC Rule
and this Agreement. If a Dissemination Agent is selected for these purposes, the Obligor shall provide prior written notice
thereof (as well as notice of replacement or dismissal of such agent) to the Counterparty and the MSRB. Further, the
Obligor may, at its sole discretion, retain counsel or others with expertise in securities matters for the purpose of assisting
the Obligor in making judgments with respect to the scope of its obligations hereunder and compliance therewith, all to
further the purposes of this Agreement as set forth in the preamble and Section 11 hereof.
Section 10.
Failure to Disclose. If, for any reason, the Obligor fails to provide the audited financial
statements or Annual Information as required by this Agreement, the Obligor shall provide notice of such failure in a timely
manner to the MSRB in an electronic format as prescribed by the MSRB.
Section 11.
Remedies.
(a)
The purpose of this Agreement is to enable the Underwriters to purchase the Bonds by providing for an
undertaking by the Obligated Persons in satisfaction of the SEC Rule. This Agreement is solely for the benefit of the
Bondholders and creates no new contractual or other rights for, nor can it be relied upon by, the SEC, underwriters, brokers,
dealers, municipal securities dealers, potential customers, other Obligated Persons, if any, or any other third party or
person. The sole remedy against the Obligor for any failure to carry out any provision of this Agreement shall be for
specific performance of the Obligor’s disclosure obligations hereunder and not for money damages of any kind or in any
F-3
amount, or for any other remedy. The Obligor’s failure to honor its covenants hereunder shall not constitute a breach or
default of the Bonds, the Indenture or any other agreement to which the Obligor is a party.
(b)
Subject to paragraph (e) below, in the event the Obligor fails to provide any information required of it by
the terms of this Agreement, any Bondholder may pursue the remedy provided for in the preceding paragraph in any court
of competent jurisdiction in the county in which the Obligor is located. An affidavit to the effect that such person is a
Bondholder supported by reasonable documentation of such claim shall be sufficient to evidence standing to pursue this
remedy.
(c)
Subject to paragraph (e) of this Section, any challenge to the adequacy of the information provided by the
Obligor by the terms of this Agreement may be pursued only by holders of not less than 25% in principal amount of Bonds
then outstanding in any court of competent jurisdiction in the county in which the Obligor is located. An affidavit to the
effect that such persons are Bondholders supported by reasonable documentation of such claim shall be sufficient to
evidence standing to pursue the remedy set forth in the preceding paragraph.
(d)
The Counterparty, upon satisfactory indemnification and demand by those persons it reasonably believes
to be Bondholders, may also pursue the remedy set forth above in any court of competent jurisdiction in the county in
which the Obligor is located. The Counterparty shall have no obligation to pursue any remedial action in the absence of a
valid demand from Bondholders and satisfactory indemnification.
(e)
Prior to pursuing any remedy under this Agreement, a Bondholder shall give notice to the Obligor, via
registered or certified mail, of such breach and its intent to pursue such remedy. Fifteen days after the mailing of such
notice, and not before, a Bondholder may pursue such remedy under this Agreement. The Obligor’s failure to honor its
covenants hereunder shall not constitute a breach or default of the Bonds or Indenture or any other agreement to which the
Obligor is a party.
Section 12. Counterparty’s Obligations.
(a)
The Counterparty shall have no obligation to take any action whatsoever with respect to information
provided by the Obligor under this Agreement (or by any Obligated Persons covered hereby), except (i) as set forth in this
Section 12 and (ii) any obligations arising from the Counterparty serving as a Dissemination Agent, and no implied
covenants or obligations shall be read into this Agreement against the Counterparty. Further, except as set forth in this
Section 12, the Counterparty shall have no responsibility to ascertain the truth, completeness, accuracy or timeliness of the
information provided as required hereunder by the Obligor or any Obligated Person, nor as to its sufficiency for purposes of
compliance with the SEC Rule or the requirements of this Agreement. The Counterparty may, at its sole discretion, retain
counsel or others with expertise in continuing disclosure matters for the purpose of assisting the Counterparty in making
judgments with respect to the scope of its obligations hereunder and compliance therewith.
(b)
If the Counterparty has not received the Annual Information by the date which is ten days before the date
set forth in Section 5(a)(ii) hereof, the Counterparty shall notify the Obligor, via registered or certified mail, that it has not
received such Annual Information. However, a failure by the Counterparty to provide (or any delay in providing) any notice
required by this paragraph shall not: (i) operate to relieve the Obligor of its obligation to provide the Annual Information in
the manner and within the time specified in this Agreement; or (ii) constitute a defense for the Obligor, or the basis for any
claim, counterclaim, cross-claim or third-party claim by the Obligor, in any action brought pursuant to Section 11 of this
Agreement or otherwise. Nothing contained in this paragraph shall operate to grant any additional rights or remedies to any
holder of Bonds.
(c)
In the event the Counterparty has not received a copy of the Annual Information on or before the fifth
business day after the date required by Section 5(a)(ii) hereof, the Counterparty shall be obligated to, and hereby agrees that
it will provide a notice of such failure in a timely manner to the MSRB in an electronic format as prescribed by the MSRB;
provided, however, that the Counterparty shall not give such notice as described in this subsection or the notice described in
subsection (b) above, if the Obligor has provided the Counterparty with notice that the Obligor has provided notice
pursuant to Section 10 hereof.
Section 13.
Identifying Information. All documents provided to the MSRB under this Agreement shall be
accompanied by identifying information as prescribed by the MSRB.
F-4
Section 14.
Resignation and Removal of Counterparty. The Counterparty may resign in its capacity under
this Agreement at any time by giving written notice thereof to the Obligor. So long as the Obligor has not failed to honor
its obligations as set forth in Sections 5, 7 and 10, the Obligor may remove the Counterparty in its capacity under this
Agreement at any time by giving written notice thereof to the Counterparty. Upon such resignation or removal, the Obligor
shall promptly appoint a successor Counterparty.
Section 15.
Modification of Agreement. The Obligor and the Counterparty may, from time to time, amend
or modify this Agreement without the consent of or notice to the Bondholders if either (a)(i) such amendment or
modification is made in connection with a change in circumstances that arises from a change in legal requirements, change
in law or change in the identity, nature or status of the Obligor, or type of business conducted, (ii) this Agreement, as so
amended or modified, would have complied with the requirements of the SEC Rule on the date hereof, after taking into
account any amendments or interpretations of the SEC Rule, as well as any change in circumstances, and (iii) such
amendment or modification does not materially impair the interests of the Bondholders, as determined either by (A) the
Counterparty or nationally recognized bond counsel or (B) an approving vote of the holders of the requisite percentage of
outstanding Bonds as required under the Indenture, subject to the further provisions of the Indenture, at the time of such
amendment or modification; or (b) such amendment or modification (including an amendment or modification which
rescinds this Agreement) is permitted by the SEC Rule, as then in effect.
Section 16.
Interpretation. It is the intention of the parties that this Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed and enforced in accordance with the law of the State of Indiana.
This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Indiana.
Section 17.
Severability Clause. In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 18.
Successors and Assigns. All covenants and agreements in this Agreement made by the Obligor
and the Counterparty shall bind their successors, whether so expressed or not.
Section 19.
following addresses:
Notices. All notices required to be given under this Agreement shall be made in writing at the
If to the Obligor:
CWA AUTHORITY, INC.
2020 North Meridian Street
Indianapolis, Indiana 46206
Attn: General Counsel, Board of Directors for Utilities
Facsimile: (317) 927-4549
If to the Counterparty:
The Bank of New York Mellon Trust Company, N.A.
300 North Meridian Street, Suite 910
Indianapolis, Indiana 46204
Attn: Corporate Trust Department
Facsimile: (317) 637-9821
IN WITNESS WHEREOF, the Obligor and the Counterparty have caused this Agreement to be executed as of
____________, 2014.
[Remainder of Page Intentionally Left Blank – Signature Pages Follow]
F-5
SIGNATURE PAGE OF OBLIGOR
TO
CONTINUING DISCLOSURE UNDERTAKING AGREEMENT
CWA AUTHORITY, INC., as Obligor
By
John R. Brehm, Senior Vice President
and Chief Financial Officer
IFA FIRST LIEN WASTEWATER UTILITY REVENUE BONDS, SERIES 2014A
(CWA AUTHORITY PROJECT)
F-6
SIGNATURE PAGE OF COUNTERPARTY
TO
CONTINUING DISCLOSURE UNDERTAKING AGREEMENT
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Counterparty
By
Its:
IFA FIRST LIEN WASTEWATER UTILITY REVENUE BONDS, SERIES 2014A
(CWA AUTHORITY PROJECT)
F-7
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX G
DESCRIPTION OF CONSENT DECREE PROJECTS
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE 7-5 (Revised September 1, 2010)
CSO Control Measures, Design Criteria, Performance Criteria, and Critical Milestones
CSO Control
Measure1
1
White River
Screen at IUPUI
(CSO 039)
2
3
4
5
6
7
Fall Creek
Inflatable Dams
(CSOs 063,
063A, and 065)4
Modifications to
Lift Station 507
at Riviera Club
Real-time
Overflow
Controls in
Neighborhoods
(CSOs 080,
084,118)4
Pogues Run
Inflatable Dam
at Brookside
Park (CSO 101)4
White River East
Bank Storage
Tank at
IUPUI/White
River State Park4
Belmont
Advanced
Wastewater
Treatment
(AWT) Plant
Improvements -Wet-Weather
Storage and
Primary
Clarifiers
Description2
Horizontal screen with
automatic clearing for
removal of floatables
Construction of three
inflatable dams
Modifications to CSO
156 to take advantage of
available storage volume
in LS 507
Design Criteria2
Provide
instantaneous peak
screening flow rate
of 63 MGD
Provide in-system
storage capacity of
approximately 4.6
MG
Maximize in-system
storage
Construction of three
inflatable dams
Provide in-system
storage capacity of
approximately 0.5
MG
Construction of one
inflatable dam
Provide in-system
storage capacity of
approximately 0.4
MG
Provide storage
capacity of 3 MG
Overflow storage for
CSO 039
Wet-weather storage
basins (30 and 4 MG),
two new primary
clarifiers, and new
process/yard piping
When incorporated
with the rest of the
Belmont
Improvements,
provide peak
primary and
biological treatment
rate of 300 MGD
G-1
Performance
Criteria
Capture most
floatables greater
than 4 mm in size
Consistent
Operation5
Diversion of flow
from CSO 156 to
LS 507. When
incorporated with
the rest of the
White River
watershed,
achieve 95
percent capture
and 4 overflow
events6
Consistent
Operation5
Consistent
Operation5
When
incorporated with
the rest of the
White River
watershed,
achieve 95
percent capture
and 4 overflow
events6
When
incorporated with
the rest of the
Belmont
improvements,
facility complies
with current
NPDES permit
Critical
Milestones3
Bid Year – 2001
Achievement of
Full Operation 2002
Bid Year – 2001
Achievement of
Full Operation 2006
Bid Year – 2002
Achievement of
Full Operation –
2002
Bid Year – 2002
Achievement of
Full Operation –
2003
Bid Year – 2003
Achievement of
Full Operation 2004
Bid Year – 2003
Achievement of
Full Operation
(CSO 39 Only) 2004
Bid Year – 2003
Achievement of
Full Operation –
2007
CSO Control
Measure1
8
Lower Pogues
Run
Improvements Minimize
Overflows near
IPS Schools
Description2
Consolidation of outfalls
034 and 035 to Pogues
Run Tunnel.
Consolidation sewer is
approximately 5200 feet
of pipe
9
Belmont AWT -Gravity Belt
Thickeners
Installation of four
gravity belt thickeners
10
Sewer
Separation White River and
Thompson Road
(CSO 275)
Separation and
rehabilitation of sewers
to reduce stormwater
flow and minimize CSO
275
11
Sewer
Separation Lick Creek
(CSO 235)
Separation and
rehabilitation of sewers
to reduce storm water
flow and minimize CSO
235
12
Real Time
Overflow
Control Study,
Phase II
Rerouting of
Overflows on
Upper White
River to Lift
Station 507 at
Riviera Club
(CSO 205)
Develop next phase of
RTC to further maximize
the existing combined
sewer system
Relocation of CSO 205
outfall to Lift Station
507. Includes
rehabilitation of
upstream sewers to
eliminate clearwater
infiltration
13
Design Criteria2
Provide
approximate
instantaneous peak
flowrate of 40 MGD
upstream. Provide
approximate
maximum
instantaneous peak
flowrate of 150
MGD downstream
Produce a thickened
sludge concentration
of 5% total solids
(TS)
Storm drains
designed as per
Indianapolis
Stormwater
Standards. Sanitary
sewer designed as
per Indianapolis
Sanitary Standards
and Ten State
Standards
Storm drains
designed as per
Indianapolis
Stormwater
Standards. Sanitary
sewer designed as
per Indianapolis
Sanitary Standards
and Ten State
Standards
Evaluate RTC for
combined sewer
system
Provide
approximate
instantaneous peak
flowrate of 25 MGD
G-2
Performance
Criteria
When
incorporated with
the rest of the
Pogues Run
watershed,
achieve 95
percent capture
and 4 overflow
events6
Critical
Milestones3
Bid Year – 2004
Achievement of
Full Operation –
2006
Reduction of
sludge volumes
and improved
sludge
dewatering
operations.
Separation of
sewers to
minimize CSO
275.
Bid Year – 2006
Achievement of
Full Operation –
2008
Separation of
sewers to
minimize CSO
235.
Bid Year – 2006
Achievement of
Full Operation 2008
Completed Study
Commence study 2007 Complete
study – 2008
When
incorporated with
the rest of the
White River
watershed,
achieve 95
percent capture
and 4 overflow
events6
Bid Year – 2008
Achievement of
Full Operation –
2010
Bid Year – 2006
Achievement of
Full Operation 2008
CSO Control
Measure1
14
Riviera Club
Improvements to
Overflow
Storage Tank
Description2
Add wet-weather
disinfection to existing
satellite storage facility
Design Criteria2
Provide
approximate
instantaneous peak
disinfection flow
rate of 53 MGD
15
Fall Creek
Tunnel,
Collector Pipes
and Watershed
Projects
Deep storage tunnel,
consolidation sewers,
elimination of CSO 103
and dam removal8
Provide a total
effective11 storage
volume of 250 MO
in the Fall Creek,
White River, Pogues
Run, Pleasant Run
and DRTC tunnel
system10
16
Deep Rock
Tunnel
Connector, Deep
Tunnel Pumping
Station and
Screening
Facilities, and
Connection of
CSO 008, CSO
117 and CSO
118 to the Deep
Rock Tunnel
Connector
Provide a total
effective11 storage
volume of 250 MG
in the Fall Creek,
White River, Pogues
Run, Pleasant Run
and DRTC tunnel
system10 with a
minimum peak
conveyance and
dewatering capacity
of 90 MGD CSO
flow to Southport
17
Belmont AWT Wet-Weather
Treatment (New
aeration tanks )
Deep rock tunnel
originating near CSO
118 and terminating near
the headworks of the
Southport facility8, deep
tunnel pumping station
and screening facilities
located near the
Southport treatment
facility, and structures
necessary to tie CSO
008, CSO 117 and CSO
118 flows into the Deep
Rock Tunnel Connector
Provide secondary
biological treatment of
the Belmont PE Bypass
18
Lower Pogues
Run
Improvements
Deep Storage Tunnel and
consolidation sewers8
Provide a total
effective11 storage
volume of 250 MG
in the Fall Creek,
White River, Pogues
Run, Pleasant Run
and DRTC tunnel
system10
Provide in series
peak biological
treatment rate of
300 MGD
G-3
Performance
Criteria
When
incorporated with
the rest of the
White River
watershed,
achieve 95
percent capture
and 4 overflow
events6
When
incorporated with
the rest of the Fall
Creek watershed,
achieve 97
percent capture
and 2 overflow
events on Fall
Creek Watershed6
Maximize
delivery of flow
from White River
Tunnel to
Southport AWT
Plant. Optimize
capture of CSO
008, CSO 117
and CSO 118
Critical
Milestones3
Bid Year - 2009
Achievement of
Full Operation –
2011
When
incorporated with
the rest of the
Belmont
improvements,
facility complies
with current
NPDES permit
When
incorporated with
the rest of the
Pogues Run and
White River
watersheds,
achieve 95
percent capture
and 4 overflow
events6
Bid Year – 2009
Achievement of
Full Operation 2012
Bid Year – 2006
Achievement of
Full Operation 2025
Bid Year – 2011
Achievement of
Full Operation –
2017
Bid Year – 2011
Achievement of
Full Operation 2021
CSO Control
Measure1
19
Pogues Run Sewer
Separation at
Forest Manor
Park (CSO 143)
Description2
Sewer separation that
minimizes CSO 143
20
White River
Tunnel (Central
Tunnel) and
Watershed
Projects
Central tunnel,
consolidation sewers,
sewer separation and
dam modifications8
21
Belmont AWT –
Wet Weather
Chlorination /
Dechlorination
(Chlorine
Disinfection
Tank and Reestablish
Existing Outfall)
New wet-weather
disinfection system and
new discharge to White
River
22
Southport
Advanced
Wastewater
Treatment Plant
Improvements Secondary
Treatment
System
Expansion
Expansion of Secondary
Treatment System from
150 MGD to 250 MGD
Design Criteria2
Storm drains
designed as per
Indianapolis
Stormwater
Standards. Sanitary
sewer designed as
per Indianapolis
Sanitary Standards
and Ten State
Standards
Provide a total
effective storage
volume of 250 MG
in the Fall Creek,
White River, Pogues
Run, Pleasant Run
and DRTC tunnel
system”
Additional peak
disinfection
treatment rate of
150 MGD for a total
of 300 MGD peak
disinfection
treatment capacity
consistent with
applicable
disinfection
requirements of
current NPDES
permit12
When incorporated
with the rest of the
Southport
Improvements,
provide total peak
secondary and
disinfection
treatment rate of
250 MGD consistent
with applicable
disinfection
requirements of
current NPDES
permit. Provide
maximum pumping
rate of 345 MGD12
G-4
Performance
Criteria
Separation of
sewers to
minimize CSO
143
Critical
Milestones3
Bid Year – 2010
Achievement of
Full Operation 2012
When
incorporated with
the rest of the
White River
watershed,
achieve 95
percent capture
and 4 overflow
events6
When
incorporated with
the rest of the
Belmont
improvements,
facility complies
with current
NPDES permit
Bid Year – 2010
Achievement of
Full Operation 2021
When
incorporated with
the rest of the
Southport
improvements,
facility complies
with current
NPDES permit
Bid Year – 2010
Achievement of
Full Operation 2012
Bid Year – 2012
Achievement of
Full Operation 2017
CSO Control
Measure1
23
Southport
Advanced
Wastewater
Treatment Plant
Improvements -Wet Weather
Disinfection
Description2
New disinfection facility
and new process/yard
piping
24
Southport
Advanced
Wastewater
Treatment Plant
Improvements -Primary Clarifier
Expansion
Enhancement of primary
clarification facility, and
new process/yard piping
25
Belmont
Advanced
Wastewater
Treatment Plant
Improvements Raw Wastewater
Pumping
Capacity
Expansion
Rerouting of the existing
Wet Weather Pump
Station (WWPS) to the
existing wet weather
storage basin (WWSB
No.1)
Design Criteria2
When incorporated
with the rest of the
Southport
Improvements,
provide total peak
secondary and
disinfection
treatment rate of
250 MGD consistent
with applicable
disinfection
requirements of
current NPDES
permit. Provide
maximum pumping
rate of 345 MGD12
When incorporated
with the rest of the
Southport
Improvements,
provide peak
primary treatment
capacity as required
to support secondary
treatment design,
and peak secondary
and disinfection
treatment capacity
of 250 MGD
consistent with
applicable
disinfection
requirements of
current NPDES
permit. Provide
maximum pumping
rate of 345 MGD12
When incorporated
with the rest of the
Belmont
Improvements,
provide total peak
primary and
biological treatment
rate of 300 MGD.
Provide peak
pumping rate of 330
MGD12
G-5
Performance
Criteria
When
incorporated with
the rest of the
Southport
improvements,
facility complies
with current
NPDES permit
Critical
Milestones3
Bid Year – 2012
Achievement of
Full Operation –
2017
When
incorporated with
the rest of the
Southport
improvements,
facility complies
with current
NPDES permit
Bid Year – 2012
Achievement of
Full Operation –
2017
When
incorporated with
the rest of the
Belmont
improvements,
facility complies
with current
NPDES permit
Bid Year – 2011
Achievement of
Full Operation 2012
CSO Control
Measure1
26
Southport
Advanced
Wastewater
Treatment Plant
Improvements -Headworks
Description2
Expansion of headworks,
screening, grit removal,
and new process/yard
piping
Performance
Criteria
When
incorporated with
the rest of the
Southport
improvements,
facility complies
with current
NPDES permit
Critical
Milestones3
Bid Year – 2012
Achievement of
Full Operation 2017
Deleted
Deleted
279
Deleted
Deleted
Design Criteria2
When incorporated
with the rest of the
Southport
Improvements,
provide total peak
secondary and
disinfection
treatment rate of
250 MGD consistent
with applicable
disinfection
requirements of
current NPDES
permit. Provide
peak pumping rate
of 345 MGD12
Deleted
289
Deleted
Deleted
Deleted
Deleted
Deleted
29
Pleasant Run,
Deep Tunnel and
Overflow
Collector Pipe
Deep tunnel, connection
sewers, collection
interceptor and sewer
separation. Tunnel
connects to area of White
River and DRTC
Tunnels and extends to
the area of CSO 0848
Provide a total
effective11 storage
volume of 250 MG
in the Fall Creek,
White River, Pogues
Run, Pleasant Run
and DRTC tunnel
system10
Bid Year – 2010
Achievement of
Full Operation –
2025
30
Eagle Creek
Overflow
Collector Pipe
(CSO Collector
Pipe). Belmont
West Cutoff via
the Belmont
North Relief
Interceptor
System
Collection interceptor
system and relief
interceptor to achieve
Performance Criteria8
Provide
instantaneous peak
flowrate of 38 MGD
in the Belmont
North Relief
Interceptor System.
Provide
instantaneous peak
flowrate of 25 to 50
MGD at the
downstream end of
the Eagle Creek
Overflow Collector
Pipe.
When
incorporated with
the rest of the
Pleasant Run
watershed,
achieve 95
percent capture
and 4 overflow
events6
When
incorporated with
the rest of the
Eagle Creek and
White River
watersheds,
achieve 95
percent capture
and 4 overflow
events6
G-6
Bid Year – 2013
Achievement of
Full Operation 2018
CSO Control
Measure1
31
Upper Pogues
Run
Improvements
32
Belmont
Advanced
Wastewater
Treatment
(AWT) Plant
Improvements
Description2
Off-line storage facility,
collection interceptor to
achieve Performance
Criteria8.
Design Criteria2
Provide
instantaneous peak
flowrate of 40 to 80
MGD. Provide
storage volume of 1
to 3 MG
Rerouting of in-plant
recycle flows from the
headworks to primary
treatment via the Plant
Drain Pump Station
(PDPS). Diversion of the
primary effluent from
Belmont AWT to
Southport AWT via the
Primary Effluent Pump
Station (PEPS)
When incorporated
with the rest of the
Belmont AWT
improvements,
provide total peak
primary and
secondary treatment
rate of 300 MGD.
Provide peak
headworks pumping
rate of 330 MGD.
Performance
Criteria
When
incorporated with
the rest of the
Pogues Run
watershed,
achieve 95
percent capture
and 4 overflow
events6
When
incorporated with
the rest of the
Belmont
improvements,
facility complies
with current
NPDES permit
Critical
Milestones3
Bid Year – 2017
Achievement of
Full Operation –
2021
Bid Year - 2008
Achievement of
Full Operation 2009
1
Upon full implementation, the CSO Control Measures listed in Table 7-5 are expected to result in at least the
Performance Criteria of 95 percent capture and 4 CSO events on the White River, Pleasant Run, Pogues Run, and Eagle
Creek and 97 percent capture and 2 CSO events on Fall Creek, as evaluated in accordance with footnote 6. Either a
revision to Indiana’s current water quality standards or some other legal mechanism is necessary to authorize overflows due
to storms exceeding those levels of control. In Section 9 of the LTCP, the City of Indianapolis is requesting a revision to
the applicable water quality criteria consistent with this level of control through the establishment of a CSO wet weather
limited use subcategory supported by a Use Attainability Analysis (“UAA”). The design and construction of CSO Control
Measures 1 through 14 (“Phase I” Projects) are not dependent upon the level of control ultimately determined, and therefore
the City will implement CSO Control Measures 1 through 14 according to the terms and schedule set forth in this Table.
IDEM and U.S. EPA acknowledge that the City is scheduled to start investing heavily in CSO Control Measures 15 through
32, which are level of control-dependent, in the years following approval of the City’s LTCP. Accordingly, all parties
intend that the UAA process be completed within five years of LTCP approval. If the UAA process is not completed
within five years, IDEM and U.S. EPA agree that, under certain circumstances, the City can seek a modification of the
implementation schedule.
2
Footnote 2 deleted.
3
The term “Bid Year” means “Completion of the Bidding Process.”
4
The CSO control measure is not expected to achieve 95 or 97 percent capture on its own and will work in
conjunction with other CSO control measures at the specified CSO outfalls to achieve the performance criteria.
5
Consistent Operation: Performs as designed on a regular basis. Failure to perform correctly is infrequent.
6
CSO Control Measures will be designed in accordance with the Design Criteria set forth in Table 7-5, and they
shall also achieve at least the Performance Criteria of 97 percent capture for the Fall Creek watershed and 95 percent
capture for other CSO receiving waters, and 2 CSO events for the Fall Creek watershed and 4 CSO events for each of the
other CSO receiving waters in a “typical year.” “Typical year” performance, and achievement of Performance Criteria,
shall be assessed in accordance with Section 8.4 (Post Construction Monitoring) using the average annual statistics
generated by the collection system model for the representative five-year simulation period of 1996 to 2000 (or another
five-year simulation period subsequently proposed by the city and approved by IDEM and U.S. EPA).
7
Control Measure 28 deleted.
G-7
8
The collection interceptor may be installed as multiple interceptors with the combined capacity as described in the
Design Criteria.
9
Control Measure 27 and 28 deleted.
10
Control Measures 15, 16,18, 20 and 29 have a combined Design Criteria of 250 MG of “effective” (as defined
below) storage in the Fall Creek, White River, Pogues Run, Pleasant Run and DRTC Tunnel System. This total effective
available system storage of 250 MG includes audits and deaeration chambers, which are tunnel connections from drop
shafts to the mainline tunnels.
11
”Effective” as identified for Control Measures 15, 16, 18, 20 and 29 is defined as the storage volume that will be
designed and operated to ensure 250 MG of wet-weather flow may be reliably stored in the tunnel system provided
Indianapolis has received sufficient precipitation to capture 250 MG of wet-weather flow in a single event or two or more
sequential events.
12
Control Measures 21, 22, 23, 24, 25 and 26 have flowrates as noted within the Design Criteria for each Control
Measure. Control Measures 22, 23, 24 and 26 have a secondary treatment capacity of 250 MGD and a disinfection capacity
of 250 MGD (consistent with applicable disinfection requirements of the City’s current NPDES permit), which includes inplant return flows.
G-8
APPENDIX H
SCHEDULE OF PILOTS PAYABLE TO THE CITY OF INDIANAPOLIS
[THIS PAGE INTENTIONALLY LEFT BLANK]
SCHEDULE OF PILOTS PAYABLE TO THE CITY OF INDIANAPOLIS
PILOT PAYMENT SCHEDULE
Calendar Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
Amount
$12,770,735
$17,168,014
$17,168,014
$19,520,181
$22,729,332
$25,647,129
$27,908,296
$28,739,159
$29,152,282
$29,444,917
$27,788,097
$26,095,838
$24,362,479
$22,851,006
$23,154,132
$23,485,461
$23,842,921
$24,221,728
$24,618,285
$25,031,974
$25,457,202
$25,889,899
$26,330,027
$26,777,638
$27,232,858
$27,695,816
H-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX I
SCHEDULE OF PAYMENTS DUE TO THE CITY OF INDIANAPOLIS FOR THE
SANITARY DISTRICT’S GENERAL OBLIGATION BONDS
[THIS PAGE INTENTIONALLY LEFT BLANK]
SCHEDULE OF PAYMENTS DUE TO THE CITY OF INDIANAPOLIS FOR THE
SANITARY DISTRICT’S GENERAL OBLIGATION BONDS
Amount
Date
07/01/2014
01/01/2015
07/01/2015
01/01/2016
07/01/2016
01/01/2017
07/01/2017
01/01/2018
$711,593.75
$7,675,593.75
$538,788.75
$7,315,788.75
$368,017.50
$7,489,017.50
$188,572.50
$7,671,572.50
I-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX J
SUMMARY OF THE MANAGEMENT AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
SUMMARY OF THE MANAGEMENT AGREEMENT
The City of Indianapolis, Indiana (the “City”) entered into an Agreement (the “Management Agreement”) for the
Operation and Maintenance of the Advanced Wastewater Treatment Plants and Wastewater and Stormwater Collection
System with United Water, LLC (previously White River Environmental Partnership (the “Manager”). Pursuant to the
Management Agreement, the Manager will run the day-to-day operation, maintenance, repair and management of the
Wastewater System. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Management Agreement.
Term of the Management Agreement
The Management Agreement was executed as of October 11, 2007. The initial term of the Management
Agreement was nine (9) years, subject to early termination. The Commencement Date was January 1, 2008.
The City, the Sanitary District and the Manager entered into the Memorandum of Understanding dated January 12,
2011 (the “Management Agreement MOU”), which was further memorialized in that certain Agreement Pertaining to the
Management Agreement, dated January 12, 2011 (the “Amendment”). Pursuant to the Amendment, the Citizens Authority
is the permitted assignee of the City under the Management Agreement. The Citizens Authority, therefore, assumed all the
rights and responsibility of the City under the Management Agreement. As such, among other things, the Citizens
Authority may extend the Initial Term of the Management Agreement by an additional six (6) years (the “Extended Term”).
The Extended Term may be extended five (5) additional years (the “Additional Term”). The Citizens Authority and the
Manager may negotiate to extend either the Extended Term or Additional Term.
Ownership of Wastewater System
The Managed Assets, Capital Improvements and all revenues derived therefrom shall be owned by the Citizens
Authority throughout the Term of the Management Agreement. The Citizens Authority is authorized to enter upon, occupy,
and use the Managed Assets to operate, maintain, repair, replace and manage the Managed Assets, and to design, construct,
install, start-up and test any Capital Improvements authorized to be completed by the Manager under the Management
Agreement.
Operation, Maintenance and Management Responsibility
The Manager shall operate and manage the Managed Assets on a twenty-four (24) hour per day, seven (7) day per
week basis, and shall collect, receive and treat Influent, produce and discharge Effluent, handle, transport and dispose of
Residuals and operating wastes, provide all information necessary to each Regulating Entity, and otherwise operate and
manage the Managed Assets so as to comply with Applicable Law, the Contract Standards and Performance Guarantees
applicable to such activities. The Manager shall properly and regularly maintain and replace the machinery, Equipment,
Fixed Assets, Buildings and Grounds and improvements constituting the Managed Assets in a way such that when the
Managed Assets are returned to the Citizens Authority at the end of the Term they are in a condition which does not require
the Citizens Authority to undertake a significant overhaul or immediate replacements in order to continue to provide
reasonably priced and efficient wastewater treatment, Effluent delivery services and Residuals processing and disposal of
the nature provided under the Management Agreement.
Service Fee and Other Payments
The Citizens Authority shall pay the Manager an annual Service Fee as compensation for the Manager’s
performing the Contract Services. The Manager is also eligible for a Performance Incentive Fee. The annual Service Fee
shall be calculated in accordance with the following formula:
SF = FC + RC
Where,
SF
=
Service Fee
FC
=
Fixed Component
RC
=
Reimbursable Costs Charge
J-1
The Fixed Component shall be compensation for each Billing Year for all Maintenance Services to be provided by
the Manager under the Management Agreement. The Fixed Component shall be adjusted on January 1 of each Billing Year
by multiplying the Fixed Component for the previous Billing Year by the Adjustment Factor.
The “Adjustment Factor” when used with respect to any Billing Year, shall be determined as follows:
AFn
=
1+(CPIF ((CPIn-1/CPIn-2)-1))+(ECIF(ECIn-1/100))
Where,
AFn
=
The Adjustment Factor for Contract Year “n”
CPIF
=
The percentage of the Adjustment Factor adjusted for
Changes in the CPI Index and hereunder equal to sixty percent (60%).
CPIn-1
=
The arithmetic average of the twelve (12) monthly CPI
Index values for the twelve (12) month period ending on June 30 of the Contract Year preceding the Contract Year
with respect to which a calculation is to be made hereunder.
CPIn-2
=
The arithmetic average of the twelve (12) monthly CPI
Index values for the twelve (12) month period ending on June 30 of the Contract Year two (2) years preceding the
Contract Year with respect to which a calculation is to be made hereunder.
ECIF
=
The percentage of the Adjustment Factor adjusted for changes in the ECI Index and
hereunder equal to forty (40%).
ECIn-1
=
The arithmetic average of the four (4) quarterly ECI Index values for the twelve (12)
month period ending on June 30 of the preceding Contract Year with respect to which a
calculation is to be made hereunder.
The Reimbursable Cost Charge shall be an amount equal to the actual and direct expenses (without markup for
profit, administrative costs or otherwise) paid by the Manager to unrelated third parties for any charges incurred in the
operation of the Managed Assets that are the responsibility of the Citizens Authority. Such charges for which the Citizens
Authority is responsible (and for which the Manager shall be reimbursed to the extent paid by the Citizens Authority) shall
be identified by the Citizens Authority.
The Citizens Authority shall receive a credit for expenses paid by the Citizens Authority (without markup for
administrative costs or otherwise) for charges incurred in the operation of the Managed Assets that are the responsibility of
the Manager.
The Citizens Authority shall pay the Service Fee in monthly installments in an amount equal to the sum of: (1)
one-twelfth (1/12) of the annual Fixed Component; (2) any monthly Reimbursable Costs Charge; less (3) any credits
determined on a monthly basis; and plus or minus (4) any adjustment to reconcile any prior or Reimbursable Cost charge
payments. At the end of each Billing Quarter, any overpayments from prior months shall be credited against the monthly
Service Fee payment due in the last month of such Billing Quarter and any underpayments from prior months shall be
added to the monthly Service Fee payment due in the last month of such Billing Quarter. Any remaining overpayment or
underpayment shall be carried over to the next succeeding Billing Quarter. In addition, the Citizens Authority shall pay in
monthly installments an amount equal to the payments due to the Manager attributable to any Additional Services
determined on a monthly basis.
For any Billing Year, the Performance Incentive Fee shall be equal to an amount not to exceed twenty-five percent
(25%) of the Fixed Component of the Service Fee for such Billing Year. The Performance Fee is based on the following
Performance Incentives (weighted as such):
1.
Maximizing Treatment of Wet Weather Flows (20%)
2.
Maximizing TSS Removal at the AWT Facilities (10%)
J-2
3.
Maximizing Belmont Facility Primary Treatment TSS Removal (5%)
4.
Reducing Dry Weather SSOs (5%)
5.
Eliminating SSOs (dry weather and wet weather) from Sanitary Sewers (15%)
6.
Critical Equipment Availability (10%)
7.
Reduced Corrective Maintenance (10%)
8.
Maintain Effective Solids Handling at the AWT Facilities (10%)
9.
Preventing odor complaints and control H2S and odor levels at the AWT Facilities (5%)
10.
Preventing odor complaints and control H2s and odor levels in the Collection System (5%)
11.
Exceeding MBE/WBE Requirements (5%)
The Performance Incentive Fee for any Billing Year shall not exceed the Maximum Incentive Fee for such Billing
Year. For each Billing Quarter during the Billing Year, the Citizens Authority shall pay the Manager sixty percent (60%)
(the “Interim Percentage”) of the Maximum Incentive Fee for such Billing Year divided by four, upon submittal and
approval by the Citizens Authority of monthly and quarterly Performance Incentive Progress Reports. This percentage of
the Incentive Fee shall be paid by the 45th day after the end of each Billing Quarter (“Periodic Payments”). The Citizens
Authority shall offset the Periodic Payments by any credits against the Performance Incentive Fee occurring during such
Billing Quarter (i) due to sharing of cost savings from reductions in staffing or (ii) due to Manager nonperformance. If the
Citizens Authority advanced Periodic Payments to the Manager in excess of the Performance Incentive Fee due for such
Billing Year, the Manager shall repay the Citizens Authority the difference between the Periodic Payment paid to the
Manager and the Performance Incentive Fee earned by the Manager within thirty (30) days of receiving such report. If the
Periodic Payments advanced by the Citizens Authority to the Manager are less than the Performance Incentive Fee due for
such Billing Year, the Citizens Authority shall pay the difference owed the Manager within forty five (45) days of receiving
such report. Some or all of the performance measures used to calculate the Maximum Incentive Fee may be assessed as of
the last day of each Billing Quarter; however, final assessment of such measure for each Billing Year shall be made as of
the last day of the fourth Billing Quarter of each Billing Year.
Pursuant to the Amendment, the Citizens Authority and the Manager agreed that an all or nothing interpretation of
the Management Agreement that identifies the lowest performance payment percentage earned for any of the
Subcomponents of a particular Performance Incentive and then multiplies that percentage by the maximum incentive
amount to find the incentive payment due to the Company is inconsistent with the spirit of the Management Agreement,
particularly Section 9.10 and Exhibit 6 of the Management Agreement.
As further explanation, as provided in Exhibit 6 of the Management Agreement, each Performance Incentive is
assigned one to nine numbered Subcomponents, and each Subcomponent is associated with performance measurements and
assigned equal weighted percentages. Payment to the Manager of all or a portion of a Performance Incentive amount is
based upon the total percentage obtained by adding the percentage attributable to each Subcomponent that is partially or
fully satisfied by the Manager.
Capital Improvements
The Manager shall assist the Citizens Authority with operability reviews at the planning phase (10%) and the 30%,
60% and 90% design phases, provide construction support assistance and provide other assistance for all Capital
Improvements made during the Term of the Management Agreement and shall provide an estimate of any expected
increases to operation and maintenance costs resulting from the implementation of such Capital Improvement at the ninety
percent (90%) design phase. The Manager or the Citizens Authority may request an adjustment to the Fixed Component of
the Service Fee after implementation of a Capital Improvement with a construction, installation, or purchase value in excess
of ($200,000).
J-3
Personnel
The Manager shall perform the Contract Services in accordance with the Staffing Plan that describes the
organizational approach and the roles and responsibilities of the operation and management staff, Key Personnel and
technical and support staff for the Managed Assets. The Manager shall maintain a staffing level and qualifications at the
Wastewater System sufficient to enable the Manager to perform all of its obligations pursuant to the Management
Agreement in a timely and efficient manner and in compliance with all Applicable Laws.
Labor Organizations and Collective Bargaining. To the extent required or permitted by law, the Manager shall
recognize and bargain in good faith with any labor organization that represents the employees of the Manager who perform
work that is subject to the Management Agreement. Unless otherwise provided by agreement with its employees, the
Manager shall make available to its employees a defined contribution pension plan or a defined benefit pension plan but
shall not be required to provide both types of such pension plans. Any collective bargaining agreement entered into by the
Manager with the employees of the bargaining unit for the Wastewater System shall contain a “no strike/slowdowns”
provision in a form acceptable to the Citizens Authority. Should any employee performing work under the Management
Agreement not be represented by a labor organization but, during the Term of the Management Agreement become
represented by a labor organization, and following certification in accordance with the Applicable Law that a majority of
such employees in a bargaining unit have authorized a labor organization to represent them for collective bargaining with
the Manager, the Manager shall recognize the labor organization and bargain with it in good faith for a collective
bargaining agreement. Any agreement reached shall include a “no strike/slowdown” provision in a form acceptable to the
Citizens Authority.
Key Personnel. The Citizens Authority selected the Manager to perform the Contract Services based, in part, on
the past successful experience and expertise of the Manager’s key personnel, including the Project Manager (“Key
Personnel”). The Manager shall designate the persons serving as the Project Manager, the manager for the AWT Facilities,
the manager for the Collection System, the maintenance manager, the residuals manager, the odor control manager, the
laboratory manager and pretreatment manager as Key Personnel at least sixty (60) days prior to the Commencement Date
and shall provide a summary of their experience and qualifications to the Citizens Authority. The Citizens Authority
reserves the right to reject any or all of the Manager’s proposed Key Personnel. Absent approval by the Citizens Authority,
the Manager shall not replace any Key Personnel. The Citizens Authority may require the Manager to remove or replace
any Key Personnel, with or without cause at any time. The Citizens Authority, in its discretion, reserves the right to reject
any candidate the Manager proposes as a replacement or substitute Key Personnel.
Indemnification and Limitation of Liability
Indemnification. The Manager agreed that it will defend, indemnify and hold harmless the Citizens Authority
Indemnitees from and against any and all liabilities, actions, damages, indirect damages, consequential damages, claims,
lawsuits, demands, judgments, suits, losses, deficiencies, obligations, fines, penalties, costs and expenses to the extent
arising out of or relating to, directly or indirectly: (i) performance by the Manager or any of its officers, members,
employees, agents, representatives, consultants, contractors or subcontractors; or (ii) any inaccuracy or misrepresentations
in or breach of any representation, warranty, covenant or agreement delivered by the Manager or the Guarantor, certificate
or affidavit delivered by the Manager or the Guarantor.
The Manager agreed to use reasonable efforts to incorporate its indemnification obligation in all subcontracts
entered into with suppliers of materials or services, and all labor organizations who furnish skilled and unskilled labor, or
who may perform any such labor or service in connection with a contract entered into pursuant to the Management
Agreement.
The Manager’s indemnity obligation shall not be limited in any way by any limitation on the amount or type of
damages, equitable relief, compensation or benefits payable by or for the Manager, any Subcontractor under worker’s
compensation acts, disability benefit acts or other employee benefit acts.
The Manager’s indemnity obligation includes indemnification for all reasonable expenses, court costs and attorney
fees, including those incident to appeals incurred by or imposed upon the Citizens Authority Indemnitees in connection
with enforcement or defense of the Citizens Authority Indemnitees’ rights to indemnify. In addition, the Manager agreed
that the Citizens Authority Indemnitees may employ any attorney of their choice and/or may use its in-house counsel in a
matter to enforce or defend the Citizens Authority Indemnitees’ right to indemnity. However, if the Citizens Authority
J-4
Indemnitees engage their own legal counsel, and the Manager has engaged or offered to engage legal counsel to defend the
Citizens Authority Indemnitees in the matter, the Citizens Authority Indemnitees shall bear their own costs and expenses of
their legal counsel, unless the Manager’s and the Citizens Authority Indemnitees’ positions in the mater are in conflict, in
which case all reasonable costs and expenses of the Citizens Authority Indemnitees’ legal counsel shall be borne by the
Manager.
The Citizens Authority agreed to protect, indemnify and hold harmless the Manager Indemnitees from and against
any and all Losses arising out of or relating to, directly or indirectly: (i) the negligence or misconduct of the Citizens
Authority or any of its officials, employees, agents, representatives, engineers, consultants, contractors or subcontractors in
connection with the performance by the Citizens Authority of the terms and provisions of the Management Agreement; or
(ii) any inaccuracy or misrepresentation in or breach of any representation, warranty, covenant or agreement made by the
Citizens Authority in any document, certificate or affidavit delivered by the Citizens Authority pursuant to the terms and
conditions of the Management Agreement; provided the Citizens Authority’s indemnity shall not extend to any matter for
which the Manager is required to indemnify the Citizens Authority.
Limitation of Liability. The Manager and the Citizens Authority acknowledge and agree that because of the
unique nature of the undertakings contemplated by the Management Agreement, it is difficult or impossible to determine
with precision the amount of damages that would or might be incurred by the Citizens Authority or the Manager as a result
of a breach of the Management Agreement. In no event, however, shall the Citizens Authority or the Manager be liable for
or obligated in any manner, except to the extent of indemnification of claims of third parties, to pay incidental, special,
punitive, consequential or indirect damages of any nature to the other Party because of a breach of the Management
Agreement, warranty, delay or otherwise, arising out of the performance or nonperformance by the Manager or the Citizens
Authority, as applicable, of their obligations under the Management Agreement, except where such damages are subject to
a claim by the Manager for insurance, including coverage pursuant to a policy secured pursuant to the Management
Agreement.
Notwithstanding the above, the Manager shall not be responsible for any fines, penalties or other costs connected
with any complaint or a violation or any law, regulation, guideline, permit, judgment, order in effect or in existence on the
date prior to the Commencement Date of the Management Agreement or which arise from acts or omissions occurring prior
to the Commencement Date.
Insurance
Insurance Procurement; Duty to Maintain; Obligation to Provide Continuous Service. The Management
Agreement provides that the Manager, on its own behalf and on behalf of anyone directly or indirectly employed by it for
whose acts or omissions it may be liable, shall secure, or cause to be secured, and maintain, at is costs and expense,
including premium payments, certain insurance coverage and policies. The Manager shall secure each necessary insurance
policy prior to the Commencement Date, and the policies shall be maintained through the Term of the Management
Agreement. The Manager shall assure continuous coverage if any policy is canceled, not renewed or materially changed.
The Manager shall, at its own expense, pay any premiums required to assure no lapse of insurance coverage for any time
period.
Letter of Credit; Net Worth of the Guarantor
During the term of the Management Agreement and continuing thereafter until all monetary obligations of the
Manager have been discharged, the Citizens Authority shall be provided an irrevocable, direct draw letter of credit (the
“Letter of Credit”) in a form satisfactory to the Citizens Authority in the amount of Three Million Five Hundred Dollars
($3,500,000). Upon the occurrence of a Manager Default (described below), the Citizens Authority shall be permitted to
make one or more draws on such Letter of Credit in an amount which the Citizens Authority determines, in its reasonable
discretion, to be appropriate. Each bank at which such Letter of Credit is established and/or maintained shall be subject to
the approval of the Citizens Authority. Each such bank shall be instructed that it is to honor any draft the Citizens
Authority may present, without prior notice to the issuer. Also, such bank shall be instructed that it shall have no objection
rights to payment to the Citizens Authority and that the Manager or the Guarantor shall not have first claim rights to such
Letter of Credit.
Net Worth of the Guarantor. During the Term of the Management Agreement, the Guarantor shall maintain a Net
Worth of Two Hundred Million Dollars ($200,000,000) as of December 31 for each Contract Year during the Term of the
J-5
Management Agreement. As soon as reasonably practicable following the end of each Contract Year during the Term of
the Management Agreement, the Guarantor shall provide the Citizens Authority with the audited balance sheet of the
Guarantor as of December 31 (for the Contract Year immediately preceding) and the related statements of cash flow the
period then ended.
Events of Default
Events of Default by the Manager. Each of the following shall constitute an Event of Default by the Manager
(each, a “Manager Default”) after the Commencement Date:
To the extent such failures or refusals are not otherwise covered in the Management Agreement, persistent and
repeated failure or refusal of the Manager to operate and maintain the Wastewater System in accordance with the
performance measures and the Performance Guarantees set forth in the Management Agreement or to perform timely any
other obligation under the Management Agreement, unless such failure or refusal is clearly recognized, justified and
excused under the Management Agreement;
(a)
Failure of the Manager to pay amounts owed to the Citizens Authority under the Management Agreement
within thirty (30) days following the date they become due and owing;
(b)
Failure of the Manager to meet the Effluent Guarantee requirements on a rolling six (6) month average
basis, unless such failure is clearly recognized, justified and excused under the Management Agreement;
(c)
Failure of the Manager to meet any NPDES Permit conditions or requirements on a regular basis, unless
such failure is clearly recognized, justified and excused under the Management Agreement;
(d)
Failure of the Manager to comply with the Citizens Authority’s inspection rights as provided for in the
Management Agreement;
(e)
Failure to secure and maintain the insurance required under the Management Agreement;
(f)
Failure to maintain solvency as defined in the Management Agreement;
(g)
The default of the Guarantor under the Guarantee; or
(h)
Failure to secure and maintain the Letter of Credit as required by the Management Agreement.
Events of Default by the Department. Each of the following shall constitute an Event of Default on the part of the
Citizens Authority (each, a “Citizens Authority Default”) after the Commencement Date:
(a)
To the extent such failures or refusals are not otherwise covered in the Management Agreement,
persistent and repeated failure or refusal of the Citizens Authority to perform timely any material obligation under the
Management Agreement unless such failure or refusal is clearly recognized, justified and excused by the Management
Agreement; or
(b)
Failure by the Citizens Authority to pay undisputed amounts owed to the Manager under the Management
Agreement within ninety (90) days following the time they become due and payable.
Default Notices and Opportunity to Cure. With the exception of a certain termination for the reasons described in
the Management Agreement, the Management Agreement shall not be terminated for an Event of Default unless and until
(i) the Party contemplating termination gives the offending Party written notice in reasonable detail of each Event of
Default the offending Party is alleged to have committed or permitted (a “Default Notice”), and (ii) the offending Party
shall have failed to cure such Event of Default within thirty (30) days (or such longer period as may reasonably be required
to diligently effect such cure) following delivery of the Default Notice to the offending Party. Notwithstanding the
foregoing, if there are repeated Manager Defaults, then, regardless of attempts by the Manager to cure the same, the
Citizens Authority, in its sole discretion, may terminate the Management Agreement without giving a Default Notice or
affording the Manager a period to cure.
J-6
Termination of Management Agreement
Termination for a Manager Default. If the Citizens Authority gives the Manager notice pursuant to certain
subsections of the Management Agreement, the Citizens Authority may terminate the Management Agreement. Upon the
occurrence of a Manager Default under certain subsections of the Management Agreement, the Citizens Authority may
terminate the Management Agreement immediately by deliver of a Default Notice to the Manager.
Termination for a Citizens Authority Default. If the Manager gives the Citizens Authority a Default Notice
pursuant to a certain section of the Management Agreement, and such Citizens Authority Default is not cured within the
period set forth in that certain section of the Management Agreement, the Manager may terminate the Management
Agreement.
Termination for Labor Unrest. If, on or after the Commencement Date, personnel employed by the Manager and
performing services pursuant to the Manager’s obligations under the Management Agreement shall go on a labor strike or
slowdown, or if a work stoppage, walkout or secondary boycott shall occur, for any reason or cause whatsoever, and such
act or event effectively prevents the Manager from performing its material obligations under the Management Agreement,
the Manager, during the pendency of the period in which performance is prevented, may, in its sole discretion, by notice to
the Manager, terminate the Management Agreement.
Termination for Uncontrollable Circumstances. If an Uncontrollable Circumstance shall occur after the
Commencement Date relative to a material obligation of the Manager or the Citizens Authority under the Management
Agreement and such Uncontrollable Circumstance or the effect thereof prevents performance of such material obligation
for a period of thirty (30) days, the Citizens Authority and the Manager shall, during or after such thirty (30) day period,
meet to review the situation. If, despite the good faith efforts of the Parties to reach an agreement, no agreement is reached
within a reasonable time considering the nature and extent of the Uncontrollable Circumstance, then either Party may
terminate the Management Agreement upon notice to the other Party.
Termination for Insufficient Funding. In the event sufficient funds to pay for the Service Fee are unavailable,
through the failure of any entity to appropriate funds or otherwise, the Citizens Authority shall have the right to terminate
the Management Agreement upon thirty (30) days’ notice to the Manager.
Termination for Adverse Tax Treatment. If the Internal Revenue Service or any other federal or state taxing
authority issues or fails to issue any ruling, or imposes any requirement or obligation, in connection with the Citizens
Authority, the Manager or the Management Agreement, which would adversely affect the tax-exempt status of any bonds
issued by the Citizens Authority or any special taxing district thereof (in the sole judgment of the Citizens Authority), the
Citizens Authority may terminate the Management Agreement upon thirty (30) days’ notice to the Manager.
Termination for Breach of Assignment Provision. The Manager will not (i) assign or transfer the Management
Agreement or its right, title or interests or obligations therein, in whole or in part, or (ii) voluntarily or involuntarily
undergo a Change in Control without, in each instance, the Citizens Authority’s advance written approval, which the
Citizens Authority has the sole discretion to withhold. An unauthorized assignment by the Manager will constitute a breach
of the Management Agreement and the Citizens Authority may, in its sole discretion, terminate the Management
Agreement.
Termination for Convenience. The Manager or the Citizens Authority may terminate the Management
Agreement for its convenience, singly, and without cause at any time upon sixty (60) days prior written notice to the other
party. Upon a termination of the Management Agreement by either party, the Citizens Authority is not liable to the
Manager any costs or expense associated with such termination, excluding amounts due for services rendered under the
Management Agreement, except for following expenses:
•
If the Citizens Authority or the Manager exercises its right of convenience termination occurring on any date
after the Closing through and including December 31, 2013, the Manager shall be paid Five Million Five
Hundred Sixty-Eight Thousand and Ninety-Four Dollars ($5,568,094).
•
If the Citizens Authority or the Manager exercises its right of convenience termination occurring on any date
during the period beginning January 1, 2014 through and including December 31, 2014, the Manager shall be
paid Four Million Four Hundred Ninety-Seven Thousand Seven Hundred Thirty-Three Dollars ($4,497,733).
J-7
•
If the Citizens Authority or the Manager exercises its right of convenience termination occurring on any date
during the period beginning January 1, 2015 through and including December 31, 2015, the Manager shall be
paid Three Million Four Hundred Thousand Two Hundred Eleven Dollars ($3,400,211).
•
If the Citizens Authority or the Manager exercises its right of convenience termination occurring on any date
during the period beginning January 1, 2016 through and including December 31, 2016, the Manager shall be
paid Two Million Two Hundred Seventy-Six Thousand Three Hundred Eighty-Six Dollars ($2,276,386).
J-8
WASTEWATER SYSTEM BOUNDARIES
WASTEWATER SYSTEM MAP
Wholesale Customers and Excluded Cities
South Whitestown
LEGEND:
Hamilton Southeast
Excluded Cities
Wholesale Customers
Wholesale Customers that
are Excluded Cities
Marion County Boundary
Township Boundary
Old Indianapolis City Limits
CSO Area
Lawrence
1
Speedway
Ben Davis
Conservancy District
Beech Grove
Tri-County Conservancy
Southport
The three northern townships of Johnson County:
White River, Pleasant, and Clark Township
represent the Greenwood Service Area
0
1
2
3 Miles
Indiana Finance Authority • First Lien Wastewater Utility Revenue Bonds, Series 2014A (CWA Authority Project)