FINAL Approved 9/27//05
MINUTES OF THE BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
___________________________
___________________________
The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan.
|
Present: |
Commissioners Gary L. Calkins, Joseph Graves, Jr., Ifield Joseph, Santiago Rios, Robin M. Smith, and Nancy Wonch |
|
Absent: |
Commissioners Ron Callen and Tim Haggart |
The Secretary declared a quorum present.
Chairperson Smith called the meeting to order at 5:30 p.m.
APPROVAL OF MINUTES
Motion by Commissioner Wonch, seconded by Commissioner Rios, to approve the minutes of the regular meeting held May 24, 2005.
Carried unanimously.
PUBLIC COMMENTS
THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING.
Deborah Garneau, 1311 Victor Ave, Lansing, spoke regarding the BWL policy for bidding and award of contracts. By going out of state, money is taken from the local and state economies and also puts people out of work.
Referred to staff for follow up and response back to the Board.
Joseph Davis, Business Manager IBEW Local 352, handed out a letter concerning employee management issues that he believes are not being addressed. Three specific requests addressed in the letter were 1) independent third-party audit, 2) immediate suspension of any planned procedural changes, and 3) freeze on management contract negotiations.
Placed on file.
Bernice Stasa, P.O. Box 76, Shaftsburg, Michigan, spoke regarding BWL jobs that are awarded to out-of-state companies.
Referred to staff for follow up and response back to the Board.
Victor L. Colon, Jr., BWL employee, spoke regarding coal handling positions that were eliminated to save the BWL money. Mr. Colon believes this is not a savings to the BWL because of the overtime that is being paid.
Staff responded and indicated that (1) the employees themselves selected the current staffing level, (2) overtime is being caused by problems with the railroad, and (3) the overtime would be the same with 13 employees or 10 employees and that there is a savings to the BWL with the current staffing.
COMMUNICATIONS
Thank you letter from the American Public Power Association (APPA) re: Commissioner Robin Smith’s presentation at an APPA seminar on June 21, 2005.
Placed on file.
COMMITTEE REPORTS
Commissioners Present: Gary Calkins, Tim Haggart, Santiago Rios, and Nancy Wonch.
The Nominating Committee met on June 30, 2005 at 9:00 a.m. to review Commissioner survey responses for consideration of nominations for Board officers.
The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2005-06:
|
Chair: |
Robin Smith |
|
Vice Chair: |
Ifield Joseph |
|
Chair Pro Tem: |
Joseph Graves, Jr. |
There being no further business, the meeting adjourned at 9:23 a.m.
Respectfully
submitted,
NOMINATING COMMITTEE
Nancy Wonch, Chair
Motion by Commissioner Graves, seconded by Commissioner Wonch, to approve the report as presented.
Action: Carried unanimously.
Motion by Commissioner Wonch, seconded by Commissioner Rios, to approve the new slate of officers for Fiscal Year 2005-06.
Discussion: The Nominating Committee members believe they have an excellent slate of officers for FY 05-06. They would like to begin a progression system of moving commissioners up through the offices.
Action: Carried unanimously.
The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m., Tuesday, July 12, 2005.
Chair Pro Tem Ifield Joseph called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Ron Callen, Gary Calkins, Tim Haggart, Joseph Graves, Ifield Joseph, Robin Smith, and Nancy Wonch. Commissioner Santiago Rios was absent.
Public Comment
There were no public comments.
BOND REFINANCING
Dennis McFarland, Senior Vice President of Finance introduced the concept of providing for the award of sale of up to $44 million refunding bonds. He reported that this is an economic opportunity for the Board of Water and Light to save a substantial amount annually in debt service payments. Bonds would be issued to pay the cost of refunding a portion or all of the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 1999A, due July 1, 2010 through 2014, and the Water Supply, Steam and Electric Utility System Revenue Bonds Series 2002A, due July 1, 2013 through 2018, and to pay the costs of issuing the Bonds.
Mr. McFarland introduced Kevin McCanna, President of Speer Financial, Inc. and Kester So, Bond Counsel of Dickinson Wright PLLC. Mr. McCanna explained the significance of picking a savings target, such as 3%, to 3.5% savings, to generate sufficient interest savings. An Official Statement would need to be prepared as the offering document that would follow the same process used in the past. He noted that the 1999A is considered the best bond issue to refund at this time. The 2002A issue is close, but not quite ready. He provided a detailed explanation of the process and reviewed the Bond Ordinance. Mr. McCanna reviewed a summary of the bond issue and reported that under current market conditions, the total savings is projected to be between $1 million and $1.25 million for the 1999A and 2002A bond series.
(Commissioner Nancy Wonch entered the meeting at 4:45 p.m. and Commissioner Gary Calkins entered the meeting at 4:53 p.m.)
Mr. McCanna recommended using bond insurance for the proposed refunding. He noted that the market for bond insurance is very competitive, resulting in relatively low premiums. As a result, most bond issues of AA rating or less, if longer than five years, are insured. The benefit of insurance to an issuer is a lower interest rate. A comparison of the estimated cost-benefit was distributed for review. Mr. McCanna reported that the average coupon on an uninsured issue is estimated at 3.81% while insurance lowers this to 3.72%. The result is a gross savings of approximately $322,000. This is worth $268,000 on a present value basis, which compares favorably to an estimated premium of $160,000.
The Committee reviewed an initial “draft” of the Ninth Supplemental Revenue Bond Resolution, written with a not-to-exceed principal amount of $44 million, with placeholders for insurance, and as a “negotiated sale” instead of a public sale with bids. A “draft” Escrow Deposit Agreement was also reviewed.
Following discussion, General Manager Novick recommended that if the Committee is in agreement, staff will bring forth a formal resolution that would delegate to the General Manager, the Senior Vice President of Finance and a Commissioner the authorization to execute this transaction within a six-month window.
Motion by Commissioner Wonch, seconded by Commissioner Calkins, to support the philosophy of staff pursuing the refunding of a portion or all of the 1999A and 2002A series bonds and to bring forth a formal resolution on the approval of the Ninth Supplemental Revenue Bond Resolution Authorizing Water Supply, Steam and Electric Utility System Revenue Refunding Bonds of the City of Lansing, with set parameters outlining how long the resolution remains open and the savings target for action at the next Board meeting, or, if necessary, at a Special Meeting.
The motion carried by the following vote:
Aye: Callen, Calkins, Graves, Haggart, Joseph, Smith, and Wonch
Nay: None
Absent: Rios
POTENTIAL TRANSMISSION PURCHASE THROUGH THE
MICHIGAN PUBLIC POWER AGENCY (MPPA)
General Manager Novick reported that in the interest of full disclosure, he wanted to make it clear to all the Commissioners that the proposal on the potential transmission purchase through the Michigan Public Power Agency (MPPA) has some risk. Staff believes it is an investment for the future, but cannot guarantee its success. Staff’s recommendation is predicated upon assumptions about the future, which may or may not be realized. He noted that this potential purchase is included as a line item in the FY’06 Capital Budget.
Doug Wood, Director of Engineering, presented the business case on the proposal. He discussed the history of MPPA’s transmission ownership and the opportunity for the BWL to obtain up to 12.554MW of transmission and associated rights through MPPA for BWL use. Mr. Wood noted that given the current BWL operation, the BWL would not benefit from additional transmission ownership rights for its own use. However, it is anticipated that future changes in the wholesale market as well as operational changes due to the economies of current BWL generation units will make these added transmission rights much more valuable to the BWL in the future. Mr. Wood reported that risks include: (a) BWL need for transmission may not materialize such that maximum benefit is not achieved, (b) BWL may not be able to reallocate transmission to others for an acceptable price prior to BWL need, (c) MPPA and the BWL may be responsible for additional O&M or a capital contribution in the event repair is needed on the transmission asset tied to the purchase, and (d) large insurance claim and/or decommissioning cost associated with the Michigan Electric Transmission Company (METC) transmission asset is tied to the purchase.
Mr. Wood concluded that based solely on current operations, the BWL cannot justify an additional transmission purchase. Future changes in BWL operations are expected to make the added transmission purchase beneficial and justified in the future. Also BWL costs associated with the transmission purchase can be mitigated until such time as the BWL can make effective use of the purchased transmission by reallocating the associated rights to another MPPA member for a fee. Finally, the opportunity to purchase transmission similar to the proposed purchase is extremely rare.
Commissioner Robin Smith inquired about the BWL’s working relationship with MPPA since the Board’s decision in January 2005 to submit a five-year advance notice to MPPA of the BWL’s intention to terminate its participation in the MPPA Power Pool Project. General Manager Novick explained that MPPA is comprised of individual projects and the BWL plans to remain involved in other projects, such as the Belle River Project. This transmission utilization opportunity was precipitated by the results of a lawsuit settlement that MPPA initiated against Consumers Energy.
(Commissioner Nancy Wonch left the meeting at 5:35 p.m.)
Following discussion, it was moved by Commissioner Calkins, seconded by Commissioner Graves to bring forward the following recommendations to the Board for consideration at the July 26, 2005 meeting:
· To authorize the General Manager to sign a Transmission Utilization Agreement with MPPA, subject to final wording acceptable to the General Counsel, on committing to the purchase of additional transmission.
· Further, to authorize staff to initiate efforts to reallocate the associated transmission rights to other MPPA cities for a fee until such time as BWL transmission usage increases.
The motion carried by the following vote:
Aye: Callen, Calkins, Graves, Haggart, and Joseph
Nay: Smith
Absent: Rios and Wonch (Commissioner Wonch left the meeting at 5:35 p.m.)
BALANCED SCORECARD
General Manager Novick reported that the BWL implemented the corporate balanced scorecard (scorecard) concept last year. The scorecard has been very helpful in focusing on important issues as the BWL continues to look for ways to improve performance. He introduced team leader David Kus of Customer Service who presented the scorecard objectives for Fiscal Year 2006. Mr. Kus acknowledged the team members who represent all of the BWL processes: Steve Brennan from Production, Kellee Christensen from Customer Projects & System Integrity, Shelley Wells from Human Resources, and Charmaine Shellman of Finance & Planning. The balanced scorecard project sponsor is Dennis McFarland. It was pointed out that the results of the balanced scorecard is not tied to compensation. This is a quality improvement initiative to create a culture of performance to enable the BWL to clarify its vision and strategy and translate them into action. Mr. Kus reported that the program sets targets in areas where management believes performance is critical to the BWL’s success. He further reported that for the most part, the corporate balanced scorecard will look a lot like the 2005 version. He reviewed the changes for FY 2006:
Financial Performance: The operations and maintenance cost per customer has been changed to O&M budget variance.
Operational Excellence: The forced outage rate for production plants used in 2005 will be changed to availability factor for 2006. Availability factor is the percentage of time a unit is available to be used. Also the measure for circuits with five or more breaker actions during the year changes from a percentage to a fixed number.
Performance targets have been tightened for four performance measures, including the speed of answering phone calls, allowable breaker actions, fly ash sold, and the number of variances, compliance notices and fines. There will be a small reduction in the target for meter reading.
Commissioner Smith asked about management’s approach to involve all employees in setting the scorecard targets and measures and getting their buy-in. General Manager Novick responded that management is not trying to tell employees what to do, but rather tell them what the organization is trying to achieve. He emphasized that employee feedback is important in order to continuously improve strategic performance and results. He further noted that the balanced scorecard is not totally a buy-in program in the sense that employees get to decide what the goal is, but the employees have control over their actions to help create future value. Employees are encouraged to work toward meeting the goal. Following discussion, there was general consensus among the Commissioners that the balanced scorecard approach and the process used in setting the targets and measures are adequate to clarify the BWL’s vision and strategy.
lansing community college foundation
General Manager Novick reported that the Board of Water and Light has been approached by the Lansing Community College (LCC) Foundation for a commitment to the capital campaign. He stated that staff believes LCC is a critical asset to the economic vitality of the Lansing community, a major and growing customer of the BWL, and a valuable local resource for BWL employee development for the future. Accordingly, staff recommends the Board’s consideration of a commitment to the capital Campaign of $5,000 per year for four years.
Commissioner Robin Smith announced that in the interest of full disclosure, she has been installed as a Trustee of the Lansing Community College Board, thus she will not be able to participate in deliberations or the voting for the LCC Foundation.
It was moved by Commissioner Haggart, seconded by Commissioner Callen to authorize the General Manager to bring forth a resolution to the Board on committing $5,000 per year for four years to the LCC Foundation for the Lansing Community College Capital Campaign.
Aye: Callen, Calkins, Graves, Haggart, Joseph
Nay: None
Absent: Rios and Wonch. (Commissioner Wonch left the meeting at 5:35 p.m.)
Abstain: Smith
UPDATE ON TRIANGLE PROPERTY
(GRAND AVENUE/SHIAWASSEE STREET)
General Manager Novick reported that the developer (River Street Triangle, LLC) has been unable to reach accord on their development agreement with the City of Lansing due to recent proposed modifications to the project. Discussions continue between the City and the developer, however, the Board’s May 24, 2005 action to amend the Purchase Agreement with River Street Triangle is stalled at the City Council pending agreement between the City and the developer. Mr. Novick noted that the reason for bringing this matter to the Committee’s attention is twofold: (1) to apprise the Commissioners that the Amended Purchase Agreement has not been approved by City Council and (2) to notify the Commissioners that either the BWL or the developer has the right to terminate the agreement if City Council approval is not obtained by July 31, 2005.
Commissioner Robin Smith recused herself from discussion and debate concerning the Triangle Property due to her position as Trustee of the Lansing Community College Board.
After discussion, the Committee unanimously consented to doing nothing at this time. It was the sense of the Commissioners that the Board and the developer have already invested considerable time in discussions to reach agreement. By waiting until July 31, hopefully it will permit the City and the developer sufficient time to resolve pending issues with their agreement.
General Manager Novick stated that he will apprise the Commissioners after July 31, to either disapprove the agreement or if the developer has given cancellation notice. He noted that the BWL is holding their earnest money check, however, it is refundable to the developer if the agreement is not approved by July 31st.
This was an information piece only and no action was required.
On motion by Commissioner Callen, seconded by Commissioner Haggart, the Committee of the Whole adjourned at 6:25 p.m.
Respectfully submitted,
Ifield P. Joseph, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Joseph, seconded by Commissioner Wonch, to receive the Committee of the Whole reports as presented.
Action: Carried unanimously.
MANAGER’S
RECOMMENDATIONS
Background materials on items presented are on file in the Office of the Corporate Secretary.
Transmission Utilization Agreement. General Manager Novick reported that MPPA obtained the right to purchase transmission through settlement of litigation over transmission access with Michigan Electric Transmission Company. Because the BWL generates most of its own power, it does not have a current need for more transmission access. The BWL also has transmission access to allow power to be delivered to Lansing from the Belle River plant. However, uncertainties over the future operation of the transmission grid and the rare opportunity to purchase transmission access prompted staff to recommend the purchase. The 12.5MW purchase will be made at a cost of just under $750,000, but could offset over $190,000 in annual transmission costs. There is the consideration of the future of the BWL’s generating units. Potential rules concerning emissions could make some of our units, especially those at the Eckert Plant, uneconomical to operate at some point in the future. If that happens, the BWL may have to purchase electricity from other utilities and transmission ownership could make delivery of that power less expensive.
Resolution 2005-7-3
|
A. |
ENTERING INTO TRANSMISSION UTILIZATION AGREEMENT WITH MPPA |
WHEREAS, The Michigan Public Power Agency (MPPA) has been involved in litigation with the Michigan Electric Transmission Company (METC) and Consumers Power Company (Consumers) in connection with the acquisition of additional ownership interests in certain high voltage transmission lines; and
WHEREAS, as part of the settlement of the litigation, MPPA will acquire additional ownership interests in a certain high voltage transmission line owned by METC; and
WHEREAS, the BWL believes it is in the best interest of the Board for MPPA to move forward with the acquisition and for the Board to participate in the transmission project by entering into the Transmission Utilization Agreement with MPPA; and
WHEREAS, a form of the Transmission Utilization Agreement has been provided at this meeting.
RESOLVED, That, the form of the Transmission Utilization Agreement to be entered into between MPPA and the Board is approved, and the General Manager is hereby authorized to execute such agreement on behalf of the Board, with such changes as may not be materially adverse to the Board and subject to final approval of BWL General Counsel.
Staff Remarks: The BWL has an opportunity to purchase the rights to 12.554 MW of transmission through the Michigan Public Power Agency (MPPA) in the Michigan Electric Transmission Company Transmission System for $749,645.66. In the future, these rights have the potential to offset over $190,000 per year (2006 rates) of transmission costs. The minimum period the rights would be in effect would be 15 years, but it is anticipated that the benefits will extend for a much longer period. Based on current operations, the BWL cannot make use of these rights, but expect to need them in the not so distant future. The agreement with MPPA permits the BWL to reallocate the rights to another MPPA member. The need for transmission exists by other MPPA members such that the BWL may reallocate the rights for a fee, until such time as they are needed by the BWL. It is not totally certain that the BWL will obtain the maximum benefits from these rights, but given this unique opportunity, the fact that there is a high probability of needing them in the future, coupled with the ability of the BWL to offset some of its costs by reallocating the rights to another MPPA member when not needed, we recommend approval of the above resolution.
Motion by Commissioner Wonch, seconded by Commissioner Joseph, to approve the resolution.
Discussion: Commissioner Smith stated that she plans to support entering into this agreement even though she voted against it at the Committee of the Whole meeting. After that meeting, management responded to her concerns as to why this business decision was made. The BWL will own 12.5MW of transmission line capacity and will be able to sell it if they are not used.
Action: Carried unanimously.
Revenue Bond Refinancing. The following resolution authorizes refinancing of Series 1999A and Series 2002A bonds if there is a present value savings of at least 3% of the bonds refunded. Under current market conditions, the savings would be about $1.2 million. The timing for refinancing the bonds is critical since interest rates continue to fluctuate. Timing is also important because the bonds can be refinanced only one time before their call date in another eight years. Because of this, care needs to be given to ensure that the greatest possible savings are realized. If the bonds are refinanced it will be done through a negotiated sale with bond underwriters selected through a request for proposals process.
Resolution 2005-7-4
|
B. |
BOND REFINANCING OF SERIES 1999A AND SERIES 2002A BONDS |
NINTH SUPPLEMENTAL REVENUE BOND RESOLUTION AUTHORIZING
WATER SUPPLY, STEAM AND ELECTRIC
UTILITY SYSTEM REVENUE REFUNDING BONDS
OF THE CITY OF LANSING, MICHIGAN
Section 1. Supplemental Resolution. This Ninth Supplemental Revenue Bond Resolution is supplemental to, and is adopted in accordance with Section 23(a)(i) of, the Bond Resolution.
Section 2. Definitions. Unless the context indicates that another meaning is intended, the following words and terms used in this Ninth Supplemental Revenue Bond Resolution shall have the following meanings, and any other words and terms which are defined in Act 94 or in the Bond Resolution shall have the meanings as therein defined:
(i) "Bond Purchase Agreement" means the bond purchase agreement entered into by the Board with the Underwriter in connection with the sale of the Series 2005A Bonds, as authorized in Section 8 herein.
(ii) "Bond Resolution" means the Amended And Restated Bond Resolution adopted by the Board on October 24, 1989, as supplemented and amended from time to time.
(iii) "Escrow Deposit Agreement" means the Escrow Deposit Agreement between the Board and the Transfer Agent, as Escrow Trustee.
(iv) "Junior Lien Bonds" means the Series 1999B Bonds and any additional junior lien bonds issued pursuant to the Bond Resolution.
(v) "Insurance Policy" means the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Insured Bonds when due.
(vi) "Insured Bonds" means the Series 2005A Bonds, if any, designated as Insured Bonds in the Bond Purchase Agreement for the Series 2005A Bonds.
(vii) "Insurer" means MBIA Insurance Corporation, a New York domiciled stock insurance company, or any successor thereto or assignee thereof.
(viii) "Series 1994B Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1994B issued pursuant to the Bond Resolution.
(ix) "Series 1999A Bonds" means the Water Supply, Steam And Electric Utility System Revenue Bonds, Series 1999A issued pursuant to the Bond Resolution.
(x) "Series 1999B Bonds" means the Water Supply, Steam And Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) issued pursuant to the Bond Resolution.
(xi) "Series 2002A Bonds" means the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2002A issued pursuant to the Bond Resolution.
(xii) "Series 2002B Bonds" means the Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2002B issued pursuant to the Bond Resolution.
(xiii) "Series 2003A Bonds" means the Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2003A issued pursuant to the Bond Resolution.
(xiv) "Series 2005A Bonds" means the Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2005A authorized by this Ninth Supplemental Bond Resolution.
(xv) "Underwriter" or "Underwriters" means the underwriter or underwriters designated in the Bond Purchase Agreement or the Series 2005A Bonds.
Section 3. Authorization of Series 2005A Bonds. To pay the cost of refunding all or a portion of the outstanding Series 1999A Bonds and Series 2002A Bonds, including making a deposit to a reserve fund and payment of legal, financial and other expenses of the issuance of the Series 2005A Bonds, the City, by and through the Board, shall borrow a sum not in excess of Forty-four Million Dollars ($44,000,000), as finally determined in the Bond Purchase Agreement for the Series 2005A Bonds, pursuant to the provisions of Act 94, Public Acts of Michigan, 1933, as amended. The Board previously determined it was necessary for the public health, safety and welfare of the City to undertake the projects financed with the Series 1999A Bonds and the Series 2002A Bonds. The refunding satisfies a public purpose and will enable the Board to reduce the annual debt service payments in order to keep certain utility rates competitive. The estimated remaining useful lives of the projects financed with the Bonds to be Refunded (defined below) is at least 26 years.
Section 4. Bond Details, Parameters and Security. The Series 2005A Bonds shall be designated "Water Supply, Steam And Electric Utility System Revenue Refunding Bonds, Series 2005A," shall be of equal standing in priority of lien on the Net Revenues of the System with the Series 1994B Bonds, the Series 1999A Bonds, the Series 2002A Bonds, the Series 2002B Bonds, the Series 2003A Bonds and any other Additional Bonds, shall be senior in priority of lien to any Junior Lien Bonds issued hereunder, including, but not limited to the Series 1999B Bonds, and shall be payable solely out of Net Revenues and any other moneys pledged under the Bond Resolution and shall not be a general obligation of the City or the Board. Series 2005A Bonds shall be issued in denominations of $5,000 or any integral multiples of $5,000 not exceeding the amount of the Series 2005A Bonds maturing on the same date and shall be numbered in consecutive order of authentication from 1 upwards. The Series 2005A Bonds shall be issued as fully registered bonds without coupons and shall have an original issuance date of their dated date, or such other date as the Board shall approve in the Bond Purchase Agreement for the Series 2005A Bonds.
The Series 2005A Bonds shall bear interest at a rate or rates to be determined in the Bond Purchase Agreement for the Series 2005A Bonds, not exceeding seven percent (7%) per annum, and shall mature no later than July 1, 2018. The refunding must result in an aggregate net present value savings of at least 3% of the principal amount of the bonds to be refunded; however, Staff is directed to use its best efforts to maximize the amount of savings. Interest shall be payable commencing on January 1, 2006 and on each July 1 and January 1 thereafter, or such other dates specified in the Bond Purchase Agreement for the Series 2005A Bonds, by check drawn on the Transfer Agent and mailed to each Registered Owner at the registered address, as shown on the registration books of the City, by the Board of Water and Light, maintained by the Transfer Agent. Interest on the Series 2005A Bonds shall be payable to each Registered Owner as of the 15th day of the month prior to the date on which the interest payment is due. Interest on the Series 2005A Bonds shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The principal of the Series 2005A Bonds shall be payable at the principal office of the Transfer Agent upon presentation and surrender thereof; provided, however, if part of an Outstanding Series 2005A Bond registered in the name of a securities depository company as part of a book-entry system is selected for redemption, the securities depository company may retain the Series 2005A Bond and make an appropriate notation on the Series 2005A Bond indicating the date and amount of the reduction in the principal amount of the Series 2005A Bond resulting from the partial redemption, however, in the case of the final payment of the remaining principal amount of the Series 2005A Bond, the Series 2005A Bond shall be presented and surrendered to the Transfer Agent as a condition of payment. The aggregate principal amount of the Series 2005A Bonds, the amount of each maturity and the designation of serial and term bonds, if any, shall be as finally determined in the Bond Purchase Agreement for the Series 2005A Bonds.
The City's obligation to fund the Bond Reserve Account as required herein may be satisfied, in whole or in part, by delivery to the Transfer Agent of a letter of credit, surety bond or similar arrangement (the "Bond Reserve Account Guaranty") representing the irrevocable obligation of the issuer of the Bond Reserve Account Guaranty to pay to the Transfer Agent upon request made by the Transfer Agent an amount up to the stated amount thereof for application to the Series 2005A Bonds, and other Senior Lien Bonds issued under the Bond Resolution, together with written evidence from any Rating Agency rating the Series 2005A Bonds, in each case to the effect that such rating agency has reviewed the proposed Bond Reserve Account Guaranty and that the issuance of the Bond Reserve Account Guaranty or, if a Bond Reserve Account Guaranty is then in effect (in whole or in part) with respect to the Bond Reserve Account, the substitution of the proposed Bond Reserve Account Guaranty for the Bond Reserve Account Guaranty then in effect, will not by itself, result in a reduction or withdrawal of its ratings on the Series 2005A Bonds. Such Bond Reserve Account Guaranty shall be available to pay Senior Lien Bonds (and not Junior Lien Bonds), including any Additional Bonds issued on a parity therewith, in accordance with its terms. Upon acceptance of a Bond Reserve Account Guaranty, any moneys representing proceeds of the Series 2005A Bonds held in the Bond Reserve Account shall be transferred to the Bond Redemption Fund and used to purchase or redeem outstanding Series 2005A Bonds and the Transfer Agent shall return any previously held Bond Reserve Account Guaranty to the issuer thereof for cancellation; provided that after such transfer or return, there shall remain in the Bond Reserve Account moneys or Bond Reserve Account Guaranties equal to the Bond Reserve Account Requirement. If a Bond Reserve Account Guaranty is delivered contemporaneously with the delivery of the Series 2005A Bonds, the form of guaranty shall be acceptable to the Insurer and no additional written confirmation from the Rating Agencies, other than their initial rating letters on the Series 2005A Bonds, shall be required. In the event amounts held in the Bond Reserve Account are required to be utilized in accordance with the Bond Resolution, cash or securities held in the Bond Reserve Account shall be utilized first before drawing on a Bond Reserve Account Guaranty.
Upon the issuance of the Series 2005A Bonds, the Board shall designate the Series 1999A Bonds and the Series 2002A Bonds to be refunded ("Bonds to be Refunded") in the Escrow Deposit Agreement and the Board shall give irrevocable instructions to the Transfer Agent to redeem such Bonds to be Refunded on the earliest practicable call date designated by the Board's Senior Vice President and to give notice of such redemption in the manner and at the time required by the Bond Resolution.
The General Manager and Senior Vice President are severally authorized to enter into the Escrow Deposit Agreement substantially in the form on file with the Board and to purchase United States Treasuries ‑‑ State and Local Government Series or United States open market securities necessary to carry out the refunding of the Bonds to be Refunded, and to amend or modify the maturities, interest rates and amounts of such securities or request early redemption as may be necessary to comply with the Bond Resolution or to carry out the refunding. U.S. Bank National Association is named attorney-in-fact to enter into any subscriptions necessary to purchase the foregoing securities in order to carry out such refunding.
The Series 2005A Bonds shall be subject to redemption as provided in the bond form for the Series 2005A Bonds.
Section 5. Series 2005A Bond Proceeds. From the proceeds of the sale of the Series 2005A Bonds, there shall be immediately deposited in (a) the Redemption Fund an amount equal to the accrued interest, if any, received on delivery of the Series 2005A Bonds and the City, by its Board of Water and Light, shall receive a credit equal to the amount so deposited against the amount required to be deposited in the Redemption Fund for payment of the next maturing interest and (b) the Bond Reserve Account, the amount, if any, required by the Bond Resolution. The remaining proceeds of the Series 2005A Bonds shall be used, together with other available funds, to pay the costs of refunding the Bonds to be Refunded and to pay the costs of issuing the Series 2005A Bonds.
Section 6. Book-Entry System - Series 2005A Bonds. Initially, one fully-registered Series 2005A Bond for each maturity, in the aggregate amount of such maturity, will be issued in the name of Cede & Co., as nominee of The Depository Trust Company, for participation in the book-entry transfer system of The Depository Trust Company. In the event the City decides to discontinue participation in the book-entry transfer system of The Depository Trust Company (or a successor securities depository), the City shall notify the Transfer Agent and The Depository Trust Company, in writing, and thereafter the City shall execute and the Transfer Agent shall authenticate and deliver Series 2005A Bonds requested by the Registered Owners or to a successor securities depository. In the event The Depository Trust Company discontinues providing services as a securities depository for the Series 2005A Bonds and the City does not designate a successor securities depository, the City shall execute and the Transfer Agent shall authenticate and deliver Series 2005A Bonds to the Registered Owners.
Section 7. Bond Form. The Series 2005A Bonds shall be in substantially the following form:
[SERIES 2005A BONDS]
UNITED STATES OF AMERICA
STATE OF MICHIGAN
CITY OF LANSING
WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM
REVENUE REFUNDING BONDS, SERIES 2005A
|
Interest Rate Per Annum |
Maturity Date |
Date of Original Issuance |
CUSIP |
|
% |
|
|
|
REGISTERED OWNER:
PRINCIPAL AMOUNT:
The CITY OF LANSING, State of Michigan (the "City"), for value received, promises to pay the Principal Amount to the Registered Owner on the Maturity Date with interest thereon from the Date of Original Issue, or such later date to which interest has been paid, until paid at the Interest Rate Per Annum, payable on _________ 1, 2006, and on each July 1 and January 1 thereafter until the obligation of the City to pay the Principal Amount is satisfied. Principal of this Bond is payable at the principal office of U.S. Bank National Association, or such other transfer agent as the City may hereinafter designate by notice mailed to the registered owner not less than 60 days prior to any interest payment date (the "Transfer Agent"). Interest on this Bond is payable to the registered owner of this Bond as of the 15th day of the month next preceding the payment date as shown on the registration books of the City kept by the Transfer Agent by check or draft mailed to the registered owner at the registered address. The revenues of the facilities of the City for the supply and distribution of water and the generation and distribution of electricity, chilled water, steam and heat (the "System") after provision has been made for reasonable and necessary expenses of operation, maintenance and administration of the System (the "Net Revenues"), are irrevocably pledged and a statutory lien thereon has been created to secure the payment of the principal of and interest on this Bond, when due; however, the pledge of Net Revenues and the statutory lien are on a parity with the pledge of Net Revenues and statutory lien in favor of the City of Lansing's Water Supply and Electric Utility System Revenue Bonds, Series 1994B, its Water Supply, Steam and Electric Utility System Revenue Bonds, Series 1999A, its Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2002A, its Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2002B its Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2003A and any Additional Bonds (as defined below) which may be issued by the City, and senior in priority of lien to its Water Supply, Steam and Electric Utility Revenue Bonds, Series 1999B (Taxable Series) and any additional junior lien bonds issued pursuant to the Bond Resolution (defined below). Interest on this Bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
This Bond is one of a series of bonds of like tenor, except as to denomination, rate of interest, date of maturity and prior redemption, aggregating the principal sum of $____________, issued pursuant to a Bond Resolution adopted by the Board of Water and Light of the City (the "Board") on October 24, 1989, as amended and supplemented from time to time, including by an Ninth Supplemental Revenue Bond Resolution adopted by the Board on July, _____, 2005 (collectively, the "Bond Resolution"), and under and in full compliance with the Constitution and statutes of the State of Michigan, including specifically Act 94, Public Acts of Michigan, 1933, as amended, for the purpose of refunding prior bonds of the City issued in 1999 and 2002, the proceeds of which were used for remodeling, updating and extending the life of the System, making a deposit to a bond reserve account, if necessary, and paying the costs of issuing the bonds.
For a complete statement of the revenues from which and the conditions under which this Bond is payable, a statement of the conditions under which additional bonds ("Additional Bonds") of equal standing may hereafter be issued, the rights and limitations on the owners of the bonds and the general covenants and provisions pursuant to which this Bond is issued, reference is made to the Bond Resolution.
Bonds of this series maturing prior to July 1, _____, are not subject to redemption prior to their respective dates of maturity. Bonds of this series maturing on and after July 1, ____, are subject to redemption prior to maturity, at the option of the Board, at any time on and after July 1, _____, in whole or in part, in the amount selected by the Board, in order of maturities selected by the Board and within a maturity by lot, at the redemption price of par, plus accrued interest to the date of redemption.
Notice of the call of Bonds for redemption shall be mailed to the registered owner not less than 30 days prior to the date fixed for redemption at the address shown on the registration books of the City. Failure to receive such notice shall not affect the validity of the proceedings for redemption. Bonds called for redemption shall not bear interest after the date fixed for redemption, provided funds are on hand with the Transfer Agent to redeem the bonds called for redemption.
This Bond is a self-liquidating bond and is not a general obligation of the City or the Board and does not constitute an indebtedness of the City or the Board within any constitutional, statutory or charter limitation, but is payable, both as to principal and interest, solely from the Net Revenues of the System.
The Board has covenanted and agreed, and covenants and agrees, to fix and maintain at all times while any bonds payable from the Net Revenues of the System shall be outstanding, such rates for service furnished by the System as shall be sufficient to provide for payment of the principal of and interest on the bonds of this issue and any other bonds payable from the Net Revenues as and when the same shall become due and payable, to provide for the payment of expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the same in good repair and working order, and to provide for such other expenditures and funds for the System as are required by the Bond Resolution.
This Bond is transferable only upon the registration books of the City kept by the Transfer Agent by the Registered Owner hereof in person, or by his or her attorney duly authorized in writing, with a written instrument of transfer satisfactory to the Transfer Agent duly executed by the Registered Owner or his or her attorney duly authorized in writing, and thereupon a new registered bond or bonds in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefore as provided in the Bond Resolution and upon the payment of the charges, if any, therein prescribed. The City shall not be required to register the transfer of or exchange any Bond selected for redemption in whole or in part, except the unredeemed portion of bonds being redeemed in part.
It is certified and recited that all acts, conditions and things required by law precedent to and in the issuance of this Bond and the series of bonds of which this is one have been done and performed in regular and due time and form as required by law.
This Bond is not valid or obligatory for any purpose until the Certificate of Authentication on this Bond has been executed by the Transfer Agent.
IN WITNESS WHEREOF, the City of Lansing, State of Michigan, by and through its Board of Water and Light, has caused this Bond to be executed with the facsimile signatures of its Chairperson and its Corporate Secretary and the corporate seal of the City to be printed on this Bond.
CITY OF LANSING, BY AND THROUGH THE BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN
By: (FACSIMILE)
Chairperson
By:___(FACSIMILE)_____________
Corporate Secretary
(Seal)
Certificate of Authentication
This Bond is one of the bonds described in the within-mentioned Bond Resolution.
U.S. BANK NATIONAL ASSOCIATION,
Transfer Agent
By: ___________________________________
Authorized Representative
Date of Authentication:
[Statement of Insurance
to be included with respect to the Insured Bonds only]
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto ______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name and address of transferee)
______________________________________________________________________________
the within bond and all rights thereunder, and irrevocably constitutes and appoints _______________________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises.
Dated: ______________________________________
_____________________________ ______________________________________
Signature Guaranteed: NOTICE: The signature(s) to this assignment
must correspond with the name as it appears
upon the face of the within bond in every
particular, without alteration or enlargement
or any change whatsoever.
_____________________________
Signature(s) must be guaranteed by an eligible guarantor institution participating in a Securities Transfer Association recognized signature guaranty program. The Transfer Agent will not effect transfer of this Bond unless the information concerning the transferee requested below is provided.
Name and Address:_____________
PLEASE INSERT SOCIAL SECURITY
NUMBER OR OTHER IDENTIFYING ______________________________________
NUMBER OF TRANSFEREE.
_____________________________ ______________________________________
(Include information for all joint owners
if the bond is held by joint account)
_____________________________
(Insert number for first named transferee
if held by joint account)
Section 8. Negotiated Sale. The Series 2005A Bonds shall be sold in a negotiated sale to the Underwriter, pursuant to a Bond Purchase Agreement. It is hereby determined that this method of sale is in the best interests of the Board and the City and is calculated to provide the Board and City with the lowest costs of borrowing money through the issuance of the Series 2005A Bonds. The Senior Vice President for the Board or the General Manager for the Board is authorized to fix the date, time and place of the closing for the issuance of the Series 2005A Bonds. The Chairperson of the Board or any Commissioner of the Board and the Senior Vice President for the Board or the General Manager for the Board are authorized on behalf of the Board to execute a Bond Purchase Agreement in connection with the sale of the Series 2005A Bonds in order to: (a) approve the specific interest rates, dated dates, maturity dates and amounts, redemption dates, amounts and prices and the purchase price for the Series 2005A Bonds, (b) designate which of the Series 2005A Bonds will be serial bonds and term bonds, and (c) determine the amounts to be deposited into the specific funds and accounts established under the Bond Resolution.
Section 9. Tax Status. The City, by and through its Board, covenants to comply with all requirements of the Internal Revenue Code of 1986, as amended, necessary to assure that the interest on the Series 2005A Bonds will be and will remain excludable from gross income for federal income tax purposes.
Section 10. Preliminary Official Statement. The preparation and distribution of a preliminary official statement in substantially the form presented at this meeting is approved, with such changes as the Chairperson or any Commissioner and the General Manager and Senior Vice President of the Board may, in consultation with the Staff Attorney and Bond Counsel, determine to be necessary or appropriate.
Section 11. Other Staff Action. The Board ratifies and confirms actions taken and filings made by Staff necessary to effectuate the sale of the Series 2005A Bonds, including any filings with the Department of Treasury. The Chairperson, any Commissioner, the General Manager and the Senior Vice President of the Board are severally authorized to execute such certificates and other documents and to take such other actions or make such other filings as may be necessary or convenient to effectuate the proper sale, execution and delivery of the Series 2005A Bonds, including, but not limited to the execution of a continuing disclosure undertaking.
Section 12. Bond Insurance. The Insured Bonds, if any, designated in the Bond Purchase Agreement of Series 2005A Bonds shall be insured by the Insurer.
Section 13. The Insurance Policy. This Section 13 shall apply with respect to Insured Bonds in the event an Insurance Policy insures the principal of and interest on all or a portion of the Series 2005A Bonds, but only during such time as the Insurer is not in default under the terms and conditions of the Insurance Policy to be issued by the Insurer at the time of the issuance and delivery of the Insured Bonds, and the Insurance Policy is in full force and effect:
(a) (i) The Insurer shall be deemed to be and recognized as the Registered Owners of the Insured Bonds (A) at all times for the purposes of the adoption of a supplemental resolution amending, changing or modifying the Bond Resolution or this supplemental resolution or the initiation by Registered Owners of any action, or the removal of the Transfer Agent or the appointment of a successor Transfer Agent, which under the Bond Resolution, may require the written approval or consent of the Registered Owners of all or a portion of the Series 2005A Bonds (including the Insured Bonds) at the time Outstanding under the Bond Resolution or can be initiated upon the written request of the Registered Owners of not less than all or a portion of the Series 2005A Bonds (including the Insured Bonds) Outstanding under the Bond Resolution, (B) following an Event of Default for all other purposes, and (C) for the purposes of exercising all other rights and privileges available to a Registered Owner of an Insured Bond.
(ii) In the event a payment can be accelerated, no action by any Registered Owner of an Insured Bond to accelerate the payment of principal of and interest on the Insured Bonds or to pursue any other remedy with respect to the Insured Bonds shall be of any effect unless the Registered Owner obtains the written consent of the Insurer to such acceleration or the Insurer shall direct such acceleration or remedy.
(iii) In the event and to the extent that the principal and/or interest due on the Insured Bonds shall be paid by the Insurer pursuant to the Insurance Policy, the Insured Bonds shall remain Outstanding for all purposes under the Bond Resolution, not be defeased or otherwise satisfied and not be considered paid by the City and the pledge of the funds and accounts under the Bond Resolution and all covenants, agreements and other obligations of the City to the Registered Owners of the Insured Bonds shall continue to exist.
(iv) The Board shall provide written notice to the Insurer in the event the Transfer Agent resigns or is removed or if a successor is appointed. The Insurer shall have the right to consent to the appointment of any successor Transfer Agent.
(v) The Insurer shall receive from the Board on an annual basis, copies of the Board's audited financial statements and annual budgets.
(vi) The Transfer Agent shall furnish to the Insurer a copy of any notice to be given to any Registered Owner of an Insured Bond or the Transfer Agent under the Bond Resolution. All notices required to be given to the Insurer under the Bond Resolution shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management.
(vii) Notwithstanding any other provision of the Bond Resolution, the right of the Insurer to consent to and to approve certain actions as provided in this Ninth Supplemental Revenue Bond Resolution shall be null and void if the Insurer is in default under the terms and conditions of the Insurance Policy issued by the Insurer or if such Insurance Policy has been cancelled or is not otherwise in effect.
(viii) The Board shall obtain the Insurer's consent prior to adoption of a supplemental resolution or the issuance of additional bonds under the Bond Resolution if the adoption of the supplemental resolution or the issuance of such Additional Bonds is for a purpose other than (i) a refunding to obtain savings; or (ii) the issuance of additional bonds which are in accordance with any additional bonds test or additional bonds requirement contained in the Bond Resolution.
(ix) In connection with the issuance of Additional Bonds, the Board shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such Additional Bonds.
(x) Copies of any amendments made to the resolutions or documents entered into in connection with the issuance of the Insured Bonds which are consented to by the Insurer shall be sent to Standard & Poor's Corporation.
(xi) The Board agrees to reimburse the Insurer immediately and unconditionally upon demand, to the extent permitted by law, for all reasonable expenses, including attorneys' fees and expenses, incurred by the Insurer in connection with (A) the enforcement by the Insurer of the Board's obligations, or the preservation or defense of any rights of the Insurer, under the Bond Resolution and any other document executed in connection with the issuance of the Insured Bonds, and (B) any consent, amendment, waiver or other action with respect to the Bond Resolution or any related document, whether or not granted or approved, together with interest on all such expenses from and including the date incurred to the date of payment at Citibank's Prime Rate plus 3% or the maximum interest rate permitted by law, whichever is less. In addition, the Insurer reserves the right to charge a fee in connection with its review of all such consent, amendment or waiver, whether or not granted or approved.
(xii) The Board agrees not to use the Insurer's name in any public document including, without limitation, a press release or presentation announcement or forum without the Insurer's prior consent; provided however, such prohibition on the use of the Insurer's name shall not relate to the use of the Insurer's standard approved form of disclosure in public documents issued in connection with the current Insured Bonds to be issued in accordance with the terms of the Insurer's insurance commitment; and provided further such prohibition shall not apply to the use of the Insurer's name in order to comply with public notice, public meeting or public reporting or disclosure requirements.
(xiii) The Board shall not enter into any agreement nor shall it consent to or participate in any arrangement pursuant to which Insured Bonds are tendered or purchased for any purpose other than the redemption and cancellation or legal defeasance of such Insured Bonds without the prior written consent of the Insurer.
(b) (i) In the event that on the second business day, and again on the business day prior to the payment date of principal or interest on the Insured Bonds, the Transfer Agent has not received sufficient amounts in the funds established in the Bond Resolution to pay all principal and interest coming due on the Insured Bonds on the second following, or following, as the case may be, business day, the Transfer Agent shall immediately notify the Insurer or its designee by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency.
(ii) If the deficiency is made up in whole or in part prior to or on the interest payment date or principal payment date, the Transfer Agent shall so notify the Insurer or its designee.
(iii) In addition, if the Transfer Agent has written notice from any Registered Owner that any of the Registered Owners have been required to disgorge payments of principal or interest on the Insured Bonds to the City or to the trustee in bankruptcy for creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a voidable preference to such Registered Owners within the meaning of any applicable bankruptcy laws, then the Transfer Agent shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail.
(iv) The Transfer Agent is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Registered Owners of the Insured Bonds as follows:
(A) if and to the extent there is a deficiency in amounts required to pay interest on the Insured Bonds, the Transfer Agent shall (I) execute and deliver to U.S. Bank Trust National Association, or its successors under the Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Registered Owners in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (II) receive as designee of the respective Registered Owners (and not as Transfer Agent) in accordance with the tenor of the Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (III) disburse the same to such respective Registered Owners; and
(B) if and to the extent of a deficiency in amounts required to pay principal of the Insured Bonds, the Transfer Agent shall (I) execute and deliver to the Insurance Paying Agent, in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Registered Owner in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Insured Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Transfer Agent and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (II) receive as designee of the respective Registered Owners (and not as Transfer Agent) in accordance with the tenor of the Insurance Policy payment therefore from the Insurance Paying Agent and (III) disburse the same to such Registered Owners.
(v) Payments with respect to claims for interest on and principal of Insured Bonds disbursed by the Transfer Agent from proceeds of the Insurance Policy shall not be considered to discharge the obligation of the City with respect to such Insured Bonds, and the Insurer shall become the owner of such unpaid Insured Bonds and claims for interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise.
(vi) Irrespective of whether any such assignment is executed and delivered, the City through its Board and the Transfer Agent hereby agree for the benefit of the Insurer that:
(A) they recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Transfer Agent), on account of principal of or interest on the Insured Bonds, the Insurer will be subrogated to the rights of such Registered Owners to receive the amount of such principal and interest from the City, with interest thereon as provided and solely from the sources stated in the Bond Resolution and the Insured Bonds; and
(B) they will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Insurance Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in the Bond Resolution, but only from the sources and in the manner provided herein and in the Bond Resolution for the payment of principal of and interest on the Insured Bonds to Registered Owners, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest.
(c) (i) In the event the Board refunds all or a portion of the Insured Bonds, the Board shall, unless waived in writing by the Insurer, provide the Insurer: (i) a final debt service schedule within three business days from the sale date of the refunding bonds; (ii) at least 10 days in advance of the closing, drafts of a verification report by an independent certified public accounting firm of the sufficiency of the escrow to timely pay the refunded bonds, an escrow securities purchase agreement or state and local government subscription form or open market securities confirmation, and an escrow deposit agreement; (iii) at least 5 business days prior to the closing, a draft opinion of bond counsel, to the effect that the refunding bonds are being issued in compliance with state law and that interest on the refunding bonds is tax-exempt; (iv) at least 5 business days prior to the closing, a draft opinion of bond counsel to the effect that the refunded bonds have been defeased. The Insurer must give its oral approval of the form of the verification report, escrow securities order and escrow agreement.
(ii) In the event Insured Bonds are defeased in accordance with Section 5 of the Bond Resolution, the Board shall utilize only the following investments or securities to effectuate the defeasance, but only to the extent such investments or securities constitute Sufficient Government Obligations or Sufficient Municipal Obligations as defined in the Bond Resolution:
(A) Cash;
(B) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series -- "SLGs");
(C) Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities;
&nb