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Resolution - 2006 - 04 - Findings/Declarations With Respect To The Financing Of Domestic Water System Facilities - 01/10/2006 RESOLUTION NO. 06-04 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EAGLE, IDAHO, MAKING FINDINGS AND DECLARATIONS WITH RESPECT TO THE FINANCING OF DOMESTIC WATER SYSTEM FACILITIES; APPROVING AND AUTHORIZING, SUBJECT TO JUDICIAL CONFIRMATION, THE EXECUTION OF A LOAN AGREEMENT BETWEEN THE STATE OF IDAHO AND THE CITY OF EAGLE FOR THE FINANCING OF THE FACILITIES; AUTHORIZING THE FILING OF A PETITION FOR JUDICIAL CONFIRMATION IN THE DISTRICT COURT OF THE FOURTH JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR ADA COUNTY; PROVIDING FOR RELATED MATTERS; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Eagle, Ada County, Idaho (the "City"), is a municipal corporation duly organized and operating under the laws of the State of Idaho, and has since 1992 owned and operated a domestic water supply and distribution system (the "System"); and WHEREAS, the Mayor and Council of the City have determined that certain improvements and extensions to the System (the "Improvements") are required in order for the System to remain functional and adequate to meet the current and projected future needs of the City and to currently comply with applicable state and federal drinking water standards; and WHEREAS, the estimated cost of the Improvements to the City is $2,590,000; and WHEREAS, the City does not have sufficient funds available in its current fiscal year's budget to finance the cost of the acquisition and construction of the Improvements, and the Mayor and Council have determined that it is necessary to finance the cost thereof from future years' domestic water System revenues; and WHEREAS, the Mayor and Council have further determined that it is in the best interests of the City to finance the cost of the Improvements through a loan from the Drinking Water Revolving Loan Account of the State of Idaho, Department of Environmental Quality (the "State"), and the City has made application to the State for such loan; and WHEREAS, the State has tentatively approved such loan application, to be repaid by the City from domestic water System revenues over a 20-year term, subject to the condition that the City first obtain judicial confirmation of the validity of the proposed loan agreement pursuant to the Idaho Judicial Confirmation Law, the same being Title 7, Chapter 13, Idaho Code; and Page 1 WHEREAS, the financing of the costs of the Improvements in the manner described would create an indebtedness or liability of the City exceeding the current year's revenues; and WHEREAS, the Mayor and Council have determined that the cost of the Improvements, and the proposed loan obligation to be incurred to finance the same, constitute "ordinary and necessary expenses" of the City authorized by the general laws of the State within the meaning of Article 8, Section 3, of the Idaho Constitution, for which no approving vote of the electors is required; and WHEREAS, the Mayor and Council, on December 13, 2005, held and conducted a public hearing, pursuant to at least fifteen (15) days' published notice in the manner required by Sections 7- 1304 and 7-1306, Idaho Code, on the question of whether the Council should adopt a resolution authorizing the filing of a petition with the District Court of the Fourth Judicial District of the State of Idaho, in and for the County of Ada, seeking judicial confirmation of the proposed loan agreement and the incurring of such indebtedness as an "ordinary and necessary expense" within the meaning of Article 8, Section 3, of the Idaho Constitution, pursuant to the Judicial Confirmation Law; and WHEREAS, at least fourteen (14) days have elapsed following such public hearing, and the Mayor and Council have determined that it is in the best interests of the City and the public health, safety, and welfare for the City to file a petition for judicial confirmation pursuant to the Judicial Confirmation Law upon the question of the authority of the City to incur such indebtedness, to enter into the proposed loan agreement, to issue its promissory note or other evidence thereof, and to pledge its domestic water System revenues as security for the payment thereof. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EAGLE, IDAHO, as follows: Section 1: The foregoing recitations are hereby adopted as findings of fact by the Council. Section 2: Subj ect to the entry of a final order of the District Court of the Fourth Judicial District of the State of Idaho, in and for the County of Ada (the "District Court"), confirming the authority of the City to enter into the transaction, the Loan Offer, Acceptance and Contract, substantially in the form which is annexed hereto as Exhibit "A" (the "Loan Agreement"), is hereby approved, and the Mayor is hereby authorized to execute the same for and on behalf of the City. The Mayor is further authorized to execute, on behalf of the City, a promissory note as evidence of the indebtedness incurred pursuant to the Loan Agreement. The appropriate Page 2 officials of the City are hereby further authorized to execute such additional documents and certifications as may be required to carry out the intent of this Resolution. Section 3: The Petition for Judicial Confirmation (the "Petition"), substantially in the form which is annexed hereto as Exhibit "B" and by reference made a part hereof, is hereby approved, and the Mayor is authorized to execute the verification of the same. Section 4: The law firm of Moore Smith Buxton & Turcke, Chartered, Boise, Idaho, as general counsel to the City, is hereby authorized to file the Petition on behalf of the City in the District Court, and to take all actions necessary with respect thereto in order to obtain a judgment of the District Court in accordance with the prayer of the Petition. Section 5: The Council hereby finds and declares that the proposed Loan Agreement, the indebtedness incurred thereby, and any evidence of indebtedness executed pursuant thereto, for the financing of the Improvements, constitute an ordinary and necessary expense of the City authorized by the general laws of the State of Idaho within the meaning of Article 8, Section 3, Idaho Constitution, for which no approving vote of the electors of the City is required, for the following reasons: A. The proposed expenditure is necessary to protect the health and safety of the inhabitants of the City and to comply with applicable state and federal drinking water standards. B. The proposed expenditure is for the purpose of rehabilitating, maintaining, and extending existing Ci ty property in order to render it serviceable, as opposed to the construction of wholly new facilities. C. The proposed Improvements are authorized by the general laws of the state. D. The City has operated the existing domestic water supply facilities since 1992 and has determined that the Improvements are indispensable to the efficient continued operation of the domestic water system. Section 6: This Resolution shall take effect and be in force immediately upon its passage and approval. Page 3 ~ DATED this ~ day of January, 2006. ATTEST: ~OA--cV -~ 0J1~~ ~City"Clerk Page 4 CITY OF EAGLE Ada County, Idaho By .,annUl., Of E", ....... ~~ ........ O~.J\,"" ,.- -.v. e.; ... ~.\' () R -1)'0... :.0 t<'\ *i~ _.~ 1* . -. '.) T .:\ 1 . ;:1 \ .J .... .~. .:..~O '''", / -... ~ ..' ..... .... " '0 '~~ I ""... .'. .t\". Loan No. DW-9927 DRAFT STATE OF IDAHO DEPARTMENT OF ENVIRONMENTAL QUALITY LOAN OFFER, ACCEPTANCE AND CONTRACT FOR DRINKING WATER TREATMENT DESIGN AND CONSTRUCTION SECTION I. INTRODUCTION The Idaho Department of Environmental Quality (Department) is authorized by Title 39, Chapter 76, Idaho Code, to make loans from the State Drinking Water Revolving Loan Account (Account) to assist public water systems in the construction of drinking water treatment facilities. The Department has determined that the City of Eagle has established eligibility for a loan under the terms of the Idaho Code and IDAPA 58.01.020 et seq., The Rules for Administration of Drinking Water Loan Program (the Rules). A completed application for a Drinking Water Design and Construction Loan has been submitted to the Department by the Applicant. The Department hereby offers a loan to the Applicant according to the terms and conditions contained in this document and the Rules. SECTION II. DESCRIPTION OF PROJECT This loan offer is for design and construction of the following project: A. Loan Project Number: DW-9927 B. Name and Address of Applicant: City of Eagle 310 E. State St. Eagle, ill 83616 c. Terms: $2,590,000 at 3.25% interest to be repaid in biannual installments over 20 years. D. Proj ect Description: Design and construction of new well, enhancement of the existing well, standby power and a new water storage reservoir. 1 EXHIBIT 'A Loan No. DW-9927 E. Estimated Project Budget 1. Administrative $95,500 2. Engineering Fees $329,500 3. Land Acquistion $80,000 3. Construction $2,085,000 4. Total $2,590,000 SECTION III. GENERAL CONDITIONS This offer may only be accepted by signature by an authorized representative of the Applicant. Upon acceptance by the Applicant, this offer shall become a loan contract and the Applicant shall become a Borrower. By accepting this offer, the Borrower agrees to all terms and conditions set forth in this document and the Rules: The Borrower agrees: A. To not transfer, assign or pledge any beneficial interest in this contract to any other person or entity without the prior written consent of the Director of the Department of Environmental Quality (Director); To not enter into sale, lease or transfer of any of the property related to the project; To not make any additional material encumbrances to the project without the prior written consent ofthe Director; To not incur any liabilities that would materially affect the funds pledged to repay this loan withoutthe prior written consent ofthe Director; To not delegate legal responsibility for complying with the terms, conditions, and obligations of this contract without the prior written consent of the Director; Notwithstanding any other provision ofthis paragraph, the Borrower may sell or otherwise dispose of any ofthe works, plant, properties and facilities of the project or any real or personal property comprising a part ofthe same which shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the project, or no longer necessary, material or useful in such operation, without the prior written consent of the Director. B. To enter into such contractual arrangements with third parties as it deems advisable to assist it in meeting its responsibilities under this contract. C. To fulfill all declarations, assurances, representations and statements in the application and all other documents, amendments and communications filed with the Department by the 2 Loan No. DW-9927 Applicant in support of the request for this loan. Which application is attached hereto and incorporated by reference herein. D. To comply with applicable State and Federal employment requirements including, but not limited to, Equal Employment Opportunity and Civil Rights requirements. E. To make efforts to award sub agreements to Minority and Women-owned businesses (MBE/WBE). The separate fair share goals for MBE and for WBE, will be in bid solicitations and documentation of efforts to obtain MBElWBE participation will be required of any contractor who fails to attain the goals. Quarterly reports ofMBE/WBE utilization will be prepared on forms supplied by the Department. F. To provide evidence of ownership in the form of fee simple title or long-term lease and right of access or easements for real property on which the project is to be constructed. Clear title to all real property necessary for the successful operation ofthe facilities shall be guaranteed by the Borrower for the useful life of the project. G. To take affirmative action to ensure that the project shall be completed and operated in conformance with federal and state laws relating to occupational health and safety. H. That ifprior to completion ofthis contract the project is damaged or destroyed, there will be no reduction in the amounts payable by the Borrower to the Department. I. That in the event there is any default in the payment of either the principal amount or the interest due under this contract, or any breach by the Borrower of any of the terms or conditions of this contract, the entire principal amount and whatever interest is due to the date of payment may be declared due and immediately payable. The amount of such default shall bear the same interest rate as applies to the principal of this loan from the date of default until the date of payment by the Borrower. All costs incurred by the Department due to such default, including court costs and attorney's fees, shall be repaid by the Borrower to the Department. J. That any waiver by the Department at any time of the rights or duties under this contract shall not be deemed a waiver of any subsequent or additional rights or duties under this contract. K. That the use by the Department of any remedy specified in this contract for its enforcement is not exclusive and shall not deprive the Department ofthe right to seek any other appropriate legal or equitable remedy. 1. That this agreement is binding upon the Borrower and the Department, and any person, office or entity succeeding the Borrower or the Department. 3 Loan No. DW-9927 M. To comply with all applicable federal, state and local laws. SECTION IV. PROJECT MANAGEMENT The Borrower agrees to: A. Require the prime engineering firm( s) and their principals retained for engineering services to carry professional liability insurance to protect the public from the engineer's negligent acts and errors of omission of a professional nature. The total aggregate of the engineer's professional liability insurance shall be one hundred thousand dollars ($1 00,000) or twice the amount of the engineer's fee, whichever is greater. Professional liability insurance must cover all services rendered for all phases of the project, whether or not those services are state funded, until the certification ofproject performance is accepted by the Department. B. Comply with the Public Contracts Bond Act, Title 54, Chapter 19, Idaho Code, including requiring the prime construction contractor retained for construction to carry performance and payment bonds equal to one hundred percent (100%) of the contract price. The bond will be released when the constructed facility is accepted by the Borrower. C. Assure that c0ntracts related to the project which provide for arbitration allow appeal of any resulting arbitration decision to a district court or allow the arbitration to be non-binding on both parties if either party desires not to use arbitration as a method of dispute settlement. D. Jointly with an engineering consultant provide assurances that the physical and operational integrity of the works, when constructed, will achieve the level oftreatment provided for in the design specifications. E. Provide for the accumulation of funds through charges made for services or otherwise, for the purposes of (I) establishing a fund dedicated solely to the repayment of principal and interest on this loan, (2) capital replacement and (3) future improvement, betterment, and extension of such works occasioned by increased usage on the facility. F. Provide a plan and program for an equitable user charge system for payment of operation and maintenance of constructed facilities. The user charge system shall be approved by the Department and enacted by the Borrower prior to receiving final payment. Make available on an equitable basis the services of the project to the residents and commercial and industrial establishments of the area it was designed to serve. G. Develop and adopt a water system protection ordinance approved by the Department prior to receiving final payment ofloan funds. 4 Loan No. DW-9927 H. Provide an operation and maintenance manual for the project approved by the Department prior to receiving final payment of loan funds. I. Provide adequate staffing and qualified operation and maintenance personnel as specified in the operation and maintenance manual approved by the Department. J. Assure that the operator in responsible charge of the facility has a level of competency commensurate with the nature of the facility. He or she must be certified as a Drinking Water Operator in a class equal to or greater than that of the facility. K. Assure that treatment facility personnel shall participate in operator training programs designed to assure competel1ce in the operation and maintenance of the facility. 1. Commence satisfactory operation and maintenance ofthe drinking water treatment facility on completion ofthe project in accordance with applicable provisions, rules of the Department and any other applicable law, rule or regulation and not discontinue operation or dispose of the facility without the written approval of the Department. M. Review and update the user charge system at least biennially during the life of this agreement to assure that all costs including debt retirement, operation and maintenance are offset by sufficient revenues. N. Maintain project accounts in accordance with generally accepted govemment accounting principles issued by the Government Accounting Standards Board (GASB). SECTION V. SPECIAL CONDITIONS A. The Borrower shall complete the project in accordance with the following schedule: Number of months from Loan Acceptance Task 10% Design Review 50% Design Review 90% Design Review User Charge System Approved Water System Protection Ordinance Approved Final Plans, Specifications and Bidding Documents Bid Summary Award Construction Contract Project Management Conference Plan of Operation Amendment 5 DEC-06-2005 TUE 11:36 AM A FAX NO, 1 P. 02 Loan No. DW-~927 Draft Operation & Maintenance Manual Staffing Plan Construction Completion User Charge System Enacted Water Protection Ordinance Enacted Final O&M Manual Final Inspection Initiatc Operation Final Paymcnt B. Th ~ above schedule constitutes the project schedule; all amendments to the project schedule mt st be approved by the project engineer in the DEQ regional.officc, prior to becoming eff :ctive. SECTIOI' VI. SECURITY REOUlREMENTS The Borro' ver agrees: A. Till;; loan will be evidenced and secured by a promissory note in the amount of$2,590,OOO. A c ;,py oftha promissory note ordinance shall be attached to this contract and incorporated by 'eference herein upon project completion. B. Wi hin 5 years ofproject completion, establish a reserve account in an amount equal to 1 yea "5 payment ofprincipaJ and interc:st due on this contract. In the eVent Borrower fails to mal :e any payment due on this Contract, Borrower shall immediately use funds in the reserve acc. Hl1'lt to pay the past due principal and interest and inform the Department in writing. Wil hin 30 days of using the reserve account funds Borrower will replenish the funds in the TeSt rYe account. Funds in the reserve account may be used solely for the purpose of secming pay nents on this contract. SECTION VII. LOAN DISBURSEMENTS The BOlTovcr agrees: A. Thi! loan shall be used SOlely to aid in the fmancing of the Borrower's project described in SecI ion II above. B. Req lests for actual disbursement of loan funds will be made by the Borrower using forms pro\ ided by the Department. Upon approval ofthe disbursement request by the Department loan I fbnds shall be released to the BOlTower. 6 Loan No. DW-9927 C. The costs set forth in Section II have been determined by the Department to be eligible costs for funding. Some of the costs, however, have been estimated, and the actual costs may differ from such estimated costs. A project review by the Department will determine final eligible costs for the project. D. Ifthe actual eligible cost of the project is determined by the Department to be lower than the estimated eligible cost, the loan amount will be reduced accordingly. E. Payment of the final five percent (5%) of this loan shall be withheld until the following requirements are met: I. The Borrower's engineer certifies (a) that the project has been constructed according to plans and specifications previously approved by the Department and (b) that the project is fully operational; and 2. The Department has inspected the project and verifies the engineer's certification; and 3. The Department has determined that all terms and conditions ofthis agreement have been met; and 4. A final loan repayment schedule has been completed; and 5. All security requirements of Section VI have been satisfied. F. This offer is subject to the existence of the offered sum of money in the Account at the time of payment. Should the offered sum of money not be available in the Account at the time of payment, the Department hereby agrees to pay the Applicant the offered sum of money on the basis of the Applicant's priority position immediately upon the accrual of said sum in the Account. SECTION VIII. REPAYMENT TERMS AND SCHEDULE The Borrower agrees: A. This loan shall be repaid in the manner set forth in the promissory note which shall be attached to this contract upon project completion and incorporated by reference. B. To pay biannual payments of principal and interest and to fully amortize this loan not later than twenty 20 years from project completion. Interest will begin accruing with the first disbursement. At the end of construction accrued interest will either be paid to the Department or incorporated into the fmalloan amount ifthe approved amount has not been exceeded. 7 Loan No. DW-9927 C. This loan contract shall remain in full force and effect until all loan proceeds, including principal and interest, have been paid in full or the contract is otherwise suspended or , terminated by the Department. ' SECTION IX. SUSPENSION OR TERMINATION OF LOAN CONTRACT A. The Director may suspend or terminate this loan contract prior to final disbursement for good cause including, but not limited to, the following: 1. Commission by an employee or agent of the Borrower, of any of the following acts which affects the Borrower's obligations under this contract: fraud, embezzlement, theft, forgery, bribery, misrepresentation, conversion, malpractice, misconduct, malfeasance, misfeasance, falsification or unlawful destruction of records, receipt of stolen property or any crime for which the maximum sentence includes the possibility , of one (I) or more years' imprisonment. 2. Violation(s) of any term of this loan contract; or 3. Any willful or serious failure to perform within the scope of the project, plan of operation and project schedule, terms of engineering subagreements, or contracts for construction; or 4. Utilizing a contractor or subcontractor who has been suspended or debarred by order of any federal or state agency from working on public work projects funded by that agency. B. The Director will notify the Borrower in writing and by certified mail ofthe intent to suspend or terminate this loan contract. The notice of intent shall state: 1. Specific acts or omissions which form the basis for suspension or termination; and 2. Availability of a contested case hearing, before the Board of Environmental Quality, conducted as provided for in the Rules of Administrative Procedure Before the Board of Environmental Quality, IDAPA 58.01.23. et seq. C. Ifthe Borrower does not initiate a contested case hearing before the Board by filing a petition within the time period specified by the Rules of Administrative Procedure Before the Board of Environmental Quality, IDAP A 58.01.23 et. seq., the Department may thereafter terminate or suspend the loan contract by written notice to the Borrower. If the Borrower initiates a contested case, the termination or suspension shall be determined by the Board. B Loan No. DW-9927 D. The Borrower shall perform no work under the contract after receiving a notice of intent to suspend or terminate until all administrative proceedings and appeals therefrom are terminated or the Department reinstates the contract as provided herein. E. Upon written request by the Borrower with evidence that the cause(s) for suspension no longer exists, the Director may, if funds are available, reinstate the loan contract. If a suspended loan contract is not reinstated, the loan will be amortized and a repayment schedule prepared in accordance with the provisions of the loan contract. F. No terminated loan shall be reinstated. Terminated loans will be amortized and a repayment schedule prepared in accordance with the provisions of this loan contract. SECTION X. ACCESS AND INDEMNIFICATION The Borrower agrees to: A. Provide the Department, or its authorized agents, and the Environmental Protection Agency, access to all files, records, accountings and books relating to the management and accountability ofthis loan. B. Indemnify and hold harmless the Department, its agents, and its employees from any and all claims, actions, damages, liabilities and expenses directly or indirectly connected to the Borrower or its agents, employees, contractors, or assignees actions related to the location, design, construction, operation, maintenance, repair, failure or deactivation ofthe project or any part of the project. 9 Loan No. DW-9927 SECTION XI. OFFER The offer set forth herein must be accepted, if at all, on or before . An acceptance must be accompanied by a resolution of the Applicant's governing body authorizing the signator to sign on the Applicant's behalf for the purpose ofthis agreement. Dated ,2006. Director Department of Environmental Quality SECTION XII. ACCEPTANCE The City of Eagle, by and through its undersigned representative, accepts the foregoing offer and agrees to discharge all obligations and to comply with all terms and conditions contained herein. Representative Name and Title of Representative - type or print Date 10 MICHAEL C. MOORE, ISB #1188 TAMMY A. ZOKAN, ISB #5450 MOORE SMITH BUXTON & TURCKE, CHARTERED 225 North 9th Street, Suite 420 Boise, Idaho 83702 Telephone: (208) 331-1800 Facsimile: (208) 331-1202 e-mail: mcm@msbtlaw.com e-mail: taz@msbtlaw.com Attorneys for Petitioner IN THE DISTRICT COURT OF THE FOURTH JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF ADA In re: Case No. THE CITY OF EAGLE, an Idaho municipal corporation, PETITION FOR JUDICIAL CONFIRMATION Petitioner. Fee Category: G Fee: $82.00 COMES NOW the Petitioner, City of Eagle, Ada County, Idaho, an Idaho municipal corporation (the "Petitioner"), by and through its undersigned attorneys, and petitions this Court, pursuant to the Idaho Judicial Confirmation Law, Idaho Code Sections 7-1301 through 7-1312, inclusive, for a judicial examination and determination of the authority of Petitioner to enter into a certain loan agreement with the State of Idaho and to issue its promissory note or other evidence of such indebtedness, as an "ordinary and necessary expense" of the Petitioner authorized by PETITION FOR JUDICIAL CONFIRMATION - Page 1 EXHIBIT "B" the general laws of the State, within the meaning of Article 8, Section 3, Idaho Constitution. represents as follows: In support thereof, Petitioner I. This action is in the nature of a proceeding In rem, and jurisdiction of all parties interested will be obtained by publication and posting as provided in Sections 7-1305 and 7- 1306, Idaho Code. II. Petitioner is an incorporated city duly organized, existing, and operating pursuant to Title 50, Idaho Code, and as such is a "political subdivision" within the definition contained in Section 7-1303(6), Idaho Code. Petitioner is authorized to institute a judicial confirmation proceeding pursuant to Section 7-1304, Idaho Code. Petitioner's governing body has adopted a resolution authorizing the filing of this Petition for Judicial Confirmation at least fourteen (14) days following a public hearing duly held and conducted pursuant to publication of notice containing the date, time, and place of such hearing and a summary of the matter at least fifteen (15) days prior to the date set for the public hearing in a newspaper of general circulation within Petitioner, in the form and content described in Section 7-1306(2), Idaho Code. PETITION FOR JUDICIAL CONFIRMATION - Page 2 EXHIBIT "B" III. petitioner is authorized by law to own, operate, and maintain, and has since 1992 owned, operated, and maintained, a municipal domestic water supply and distribution system (the "System"). The System serves approximately 1,300 service connections within the City of Eagle, Idaho. IV. As owner and operator of the System, Petitioner is charged with the duty of maintaining a safe and reliable domestic water supply for residents of Petitioner connected to Petitioner's System. Petitioner must also provide water service to the Petitioner's growing population. In furtherance of that responsibility, the City, in 2002, retained the services of Holladay Engineering Company (the "Engineer"), to conduct a study of the System for the purpose of determining the adequacy of the System for present and future needs. The Engineer has completed a Water System Master Plan, dated April 29, 2002, and an Amended Water System Master Plan, dated February 25, 2005 (collectively the "Study"). The Study includes a number of recommended improvements to the System and identifies water storage and related improvements as a priority for the City to meet existing and growing needs for flow equalization, fire reserve, and PETITION FOR JUDICIAL CONFIRMATION - Page 3 EXHIBIT "B" emergency reserve supply. Based upon the Study, the Mayor and Council of Petitioner have determined that certain components of the System have become outmoded and inadequate for the present and future needs of the City and are in need of upgrade or replacement in order for the System to remain functional and adequate to meet the existing and projected requirements of the System. V. The Petitioner has determined that certain improvements, consisting of at least one (1) water storage tank, water storage tank site, drain and fill pipes to and from the tank, together with a municipal well, well house and well house improvements, standby power, and related facilities and improvements (the "Improvements"), are required in order to upgrade, replace, and extend existing City infrastructure/services and render the System serviceable and adequate to meet existing and proj ected needs of Petitioner and its water users, and to protect Petitioner's water supply against terrorism and other threats. Acquisition and installation of these Improvements will enhance Petitioner's ability to provide a reliable backup water supply and will further allow Petitioner to meet its obligations to users of its System to maintain a safe, sound and reliable System by providing additional flow equalization, fire protection, and PETITION FOR JUDICIAL CONFIRMATION - Page 4 EXHIBIT "B" reduce the System's vulnerability to equipment failures and acts of terrorism. The Improvements are necessary for the reasons summarized below: A. The current System has only limited storage through a temporary connection with a private third-party water purveyor. B. The proposed water storage is required for the System to meet System demand and maintain System pressure, to provide water needed to fight fires, and to provide water in emergency situations and during System maintenance or System disruptions. C. The current System has only one active municipal well. D. The proposed municipal well is needed to provide a backup water source for the System as required by State regulations, and to reduce wear and tear on the pumping system operating the one active municipal well. E. The proposed well house and standby power at the proposed municipal well and the replacement well house and standby power at the existing municipal well are required to protect the municipal water sources from unauthorized access, and to provide a backup power source in the case the primary source is interrupted. PETITION FOR JUDICIAL CONFIRMATION - Page 5 EXHIBIT "B" VI. The total cost of the Improvements, including acquisition and construction, engineering and legal services, interest on borrowed funds during construction, contingencies, and related costs, has been estimated by the Engineer as $2,590,000. petitioner does not have funds available to it within its present budget or its budget for the next fiscal year to meet its share of the cost of the Improvements and has determined that such cost must be financed over a term of years from the revenues of the System. VII. Pursuant to Sections 39-7601 through 39-7605, Idaho Code, and rules and regulations promulgated pursuant thereto, the State of Idaho, Department of Environmental Quality (the "State"), has established a Drinking Water Revolving Loan Account for the purpose, among other purposes, of making loans to municipalities for the financing of community water systems to facilitate compliance with national primary drinking water standards. VIII. In order to finance the cost of the Improvements, Petitioner has made application to the State for a loan from the Drinking Water Revolving Loan Account referred to above. The State has determined that Petitioner is eligible for such loan and has PETITION FOR JUDICIAL CONFIRMATION - Page 6 EXHIBIT "B" indicated its approval of such loan, substantially on the terms and conditions set forth in the draft Loan Offer, Acceptance and Contract (the "Loan Agreement") which is annexed hereto as Exhibit "A" and by reference incorporated herein. IX. The Loan Agreement, if entered into by Petitioner, would be in the principal amount not to exceed $2,590,000, payable over a 20-year period from water System revenues, and would constitute an indebtedness of Petitioner extending beyond the current year's revenues of Petitioner. No approving vote of the electors of Petitioner has been sought or obtained. X. Article 8, Section 3, Idaho Constitution, provides that no county, city, or other political subdivision shall incur any indebtedness or liability, in any manner or for any purpose, exceeding in that year the income and revenue provided to it for such year, without the assent of two-thirds (or, in the case of certain revenue bonds, the assent of the majority) of the qualified electors thereof voting at an election held for that purpose, but said Article 8, Section 3, contains the following exception: "provided, that this section shall not be construed to apply to the ordinary and necessary expenses authorized by the general laws of the state...." PETITION FOR JUDICIAL CONFIRMATION - Page 7 EXHIBIT "B" XI. Petitioner, by and through its Mayor and Council, has determined that the proposed Loan Agreement for the financing of the Improvements constitutes an ordinary and necessary expense of the Petitioner authorized by the general laws of the State, within the meaning of the above-quoted proviso to Article 8, Section 3, Idaho Constitution, for which no approving vote of the electors is required. This determination is based upon the following factors: A. The proposed expenditure is necessary to protect the health, safety, and welfare of the inhabitants of the Petitioner who use the System and to comply with state and federal drinking water standards. B. The proposed expenditure is for the purpose of repairing, rehabilitating, maintaining, and extending existing services of Petitioner in order to render them serviceable, as opposed to the construction of wholly new facilities. C. The proposed Improvements are authorized by the general laws of the State. D. Petitioner has operated the existing System since 1992 and has determined that the Improvements are PETITION FOR JUDICIAL CONFIRMATION - Page 8 EXHIBIT "B" indispensable to the efficient continued operation of the System. E. The cost of the Improvements is not disproportionate to Petitioner's annual budget. XII. Petitioner seeks a determination of the validity of the proposed Loan Agreement, including the Petitioner's proposed pledge to repay the loan from water System revenues, in view of: A. The legal issue, arising under Article 8, Section 3, Idaho Constitution, as to whether or not the proposed Loan Agreement and any promissory note or other obligation evidencing such agreement constitutes an "ordinary and necessary expense" of Petitioner, authorized by the general laws of the State, for which an approving vote of the electors is not required. B. The requirement contained in the State's loan offer that judicial confirmation of the validity of the Loan Agreement be obtained as a condition precedent to the execution of the Loan Agreement. XIII. Judicial examination and confirmation pursuant to this Petition would serve an important public purpose by providing an early determination of the validity of the power of Petitioner to PETITION FOR JUDICIAL CONFIRMATION - Page 9 EXHIBIT "B" enter into the proposed Loan Agreement, to issue its promissory note or other evidence thereof, and to pledge to repay said obligations from the revenues of the Petitioner's domestic water System, all as provided by the Judicial Confirmation Act and in particular Section 7-1302, Idaho Code. WHEREFORE, Petitioner prays (1) for an order setting the date and time of a hearing herein and directing the giving of notice hereof as provided by law, and (2) for a judicial examination and determination of the validity of the power and authority of Petitioner (a) to enter into the proposed Loan Agreement with the State, (b) to incur indebtedness in the amount not to exceed $2,590,000 thereunder without the approval of the electors of Petitioner at a special election as an "ordinary and necessary expense" authorized by the general laws of the State, and to issue its evidence of such indebtedness to the State, and (c) to pledge its domestic water System revenues to the payment of such indebtedness; and a declaration that the Loan Agreement and the evidence of indebtedness thereof, when issued pursuant to such authority, will be valid and binding special obligations of Petitioner, payable in accordance with their terms. PETITION FOR JUDICIAL CONFIRMATION - Page 10 EXHIBIT "B" DATED this ____ day of , 2006. MOORE SMITH BUXTON & TURCKE, CHARTERED Michael C. Moore Attorney for Petitioner EXHIBIT "B" PETITION FOR JUDICIAL CONFIRMATION - Page 11 VERIFICATION STATE OF IDAHO ss. County of Ada Nancy Merrill, being first duly sworn, deposes and says: That she is the Mayor of the City of Eagle, Idaho; that she has read the foregoing Petition, knows the contents thereof, and believes the same to be true and correct. Nancy Merrill SUBSCRIBED AND SWORN TO before me this 2006. day of Notary Public in and for the State of Idaho, residing at therein My Commission expires PETITION FOR JUDICIAL CONFIRMATION - Page 12 EXHIBIT "B"