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Section 4. Payment: Security: Pledges and Covenants. 4.01. The City will create and continue to operate its Water and Sewer Fund to which will be credited all gross revenues of the water and sewer plant system and out of which will be paid all normal and reasonable expenses of current operations of the water and sewer plant system. Any balance therein are deemed net revenues and will be transferred, from time to time, to a General Obligation Sewer and Water Revenue Bonds, Series 1998 Debt Service Fund (Debt Service Fund) hereby created in the Water and Sewer Fund, which fund will be used only to pay principal of and interest on the Bonds and any other bonds similarly authorized. There will always be retained in the Debt Service Fund a sufficient amount to pay principal of and interest on all the Bonds described in Section 1.01, and the City Administrator must report any current or anticipated deficiency in the Debt Service Fund to the City Council. There is appropriated to the Debt Service Fund (i) capitalized interest financed from Bond proceeds, if any, (ii) any amount over the minimum purchase price of the Bonds paid by the Purchaser, and (iii) the accrued interest paid by the Purchaser upon closing and delivery of the Bonds. 4.02. The City Council covenants and agrees with the holders of the Bonds that so long as any of the Bonds remain outstanding and unpaid, it will keep and enforce the following covenants and agreements: (a) The City will continue to maintain and efficiently operate the water and sewer plant system as public utilities and conveniences free from competition of other like utilities and will cause all revenues therefrom to be deposited in bank accounts and credited to the water and sewer system accounts as hereinabove provided, and will make no expenditures from those accounts except for a duly authorized purpose and in accordance with this resolution. (b) The City will also maintain the Debt Service Fund as a separate account in the Water and Sewer Fund and will cause money to be credited thereto from time to time, out of net revenues from the water and sewer plant and system in sums sufficient to pay principal of and interest on the Bonds when due. ( c) The City will keep and maintain proper and adequate books of records and accounts separate from all other records of the City in which will be complete and correct entries as to all transactions relating to the water and sewer plant system and which will be open to inspection and copying by any bondholder, or the bondholder's agent or attorney, at any reasonable time, and it will furnish certified transcripts therefrom upon request and upon payment of a reasonable fee therefor, and said account will be audited at least annually by a qualified public accountant and statements of such audit and report will be furnished to all bondholders upon request. (d) The City Council will cause persons handling revenues of the water and sewer plant system to be bonded in reasonable amounts for the protection of the City and the bondholders and will cause the funds collected on account of the operations of the DJK144119 CE1SS-13