4.1. ERMUSR 02-11-2014 - Laserfiche WebLink

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Limited Obligation The obligation of the City to pay the principal of and interest on the Bonds is a limited obligation. The full faith and credit and taxing powers of the City are not pledged to pay the principal and interest on the Bonds and the City has not pledged ad valorem property taxes to pay the principal and interest on the Bonds. As further described elsewhere herein, the principal of and interest on the Bonds is payable solely from Net Revenues of the Utility. While it is believed that revenues of the Utility will be sufficient to pay operating and maintenance expenses of the Utility as well as the principal of and interest on the Bonds when due, a number of factors described below may affect the receipt of sufficient revenues from the Utility for such purposes, which may impair the ability of the City to make timely principal and interest payments on the Bonds. General Factors that May Affect Sufficiency of Revenues As stated above, the City is obligated to pay the principal of and interest on the Bonds solely from Net Revenues of the Utility. A number of factors may have an adverse effect on the receipt of moneys in an amount sufficient to pay operating and maintenance expenses of the Utility as well as the principal and interest on the Bonds. These include potential adverse changes in the economic condition of the City, including potential decreases in population that may arise from decisions by employers located in and around the City to relocate their operations elsewhere; and potential unemployment at a level that would preclude residents of the City from paying sufficient user fees in order to support the operations of the Utility and the payment of principal and interest on the Bonds. The loss of any of the major electric users would also have an adverse effect on the revenues of the Utility. Unforeseen Problems with the Utility Payment of the principal of and interest on the Bonds is dependent to a considerable degree upon the continued operation of the Utility for the purposes for which they were designed. While the City believes that the Utility has been designed and constructed in such a manner as to permit their continued operation without requiring unreasonable costs for maintenance or repairs and has provided under the terms of the Awarding Resolution for the creation and maintenance of funds in amounts which the City believes to be sufficient to provide for the necessary repairs and maintenance of the Utility, there can be no assurance that such amounts will, in fact, be sufficient to assure the ongoing operation of the Utility. Although the Utility is covered by policies of insurance as otherwise described herein, casualties and other occurrences may result in damage to the Utility, which may not be covered by the net proceeds of any insurance award. Any material interruption of the operation of the Utility may have an adverse effect on the ability of the City to collect fees from users of the Utility and could, in turn, have a materially adverse effect on the ability of the Utility to make timely payments of principal and interest on the Bonds. The Electric Utility Industry Generally The electric utility industry has been, and in the future will be, affected by a number of factors which could impact the financial condition and competitiveness of electric utilities, such as the Electric System of the Utility. Such factors include, among others, (i) effects of compliance with changing environmental, safety, licensing, regulatory and legislative requirements; (ii) changes resulting from conservation and demand-side management programs on the timing and use of electric energy; (iii) other federal and state legislative changes; (iv) effects of competition from other electric utilities (including increased competition resulting from mergers, acquisitions, and "strategic alliances" of competing electric (and gas) utilities and from competitors offering less expensive electricity from much greater distances transmitted over an interconnected system) - 5 - 86