AN ORDINANCE relating to the electric system of The City of Seattle; authorizing the issuance of short-term debt in the principal amount of not to exceed One Hundred Twenty-Five Million Dollars ($125,000,000) outstanding at any time to pay for or finance system expenses pending the receipt of system revenues; providing for the terms, conditions, covenants, security and manner of sale of such short-term debt; and describing the lien of such short-term debt.

WHEREAS, The City of Seattle, Washington (the "City") owns, operates and maintains an electric system (the "Light System"); and

WHEREAS, unanticipated increases in the wholesale cost of purchased power in 2000 and 2001, together with adverse snowpack and water conditions in the 2000 to 2001 water year, have resulted in an operating cash flow deficit that is expected to continue into the first quarter of 2004; and

WHEREAS, the Light System's operating cash flow deficit has heretofore been financed through a loan from the City's Consolidated (Residual) Cash Portfolio; and

WHEREAS, the City Council finds that significant savings in interest costs can be realized by financing the Light System's operating cash flow deficit through the issuance of its fixed rate or adjustable rate revenue anticipation note(s), commercial paper obligation(s), a bank loan or line of credit or other short-term debt to pay or finance Light System expenses pending the receipt of Gross Revenues (as defined below); and

WHEREAS, the City previously issued its Municipal Light and Power Refunding Revenue Bonds, Series 1992B, its Municipal Light and Power Revenue and Refunding Revenue Bonds, 1993, its Municipal Light and Power Revenue Bonds, 1994, its Municipal Light and Power Revenue Bonds, 1995, Series A and B, its Municipal Light and Power Revenue Bonds, 1996, its Municipal Light and Power Revenue Bonds, 1997, its Municipal Light and Power Refunding Revenue Bonds, 1998, Series A, its Municipal Light and Power Revenue Bonds, 1998, Series B, its Municipal Light and Power Revenue Bonds, 1999, its Municipal Light and Power Revenue Bonds, 2000, and its Municipal Light and Power Improvements and Refunding Revenue Bonds, 2001 (collectively, the "Senior Lien Bonds");

WHEREAS, the City previously issued its Municipal Light and Power Adjustable Rate Revenue Bonds, 1990, its Municipal Light and Power Adjustable Rate Revenue Bonds, 1991, Series A and B, its Municipal Light and Power Adjustable Rate Revenue Bonds, 1993 and its Municipal Light and Power Adjustable Rate Revenue Bonds, 1996 (collectively the "Subordinate Lien Bonds"); and

WHEREAS, by Ordinance 120273 and Resolution 30304 (the "2001 Note Legislation") the City issued is Municipal Light and Power Revenue Anticipation Notes, 2001 (the "2001 Notes"), and reserved the right to issue additional Senior Lien Bonds or Subordinate Lien Bonds or additional obligations with a lien on Gross Revenues of the Light System equal or junior to the lien of the 2001 Notes so long as such additional obligations (i) do not mature prior to the to the maturity date of the 2001 Notes, or (ii) meet certain other requirements set forth in the 2001 Note Legislation;

NOW, THEREFORE, BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1 . Definitions.

As used in this ordinance, the following words and phrases shall have the meanings set forth below.

"Bond Counsel" means a lawyer or a firm of lawyers, selected by the City, of nationally recognized standing in matters pertaining to bonds issued by states and their political subdivisions.

"City" means The City of Seattle, Washington, a municipal corporation duly organized and existing under the laws of the State of Washington.

"City Council" means the City Council of the City, as duly and regularly constituted from time to time.

"Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto, and all applicable regulations thereunder.

"Director of Finance" means the Director of Finance of the City.

"Gross Revenues" means (a) all income, revenues, receipts and profits derived by the City through the ownership and operation of the Light System; (b) the proceeds received by the City directly or indirectly from the sale, lease or other disposition of any of the properties, rights or facilities of the Light System; (c) payment agreement receipts, to the extent that such receipts are not offset by payment agreement payments; and (d) the investment income earned on money held in any fund or account of the City, including any bond redemption funds and the accounts therein, in connection with the ownership and operation of the Light System. Gross Revenues do not include: (A) insurance proceeds compensating the City for the loss of a capital asset; (B) income derived from investments irrevocably pledged to the payment of any defeased bonds payable from Gross Revenues; (C) investment income earned on money in any fund or account created or maintained solely for the purpose of complying with the arbitrage rebate provisions of the Code; (D) any gifts, grants, donations or other funds received by the City from any State or federal agency or other person if such gifts, grants, donations or other funds are the subject of any limitation or reservation imposed by the donor or grantor or imposed by law or administrative regulation to which the donor or grantor is subject, limiting the application of such funds in a manner inconsistent with the application of Gross Revenues hereunder; (E) the proceeds of any borrowing for capital improvements (or the refinancing thereof); and (F) the proceeds of any liability or other insurance (excluding business interruption insurance or other insurance of like nature insuring against the loss of revenues).

"Light Fund" means the special fund of the City of that name heretofore created and established by the City Council.

"Light System" means the municipal light and power plant and system now belonging to or which may hereafter belong to the City.

"Mayor" means the Mayor of the City.

"Note(s)" means the short-term debt authorized to be issued pursuant to, under the authority of and for the purposes provided in this ordinance and the Resolution. The term "Note(s)" shall include periodic draws made on a line of credit entered into pursuant to this ordinance and the Resolution.

"Resolution" means the resolution or resolutions fixing the terms of and other matters relating to the Note(s), as authorized by Section 2 of this ordinance.

"Senior Lien Bonds" means, collectively, the City's outstanding Municipal Light and Power Refunding Revenue Bonds, Series 1992B, Municipal Light and Power Revenue and Refunding Revenue Bonds, 1993, Municipal Light and Power Revenue Bonds, 1994, Municipal Light and Power Revenue Bonds, 1995, Series A and B, Municipal Light and Power Revenue Bonds, 1996, Municipal Light and Power Revenue Bonds, 1997, Municipal Light and Power Refunding Revenue Bonds, 1998, Series A, Municipal Light and Power Revenue Bonds, 1998, Series B, Municipal Light and Power Revenue Bonds, 1999, Municipal Light and Power Revenue Bonds, 2000, Municipal Light and Power Improvements and Refunding Revenue Bonds, 2001, and any bonds issued hereafter having a charge or lien upon the Gross Revenues of the Light System on a parity with those bonds.

"State" means the State of Washington.

"Subordinate Lien Bonds" means, collectively, the City's outstanding Municipal Light and Power Adjustable Rate Revenue Bonds, 1990, Municipal Light and Power Adjustable Rate Revenue Bonds, 1991, Series A and B, Municipal Light and Power Adjustable Rate Revenue Bonds, 1993, and Municipal Light and Power Adjustable Rate Revenue Bonds, 1996, and any bonds issued hereafter, having a charge or lien upon the Gross Revenues of the Light System on a parity with those bonds.

"2001 Note Legislation" means Ordinance 120273 and Resolution 30304 of the City Council authorizing and providing for the issuance of the 2001 Notes.

"2001 Notes" means the Municipal Light and Power Revenue Anticipation Notes, 2001, issued pursuant to the 2001 Note Legislation.

Section 2 . Authorization and Description of Note(s).

Pending the receipt of sources of repayment, including but not limited to Gross Revenues of the Light System, the City shall issue the Note(s), in the aggregate principal amount of not to exceed One Hundred Twenty-Five Million Dollars ($125,000,000), for the purpose of (1) providing for the payment or financing of Light System expenses pending the receipt of Gross Revenues, and (2) paying the costs of issuing and selling the Note(s).

The Note(s) shall be issued in one or more series, with the final series issued on or before the date that is eighteen (18) months after the initial date of issuance; shall have such title and designation or designations as determined by the Director of Finance or as the City Council shall specify in the Resolution; shall be dated and shall mature on such date or dates specified in the Resolution, except that no Note may mature prior to the maturity date of the 2001 Notes and the maturity date of each Note shall not be more than 13 months after the date of issuance of that Note; shall bear interest at the rate or rates specified in the Resolution, except that the net interest cost of any series of the Note(s) shall not exceed a weighted average rate of 12% per annum, payable at the times and in the manner specified in the Resolution; and shall have such denominations, and be subject to optional or mandatory redemption, open market purchase or defeasance, and other provisions, all on the terms and at the times specified in the Resolution. If approved by a resolution of the City Council, the City may extend the period during which Note(s) may be issued under this ordinance for such additional term or terms recommended by the Finance Director, except that the final date of issuance of Note(s) hereunder shall not be more than four years after the initial date of issuance.

The Note(s) may be issued as fixed rate or adjustable rate, commercial paper or other form of obligations or obligation, including but not limited to a bank loan or line of credit, under such terms as specified in the Resolution. The Resolution also shall specify whether interest on the Note(s) shall be included in or excluded from gross income for federal tax purposes.

The Resolution shall set forth the manner of execution, sale, delivery, and, if necessary, the manner of registration, provisions relating to the payment and transfer of the Note(s) and appointment of a Note registrar. The Resolution may include such other covenants, conditions and provisions relating to the Note(s), including, without limitation, security for and repayment of the Note(s), that the City Council deems appropriate.

The Resolution may provide for municipal bond insurance, a letter of credit, a standby bond purchase agreement, or other form of credit or liquidity facility, and conditions or covenants relating thereto, including additional terms, conditions and covenants relating to the Note(s) that are required by the bond insurer or credit or liquidity facility provider and are consistent with the provisions of this ordinance, including but not limited to restrictions on investments and requirements of notice to and consent of the bond insurer or letter of credit provider.

The Resolution may approve and authorize the execution and delivery on behalf of the City of any contracts consistent with the provisions of this ordinance for which the City's approval is necessary or to which the City is a party and that are related or incidental to the initial issuance and sale of the Note(s), the initial establishment of the interest rate or rates on the Note(s) and any redemption of the Note(s).

The City may by the Resolution appoint or provide for the appointment by the Director of Finance of a tender agent, a paying agent, a remarketing agent and a bank or other financial institution furnishing liquidity or credit support for the Note(s). The Resolution shall approve and authorize the execution of contracts covering the duties of those agents, the bank or other institution, and the City, with respect to the Note(s).

The City Council may adopt the Resolution and may provide therein for the matters described in this ordinance, and such other matters that the City Council deems necessary and appropriate to carry out the purposes of this ordinance. Once adopted, the Resolution shall be deemed a part of this ordinance as if set forth herein.

Section 3 . Priority of Lien.

The lien and charge of the Note(s) on the Gross Revenues of the Light System shall be subordinate to the lien and charge of the Senior Lien Bonds and the Subordinate Lien Bonds on the Gross Revenues, and, upon compliance with the applicable conditions for the issuance of additional obligations set forth in the 2001 Note Legislation, shall be equal to or subordinate to the lien and charge of the 2001 Notes on the Gross Revenues, all as determined by and specified in the Resolution. The lien and charge of the Note(s) on the Gross Revenues shall be subordinate to the payment of all reasonable charges for maintenance and operation of the Light System.

Section 4 . Security for the Note(s).

The Note(s) shall be special limited obligations of the City payable from and secured by the Gross Revenues of the Light System and/or other obligations issued to redeem the Note(s). The City irrevocably pledges to redeem the Note(s) on or prior to their maturity from one or more of those sources. The Note(s) shall not in any manner or to any extent constitute general obligations of the City, the State of Washington or any political subdivision of the State of Washington or a charge upon any general fund or upon any money or other property of the City, the State of Washington or any political subdivision of the State of Washington not specifically pledged thereto by this ordinance.

Section 5 . Preservation of Tax Exemption for Interest on Note(s).

If the Resolution specifies that the Note(s) are to be issued as tax-exempt obligations, the City covenants that it will take all actions within its power and reasonably necessary to prevent interest on the Note(s) from being included in gross income for federal income tax purposes, and it will neither take any action nor make or permit any use of proceeds of the Note(s) or other funds of the City treated as proceeds of the Note(s) at any time during the term of the Note(s) which will cause interest on the Note(s) to be included in gross income for federal income tax purposes.

The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon.

Section 6 . Sale of Note(s).

The Director of Finance may provide for the sale of the Note(s) by public sale, or by a negotiated sale, limited offering or private placement with the underwriter or placement agent, as applicable, chosen through a selection process acceptable to the Director of Finance. The terms of that sale shall be consistent with this ordinance and the Resolution and shall be confirmed by the Resolution. The Note(s) will be delivered to the purchaser(s) as provided in the Resolution immediately (i) upon payment to the City of the purchase price plus accrued interest, if any, to the date of closing in immediately available federal funds in Seattle, Washington, at the City's expense or at another place upon which the Director of Finance and the purchaser may mutually agree at the purchaser's expense, or (ii) upon receipt by the City of other valuable consideration specified in the Resolution, including but not limited to the right to make loan draws under the Note(s).

Section 7 . Continuing Disclosure.

If required in connection with the Note(s), the City shall undertake to provide for the benefit of holders of the Note(s) disclosure of certain financial information and operating data of the type included in the final official statement or other offering document for the Note(s), as well as disclosure of certain material events respecting the Note(s), in the manner and to the extent required by United States Securities and Exchange Commission Rule 15c2-12. The particular terms of the undertaking, if required, shall be set forth in the Resolution.

Section 8 . General Authorization.

The Mayor and the Director of Finance and each of the other appropriate officers of the City are each authorized and directed to do everything as in their judgment may be necessary, appropriate or desirable in order to carry out the terms and provisions of, and complete the transactions contemplated by, this ordinance. In particular, and without limitation, the Director of Finance may, in his discretion and without further action by the City Council, (a) comply with any continuing disclosure requirements applicable to the Note(s); (b) deem final and approve the distribution of any preliminary official statement or other offering document prepared in connection with the sale of the Note(s); (c) appoint a note registrar or securities depository for the Note(s); and (d) carry out such other responsibilities as are set forth in the Resolution.

Section 9 . Severability.

The provisions of this ordinance are declared to be separate and severable. If a court of competent jurisdiction, all appeals having been exhausted or all appeal periods having run, finds any provision of this ordinance to be invalid or unenforceable as to any person or circumstance, such offending provision shall, if feasible, be deemed to be modified to be within the limits of enforceability or validity. However, if the offending provision cannot be so modified, it shall be null and void with respect to the particular person or circumstance, and all other provisions of this ordinance in all other respects, and the offending provision with respect to all other persons and all other circumstances, shall remain valid and enforceable.

Section 10 . Ratification of Prior Acts.

Any action taken consistent with the authority but prior to the effective date of this ordinance, including, if applicable, but not limited to giving notices of the sale of Note(s), adopting the Resolution, executing contracts, making fund transfers and paying warrants, is ratified, approved and confirmed.

Section 11 . Section Headings.

Section headings in this ordinance are used for convenience only and shall not constitute a substantive portion of this ordinance.

Section 12 . Effective Date of Ordinance.

This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

Passed by the City Council the _____ day of _______, 2002, and signed by me in open session in authentication of its passage this ____ day of _________, 2002. ___________________ President _____________ of the City Council

Approved by me this ____ day of __________, 2002. ___________________ Gregory J. Nickels, Mayor

Filed this ____ day of ______________, 2002. ___________________ City Clerk September19, 2002 version 6 t