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City of Santa Ana <br />Agreement No.: D2202003 <br />Project No.: 3010038-003C <br />Page 20 of 49 <br />Subject to the provisions of any outstanding System Obligation, money on deposit in the Enterprise Fund <br />shall be applied and used first, to pay Operations and Maintenance Costs, and thereafter, all amounts <br />due and payable with respect to the System Obligations in order of priority. After making all payments <br />hereinabove required to be made in each Fiscal Year, the Recipient may expend in such Fiscal Year any <br />remaining money in the Enterprise Fund for any lawful purpose of the Recipient. <br />B.2.8 No Prepayment <br />Pursuant to State Water Board's Debt Management Policy, adopted on October 3, 2017, the Recipient <br />may not prepay any portion of the principal and interest due under this Agreement without the written <br />consent of the Deputy Director of the Division. <br />B.2.9 Reserve Fund. <br />Prior to Completion of Construction, the Recipient must establish a restricted Reserve Fund, held in its <br />Enterprise Fund, equal to one year's Debt Service on this Obligation. The Recipient must maintain the <br />Reserve Fund throughout the term of this Agreement. The Reserve Fund is subject to lien and pledged <br />as security for this Obligation, and its use is restricted to payment of this Obligation during the term of this <br />Agreement. <br />B.3 RATES, FEES AND CHARGES <br />(a) The Recipient must, to the extent permitted by law, fix, prescribe and collect rates, fees and charges <br />for the System during each Fiscal Year which are reasonable, fair, and nondiscriminatory and which will <br />be sufficient to generate Revenues in the amounts necessary to cover Operations and Maintenance <br />Costs, and must ensure that Net Revenues are equal to [the sum of (i) at least 120% of the Maximum <br />Annual Debt Service with respect to all outstanding System Obligations senior to and on parity with the <br />Obligation and (ii) at least 100% of the Maximum Annual Debt Service with respect to all outstanding <br />System Obligations subordinate to the Obligation], so long as System Obligations other than this <br />Obligation are outstanding. Upon defeasance of all System Obligations other than this Obligation, this <br />ratio must be at least 120%, except where System Obligations are defeased pursuant to refunding <br />obligations. <br />(b) The Recipient may make adjustments from time to time in such fees and charges and may make such <br />classification thereof as it deems necessary, but shall not reduce the rates, fees and charges then in <br />effect unless the Net Revenues from such reduced rates, fees, and charges will at all times be sufficient <br />to meet the requirements of this section. <br />(c) Upon consideration of a voter initiative to reduce Revenues, the Recipient must make a finding <br />regarding the effect of such a reduction on the Recipient's ability to satisfy the rate covenant set forth in <br />this Section. The Recipient must make its findings available to the public. The Recipient's Authorized <br />Representative must request, if necessary, the authorization of the Recipient's decision -maker or <br />decision -making body to file litigation to challenge any such initiative that it finds will render it unable to <br />satisfy the rate covenant set forth in this Agreement and its obligation to operate and maintain the Project <br />for its Useful Life. The Recipient must diligently pursue and bear any and all costs related to such <br />challenge. The Recipient must notify and regularly update the State Water Board regarding the status of <br />any such challenge. <br />B.4 ADDITIONAL DEBT. <br />(a) The Recipient's future debt that is secured by Revenues pledged herein may not be senior to this <br />Obligation. <br />Exhibit B <br />