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bonds shall be set aside in the Bond Service Fund in cash at least one m onth prior to the date said next m aturity or instalm ent of principal or interest becomes due. Any amount required to be set aside, transferred to and placed in the Bond Service Fund may be prepaid in whole or in part by being earlier set aside, transferred to and placed in the Bond Service Fund and in th at event the monthly transfer which has been so prepaid need not be made at the time appointed therefor. In any event, at least one m onth prior to the due date of any m aturity or installm ent of principal of or interest on the bonds all sums required for the payment thereof m ust be in such Bond Service Fund in cash. T he Board of Directors of said D istrict directs th at such sums be set aside from the Revenue Fund through transfers or payment made into the Bond Service Fund in such am ounts as may be necessary to comply with the foregoing provisions of this section. D uring the period of construction of any of the works referred to in the bond proposal set forth in the recitals hereof and for six m onths thereafter, if, for any reason, the moneys in the Bond Service Fund plus any sum available in the Reserve Fund for transfer thereto are insufficient to pay an instalm ent of interest when the same becomes due, there shall be set aside from the Construction Fund and transferred to and placed in the Bond Service Fund such am ount as will, w ith any sum then in such Bond Service Fund, plus the am ount available therefor in the Reserve Fund, be sufficient to pay such interest as it becomes due. Moneys set aside and placed in said Bond Service Fund shall remain therein until from time to time expended for the paym ent of principal and interest and shall not be used for any other purpose whatsoever except that any such moneys so set aside and placed in the Bond Service Fund which at any time may be in excess of the am ount which at th at tim e is required by the term s of this section to be in the Bond Service Fund in cash may be tem porarily invested as hereinafter provided, but such investment shall not affect the obligation of the D istrict to cause the full am ount required by the term s of this section to be available in said Bond Service Fund in cash at the time required by the term s of this section. All money rem aining in said Bond Service Fund in excess of the amount required to accomplish the purpose of its establishment shall be transferred to the Revenue Fund. If at the time any bond or interest coupon is presented for paym ent the moneys in the Bond Service Fund are insufficient to make such payment, moneys sufficient for such paym ent shall be set aside from the Reserve Fund and transferred to and placed in said Bond Service Fund. Section 19. Reserve Fund. N ot later than the first day of the fourth month next succeeding th at m onth in which the D istrict shall acquire the w ater facilities of the Las Vegas Land and W ater Company and on the first day of each month thereafter, there shall be set aside from the Revenue Fund and transferred to and placed in the Reserve Fund a sum at least equal to l/36th of the maximum annual debt service. As used in this resolution “maximum annual debt service” shall mean the maximum am ount required to be paid out of thef Bond Service Fund in any year after the date of the bonds (except the year which ends March 1, 1990) on account of interest to accrue and principal to become payable on the bonds. Said m onthly transfers shall continue until such tim e as there has been paid into said Reserve Fund a sum at least equal to the maximum annual debt service, and thereafter there shall be maintained in said Reserve Fund a sum at least equal to said maximum annual debt service. No paym ent need be made into the Reserve Fund so long as there shall be in said fund a sum at least equal to said maximum annual debt service. W henever moneys are w ithdraw n from the Reserve Fund to pay principal and interest of bonds, the am ount of the Reserve Fund shall be restored to the am ount required- in this section by m onthly transfers from the Revenue Fund made on the first day of each calendar month thereafter, each such transfer (except the last) to be not less than l/3 6 th of the maximum annual debt service. Except as hereinafter in this paragraph provided, moneys in the Reserve Fund shall be used solely for the purpose of paying the principal of and interest on the bonds in the event th at the moneys in the Bond Service Fund are insufficient therefor, and for th at purpose may be withdrawn and transferred to the Bond Service Fund. W henever the aggregate moneys available in the Bond Service Fund, the Redemption Fund, and the Reserve Fund are sufficient to call and redeem, prior to m aturity, all of the outstanding bonds of this issue, then the moneys in the Bond Service Fund and the Reserve Fund may be transferred to the Redemption Fund and all such outstanding bonds may be purchased prior to m aturity or called and redeemed prior to 7 m aturity. W henever the aggregate amounts of money available in the Bond Service Fund and the Reserve Fund shall be sufficient to pay the principal and interest thereafter coming due and payable on all outstanding bonds of this issue, all or any part of the moneys in the Reserve Fund may be transferred to the Bond Service Fund and used for the purpose of paying principal and interest upon such outstanding bonds. Section 20. Additional Fund Uses. So long as all principal and interest of the bonds are paid in accordance w ith the term s hereof, and all payments required to be made into the Bond Service Fund, Redemption Fund and Reserve Fund have been made, and all other covenants of the D istrict contained herein have been duly performed, any moneys in the Revenue Fund may be used for any purpose of the D istrict now or hereafter authorized by law, including but not limited to, transfers to the Bond Service Fund or Reserve Fund for prepaym ent of sums required to be placed therein, transfers to the Redemption Fund for the purchase or redemption of bonds prior to m aturity, the acquisition and construction of extensions, additions, improvements, renewals and replacements (other than ordinary maintenance and repairs) to the works and properties of the District. Section 21. Warranty. Las Vegas Valley W ater D istrict shall preserve and protect the security of the bonds and the rights of the bondholders and w arrant and defend their rights against all claims and demands of all persons. In order to fully preserve and protect the priority and security of the bonds the D istrict shall pay and discharge all lawful claims for labor, m aterials and supplies which, if unpaid, may become a lien or charge upon the revenues prior to or superior to the lien of the bonds or impair the security of the bonds. Section 22. Covenants. So long as any of the bonds issued hereunder are outstanding and unpaid, or so long as provision for the full payment and discharge thereof at m aturity or upon redem ption prior to m aturity through the setting apart in the Bond Service Fund or in the Redemption Fund or in a special tru st fund to insure the payment or redemption thereof (as the case may be) of money sufficient for th at purpose has not been made, the D istrict covenants w ith the bondholders as follow s: Covenant 1. As soon as funds are available therefor, the D istrict will commence the acquisition and construction of revenue producing works and properties and continue the same to completion with all practical dispatch and in an economical manner. Covenant 2. The D istrict shall at all times operate its works and properties in a sound and economical manner and shall maintain, preserve and keep the same, w ith appurtenances and every part and parcel thereof, properly or cause the same to be so maintained, preserved and kept, in good repair, working order and condition, and will from time to tim e make, or cause to be made, all necessary and proper repairs, replacements and renewals so th at at all times the operation of the waterw orks may be properly and advantageously conducted. Covenant 3. T he works and properties of the D istrict shall not be sold or leased or other­wise disposed of as a whole, or substantially as a whole, unless such sale, lease or other disposition be so arranged as to provide for a continuance of payments into the Sinking Fund at least sufficient in am ount to provide the sums required for such fund under the term s of this resolution, and unless sold or leased in such manner the D istrict shall operate its works and properties continuously. Covenant 4. The D istrict shall at all times m aintain w ith responsible insurers all such insurance as is customarily maintained w ith respect to works and properties of like character against loss of or damage to such works or properties and against public or other liability to the extent reasonably necessary to protect the interest of the D istrict and the bondholders. If any useful part of the works and properties shall be damaged or destroyed, the D istrict shall repair or replace the damaged works or properties so as to restore the same to use. The proceeds of any insurance policies covering any such loss or damage shall be payable to the D istrict, and shall be applied to the D istrict’s reasonable and necessary reconstruction costs and, to the extent not so applied, shall be paid into the Revenue Fund and used in the same m anner as other moneys in said fund. Covenant 5. T he D istrict will keep proper books of record and account, in accordance with sound accounting practice, in which complete and correct entries shall be made of its trans­actions relating to its works and properties and the revenues received therefrom, which, together with all other books and papers and properties of the D istrict shall at all times be sub­ject to the reasonable inspection of the holder or holders of not less than five per cent (5%) in 8