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but the City may contest the validity or applicability of any <br />law or regulation so long as the System is not thereby subject <br />to unreasonable penalties or risk of damage or forfeiture. The <br />City shall construct the improvements or extensions ultimately <br />determined to be necessary to comply with applicable laws or <br />regulations so that the System may be used and operated as a <br />revenue -producing utility, and the City may issue additional <br />obligations secured by a parity lien on and ratably payable <br />from the net revenues of the System, as provided in Section 6 <br />hereof, for the purpose of providing money for said necessary <br />improvements or extensions. <br />@.,Oi. The City covenants and agrees with the owners <br />of the Bonds that the investments of proceeds of the Bonds, <br />including the investment of any revenues pledged pursuant to <br />Section 6 hereof, any grant proceeds or any other revenues <br />pledged to the Bonds which are considered proceeds under the <br />applicable regulations, and accumulated sinking funds, if any, <br />shall be limited as to amount and yield in such manner that the <br />Bonds shall not be arbitrage bonds within the meaning of <br />Section 148 of the Internal Revenue Code of 1986 (the "Code"), <br />and regulations thereunder., On the basis of the existing <br />facts, estimates and circumstances, including the foregoing <br />findings and covenants, the City Council hereby certifies that <br />it is not expected that the proceeds of the Bonds will be used <br />in suet: manner as to cause the Bonds to be arbitrage bonds <br />under Section 148 of the Code and regulations thereunder. The <br />City Council also finds that the exception for small <br />governmental units available under Section 148(f)(4)(C) is <br />applicable to the Bonds because (i) the City has general taxing <br />powers, (ii) the Bonds are not private activity bonds under <br />Section 141(a) of the Code, (iii) ninety-five percent of more <br />of the net proceeds of the Bonds are to be used for local <br />governmental activities of the City and (iv) the aggregate face <br />amount of all tax-exempt bonds (other than Private activity <br />bonds) during the current calendar year is not reasonably <br />expected to exceed $5,000,000. The City Clerk shall furnish an <br />arbitrage certificate to the Purchaser embracing or based on <br />the foregoing certification at the time of delivery of the <br />Bonds to the Purchaser. <br />Q.02. The City Council hereby designates the Bonds to <br />be "qualified tax-exempt obligations" for the purposes of <br />Section 265 of the Code and finds that the reasonably <br />anticipated amount of qualified tax-exempt obligations (other <br />than private activity bonds) which will be issued by the City <br />during the current calendar year does riot exceed $10,000,000. <br />The City Clerk is hereby authorized and <br />directed to certify a copy of this Resolution a,d to cause the <br />-15- <br />