2010-02 Refinance Hall Property BondsATTACHMENT 1
RESOLUTION NO. 2010-02
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
ENCINITAS PUBLIC FINANCING AUTHORITY
AUTHORIZING THE ISSUANCE OF ITS REFUNDING
REVENUE BONDS IN THE AGGREGATE PRINCIPAL
AMOUNT OF NOT TO EXCEED $20,000,000 IN
CONNECTION WITH THE REFINANCING OF THE
ACQUISITION OF LAND FOR PUBLIC PARKS,
AUTHORIZING AND DIRECTING EXECUTION OF AN
INDENTURE OF TRUST AND AN AMENDED AND
RESTATED LEASE AGREEMENT, ESCROW DEPOSIT
AND TRUST AGREEMENT AUTHORIZING THE SALE
OF THE BONDS AND AN OFFICIAL STATEMENT AND
AUTHORIZING OFFICIAL ACTIONS AND EXECUTION
OF RELATED DOCUMENTS
WHEREAS, the Encinitas Public Financing Authority (the "Authority") is a Joi
Exercise of Powers Agreement (the "Agreement) between the City of Encinitas (the "City") E
the San Dieguito Water District, and is authorized under said Agreement and under the laws
the State of California to finance the acquisition and construction of public capital improveme
for the City; and
WHEREAS, the City has requested the Authority to issue its bonds for
purpose of providing funds to enable the City to refinance the acquisition of land to be used asl a
public park (the "2001 Project"); and
WHEREAS, the Authority has previously issued its 2001 Lease Revenue
Series A (Acquisition Project) (the "2001 Bonds") in an original principal amount
$22,645,000; and
WHEREAS, the 2001 Bonds were issued for the purpose of providing funds
enable the City to acquire 2001 Project and the 2001 Bonds are payable from lease payments
ATTACHMENT 1
be paid to the Authority by the City pursuant to a Lease Agreement between the City and the
Authority dated April 1, 2001 (the "2001 Lease Agreement"); and
WHEREAS, to defease and redeem the 2001 Bonds, if financially feasible, the
Authority proposes to issue its revenue bonds (the "Bonds") in an aggregate principal amount of
not to exceed $20,000,000 under the provisions of Article 4 (commencing with Section 6584) of
Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"),
which are proposed to be payable from the revenues to be derived by the Authority from lease
payments to be made by the City for the lease of certain facilities pursuant to an Amended and
Restated Lease Agreement relating to refinancing of the 2001 Project (the "Lease Agreement");
and
WHEREAS, if financially feasible to do so, a portion of the proceeds of the
Bonds will be deposited in an escrow established under an Escrow Deposit and Trust Agreement,
and used to prepay the lease payments to be made under the 2001 Lease Agreement and defease
and redeem the 2001 Bonds; and
WHEREAS, the Authority has determined that the 2010 Bonds should be
initially offered for sale on a competitive basis and there has been presented to the Authority a
form of notice of sale to be used in connection with the sale thereof, and
WHEREAS, in order to maintain the maximum flexibility in the sale of the
Bonds during the current fluctuating conditions in the municipal bond market, the Authority has
further determined to authorize, as an alternative to offering the Bonds for sale on a competitive
basis, that the Bonds be offered for sale on a negotiated basis if the Authority is unable, as a
result of such market conditions, to sell the 2010 Bonds on a competitive basis on terms that are
in the best financial interests of the Authority; and
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ATTACHMENT 1
WHEREAS, the Board of the Authority (the "Board") has duly considered such
transactions and has determined that it approves said transactions in the public interests of the
City and the Authority;
THEREFORE, BE IT RESOLVED by the Board of the Encinitas Public
Financing Authority adopt as follows:
Section 1. Findings and Determinations. (a) Pursuant to the Act, the Board
hereby finds and determines that the issuance of the Bonds will result in savings in effective
interest rates, bond underwriting costs and bond issuance costs and thereby result in significant
public benefits within the contemplation of Section 6586 of the Act.
(b) The Board finds and determines that the above recitals are true and correct
and that the fair rental value of 2001 Project exceeds the present value of Lease Payments to be
made under the Lease Agreement.
Section 2. Issuance of Bonds. The Board hereby authorizes the issuance of the
2010 Bonds for the purpose of refinancing the 2001 Bonds under and pursuant to the Act, in the
maximum aggregate principal amount not to exceed $20,000,000.
Section 3. Approval of Financing Documents. The Board hereby approves each
of the following documents in substantially the respective forms on file with the Secretary,
together with such additions thereto and changes therein as Bond Counsel shall deem necessary,
desirable or appropriate, the execution of which by the Chairperson, the Vice-Chairperson, the
Executive Director, or the City Finance Director shall be conclusive evidence of the approval of
any such additions and changes:
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ATTACHMENT 1
(1) the Amended and Restated Lease Agreement (Attachment 2) relating to
the lease of the 2001 Project by the City from the Authority for the purpose of
refinancing the existing 2001 Lease Agreement; and
(2) the Escrow Deposit and Trust Agreement (Attachment 3) by and among
the City, the Authority and Union Bank, N.A.
(3) the Indenture of Trust (Attachment 4) relating to the issuance of the
Bonds and to the 2001 Project, by and between Union Bank, N.A. (the "Trustee") and the
Authority;
The Chairperson, the Vice-Chairperson, the Executive Director, or the City
Finance Director are hereby authorized and directed to execute, and the Secretary is hereby
authorized and directed to attest and affix the seal of the Authority to, the final form of each of
the foregoing documents and agreements for and in the name and on behalf of the Authority.
The Board hereby authorizes the delivery and performance of each of the foregoing documents
and agreements.
Section 4. Official Notice of Sale. The form of Official Notice of Sale
(Attachment 6) as presented to this meeting is hereby approved and the Executive Director, or
his designee, is hereby authorized and directed to execute the same in substantially the form
presented to this meeting, with such changes therein as he may approve, such approval to be
conclusively evidenced by the execution and delivery thereof.
Section 5. Award of Sale of Bonds; Final Terms of Bonds. The Authority hereby
authorizes the sale of the Bonds at competitive or negotiated sale pursuant to and consistent with
the terms and conditions of this resolution. In the case of a competitive bid, the terms of the
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ATTACHMENT I
Bonds are hereby established as follows: (i) the final principal amount of the Bonds shall not
exceed $20,000,000 in the aggregate; and (ii) the Executive Director, or his designee, is hereby
authorized and directed to award the sale of the Bonds to the bidder with the lowest true interest
cost, provided that such interest costs shall result in a net present value savings of debt service on
the 2001 Bonds of at least 5.00%.
Following publication of the Notice of Intention to Sell Securities (Attachment 7)
and the distribution of the Official Notice of Sale as provided for in Section 6 below and the
receipt of competitive bids for the sale of the Bonds, the Executive Director, or his designee,
may accept or reject all or any of the bids received on the Bonds. In any event, if the Executive
Director, in consultation with the Authority's Financial Advisor, determines that a competitive
sale of the bonds would not be likely to produce the best financial result for the Authority, the
Executive Director is hereby authorized to negotiate the sale of the Bonds with one or more
underwriters (the "Underwriter") and execute and deliver the Purchase Contract pursuant to
Section 7 hereof.
Section 6. Publication of Notice. The Secretary in cooperation with the City
Clerk of the City and Bond Counsel is hereby authorized and directed to publish a Notice of
Intention to Sell Securities in The Bond Buyer at least 5 days prior to the date bids are to be
received. The Secretary, in cooperation with the Financial Advisor, shall cause the Official
Notice Inviting Bids to be circulated among prospective bidders.
Section 7. Purchase Contract. The Form of Purchase Contract (Attachment 8)
as presented to this meeting, among the City, the Authority and the proposed Underwriter and
the-sale of the Bonds pursuant thereto upon the terms and conditions set forth therein in the event
of a negotiated sale is hereby approved. Subject to such approval and subject to the provisions of
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ATTACHMENT 1
Section 8 hereof, in the event of a negotiated sale of the Bonds, the Executive Director or his
designee is hereby authorized and directed to evidence the Authority's acceptance of the offer
made by the Purchase Contract by executing and delivering the Purchase Contract in
substantially the form presented to this meeting with such changes therein as the officer
executing the same may approve and such matters are as authorized by Section 8 hereof, such
approval to be conclusively evidenced by the execution and delivery thereof.
Section 8. Executive Director Authorized to Establish Final Terms of Negotiated
Sale of 2010 Bonds. In the event of a negotiated sale of the Bonds, the Executive Director, or his
designee based on such advice of Authority staff and the Authority's financial consultant as said
officer may deem necessary, is hereby authorized and directed to act on behalf of the Authority
to establish and determine (i) the final principal amount of the various maturities of the Bonds,
which amount shall not exceed $20,000,000; (ii) the final interest rates on various maturities of
the Bonds shall result in a net present value savings of debt service from the 2001 Bonds of at
least 5.00%.
Section 9. Official Statement; Continuing Disclosure. The Board hereby
approves the preparation of, and hereby authorizes the Executive Director to deem final within
the meaning of Rule 15c2-12 of the Securities and Exchange Commission except fbr permitted
omissions, a preliminary, form of Official Statement (Attachment 5)of the Bonds. The Executive
Director or the City Finance Director is hereby authorized to execute the final Official Statement
in the name and on behalf of the Authority, including any modifications resulting from additions
thereto and changes therein as Bond Counsel shall deem necessary, desirable or appropriate, with
the execution of the final Official Statement by the Chairperson to be conclusive evidence of the
approval of any such additions and changes. The Executive Director or City Finance Director is
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further authorized to sign on behalf of the Authority a continuing disclosure certificate with
respect to the financing, in such form as may be approved by Bond Counsel.
Section 10. Official Actions. The Chairperson, the Vice-Chairperson, the
Executive Director, the City Finance Director, the Secretary and any and all other officers of the
Authority are hereby authorized and directed, for and in the name and on behalf of the Authority,
to do any and all things and take any and all actions, including obtaining a rating on the Bonds
and/or a municipal bond insurance policy and a debt service reserve fund surety bond, and
including execution and delivery of any and all assignments, certificates, requisitions,
agreements, notices, consents, instruments of conveyance, warrants and other documents, which
they, or any of them, may deem necessary or advisable in connection with the issuance and sale
of the Bonds.
Section 11. Effective Date. This Resolution shall take effect from and after the
date of its passage and adoption.
ADOPTED this 12th day of May, 2010.
AYES:
Barth, Bond, Dalager, Houlihan, Stocks.
NAYS:
None.
ABSENT:
None.
ABSTAIN:
None.
Dan Dalager, Mayor
ATTEST:
\ f
Deborah Cervone, Secretary
Encinitas Public Financing
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CERTIFICATION
I, Deborah Cervone, Secretary of the Encinitas Public Financing Authority, do hereby certify
that the foregoing resolution was adopted by the Board of Directors of the Encinitas Public
Financing Authority at a regular meeting thereof held on the 12th day of May, 2010, by the
following vote of the Public Financing Authority:
AYES: Barth, Bond, Dalager, Houlihan, Stocks.
NAYS: None.
ABSENT: None.
ABSTAIN: None.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
Encinitas Public Financing Authority this 12th day of May, 2010.
Deborah Cervone,
Secretary of the Encinitas Public
Financing Authority
(SEAL)
ATTACHMENT 2
AMENDED AND RESTATED
LEASE AGREEMENT
Dated as of 2010
by and between the
ENCINITAS PUBLIC FINANCING AUTHORITY,
aslessor
and the
CITY OF ENCINITAS,
aslessee
Relating to
Encinitas Public Financing Authority
2010 Lease Revenue Refunding Bonds
Series A
(Park Project)
ATTACHMENT 2
LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (this "Lease
Agreement"), dated as of , 2010, is by and between the ENCINITAS PUBLIC
FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of
the State of California, as lessor (the "Authority"), and the CITY OF ENCINITAS, a municipal
corporation organized and existing under the laws of the State of California, as lessee (the
"City");
WITNESSETH:
WHEREAS, the Authority is a joint powers authority duly organized and existing under
and pursuant to that certain Joint Exercise of Powers Agreement dated as of November 6, 1991,
executed by and among the City, Cardiff Sanitation District, Encinitas Fire Protection District,
Encinitas Sanitary District, and San Dieguito Water District; and
WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division
7 of Title 1 of the California Government Code (the "Bond Law") the Authority is authorized to
borrow money for the purpose of financing the acquisition of bonds, notes and other obligations
of, or for the purpose of making loans to, public entities including the City, and to provide
financing for public capital improvements of public entities including the City and to lease and
lease back such public capital improvements including the land on which the public capital
improvements are or will be located; and
WHEREAS, for the purpose of providing moneys to acquire or construct capital projects
of the City, the Authority issued its $22,645,000 aggregate principal amount 2001 Lease
Revenue Bonds, Series A (the "2001 Bonds") under that certain Indenture of Trust dated as of
April 1, 2001 (the "2001 Indenture") by and between the Authority and Union Bank, N.A., as
trustee; and
WHEREAS, the City secured the 2001 Bonds with the lease payments pursuant to a
Lease Agreement dated as of April 1, 2001 (the "2001 Lease") and in which the City leased
certain sites owned by the City (the "Leased Premises") pursuant to the laws of the State of
California to enter into leasehold agreements for such purpose; and
WHEREAS, the Leased Premises constitute a public capital improvement, as that term is
defined in the Bond law; and
WHEREAS, the City wishes to refinance its obligations under the 2001 Lease in order to
achieve an interest cost savings; and
WHEREAS, the Authority and the City purpose to lease and lease back the Leased
Premises as provided in this Lease Agreement, such lease back to the City being for the purpose
(among others) of providing amounts sufficient to provide for the payment of the principal of
and interest on the Bonds (as defined herein); and
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ATTACHMENT 2
WHEREAS, all conditions to the execution and delivery of this Lease Agreement have
been satisfied and the Authority and the City are duly authorized to execute and deliver this
Lease Agreement;
NOW, THEREFORE, for and in consideration of the premises and the material
covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind
themselves as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
SECTION 1.01 Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Lease Agreement shall have the respective
meanings specified in Section 1.01 of the Indenture. In addition, the following terms heretofore
defined in this Lease Agreement and the following terms defined in this Section 1.01 shall, for
all purposes of this Lease Agreement, have the respective meanings herein specified.
"Event of Default" means any of the events of default defined as such in Section 9.01.
"Facilities" means all of the buildings, improvements and facilities at any time situated
on the Site and described in any amendment to this Lease Agreement hereto and by this
reference incorporated herein.
"Fiscal Year" means the twelve-month period beginning on July 1 of any year and ending
on June 30 of the next succeeding year, or any other twelve-month period established by the City
as its fiscal year pursuant to written notice filed with the Authority and the Trustee.
"Hazardous Substance" means any substance, pollutant or contamination included in
such (or any similar) term under any federal, state or local statute, law, ordinance, code or
regulation now in effect or hereafter enacted or amended.
"Indenture" means the Indenture of Trust dated as of , 2010, by and between
the Authority and the Trustee, together with any duly authorized and executed amendments
thereto.
"Lease Payment Date" means, with respect to any Interest Payment Date, the fifteenth
(15th) calendar day of the month preceding such Interest Payment Date.
"Lease Payments" means the amounts payable by the City pursuant to Section 4.03(a),
including any prepayment thereof pursuant hereto and including any amounts payable upon a
delinquency in the payment thereof
"Leased Premises" means the Site subject to the provisions of Section 4.08, described in
Exhibit A attached hereto and by this reference incorporated herein.
"Miscellaneous Rent" means the amounts of additional rental which are payable by the
City pursuant to Section 4.08.
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"Permitted Encumbrances" means, as of any time: (a) liens for general ad valorem taxes
and assessments, if any, not then delinquent, or which the City may permit to remain unpaid
pursuant to Article V; (b) this Lease Agreement, the Indenture and any other agreement or other
document contemplated hereunder to be recorded against the Leased Premises; (c) any right or
claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the
manner prescribed by law; and (d) easements, rights of way, mineral rights, drilling rights and
other rights, reservations, covenants, conditions or restrictions which exist of record and which
the City certifies in writing will not materially impair the use of the Leased Premises for their
intended purposes.
"Site" means all of the land described in Exhibit A attached hereto and by this reference
incorporated herein.
"Term of this Lease Agreement" means the time during which this Lease Agreement is in
effect, as provided in Section 4.02.
"Trustee" means Union Bank, N.A. or any successor thereto acting as Trustee pursuant to
the Indenture.
SECTION 1.02 Exhibits. The following exhibits are attached to, and by this
reference made a part of, this Lease Agreement.
Exhibit A: Description of the Leased Premises.
Exhibit B: Schedule of Lease Payments.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.01 Representations, Covenants and Warranties o the City. The City
makes the following covenants, representations and warranties to the Authority as of the date of
the execution and delivery of this Lease Agreement:
(a) Due Organization and Existence. The City is a municipal corporation duly
organized and validly existing under the laws of the State, has full legal right, power and
authority under the laws of the State to enter into this Lease Agreement and to carry out
and consummate all transactions contemplated hereby and thereby, and by proper action
the City has duly authorized the execution and delivery of this Lease Agreement.
(b) Due Execution. The representatives of the City executing this Lease
Agreement have been fully authorized to execute the same pursuant to a resolution duly
adopted by the City Council of the City.
(c) Valid, Binding and Enforceable Obligation s. This Lease Agreement has
been duly authorized, executed and delivered by the City and constitutes the legal, valid
and binding agreement of the City enforceable against the City in accordance with the
terms hereof.
ATTACHMENT 2
(d) No Conflicts. The execution and delivery of this Lease Agreement, the
consummation of the transactions herein contemplated and the fulfillment of or
compliance with the terms and conditions hereof, do not and will not conflict with or
constitute a violation or breach of or default (with due notice or the passage of time or
both) under any applicable law or administrative rule or regulation, or any applicable
court or administrative decree or order, or any indenture, mortgage, deed of trust, lease,
contract or other agreement or instrument to which the City is a party or by which it or its
properties are otherwise subject or bound, or result in the creation or imposition of any
prohibited lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of the City, which conflict, violation, breach, default, lien, charge or
encumbrance would have consequences that would materially and adversely affect the
consummation of the transactions contemplated by this Lease Agreement or the financial
condition, assets, properties or operations of the City.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the City or of the voters of the City, and no consent, permission,
authorization, order or license of, or filing or registration with, any governmental
authority is necessary in connection with the execution and delivery of this Lease
Agreement, or the consummation of any transaction herein contemplated, except as have
been obtained or made and as are in full force and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other governmental
authority pending or, to the knowledge of the City after reasonable investigation,
threatened against or affecting the City or the assets, properties or operations of the City
which, if determined adversely to the City or its interests, would have a material and
adverse effect upon the consummation of the transactions contemplated by or the validity
of this Lease Agreement, or upon the financial condition, assets, properties or operations
of the City, and the City is not in default with respect to any order or decree of any court
or any order, regulation or demand of any federal, state, municipal or other governmental
authority, which default might have consequences that would materially and adversely
affect the consummation of the transactions contemplated by this Lease Agreement or the
financial conditions, assets, properties or operations of the City.
(g) Essentiality. The Leased Premises constitutes property that is essential to
carrying out the governmental functions of the City.
SECTION 2.02 Representations, Covenants and Warranties of Authority. The
Authority makes the following covenants, representations and warranties to the City as of the
date of the execution and delivery of this Lease Agreement:
(a) Due Organization and Existence. The Authority is a joint powers
authority duly organized and existing under and by virtue of the laws of the State; has
power to enter into this Lease Agreement and the Indenture; is possessed of full power to
own and hold, improve and equip real and personal property, and to lease and lease back
the same; and has duly authorized the execution and delivery of each of the aforesaid
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ATTACHMENT 2
agreements and such agreements constitute the legal, valid and binding agreements of the
Authority, enforceable against the Authority in accordance with their respective terms.
(b) Due Execution. The representatives of the Authority executing this Lease
Agreement and the Indenture are fully authorized to execute the same pursuant to official
action taken by the governing body of the Authority.
(c) Valid Binding and Enforceable Obligations. This Lease Agreement and
the Indenture have been duly authorized, executed and delivered by the Authority and
constitute the legal, valid and binding agreements of the Authority, enforceable against
the Authority in accordance their respective terms.
(d) No Conflicts. The execution and delivery of this Lease Agreement and
the Indenture, the consummation of the transactions herein and therein contemplated and
the fulfillment of or compliance with the terms and conditions hereof and thereof, do not
and will not conflict with or constitute a violation or breach of or default (with due notice
or the passage of time or both) under any applicable law or administrative rule or
regulation, or any applicable court or administrative decree or order, or any indenture,
mortgage, deed of trust, lease, contract or other agreement or instrument to which the
Authority is a party or by which it or its properties are otherwise subject or bound, or
result in the creation or imposition of any prohibited lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Authority, which conflict,
violation, breach, default, lien, charge or encumbrance would have consequences that
would materially and adversely affect the consummation of the transactions contemplated
by this Lease Agreement and the Indenture or the financial condition, assets, properties or
operations of the Authority.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the Authority, and no consent, permission, authorization, order or
license of, or filing or registration with, any governmental authority is necessary in
connection with the execution and delivery of this Lease Agreement or the Indenture, or
the consummation of any transaction herein or therein contemplated, except as have been
obtained or made and as are in full force and effect.
(0 No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other governmental
authority pending or, to the knowledge of the Authority after reasonable investigation,
threatened against or affecting the Authority or the assets, properties or operations of the
Authority which, if determined adversely to the Authority or its interests, would have a
material and adverse effect upon the consummation of the transactions contemplated by
or the validity of this Lease Agreement or the Indenture, or upon the financial condition,
assets, properties or operations of the Authority, and the Authority is not in default with
respect to any order or decree of any court or any order, regulation or demand of any
federal, state, municipal or other governmental authority, which default might have
consequences that would materially and adversely affect the consummation of the
transactions contemplated by this Lease Agreement or the Indenture or the financial
conditions, assets, properties or operations of the Authority.
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ATTACHMENT 2
ARTICLE III
THE BONDS
SECTION 3.01 The Bonds. The Authority has authorized the issuance of the
Bonds pursuant to the Indenture in the aggregate principal amount of
Dollars The Authority agrees that
the proceeds of sale of the Bonds shall be paid to the Trustee on the Closing Date for deposit and
application pursuant to the terms and conditions of the Indenture. The City hereby approves the
Indenture, the assignment to the Trustee of the rights of the Authority assigned or purported to be
assigned thereunder, and the issuance of the Bonds by the Authority thereunder.
SECTION 3.02 RefnancinQof Leased Premises. In order to pay the Authority's
lease payment for the Leased Premises hereunder, on the Closing Date, the Authority and the
City shall execute all documents and take all action as may be required to refinance the Site by
depositing sufficient funds with the Escrow Fund established under the Escrow Agreement.
SECTION 3.03 Payment of Costs o Issuance. Payment of all Costs of Issuance
shall be made from the moneys deposited with the Trustee in the Costs of Issuance Fund, which
moneys shall be disbursed for such purpose in accordance with Section 3.03 of the Indenture.
Any Costs of Issuance for the payment of which insufficient funds shall be available on deposit
in the Costs of Issuance Fund, shall be paid by the City.
ARTICLE IV
LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS
SECTION 4.01 Lease by Authority and Lease Back to City.
(a) In consideration of the payment of $ by the
Authority less the Underwriters' Bond discount, original issue discount, the payment of
Costs of Issuance, and in consideration of the execution of this Lease Agreement by the
City, and other good and valuable consideration, the City hereby leases to the Authority,
and the Authority hereby leases from the City, the Leased Premises for the Term of this
Lease Agreement, plus one week following the end of the Term of this Lease Agreement.
(b) The Authority hereby leases the Leased Premises to the City, and the City
hereby leases the Leased Premises from the Authority, upon the terms and conditions set
forth in this Lease Agreement.
(c) The City hereby takes possession of the Leased Premises on the Closing
Date.
SECTION 4.02 Term o Lease Agreement. The Term of this Lease Agreement
shall commence on , 2010 and shall end on April 1, 2031, unless such term is
extended as hereinafter provided or unless Lease Payments have been paid or prepaid in full or
provision shall have been made for such payment pursuant to Section 4.03(g) hereof. If on April
1, 2031, the Indenture shall not be discharged by its terms or if the Lease Payments payable
hereunder shall have been abated at any time and for any reason, then the Tenn of this Lease
Agreement shall be extended until the earlier of April 1, 2041, or the date the Indenture shall be
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ATTACHMENT 2
discharged by its terms. If prior to April 1, 2031, the Indenture shall be discharged by its terms
and any amounts then owed to the Trustee have been paid in full, the Term of this Lease
Agreement shall thereupon end.
SECTION 4.03 Lease Payments; Security Deposit.
(a) Obligation to Pay. In consideration of the lease and lease back by the
Authority of the Leased Premises and in consideration of the issuance of the Bonds by
the Authority for the purpose of acquiring the Site, and subject to the provisions of
Sections 6.01 and 6.03, the City agrees to pay to the Authority, its successors and assigns,
as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the
Lease Payments (denominated into components of principal and interest) for the Leased
Premises in the respective amounts specified in Exhibit B hereto, to be due and payable
on the fifteenth day prior to each respective Lease Payment Date specified in Exhibit B
hereto. Any amount held in the Bond Fund (but not including any amounts on deposit in
the Reserve Account), the Interest Account, the Sinking Account or the Principal
Account (other than amounts resulting from the prepayment of the Lease Payments in
part but not in whole pursuant to Section 4.05) on any Lease Payment Date shall be
credited towards the Lease Payment then due and payable. The Lease Payments coming
due and payable in any Fiscal Year shall be for the use of the Leased Premises for such
Fiscal Year.
(b) Effect of Prepayment. In the event that the City prepays all Lease
Payments in full pursuant to Section 4.05, the City's obligations under this Lease
Agreement shall thereupon cease and terminate, including but not limited to the City's
obligation to pay Lease Payments under this Section 4.03. In the event that the City
prepays the Lease Payments in part but not in whole pursuant to Section 4.05 the
Authority shall provide, or cause to be provided, to the Trustee and the City a revised
schedule of Lease Payments due after such partial prepayment, which revised schedule of
Lease Payments shall be sufficient to provide for the scheduled payment of remaining
principal of and interest on the Bonds, and which schedule shall represent an adjustment
to the schedule of Lease Payments set forth in Exhibit B hereto after taking into account
said partial prepayment.
(c) Rate on Overdue Payments. In the event the City should fail to make any
of the payments required in this Section 4.03, the payment in default shall continue as an
obligation of the City until the amount in default shall have been fully paid, and the City
agrees to pay the same with interest thereon, to the extent permitted by law, from the date
of default to the date of payment at the rate per annum equal to the average interest rate
on the Bonds. Such interest, if received, shall be deposited in the Bond Fund.
(d) Fair Rental Value. The Lease Payments and Miscellaneous Rent coming
due and payable hereunder in each Fiscal Year shall constitute the total rental for the
Leased Premises for each Fiscal Year and shall be paid by the City in each Fiscal Year
for and in consideration of the right of the use and occupancy of, and the continued quiet
use and enjoyment of, the Leased Premises during each Fiscal Year. The parties hereto
have agreed and determined that the total amount of such Lease Payments and
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Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the
Leased Premises. In making such determination, consideration has been given to the
obligations of the parties under this Lease Agreement, the uses and purposes which may
be served by the Leased Premises and the benefits therefrom which will accrue to the
City and the general public.
(e) Source of Payments; Budget and Appropriation. The Lease Payments
shall be payable from any source of available funds of the City, subject to the provisions
of Sections 6.01 and 6.03. The City covenants to take such action as may be necessary to
include all Lease Payments and Miscellaneous Rent due hereunder in each of its budgets
during the Term of this Lease Agreement and to make the necessary annual
appropriations for all such Lease Payments and Miscellaneous Rent. The covenants on
the part of the City herein contained shall be deemed to be and shall be construed to be
ministerial duties imposed by law and it shall be the duty of each and every public
official of the City to take such action and do such things as are required by law in the
performance of the official duty of such officials to enable the City to carry out and
perform the covenants and agreements in this Lease Agreement agreed to be carried out
and performed by the City.
The City and the Authority understand and intend that the obligation of the City to pay
Lease Payments and other payments hereunder constitutes a current expense of the City and shall
not in any way be construed to be a debt of the City in contravention of any applicable
constitutional or statutory limitation or requirement concerning the creation of indebtedness by
the City, nor shall anything contained herein constitute a pledge of the general tax revenues,
funds or moneys of the City. Lease Payments due hereunder shall be payable only from current
funds which are budgeted and appropriated, or otherwise legally available, for the purpose of
paying Lease Payments or other payments due hereunder as consideration for use of the Leased
Premises during the Fiscal Year for which such funds were budgeted and appropriated or
otherwise made legally available for such purpose. This Lease Agreement shall not create an
immediate indebtedness for any aggregate payments which may become due hereunder. The
City has not pledged the full faith and credit of the City, the State or any agency or department
thereof to the payment of the Lease Payments or any other payments due hereunder, the Bonds
or the interest thereon.
(f) Assignment. The City understands and agrees that all Lease Payments
have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for
the benefit of the Owners of the Bonds, and the City hereby assents to such assignment.
The Authority hereby directs the City, and the City hereby agrees, to pay all of the Lease
Payments to the Trustee at its Office.
(g) Security Deposit. Notwithstanding any other provision of this Lease
Agreement, the City may on any date secure the payment of the Lease Payments in whole
or in part by depositing with the Trustee an amount of cash which, together with other
available amounts, is either (a) sufficient to pay such Lease Payments, including the
principal and interest components thereof, in accordance with the related Lease Payment
schedule set forth in Exhibit B, or (b) invested in whole or in part in non-callable Federal
Securities in such amount as will, in the opinion of an Independent Accountant, together
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with interest to accrue thereon and together with any cash which is so deposited, be fully
sufficient to pay such Lease Payments when due hereunder or on any optional
prepayment date pursuant to Section 4.05, as the City shall instruct at the time of said
deposit. Said security deposit shall be deemed to be and shall constitute a special fund for
the payment of Lease Payments in accordance with the provisions of this Lease
Agreement. In connection with the making of any such security deposit, the Authority
shall take, and shall cause the Trustee to take, any actions necessary to remove the
appropriate portions Leased Premises from the lien of this Lease Agreement.
(h) Delinquent Lease Pa moments. Any delinquent Lease Payment shall be
made to the Trustee for application as set forth in the Indenture.
SECTION 4.04 [Intentionally Reserve.
SECTION 4.05 Optional Prepayment. The City shall have the option to prepay the
principal components of the Lease Payments in whole, or in part in any integral multiple of
$5,000, on any date on or after April 1, , by paying a prepayment price equal to the
aggregate principal components of the Lease Payments to be prepaid, together with a prepayment
premium equal to the premium (if any) required to be paid on the corresponding redemption of
the Bonds pursuant to Section 4.01(b) of the Indenture and together with accrued interest to the
prepayment date. Such prepayment price (except the interest portion thereof, which shall be
deposited into the Interest Account) shall be deposited by the Trustee in the Redemption Fund to
be applied to the redemption of Bonds pursuant to Section 4.01(b) of the Indenture. The City
shall give the Trustee written notice of its intention to exercise its option not less than sixty (60)
days in advance of the date of exercise. Notwithstanding any such prepayment, as long as any
Bonds remain Outstanding or any Miscellaneous Rent payments remain unpaid, the City shall
not be relieved of its obligations hereunder as to such Bonds or such Miscellaneous Rent.
SECTION 4.06 Quiet Enio ry nent. During the Term of this Lease Agreement, the
Authority shall provide the City with quiet use and enjoyment of the Leased Premises, and the
City shall, during such Term, peaceably and quietly have and hold and enjoy the Leased
Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in
this Lease Agreement. The Authority will, at the request of the City and at the City's cost, join
in any legal action in which the City asserts its right to such possession and enjoyment to the
extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall
have the right to inspect the Leased Premises as provided in Section 7.02.
SECTION 4.07 Title. During the Term of the Lease Agreement, the Authority
shall hold a leasehold in the Leased Premises, and in any and all additions which comprise
fixtures, repairs, replacements or modifications to the Leased Premises, except for those fixtures,
repairs, replacements or modifications which are added to the Leased Premises by the City at its
own expense and which may be removed without damaging the Leased Premises and except for
any items added to the Leased Premises by the City pursuant to this Lease Agreement. All right,
title and interest of the Authority in and to the Leased Premises shall be transferred to and vested
in the City if (a) the City pays all of the Lease Payments and Miscellaneous Rent during the
Term of this Lease Agreement as the same become due and payable, or if the City posts a
security deposit for payment of the Lease Payments pursuant to Section 4.03(g) or prepays the
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Lease Payments pursuant to Section 4.05, and (b) if the City has paid in full all of 1
Miscellaneous Rent coming due and payable as of the date of such prepayment; and provided
any event that no Event of Default shall have occurred and be continuing. The Authority agre
to take any and all steps and execute and record any and all documents reasonably required
the City to consummate any such transfer of title.
SECTION 4.08 Miscellaneous Rent. In addition to the Lease Payments, the
shall pay when due the following items of Miscellaneous Rent:
(a) All fees and expenses incurred by the Authority in connection with or by
reason of its leasehold estate in the Leased Premises as and when the same become due
and payable;
(b) All compensation and indemnification to the Trustee pursuant to Section
8.06 of the Indenture for all services rendered under the Indenture and for all reasonable
expenses, charges, costs, liabilities, legal fees and other disbursements incurred in arid
about the performance of its powers and duties under the Indenture;
(c) The reasonable fees and expenses of such accountants, consultants,
attorneys and other experts as may be engaged by the Authority or the Trustee to prepare
audits, financial statements, reports, opinions or provide such other services required
under this Lease Agreement or the Indenture; and
(d) The reasonable out-of-pocket expenses of the Authority in connecti n
with the execution and delivery of this Lease Agreement or the Indenture, or n
connection with the issuance of the Bonds, including but not limited to amounts payable
pursuant to Section 5.11, and including but not limited to any and all expenses incurred n
connection with the authorization, issuance, sale and delivery of the Bonds, or incurred
by the Authority in connection with any litigation which may at any time be institut d
involving this Lease Agreement, the Bonds, the Indenture or any of the other documents
contemplated hereby or thereby, or otherwise incurred in connection with the
administration of this Lease Agreement.
SECTION 4.09 Substitution or Release of Leased Premises. The City shall have,
and is hereby granted, the option at any time and from time to time during the Term of this Lease
Agreement, to substitute other land, facilities or improvements (the "Substitute Leased
Premises") for the Leased Premises or any portion thereof (the "Former Leased Premises") or to
release a portion of the Leased Premises (the "Released Premises") from the lien of this Lea e
Agreement, provided that the City shall satisfy all of the following requirements which a e
hereby declared to be conditions precedent to such substitution or release:
(a) The City shall provide written notification of such substitution or release
to the Trustee and Rating Agencies, which notice shall contain the certification that all
conditions set forth in this Section 4.09 are met with respect to such substitution or
release;
(b) The City shall take all actions and shall execute all documents required
subject the Substitute Leased Premises to the terms and provisions of this Le,
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Agreement, including the filing with the Authority and the Trustee an amended Exhibit A
which adds thereto a description of the Substitute Leased Premises and deletes therefrom
the description of the Former Leased Premises or the Released Premises, as applicable;
(c) (i) In the case of a substitution, the City shall determine and certify to
the Authority and the Trustee that the fair rental value of the Substitute Leased Premises
is at least equal to the fair rental value of the Former Leased Premises and that the
Substitute Leased Premises is essential to the governmental functions of the City;
(ii) In the case of a release, the City shall determine and certify to the
Authority and the Trustee that the fair rental value of the remaining Leased Premises after
removal of the Released Premises is at least equal to the then remaining Lease Payments;
(d) In the case of a substitution, the City shall certify in writing to the
Authority and the Trustee that the Substitute Leased Premises serve the public purposes
of the City and constitute property which the City is permitted to lease under the laws of
the State;
(e) In the case of a substitution, the City shall certify in writing to the
Authority and the Trustee that the estimated useful life of the Substitute Leased Premises
at least extends to the date on which the final Lease Payment becomes due and payable
hereunder;
(f) In the case of a substitution, the City shall obtain a CLTA policy of title
insurance meeting the requirements of Section 5.06 with respect to any real property
portion of the Substitute Leased Premises;
(g) In the case of a substitution, the substitution of the Substitute Leased
Premises shall not cause the City to violate any of its covenants, representations and
warranties made herein; and
(h) The City shall obtain and cause to be filed with the Trustee and the
Authority an opinion of Bond Counsel stating that such substitution or release is
permitted hereunder and does not cause interest on the Bonds to become includable in
the gross income of the Bond Owners for federal income tax purposes.
From and after the date on which all of the foregoing conditions precedent to such
substitution or release are satisfied, the Term of this Lease Agreement shall cease with respect to
the Former Leased Premises or Released Premises, as applicable, and shall be continued with
respect to the Substitute Leased Premises and the remaining Leased Premises and all references
herein to the Former Leased Premises shall apply with full force and effect to the Substitute
Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other
modification of the Lease Payments whatsoever as a result of such substitution or release.
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ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE
LIMITATIONS; AND OTHER MATTERS
SECTION 5.01 Maintenance. Utilities, Taxes and Assessments. Throughout the
Term of this Lease Agreement, as part of the consideration for the rental of the Leased Premises,
all improvement, repair and maintenance of the Leased Premises shall be the responsibility of the
City and the City shall pay for or otherwise arrange for the payment of all utility services
supplied to the Leased Premises which may include, without limitation, janitor service, security,
power, gas, telephone, light, heating, water and all other utility services, and shall pay for or
otherwise arrange for the payment of the cost of the repair and replacement of the Leased
Premises resulting from ordinary wear and tear or want of care on the part of the City or any
assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority
agrees to provide only the Leased Premises, as hereinbefore more specifically set forth. The City
waives the benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such
waiver-shall not limit any of the rights of the City under the terms of this Lease Agreement.
The City shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the City affecting the Leased Premises or the
respective interests or estates therein; provided that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
shall be obligated to pay only such installments as are required to be paid during the 'Term of this
Lease Agreement as and when the same become due.
The City may, at the City's expense and in its name, in good faith contest any such taxes,
assessments, utility and other charges and, in the event of any such contest, may permit the taxes,
assessments or other charges so contested to remain unpaid during the period of such contest and
any appeal therefrom unless the Authority shall notify the City that, in the opinion of
independent counsel, by nonpayment of any such items, the interest of the Authority in the
Leased Premises will be materially endangered or the Leased Premises or any part thereof will
be subject to loss or forfeiture, in which event the City shall promptly pay such taxes,
assessments or charges or provide the Authority with full security against any loss which may
result from nonpayment, in form satisfactory to the Authority.
SECTION 5.02 Modification of Leased Premises. The City shall, at its own
expense, have the right to make additions, modifications and improvements to the Leased
Premises. All additions, modifications and improvements to the Leased Premises shall thereafter
comprise part of the Leased Premises and be subject to the provisions of this Lease Agreement.
Such additions, modifications and improvements shall not in any way damage the Leased
Premises or cause the Leased Premises to be used for purposes other than those authorized under
the provisions of State and federal law; and the City shall file with the Trustee and the Leased
Premises, upon completion of any additions, modifications and improvements made thereto
pursuant to this Section 5.02, shall be of a value which is not substantially less than the value of
the Leased Premises immediately prior to the making of such additions, modifications and
improvements. The City will not permit any mechanic's or other lien to be established or remain
against the Leased Premises for labor or materials furnished in connection with any remodeling,
additions, modifications, improvements, repairs, renewals or replacements made by the City
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pursuant to this Section 5.02; provided that if any such lien is established and the City shall first
notify or cause to be notified the Authority of the City's intention to do so, the City may in good
faith contest any lien filed or established against the Leased Premises, and in such event may
permit the items so contested to remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom and shall provide the Authority with full security against any
loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory
to the Authority. The Authority will cooperate fully in any such contest, upon the request and at
the expense of the City.
SECTION 5.03 Public Liability and Property Damage Insurance. The City shall
maintain or cause to be maintained throughout the Term of this Lease Agreement, but only if and
to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the
City, a standard comprehensive general insurance policy or policies in protection of the
Authority, City, and their respective members, officers, agents, employees and assigns. Said
policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for
personal injury or death of each person and $3,000,000 for personal injury or deaths of two or
more persons in each accident or event, and in a minimum amount of $100,000 (subject to a
deductible clause of not to exceed $25,000) of damage to property resulting from each accident
or event. Such public liability and property damage insurance may, however, be in the form of a
single limit policy or policies in the amount of $3,000,000 (subject to a deductible clause of not
to exceed $25,000) covering all such risks. Such policy or policies shall provide coverage in
such liability limits and be subject to such deductibles as the City shall deem adequate and
prudent. Such insurance may be maintained as part of or in conjunction with any other insurance
coverage carried by the City, and may be maintained in whole or in part in the form of
self-insurance by the City, subject to the provisions of Section 5.07, or in the form of the
participation by the City in a joint powers agency or other program providing pooled insurance.
In the case of the City's self-insurance of public liability and workers' compensation, the City
may maintain a self-insured retention, and pay up to $500,000 of each liability claim and up to
$300,000 of each worker's compensation claim, so long as the provisions of Section 5.07(b)
hereof. The proceeds of such liability insurance shall be applied by the City toward
extinguishment or satisfaction of the liability with respect to which paid.
SECTION 5.04 Casualty Insurance. The City shall procure and maintain, or cause
to be procured and maintained, throughout the Term of this Lease Agreement, insurance against
loss or damage to any Facilities by fire and lightning, with extended coverage and vandalism and
malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as
practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke
and such other hazards as are normally covered by such insurance, and shall include earthquake
coverage if such coverage is available at reasonable cost from reputable insurers in the judgment
of the City's risk manager. Such insurance shall be in an amount at least equal to the lesser of (a)
one hundred percent (100%) of the replacement cost of the Facilities, or (b) the aggregate unpaid
principal components of the Lease Payments allocable to the Facilities. Such insurance may be
subject to such deductibles as the City shall deem prudent. Such insurance may be maintained as
part of or in conjunction with any other insurance coverage carried by the City, and may be
maintained in whole or in part in the form of the participation by the City in a joint powers
agency or other program providing pooled insurance. The Net Proceeds of such insurance shall
be applied as provided in Section 6.02(a).
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Each policy of insurance to be maintained by the City pursuant to this Section 5.04 shall
(a) provide for the full payment of insurance proceeds up to the applicable dollar limit in
connection with damage to the Leased Premises and shall, under no circumstances, be contingent
upon the degree of damage sustained at other facilities owned or leased by the City; and
(b) explicitly waive any co-insurance penalty.
SECTION 5.05 Rental Interruption Insurance. The City shall procure and
maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement,
rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any
Facilities to be constructed on the Leased Premises, as a result of any of the hazards covered by
the insurance required by Section 5.04, in an amount at least equal to the maximum Lease
Payments allocable to the Facilities coming due and payable during any future twenty-four (24)
month period. Such insurance may be maintained as part of or in conjunction with any other
insurance coverage carried by the City, and may be maintained in whole or in part in the form of
the participation by the City in a joint powers agency or other program providing pooled
insurance. The proceeds of such insurance, if any, shall be paid to the Trustee and deposited in
the Bond Fund, and shall be applied for the uses and purposes set forth in Article V of the
Indenture.
SECTION 5.06 Recordation Hereof; Title Insurance. On or before the Closing
Date the City shall, at its expense, (a) cause this Lease Agreement, or a memorandum hereof in
form and substance approved by Bond Counsel, to be recorded in the office of the San Diego
County Recorder and (b) obtain a CLTA policy of title insurance insuring the City's leasehold
estate hereunder, subject only to Permitted Encumbrances, in an amount at least equal to the
aggregate principal amount of the Bonds. All Net Proceeds received under said policy shall be
deposited with the Trustee in the Redemption Fund and shall be applied to the redemption of the
Bonds pursuant to Section 4.01(c) of the Indenture.
SECTION 5.07 Net Proceeds oflnsurance: Form of Policies.
(a) Each policy of insurance maintained pursuant to Sections 5.04, 5.05 and
5.06 shall name the Trustee as loss payee so as to provide that all proceeds thereunder
shall be payable to the Trustee and shall name the Authority, the City and the Trustee as
insureds. The City shall pay or cause to be paid when due the premiums for all insurance
policies required by this Lease Agreement. All such policies shall provide that the
Trustee shall be given thirty (30) days' notice of each expiration, any intended
cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not
be responsible for the sufficiency or amount of any insurance or self-insurance herein
required and shall be fully protected in accepting payment on account of such insurance
or any adjustment, compromise or settlement of any loss. The City shall cause to be
delivered to the Trustee annually, no later than May l in each year, a certificate stating
that all of the insurance policies required by this Lease Agreement are in full force and
effect and identifying whether any such insurance is then maintained in the form of
self-insurance.
(b) In the event that any insurance maintained pursuant to Section 5.03 shall
be provided in the form of self-insurance, the City shall file with the Trustee annually,
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within ninety (90) days following the close of each Fiscal Year, a statement of the risk
manager of the City or an independent insurance adviser engaged by the City identifying
the extent of such self-insurance and stating the determination that the City maintains
sufficient reserves with respect thereto. In the event that any such insurance shall be
provided in the form of self-insurance by the City, the City shall not be obligated to make
any payment with respect to any insured event except from such reserves. The Trustee
shall not be responsible for the sufficiency or adequacy of any insurance herein required
and shall be fully protected in accepting payment on account of such insurance or any
adjustment, compromise or settlement of any loss agreed to by the Trustee.
(c) If the City shall fail to perform any of its obligations under this Article V,
the Authority or the Trustee may, but shall not be obligated to, take such action as may be
necessary to cure such failure, including the advancement of money, and the City shall be
obligated to repay all such advances as soon as possible, with interest at the rate payable
by the Authority on the Bonds from the date of the advance to the date of repayment.
SECTION 5.08 Installation of Personal Property. The City may, at any time and
from time to time, in its sole discretion and at its own expense, install or permit to be installed
items of equipment or other personal property in or upon any portion of the Leased Premises. All
such items shall remain the sole property of the City, in which neither the Authority nor the
Trustee shall have any interest, and may be modified or removed by the City at any time
provided that the City shall repair and restore any and all damage to the Leased Premises
resulting from the installation, modification or removal of any such items. Nothing in this Lease
Agreement shall prevent the City from purchasing or leasing items to be installed pursuant to this
Section 5.08 under a lease or conditional sale agreement, or subject to a vendor's lien or security
agreement, as security for the unpaid portion of the purchase price thereof, provided that no such
lien or security interest shall attach to any part of the Leased Premises.
SECTION 5.09 Liens. Neither the City nor the Authority shall, directly or
indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge,
encumbrance or claim on or with respect to any portion of the Leased Premises, other than the
respective rights of the Authority and the City as provided herein and other than Permitted
Encumbrances. Except as expressly provided in this Article V, the City and the Authority shall
promptly, at their own expense, take such action as may be necessary to duly discharge or
remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is
responsible, if the same shall arise at any time. The City shall reimburse the Authority for any
expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge,
encumbrance or claim.
SECTION 5.10 Tax Covenants.
(a) Private Activity Bond Limitation. The City shall assure that the proceeds
of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of
Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the
Tax Code.
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(b) Federal Guarantee Prohibition. The City shall not take any action or
permit or suffer any action to be taken if the result of the same would be to cause any of
the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Tax
Code.
(c) No Arbitrage. The City shall not take, or permit or suffer to be taken by
the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if
such action had been reasonably expected to have been taken, or had been deliberately
and intentionally taken, on the Closing Date would have caused the Bonds to be
"arbitrage bonds" within the meaning of Section 148 of the Tax Code.
(d) Maintenance of Tax-Exemption. The City shall take all actions necessary
to assure the exclusion of interest on the Bonds from the gross income of the Owners of
the Bonds to the same extent as such interest is permitted to be excluded from gross
income under the Tax Code as in effect on the Closing Date.
SECTION 5.11 Payment of Rebatable Amounts. The City agrees to furnish all
information to, and cooperate fully with, the Authority and their respective officers, employees,
agents and attorneys, in order to assure compliance with the provisions of Section 6.07(e) of the
Indenture. In the event that the Authority shall determine, pursuant to Section 6.07(e) of the
Indenture, that any amounts are due and payable to the United States of America thereunder and
that neither the Authority nor the Trustee has on deposit an amount of available moneys
(excluding moneys on deposit in the funds and accounts established for the payment of the
principal of or interest or redemption premium, if any, on the Bonds) to make such payment, the
Authority shall promptly notify the City of such fact. Upon receipt of any such notice, the City
shall promptly pay the amounts determined by the Authority to be due and payable to the United
States of America under such Section 6.07(e), such payments to be made in accordance with the
applicable provisions of the Tax Code.
SECTION 5.12 Continuing Disclosure. The City hereby covenants and agrees that
it will comply with and carry out all of the provisions of its Undertaking to Provide Continuing
Disclosure with respect to the Bonds, as originally executed and as it may be amended from time
to time in accordance with the terms thereof. Notwithstanding any other provision of this Lease
Agreement, failure of the City to comply with such Undertaking to Provide Continuing
Disclosure shall not be considered an Event of Default; however, any Owner may take such
actions, as provided in such Undertaking to Provide Continuing Disclosure, as may be necessary
and appropriate to cause the City to comply with its obligations under such Undertaking to
Provide Continuing Disclosure.
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN;
USE OF NET PROCEEDS
SECTION 6.01 Eminent Domain. If all of the Leased Premises shall be taken
permanently under the power of eminent domain or sold to a government threatening to exercise
the power of eminent domain, the Term of this Lease Agreement shall cease as of the day
possession shall be so taken. If less than all of the Leased Premises shall be taken permanently,
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or if all of the Leased Premises or any part thereof shall be taken temporarily under the power
eminent domain, (a) this Lease Agreement shall continue in full force and effect and shall not
terminated by virtue of such taking and the parties waive the benefit of any law to the contra
and (b) there shall be a partial abatement of Lease Payments in an amount to be agreed upon
the City and the Authority such that the resulting Lease Payments for the Leased Premis
represent fair consideration for the use and occupancy of the remaining usable portion of 1
Leased Premises.
SECTION 6.02 Application ofNet Proceeds.
(a) From Insurance Award. The Net Proceeds of any insurance a,"
resulting from any damage to or destruction of the Leased Premises by fire or of
casualty shall be deposited in its Insurance and Condemnation Fund or the Redempi
Fund, as applicable, by the Trustee and applied in accordance with Section. 5.08 of
Indenture.
(b) From Eminent Domain Award. The Net Proceeds of any eminent dor
award resulting from any event described in Section 6.01 shall be deposited in
Insurance and Condemnation Fund or the Redemption Fund, as applicable, by the Tru
and applied in accordance with Section 5.08 of the Indenture.
SECTION 6.03 Abatement of Lease Pavments in the Event of _Damaze
Destruction. The Lease Payments allocable to the Leased Premises shall be abated during aj
period in which by reason of damage or destruction (other than by eminent domain which
hereinbefore provided for) there is substantial interference with the use and occupancy by t]
City of the Leased Premises or any portion thereof. The amounts of the Lease Payments and
such circumstances may not be less than the amounts of the unpaid Lease Payments, unless sul
unpaid amounts are determined to be greater than the fair rental value of the portions of t:
Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser wi
expertise in valuing such properties or other appropriate method of valuation, in which event t]
Lease Payments shall be abated such that they represent said fair rental value. Such abateme
shall continue for the period commencing with such damage or destruction and ending with t]
substantial completion of the work of repair or reconstruction. In the event of any such dama;
or destruction, this Lease Agreement shall continue in full force and effect and the City waiv
any right to terminate this Lease Agreement by virtue of any such damage and destructio
Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent th
(a) the proceeds of rental interruption insurance, are available to pay Lease Payments,
(b) amounts in the Bond Fund are available to pay Debt Service payable from Lease Paymer
which would otherwise be abated.
ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
SECTION 7.01 Disclaimer of Warranties. Neither the Authority nor the Trust,
makes any warranty or representation, either express or implied, as to the value, desig
condition, merchantability or fitness for any particular purpose or fitness for the u
contemplated by the City of the Leased Premises, or any other representation or warranty wi
17
ATTACHMENT 2
respect to the Leased Premises. In no event shall the Authority, the Trustee, and their respective
assigns be liable for incidental, indirect, special or consequential damages in connection with or
arising out of this Lease Agreement or the Indenture for the existence, furnishing, functioning or
the City's use of the Leased Premises.
SECTION 7.02 Ri hits o Access. The City agrees that the Authority and any
Authorized Representative of the Authority, and the Authority's successors or assigns, shall have
the right at all reasonable times to enter upon and to examine and inspect the Leased Premises.
The City further agrees that the Authority, any Authorized Representative of the Authority, and
the Authority's successors or assigns shall have such rights of access to the Leased Premises as
may be reasonably necessary to cause the proper maintenance of the Leased Premises in the
event of failure by the City to perform its obligations hereunder.
SECTION 7.03 Release and Indemnification Covenants. The City shall and hereby
agrees to indemnify and save the Authority, the Trustee, and their respective officers, agents,
successors and assigns, harmless from and against all claims, losses and damages, including legal
fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from
any work or thing done on the Leased Premises by the City, (b) any breach or default on the part
of the City in the performance of any of its obligations under this Lease Agreement, (c) any act
or negligence of the City or of any of its agents, contractors, servants, employees or licensees
with respect to the Leased Premises, (d) the use, presence, storage, disposal of any Hazardous
Substances, Substance on or about the Leased Premises, or (e) any act or negligence of any
sublessee of the City with respect to the Leased Premises. No indemnification is made under this
Section 7.03 or elsewhere in this Lease Agreement for willful misconduct, negligence under this
Lease Agreement by the Authority or the Trustee or any of their respective officers, agents,
employees, successors or assigns.
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
SECTION 8.01 Assignment by the Authority. The Authority's rights under this
Lease Agreement, including the right to receive and enforce payment of the Lease Payments to
be made by the City under this Lease Agreement, have been pledged and assigned to the Trustee
for the benefit of the Owners of the Bonds pursuant to the Indenture, to which pledge and
assignment the City hereby consents. The assignment of this Lease Agreement to the Trustee is
solely in its capacity as Trustee under the Indenture and the duties, powers and liabilities of the
Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without
limitation, the provisions of Article VIII thereof.
SECTION 8.02 Assignment and Subleasing by the City. This Lease Agreement
may not be assigned by the City. The City may sublease the Leased Premises or any portion
thereof, but only with the written consent of the Authority and subject to all of the following
conditions:
(a) This Lease Agreement and the obligation of the City to make Lease
Payments hereunder shall remain obligations of the City;
18
ATTACHMENT 2
(b) The City shall, within thirty (30) days after the delivery thereof, furnish or
cause to be furnished to the Authority and the Trustee a true and complete copy of such
sublease;
(c) No such sublease by the City shall cause the Leased Premises to be used
for a purpose other than as may be authorized under the provisions of the laws of the
State; and
(d) The City shall furnish the Authority and the Trustee with a written opinion
of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the
Indenture, and will not cause the interest on the Bonds to become included in gross
income for federal income tax purposes.
SECTION 8.03 Amendment Hereof. The Authority and the City may at any time
amend or modify any of the provisions of this Lease Agreement, but only (a) with the prior
written consent of a majority in aggregate principal amount of the Outstanding Bonds, or (b)
without the consent of any of the Bond Owners, but only if such amendment or modification is
for any one or more of the following purposes:
(a) to add to the covenants and agreements of the City contained in this Lease
Agreement, other covenants and agreements thereafter to be observed, or to limit or
surrender any rights or power herein reserved to or conferred upon the City;
(b) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained herein, or in any
other respect whatsoever as the Authority and the City may deem necessary or desirable,
provided that, in the opinion of Bond Counsel, such modifications or amendments will
not materially adversely affect the interests of the Owners of the Bonds;
(c) to amend any provision thereof relating to the Tax Code, to any extent
whatsoever but only if and to the extent such amendment will not adversely affect the
exclusion from gross income of interest on the Bonds under the Tax Code, in the opinion
of Bond Counsel;
(d) to amend the description of the Leased Premises set forth in Exhibit A
hereto to add property acquired by the City and the Authority from proceeds on deposit in
the Project Fund or to reflect accurately the property originally intended to be included
therein, or in connection with any substitution or release pursuant to Section 4.08; or
(e) to obligate the City to pay additional amounts of rental hereunder for the
use and occupancy of the Leased Premises, provided that (A) no Event of Default has
occurred and is continuing under this Lease, (B) such additional amounts of rental do not
cause the total rental payments made by the City hereunder to exceed the fair rental value
of the Leased Premises, as set forth in a certificate of a City Representative filed with the
Trustee and the Authority, (C) the City shall have obtained and filed with the Trustee and
the Authority a Written Certificate of an Authorized Representative of the City showing
that the fair rental value of the Leased Premises is not less than the sum of the aggregate
unpaid principal components of the Lease Payments and the aggregate principal
19
ATTACHMENT 2
components of such additional amounts of rental, (D) such additional amounts of rental
are pledged or assigned for the payment of any bonds, notes, leases or other obligations
the proceeds of which shall be applied to finance the construction or acquisition of land,
facilities or other improvements which are authorized pursuant to the laws of the State,
and (E) such additional rental is not at variable rates.
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
SECTION 9.01 Events of Default Defined. The following shall be "Events of
Default" under this Lease Agreement:
(a) Failure by the City to pay any Lease Payment required to be paid
hereunder at the time specified herein.
(b) Failure by the City to make any Miscellaneous Rent payment required
hereunder and the continuation of such failure for a period of thirty (30) days.
(c) Failure by the City to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in the
preceding clauses (a) or (b), for a period of thirty (30) days after written notice specifying
such failure and requesting that it be remedied has been given to the City by the
Authority, or the Trustee; provided, however, that if in the reasonable opinion of the City
the failure stated in the notice can be corrected, but not within such sixty (60) day period,
such failure shall not constitute an Event of Default if the City shall commence to cure
such failure within such sixty (60) day period and thereafter diligently and in good faith
shall cure such failure in a reasonable period of time.
(d) The filing by the City of a voluntary petition in bankruptcy, or failure by
the City promptly to lift any execution, garnishment or attachment, or adjudication of the
City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by
the City into an agreement of composition with creditors, or the approval by a court of
competent jurisdiction of a petition applicable to the City in any proceedings instituted
under the provisions of applicable federal bankruptcy law, or under any similar acts
which may hereafter be enacted.
SECTION 9.02 Remedies on De ault. Whenever any Event of Default referred to
in Section 9.01 shall have happened and be continuing, it shall be lawful for the Authority to
exercise any and all remedies available pursuant to law or granted pursuant to this Lease
Agreement; provided, however, that notwithstanding anything to the contrary herein or in the
Indenture, there shall be no right under any circumstances to accelerate the Lease Payments or
otherwise declare any Lease Payments not then in default to be immediately due and payable or
to terminate this Lease Agreement or to cause the leasehold interest of the Autliority or the
subleasehold interest of the City in the Site to be sold, assigned or otherwise alienated. Each and
every covenant hereof to be kept and performed by the City is expressly made a condition and
upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon
the Leased Premises. In the event of such default and notwithstanding any re-entry by the
20
ATTACHMENT 2
Authority, the City shall, as herein expressly provided, continue to remain liable for the payment
of the Lease Payments and/or damages for breach of this Lease Agreement and the performance
of all conditions herein contained, and in any event such rent and damages shall be payable to
the Authority at the time and in the manner as herein provided, to wit:
(a) The City agrees to and shall remain liable for the payment of all Lease
Payments and the performance of all conditions herein contained and shall reimburse the
Authority for any deficiency arising out of the re-leasing of the Leased Premises, or, in
the event the Authority is unable to relet the Leased Premises, then for the full amount of
all Lease Payments to the end of the Term of this Lease Agreement, but said Lease
Payments and/or deficiency shall be payable only at the same time and in the same
manner as hereinabove provided for the payment of Lease Payments hereunder,
notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer,
or otherwise, brought by the Authority for the purpose of effecting such re-entry or
obtaining possession of the Leased Premises or the exercise of any other remedy by the
Authority.
(b) The City hereby irrevocably appoints the Authority as the agent and
attorney-in-fact of the City to enter upon and re-lease the Leased Premises in the event of
default by the City in the performance of any covenants herein contained to be performed
by the City and to remove all personal property whatsoever situated upon the Leased
Premises to place such property in storage or other suitable place in the County of San
Diego, for the account of and at the expense of the City, and the City hereby exempts and
agrees to save harmless the Authority from any costs, loss or damage whatsoever arising
or occasioned by any such entry upon and re-leasing of the Leased Premises and the
removal and storage of such property by the Authority or its duly authorized agents in
accordance with the provisions herein contained.
(c) The City hereby waives any and all claims for damages caused or which
may be caused by the Authority in re-entering and taking possession of the Leased
Premises as herein provided and all claims for damages that may result from the
destruction of or injury to the Leased Premises and all claims for damages to or loss of
any property belonging to the City that may be in or upon the Leased Premises.
(d) The City agrees that the terms of this Lease Agreement constitute full and
sufficient notice of the right of the Authority to re-lease the Leased Premises in the event
of such re-entry without effecting a surrender of this Lease Agreement, and further agrees
that no acts of the Authority in effecting such releasing shall constitute a surrender or
termination of this Lease Agreement irrespective of the term for which such re-leasing is
made or the terms and conditions of such re-leasing, or otherwise.
(e) The City further waives the right to any rental obtained by the Authority in
excess of the Lease Payments and hereby conveys and releases such excess to the
Authority as compensation to the Authority for its services in re-leasing the Leased
Premises.
21
ATTACHMENT 2
SECTION 9.03 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative
and shall, except as herein expressly provided to the contrary, be in addition to every other
remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to entitle the
Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give
any notice, other than such notice as may be required in this Article IX or by law.
SECTION 9.04 Aueement to Pay Attorneys' Fees and Expenses. In the event
either party to this Lease Agreement should default under any of the provisions hereof and the
nondefaulting party should employ attorneys or incur other expenses for the collection of
moneys or the enforcement or performance or observance of any obligation or agreement on the
part of the defaulting party herein contained, the defaulting party agrees that it will on demand
therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other
expenses so incurred by the nondefaulting party.
SECTION 9.05 No Additional Waiver Implied by One Waiver. In the event any
agreement contained in this Lease Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
SECTION 9.06 Trustee and Bondholder to Exercise Rights. Such rights and
remedies as are given to the Authority under this Article IX have been assigned by the Authority
to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights
and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the
Indenture.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Notices. All written notices to be given under this Lease
Agreement shall be given by first class mail or personal delivery to the party entitled thereto at
its address set forth below, or at such address as the party may provide to the other party in
writing from time to time. Notice shall be effective either (a) upon transmission by facsimile
transmission or other form of telecommunication, (b) 48 hours after deposit in the United States
mail, postage prepaid, or (c) otherwise, upon actual receipt. The Authority, the City, or the
Trustee may, by written notice to the other parties, from time to time modify the address or
number to which communications are to be given hereunder.
If to the Authority: Encinitas Public Financing Authority
505 South Vulcan Avenue
Encinitas, CA 92024-3633
Attention: Executive Director
22
ATTACHMENT 2
If to the City: City of Encinitas
505 South Vulcan Avenue
Encinitas, CA 92024-3633
Attention: City Manager
If to the Trustee: Union Bank, N.A.
120 S. San Pedro Street, Suite 400
Los Angeles, CA 90012
Fax: (213) 972-5694
Attn: Corporate Trust Department
SECTION 10.02 Binding Ff ect. This Lease Agreement shall inure to the benefit of
and shall be binding upon the Authority and the City and their respective successors and assigns.
SECTION 10.03 Severabilitv. In the event any provision of this Lease Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall
not invalidate or render unenforceable any other provision hereof.
SECTION 10.04 Net-net-net Lease. This Lease Agreement shall be deemed and
construed to be a "net-net-net lease" and the City hereby agrees that the Lease Payments shall be
an absolute net return to the Authority, free and clear of any expenses, charges or set-offs
whatsoever.
SECTION 10.05 Further Assurances and Corrective Instruments. The Authority
and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such supplements hereto and such further
instruments as may reasonably be required for correcting any inadequate or incorrect description
of the Leased Premises hereby leased or intended so to be or for carrying out the expressed
intention of this Lease Agreement.
SECTION 10.06 Execution in Counterparts. This Lease Agreement may be
executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 10.07 Applicable Law. This Lease Agreement shall be governed by and
constructed in accordance with the laws of the State.
SECTION 10.08 Authorized Representatives. Whenever under the provisions of
this Lease Agreement the approval of the Authority or the City is required, or the Authority or
the City is required to take some action at the request of the other, such approval or such request
shall be given for the Authority by an Authorized Representative of the Authority and for the
City by an authorized Representative of the City, and any party hereto shall be authorized to rely
upon any such approval or request.
SECTION 10.09 Captions. The captions or headings in this Lease Agreement are
for convenience only and in no way define, limit or describe the scope or intent of any provisions
or Section of this Lease Agreement.
23
ATTACHMENT 2
IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be
executed in its corporate name by its duly authorized officers and sealed with its corporate seal;
and the City has caused this Lease Agreement to be executed in its name by its duly authorized
officers and sealed with its corporate seal, as of the date first above written.
ENCINITAS PUBLIC FINANCING AUTHORITY
Attest:
Secretary
By
Chairperson
CITY OF ENCINITAS
By
Mayor
(S E A L)
Attest:
City Clerk
24
ATTACHMENT 2
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )
On before me, , a
Notary Public, personally appeared , who
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
25
ATTACHMENT 2
EXHIBIT A
DESCRIPTION OF THE LEASED PREMISES
[Legal description of Hall Property]
A-1
ATTACHMENT Z
EXHIBIT B
SCHEDULE OF LEASE PAYMENTS
Lease Payment Principal Interest Total Lease Annual Lease
Date Component Component Payment Payment
B-1
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01 Definitions 2
Section 1.02 Exhibits 3
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.01 Representations, Covenants and Warranties of the City 3
Section 2.02 Representations, Covenants and Warranties of Authority 4
ARTICLE III
THE BONDS
Section 3.01 The Bonds 6
Section 3.02 Refinancing of Leased Premises 6
Section 3.03 Payment of Costs of Issuance 6
ARTICLE IV
LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS
Section 4.01 Lease by Authority and Lease Back to City.
Section 4.02
Term of Lease Agreement
Section 4.03
Lease Payments; Security Deposit
Section 4.04
[Intentionally Reserved]
Section 4.05
Optional Prepayment
Section 4.06
Quiet Enjoyment
Section 4.07
Title
Section 4.08
Miscellaneous Rent
Section 4.09
Substitution or Release of Leased Premises.
6
6
7
9
9
9
9
10
10
ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS
Section 5.01
Maintenance, Utilities, Taxes and Assessments
12
Section 5.02
Modification of Leased Premises
12
Section 5.03
Public Liability and Property Damage Insurance
13
Section 5.04
Casualty Insurance
13
Section 5.05
Rental Interruption Insurance
14
Section 5.06
Recordation Hereof, Title Insurance
14
Section 5.07
Net Proceeds of Insurance; Form of Policies
14
Section 5.08
Installation of Personal Property
15
Section 5.09
Liens
15
-i-
TABLE OF CONTENTS
(continued)
Page
Section 5.10 Tax Covenants 15
Section 5.11 Payment of Rebatable Amounts 16
Section 5.12 Continuing Disclosure 16
ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS
Section 6.01 Eminent Domain 16
Section 6.02 Application of Net Proceeds 17
Section 6.03 Abatement of Lease Payments in the Event of Damage or Destruction........ 17
ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.01 Disclaimer of Warranties 17
Section 7.02 Rights of Access 18
Section 7.03 Release and Indemnification Covenants 18
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.01 Assignment by the Authority 18
Section 8.02 Assignment and Subleasing by the City 18
Section 8.03 Amendment Hereof 19
ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
Section 9.01
Events of Default Defined
20
Section 9.02
Remedies on Default
20
Section 9.03
No Remedy Exclusive
22
Section 9.04
Agreement to Pay Attorneys' Fees and Expenses
22
Section 9.05
No Additional Waiver Implied by One Waiver
22
Section 9.06
Trustee and Bondholder to Exercise Rights
22
ARTICLE X
MISCELLANEOUS
Section 10.01 Notices 22
Section 10.02 Binding Effect 23
Section 10.03 Severability 23
Section 10.04 Net-net-net Lease 23
Section 10.05 Further Assurances and Corrective Instruments 23
Section 10.06 Execution in Counterparts 23
-11-
TABLE OF CONTENTS
(continued)
Page
Section 10.07 Applicable Law 23
Section 10.08 Authorized Representatives 23
Section 10.09 Captions 23
EXHIBIT A - DESCRIPTION OF THE LEASED PREMISES A-1
EXHIBIT B - SCHEDULE OF LEASE PAYMENTS B-1
-iii-
ATTACHMENT 3
ESCROW DEPOSIT AND TRUST AGREEMENT
by and among the
CITY OF ENCINITAS, CALIFORNIA
ENCINITAS PUBLIC FINANCING AUTHORITY
and
UNION BANK, N.A.,
as Escrow Bank
Dated as of .2010
ATTACHMENT 3
ESCROW DEPOSIT AND TRUST AGREEMENT
This ESCROW DEPOSIT AND TRUST AGREEMENT is made and entered into
1 st day of , 2010, by and among the CITY OF ENCINITAS, a municipal
corporation organized and existing by virtue of Constitution and laws of the State of California
(the "City"), ENCINITAS PUBLIC FINANCING AUTHORITY, a joint exercise of powers
authority organized and existing under the laws of the State of California (the "Authority") and
UNION BANK, N.A., as Escrow Bank (the "Escrow Bank");
WITNESSETH:
WHEREAS, the City and the Authority have heretofore entered into an Lease
Agreement, dated as of April 1, 2001 (the "Prior Agreement");
WHEREAS, payments by the City of lease payments pursuant to the Prior
Agreement (the "Prior Payments") are applied to the payment of the $22,645,000 original
principal amount of Encinitas Public Financing Authority 2001 Lease Revenue Bonds, Series A
(the "Prior Bonds");
WHEREAS, the Prior Agreement provides that in the event that the City
deposits, or causes the deposit on its behalf of, moneys and certain Federal Securities (as defined
in the Prior Agreement) in an amount, together with investment earnings and certain funds held
under the Prior Indenture of Trust (defined below), sufficient to pay and discharge all or a
portion of the indebtedness of the Prior Agreement at or before maturity, then the obligations of
the City under the Prior Agreement shall cease and terminate with respect to the obligations so
discharged, except only the obligation of the City to pay or cause to be paid to the Authority all
sums due thereon out of the Escrow Fund with respect to the obligations so discharged and
thereafter such Lease Payments (as defined in the Prior Agreement) shall be released from the
lien of the Prior Agreement; and
WHEREAS, pursuant to a Trust Agreement, relating to and dated as of the same
date as the Prior Agreement, by and between the Authority and the Prior Trustee (the "Prior
Indenture of Trust"), the Prior Bonds were issued, secured in part by the prior payments; and
WHEREAS, the City has determined that it is in the best interests of the City at
this time to refinance the City's obligation to make the lease payments under the Prior
Agreement and, as a result thereof, to prepay such lease payments on said , 2010 at
a prepayment price of 100% of the principal amount thereof, plus accrued interest; and
WHEREAS, the City proposes to make the deposit of moneys and Federal
Securities referenced in Section 10.01 of the Prior Indenture of Trust and to appoint the Escrow
Bank as its agent for the purpose of applying said deposit to the prepayment of lease payments in
accordance with the instructions provided by this Escrow Deposit and Trust Agreement and of
applying said lease payments to the payment and redemption of the Prior Bonds in accordance
with the Prior Indenture of Trust and Prior Agreement, and the Escrow Bank will accept said
appointment; and
issue its $
WHEREAS, to obtain moneys to make such deposit, the Authority proposes to
Encinitas Public Financing Authority 2010 Lease Revenue Refunding
ATTACHMENT 3
Bonds, Series A (the "2010 Bonds") pursuant to that certain Indenture of Trust, dated as of
, 2010 (the "Indenture"), by and between the Authority and the Trustee; and
WHEREAS, the City wishes to make such a deposit with the Escrow Bank and to
enter into this Escrow Deposit and Trust Agreement for the purpose of providing the terms and
conditions for the deposit and application of amounts so deposited; and
WHEREAS, the Escrow Bank has full powers to act with respect to the
irrevocable escrow and trust created herein and to perform the duties and obligations to be
undertaken pursuant to this Escrow Deposit and Trust Agreement.
NOW, THEREFORE, in consideration of the above premises and of the mutual
promises and covenants herein contained and for other valuable consideration, the parties hereto
do hereby agree as follows:
Section 1. Definition of Federal Securities. As used herein, the term "Federal
Securities" means direct non-callable obligations of the United States of America, Refcorp
interest strips, or securities fully and unconditionally guaranteed as to the timely payment of
principal and interest by the United States of America, provided, that the full faith and credit of
the United States of America has been pledged to any such obligation or guarantee.
Section 2. Appointment of Escrow Bank. The City and the Authority hereby
appoint the Escrow Bank as escrow bank for all purposes of this Escrow Deposit and Trust
Agreement and in accordance with the terms and provisions of this Escrow Deposit and Trust
Agreement, and the Escrow Bank hereby accepts such appointment.
Section 3. Establishment of Escrow Fund. There is hereby created by the
City and the Authority with, and to be held by, the Escrow Bank, as security for the payment of
the Prior Payments as hereinafter set forth, an irrevocable escrow to be maintained in trust by the
Escrow Bank on behalf of the City and the Authority and for the benefit of the owners of the
Prior Bonds, said escrow to be designated the "Escrow Fund." All moneys and Federal
Securities deposited in the Escrow Fund shall be held as a special fund for the payment of the
lease payments in accordance with the provisions of the Prior Indenture of Trust. If at any time
the Escrow Bank shall receive actual knowledge that the moneys and Federal Securities in the
Escrow Fund will not be sufficient to make any payment required by Section 5 hereof, the
Escrow Bank shall notify the City of such fact and the City shall immediately cure such
deficiency.
Section 4. Deposit into Escrow Fund; Investment of Amounts. Concurrently
with delivery of the Bonds, the City and Authority shall cause to be transferred to the Escrow
Bank for deposit into the Escrow Fund the amount of $ in immediately available
funds which shall be derived as follows: $ representing funds on deposit in the
Bond Fund with respect to the Prior Bonds and $ to come from the proceeds of
the 2010 Bonds.
The Escrow Bank shall hold the Escrow Fund which shall be held in cash
uninvested (the "Cash") in a non-interest earning account.
2
ATTACHMENT 3
The Escrow Bank shall not be liable or responsible for any loss resulting from any
reinvestment made pursuant to this Escrow Deposit and Trust Agreement and in full compliance
with the provisions hereof.
Section 5. Instructions as to Application of Doosit• Authority Retains Right
of Optional Redemption. The City and the Authority hereby irrevocably direct and instruct the
Escrow Bank to prepay the remaining Prior Payments in full on , 2010 at a
prepayment price of 100% of the principal amount thereof, all as more particularly, set forth in
Exhibit B attached hereto and hereby made a part hereof. For such purpose of call and
redemption prior to maturity of the Prior Bonds, the Authority hereby instructs the Escrow Bank,
and the Escrow Bank, hereby agrees to cause to be given notice of redemption of the Prior
Bonds, such notice of redemption to be given timely for redemption of the Prior Bonds on the
dates indicated in Exhibit B, in accordance with the applicable provisions of the Prior Trust
Agreement.
Section 6. Application of Certain Terms of Prior Indenture of Trust. All of
the terms of the Prior Indenture of Trust relating to the making of payments of principal and
interest with respect to the Prior Bonds are incorporated in this Escrow Deposit and Trust
Agreement as if set forth in full herein. The provisions of the Prior Indenture of Trust relating to
the limitations from liability and protections afforded the Prior Trustee and the resignation and
removal of the Prior Trustee are also incorporated in this Escrow Deposit and Trust Agreement
as if set forth in full herein and shall be the procedure to be. followed with respect to any
resignation or removal of the Escrow Bank hereunder.
Section 7. Compensation to Escrow Bank. The City shall pay the Escrow
Bank full compensation for its duties under this Escrow Deposit and Trust Agreement, including
out-of-pocket costs such as publication costs, prepayment or redemption expenses, legal fees and
other costs and expenses relating hereto and, in addition, fees, costs and expenses relating to the
purchase of any Federal Securities after the date hereof, pursuant to a separate agreement
between the City and the Escrow Bank. Under no circumstances shall amounts deposited in the
Escrow Fund be deemed to be available for said purposes.
Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank
shall have no obligation to make any payment or disbursement of any type or incur any financial
liability in the performance of its duties under this Escrow Deposit and Trust Agreement unless
the City shall have deposited sufficient funds with the Escrow Bank to satisfy such obligation.
The Escrow Bank may rely and shall be protected in acting upon the written instructions of the
City or its agents relating to any matter or action as Escrow Bank under this Escrow Deposit and
Trust Agreement.
The Escrow Bank undertakes such duties as specifically set forth herein and no
implied duties or obligations shall be read into this Escrow Deposit and Trust Agreement against
the Escrow Bank.
The City hereby assumes liability for, and hereby agrees (whether or not any of
the transactions contemplated hereby are consummated) to indemnify, protect, save and hold
harmless the Escrow Bank and its respective successors, assigns, agents and servants from and
against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs,
3
ATTACHMENT 3
expenses and disbursements (including legal fees and disbursements) of whatsoever kind and
nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Bank
(whether or not also indemnified against by any other person under any other agreement or
instrument) and in any way relating to or arising out of the execution and delivery of this Escrow
Deposit and Trust Agreement, the establishment of the Escrow Fund, the retention of the moneys
therein and any payment, transfer or other application of moneys or securities by the Escrow
Bank in accordance with the provisions of this Escrow Deposit and Trust Agreement, or as may
arise by reason of any act, omission or error of the Escrow Bank made in good faith in the
conduct of its duties; provided, however, that the City shall not be required to indemnify the
Escrow Bank against its own negligence or misconduct. The indemnities contained in this
Section 8 shall survive the termination of this Escrow Deposit and Trust Agreement and the
resignation and removal of the Escrow Bank.
The Escrow Bank shall not have any liability hereunder except to the extent of its
own negligence or willful misconduct. In no event shall the Escrow Bank be liable for any
special indirect or consequential damages.
The Escrow Bank may consult with counsel of its own choice and the opinion of
such counsel shall be full and complete authorization to take or suffer in good faith any action
hereunder in accordance with such opinion of counsel.
The Escrow Bank shall not be responsible for any of the recitals or
representations contained herein.
No provision of this Agreement shall require the Escrow Bank to expend or risk
its own funds or otherwise incur any financial liability in the performance or exercise of any of
its duties hereunder, or in the exercise of its rights or powers.
Section 9. Amendment. This Escrow Deposit and Trust Agreement may be
modified or amended at any time by a supplemental agreement which shall become effective
when the written consents of the owners of one hundred percent (100%) in aggregate principal
amount of the Prior Bonds then outstanding shall have been filed with the Escrow Bank. This
Escrow Deposit and Trust Agreement may be modified or amended at any time by a
supplemental agreement, without the consent of any such owners, but only (1) to add to the
covenants and agreements of any party, other covenants to be observed, or to surrender any right
or power herein or therein reserved to the City, (2) to cure, correct or supplement any ambiguous
or defective provision contained herein, (3) in regard to questions arising hereunder or
thereunder, as the parties hereto or thereto may deem necessary or desirable and which, in the
opinion of counsel, shall not adversely affect the interests of the owners of the Prior Bonds or the
Bonds, and that such amendment will not cause interest on the Prior Bonds or the Bonds to
become subject to federal income taxation.
Section 10. Termination; Unclaimed Money. This Escrow Deposit and Trust
Agreement shall terminate when the Prior Payments have been paid; provided, however, that (1)
money held by the Escrow Bank pursuant to this Escrow Deposit and Trust Agreement for the
payment and discharge of any of the Prior Payments (which shall not be payable as to interest
from and after the date set for redemption) which remain unclaimed for two (2) years after such
payments were due, shall be repaid by the Escrow Bank to the City free from the trust created by
4
ATTACHMENT 3
the Prior Indenture of Trust and this Escrow Deposit and Trust Agreement, and the Escrow Bank
shall thereupon be released and discharged with respect thereto and hereto and all liability of the
Escrow Bank with respect to such money shall thereupon cease and (ii) excess moneys held by
the Escrow Bank not needed for the payment and discharge of the Prior Payments shall be
transferred to the Bond Fund under the Indenture.
Section 11. Severability. If any section, paragraph, sentence, clause or
provision of this Escrow Deposit and Trust Agreement shall for any reason be held to be invalid
or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause
or provision shall not affect any of the remaining provisions of this Escrow Deposit and Trust
Agreement.
Section 12. Notice of Escrow Bank Authority and City. Any notice to or
demand upon the Escrow Bank may be served and presented, and such demand may be made, at
the principal corporate trust office of the Escrow Bank as specified by the Escrow Bank as Prior
Trustee in accordance with the provisions of the Prior Indenture of Trust or by physical delivery
with confirmation of receipt or by confirmed telecopy. Any notice to or demand upon the City
or the Authority shall be deemed to have been sufficiently given or served for all purposes by
being mailed by registered or certified mail, and deposited, postage prepaid, in a post office letter
box, addressed to such party as provided in the Prior Agreement (or such other address as may
have been filed in writing by the City or the Authority with the Escrow Bank).
Section 13. Merger or Consolidation of Escrow Bank. Any company into
which the Escrow Bank may be merged or converted or with which may be consolidated or any
company resulting from any merger, conversion or consolidation to which it shall be a party or
any company to which the Escrow Bank may sell or transfer all or substantially all of its
corporate trust business, provided such company shall be eligible to act as Trustee under the
Indenture and the Prior Trust Agreement, shall be the successor hereunder to the Escrow Bank
without the execution or filing of any paper or any further act.
Section 14. Execution in Several Counte arts. This Escrow Deposit and Trust
Agreement may be executed in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original; and all such counterparts shall constitute but one
and the same instrument.
5
ATTACHMENT 3
IN WITNESS WHEREOF, the Authority, the City and the Escrow Bank have
each caused this Escrow Deposit and Trust Agreement to be executed by their duly authorized
officers all as of the date first above written.
CITY OF ENCINITAS
By:
Finance Director
UNION BANK, N.A., as Escrow Bank
By:
Authorized Officer
ENCINITAS PUBLIC FINANCING AUTHORITY
By:
Executive Director
[SEAL]
ATTEST:
Secretary
6
ATTACHMENT 3
EXHIBIT A
IDENTIFICATION OF AND PAYMENT SCHEDULE FOR
ESCROWED FEDERAL SECURITIES
Delivery Date Securi Maturity Date Amount
ESCROW REQUIREMENTS
Principal
Period Ending Principal Interest Redeemed
Rate
Total
A-1
EXHIBIT B
PAYMENT SCHEDULE OF PRIOR PAYMENTS
ATTACHMENT 3
Date Principal Interest Rollovers Net Escrow
Receipts
B-1
EXHIBIT C
$22,645,000
Encinitas Public Financing Authority
2010 Lease Revenue Bonds, Series A
CUSIP #
NOTICE OF DEFEASANCE AND REDEMPTION
ATTACHMENT 3
OWNERS of certain maturities of the above-described Bonds (the "Defeased
Bonds") are hereby NOTIFIED that, pursuant to an Escrow Deposit and Trust Agreement dated
as of , 2010, by and among the City of Encinitas, the Encinitas Public Financing
Authority (the "Authority") and Union Bank, N.A., as Escrow Bank (the "Escrow Bank"), the
Escrow Bank has received and holds in irrevocable trust, cash moneys or noncallable direct and
general obligations of the United States of America or obligations of any agency or
instrumentality of the United States the payment of principal of and interest on which is
unconditionally guaranteed by the full faith and credit of the United States of America
(collectively, the "Escrowed Securities") interest on and the principal of which obligations, when
due, will provide moneys together with any such cash sufficient to redeem the Defeased Bonds
on 2010, at a redemption price of 100%, all as verified by an independent
certified public accountant. The Escrow Bank shall collect interest on and the principal of such
obligations and shall pay the same, together with any such cash moneys held by the Escrow
Bank, to owners of record of the Defeased Bonds, in such amounts and at such times as shall be
required to pay interest on and the principal of the Defeased Bonds to the redemption date of
, 2010, as applicable. Owners of the Defeased Bonds should surrender Defeased
Bond to Union Bank, N.A., for payment.
The Defeased Bonds are now deemed to have been paid, and the owners thereof
shall hereafter be limited to the application of such cash moneys or Escrowed Securities for the
payment of interest on and the principal of such Defeased Bonds as the same become due and
payable as described above.
UNION BANK, N.A., as Escrow Bank
C-1
TABLE OF CONTENTS
Page
SECTION 1. DEFINITION OF FEDERAL SECURITIES
2
SECTION 2. APPOINTMENT OF ESCROW BANK
2
SECTION 3. ESTABLISHMENT OF ESCROW FUND
2
SECTION 4. DEPOSIT INTO ESCROW FUND; INVESTMENT OF AMOUNTS
2
SECTION 5. INSTRUCTIONS AS TO APPLICATION OF DEPOSIT; AUTHORITY
RETAINS RIGHT OF OPTIONAL REDEMPTION
3
SECTION 6. APPLICATION OF CERTAIN TERMS OF PRIOR INDENTURE OF
TRUST
3
SECTION 7. COMPENSATION TO ESCROW BANK
3
SECTION 8. LIABILITIES AND OBLIGATIONS OF ESCROW BANK
3
SECTION 9. AMENDMENT
4
SECTION 10. TERMINATION; UNCLAIMED MONEY
5
SECTION 11. SEVERABILITY
5
SECTION 12. NOTICE OF ESCROW BANK, AUTHORITY AND CITY
5
SECTION 13. MERGER OR CONSOLIDATION OF ESCROW BANK
5
SECTION 14. EXECUTION IN SEVERAL COUNTERPARTS
5
EXHIBIT A - IDENTIFICATION OF AND PAYMENT SCHEDULE
EXHIBIT B - PAYMENT SCHEDULE OF PRIOR PAYMENTS
EXHIBIT C - NOTICE OF DEFEASANCE AND REDEMPTION......
A-1
B-1
.................................C-1
-I-
ATTACHMENT 4
INDENTURE OF TRUST
Dated as of 12010
by and between
UNION BANK, N.A.
as trustee
and the
ENCINITAS PUBLIC FINANCING AUTHORITY
Authorizing the Issuance of
Encinitas Public Financing Authority
2010 Lease Revenue Refunding Bonds
Series A
(Park Project)
ATTACHMENT 4
INDENTURE OF TRUST
This INDENTURE OF TRUST (this "Indenture"), made and entered into ,
2010, is by and between the ENCINITAS JOINT POWERS FINANCING AUTHORITY, a joint
powers authority duly organized and existing under the laws of the State of California (the
"Authority"), and UNION BANK, N.A., a national banking association, organized and existing
under the laws of the United States of America, as trustee (the "Trustee");
WITNESSETH:
WHEREAS, the Authority is a joint powers authority duly organized and existing under
and pursuant to that certain Joint Exercise of Powers Agreement dated as of November 6, 1991,
originally executed by and among the City, Cardiff Sanitation District, Encinitas Fire Protection
District, Encinitas Sanitary District, and San Dieguito Water District; and
WHEREAS, under Article 4 (commencing with Section 6584) of Chapter 5 of Division
7 of Title 1 of the California Government Code (the "Bond Law") the Authority is authorized to
borrow money for the purpose of financing the acquisition of bonds, notes and other obligations
of, or for the purpose of making loans to, public entities including the City, and to provide
financing for public capital improvements of public entities including the City and to lease and
lease back such public capital improvements including the land on which the public capital
improvements are or will be located; and
WHEREAS, for the purpose of providing moneys to acquire or construct capital projects
of the City, the Authority issued its $22,645,000 aggregate principal amount 2001 Lease
Revenue Bonds, Series A (the "2001 Bonds") under that certain Indenture of Trust dated as of
April 1, 2001 (the "2001 Indenture") by and between the Authority and Union Bank, N.A., as
trustee; and
WHEREAS, the City secured the 2001 Bonds with the lease payments pursuant to a
Lease Agreement dated as of April 1, 2001 (the "2001 Lease") and in which the City leased
certain sites owned by the City (the "Leased Premises") pursuant to the laws of the State of
California to enter into leasehold agreements for such purpose; and
WHEREAS, the Leased Premises constitute a public capital improvement, as that term is
defined in the Bond law; and
WHEREAS, the City wishes to refinance its obligations under the 2001 Lease in order to
achieve an interest cost savings; and
WHEREAS, the Authority and the City purpose to lease and lease back the Leased
Premises as provided in this Lease Agreement, such lease back to the City being for the purpose
(among others) of providing amounts sufficient to provide for the payment of the principal of
and interest on the Bonds (as defined herein); and
WHEREAS, the Authority hereby certifies that all acts and proceedings required by law
necessary to make the Bonds, when executed by the Authority, authenticated and delivered by
the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority, and
2
ATTACHMENT 4
to constitute this Indenture a valid and binding agreement for the uses and purposes herein set
forth in accordance with its terms, have been done and taken, and the execution and delivery of
the Indenture have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure
the payment of the principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding under this Indenture, according to their tenor, and to secure the
performance and observance of all the covenants and conditions therein and herein set forth, and
to declare the terms and conditions upon and subject to which the Bonds are to be issued and
received, and in consideration of the premises and of the mutual covenants herein contained and
of the purchase and acceptance of the Bonds by the owners thereof, and for other valuable
considerations, the receipt and adequacy whereof is hereby acknowledged, the Authority does
hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time
to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
SECTION 1.01 Definitions. Unless the context otherwise requires, the terms
defined in this Section 1.01 shall, for all purposes of this Indenture and of any indenture
supplemental hereto and of any certificate, opinion or other document herein mentioned, have
the meanings herein specified, to be equally applicable to both the singular and plural forms of
any of the terms herein defined. In addition, all capitalized terms used herein and not otherwise
defined in this Section 1.01 shall have the respective meanings given such terms in the Lease
Agreement.
"Authority" means the Encinitas Public Financing Authority, a joint powers authority
duly organized and existing under the laws of the State.
"Authorized Representative" means: (a) with respect to the Authority, its Chairperson,
Vice Chairperson, Executive Director, Treasurer or Secretary or any other person designated as
an Authorized Representative of the Authority by a Written Certificate of the Authority signed
by its Chairperson or Vice Chairperson, Executive Director or Treasurer and filed with the City
and the Trustee; and (b) with respect to the City, its Mayor, Deputy Mayor, City Manager, City
Clerk, Financial Services Director or any other person designated as an Authorized
Representative of the City by a Written Certificate of the City signed by its Mayor, Mayor, City
Manager or Financial Services Director and filed with the Authority and the Trustee.
"Bond Counsel" means (a) Best Best & Krieger LLP, or (b) any other attorney or firm of
attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the
issuance of obligations the interest on which is excludable from gross income for federal income
tax purposes under the Tax Code.
"Bond Fund" means the fund by that name established and held by the Trustee pursuant
to Section 5.01.
"Bond Law" means the Marks-Roos Local Bond Pooling Act of 1985, constituting
Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the
3
ATTACHMENT 4
Government Code of the State, as in existence on the Closing Date or as thereafter amended
from time to time.
"Bond Year" means each twelve-month period extending from April 2 in one calendar
year to April 1 of the succeeding calendar year, both dates inclusive; except that the first Bond
Year shall commence on the Closing Date and extend to and including April 1, 2010.
"Bonds" means the $ aggregate principal amount of Encinitas Public
Financing Authority Lease Revenue Refunding Bonds, 2010 Series A authorized by and at any
time Outstanding pursuant to this Indenture.
"Book-Entry Depository" means DTC or any successor as Book-Entry Depository for the
Bonds, appointed pursuant to Section 2.11.
"Business Day" means a day (other than a Saturday or a Sunday) on which banks are not
required or authorized to remain closed in the city in which the Office of the Trustee is located.
"City" means the City of Encinitas, a municipal corporation organized under the laws of
the State.
"Closing Date" means , 2010, being the date of delivery of the Bonds to the
Original Purchaser.
"Costs of Issuance" means all expenses incurred in connection with the authorization,
issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds,
including but not limited to all compensation, fees and expenses (including but not limited to
fees and expenses for legal counsel) of the Authority, initial fees and expenses of the Trustee and
its counsel, Insurance Policy premium, title insurance premiums, appraisal fees, compensation
to any financial consultants or underwriters, legal fees and expenses, filing and recording costs,
rating agency fees, costs of preparation and reproduction of documents and costs of printing.
"Costs of Issuance Fund" means the fund by that name established and held by the
Trustee pursuant to Section 3.03.
"Debt Service" means, during any period of computation, the amount obtained for such
period by totaling the following amounts: (a) the principal amount of all Outstanding Serial
Bonds coming due and payable by their terms in such period; (b) the minimum principal amount
of all Outstanding Term Bonds scheduled to be redeemed by operation of mandatory sinking
fund deposits in such period; and (c) the interest which would be due during such period on the
aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds
are retired as scheduled, but deducting and excluding from such aggregate amount the amount of
Bonds no longer Outstanding.
"DTC" means The Depository Trust Company, New York, New York, and its successors
and assigns.
"Escrow Account" means the account of that name established under the Escrow
Agreement.
4
ATTACHMENT 4
"Escrow Agent" means Union Bank, N.A., or its successor in interest, pursuant to the
Escrow Agreement.
"Escrow Agreement" means the Escrow Deposit and Trust Agreement, dated as of
2010, among the City, the Authority and the Escrow Agent.
"Event of Default" means any of the events specified in Section 7.01.
"Fair Market Value" means, with respect to any investment, the price at which a willing
buyer would purchase such investment from a willing seller in a bona fide, arm's length
transaction (determined as of the date the contract to purchase or sell the investment becomes
binding) if the investment is traded on an established securities market (within the meaning of
Section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the
acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the
investment is a certificate of deposit that is acquired in accordance with applicable regulations
under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal
or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed
investment contract, a forward supply contract or other investment agreement) that is acquired in
accordance with applicable regulations under the Tax Code, or (iii) the investment is a United
States Treasury Security - State and Local Government Series that is acquired in accordance with
applicable regulations of the United States Bureau of Public Debt.
"Federal Securities" means:
(a) any direct general obligations of the United States of America (including
obligations issued or held in book entry form on the books of the Department of the Treasury of
the United States of America), the payment of principal of and interest on which are
unconditionally and fully guaranteed by the United States of America;
(b) any obligations the principal of and interest on which are unconditionally
guaranteed by the United States of America; and
(c) pre-refunded municipal obligations defined as follows: Any bonds or other
obligations of any state of the United States of America or of any agency, instrumentality or
local governmental unit of any such state which are not callable at the option of the obligor prior
to maturity or as to which irrevocable instructions have been given by the obligor to call on the
date specified in the notice: and (i) which are rated, based on the escrow, in the highest rating
category of S&P and Moody's or any successors thereto; or (ii)(A) which are fully secured as to
principal and interest and redemption premium, if any, by a fund consisting only of cash or
obligations described in paragraphs (a) or (b) above, which fund may be applied only to the
payment of such principal of and interest and redemption premium, if any, on such bonds or
other obligations on the maturity date or dates thereof or the specified redemption date or dates
pursuant to such irrevocable instructions, as appropriate, and (B) which fund is sufficient, as
verified by a nationally recognized independent certified public accountant, to pay principal of
and interest and redemption premium, if any, on the bonds or other obligations described in this
paragraph on the maturity date or dates thereof or on the redemption date or dates specified in
the irrevocable instructions referred to above, as appropriate.
5
ATTACHMENT 4
"Fiscal Year" means any twelve-month period extending from July 1 in one calendar year
to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month
period selected and designated by the Authority as its official fiscal year period.
"Indenture" means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the
provisions hereof.
"Independent Accountant" means any certified public accountant or firm of certified
public accountants appointed and paid by the Authority or the City, and who, or each of whom
(a) is in fact independent and not under domination of the Authority or the City; (b) does not
have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not
connected with the Authority or the City as an officer or employee of the Authority or the City
but who may be regularly retained to make annual or other audits of the books of or reports to
the Authority or the City.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service,"
30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny
Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York
10006; Moody's "Municipal and Government," 99 Church Street, 8th Floor, New York, New
York 10007, Attention: Municipal News Reports; S&P's "Called Bond Record," 25 Broadway,
16th Floor, New York, New York 10004; and, in accordance with then current guidelines of the
Securities and Exchange Commission, such other addresses and/or such other information
services providing information with respect to called bonds as the Authority may designate in a
Written Certificate of the Authority delivered to the Trustee.
"Insurance and Condemnation Fund" means the fund by that name established and held
by the Trustee pursuant to Section 5.08.
"Interest Account" means the account by that name established in the Bond Fund
pursuant to Section 5.02.
"Interest Payment Date" means each April 1 and October 1 commencing October 1,
2010.
"Lease Agreement" means that certain Amended and Restated Lease Agreement, dated as
of , 2010, by and between the Authority, as lessor, and the City, as lessee.
"Moody's" means Moody's Investors Service, its successors and assigns.
"Net Proceeds" means all amounts derived from any policy of casualty insurance or title
insurance with respect to the Leased Premises, or the proceeds of any taking of the Leased
Premises or any portion thereof in eminent domain proceedings (including sale under threat of
such proceedings), to the extent remaining after payment therefrom of all expenses incurred in
the collection and administration thereof.
6
ATTACHMENT 4
"Office" means with respect to the Trustee, the corporate trust office of the Trustee at 120
South San Pedro Street, Suite 400, Los Angeles, California 90012, or at such other or additional
offices as may be specified in writing to the Authority and the City.
"Original Purchaser" means Salomon Smith Barney Inc., as the original purchasers of the
Bonds upon their delivery by the Trustee on the Closing Date.
"Outstanding", when used as of any particular time with reference to Bonds, means
(subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being,
authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore
cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to
which all liability of the Authority shall have been discharged in accordance with Section 10.02,
including Bonds (or portions thereof) described in Section 11.10; and (c) Bonds for the transfer
or exchange of or in lieu of or in substitution for which other Bonds shall have been
authenticated and delivered by the Trustee pursuant to this Indenture.
"Owner", whenever used herein with respect to a Bond, means the person in whose name
the ownership of such Bond is registered on the Registration Books.
"Permitted Investments" means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
1. Direct obligations of the United States of America (including obligations issued
or held in book-entry form on the books of the Department of the Treasury) or obligations the
principal of and interest on which are unconditionally guaranteed by the United States of
America.
2. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following federal agencies and provided such obligations are backed by the full
faith and credit of the United States of America (stripped securities are only pennitted if they
have been stripped by the agency itself):
a. Farmers Home Administration (FmHA)
Certificates of beneficial ownership
b. Federal Housing Administration Debentures (FHA)
C. General Services Administration
Participation certificates
d. Government National Mortgage Association (GNMA or "Ginnie Mae")
GNMA - guaranteed mortgage-backed bonds
GHMA - guaranteed pass-through obligations (participation certificates)
(not acceptable for certain cash-flow sensitive issues.)
e. U.S. Maritime Administration
Guaranteed Title XI financing
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ATTACHMENT 4
f. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
3. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed
by any of the following non-full faith and credit U.S. government agencies (stripped securities
are only permitted if they have been stripped by the agency itself):
a. Federal Home Loan Bank System
Senior debt obligations (Consolidated debt obligations)
b. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mae")
Participation Certificates (Mortgage-backed securities)
Senior debt obligations
c. Federal National Mortgage Association (FNMA or "Fannie Mae")
Mortgage-backed securities and senior debt obligations (excluded are
stripped mortgage securities which are valued greater than par on the
portion of unpaid principal).
d. Student Loan Marketing Association (SLMA or "Sallie Mae")
Senior debt obligations
e. Resolution Funding CoM. (REFCORP) Only the interest component of
REFCORP strips which have been stripped by request to the Federal
Reserve Bank of New York in book entry form are acceptable.
f Farm Credit System
Consolidated systemwide bonds and notes
4. Money market funds registered under the Federal Investment Company of 1940,
whose shares are registered under the Federal Securities Act of 1933, and having a rating by
S&P of AAAm-G; AAAm, or AA-m and if rated by Moody's rated Aaa, Aal or Aa2 including
funds for which the Trustee or an affiliate advises or services.
5. Certificates of deposit secured at all times by collateral described in (1) and/or (2)
above. CD's must have a one year or less maturity. Such certificates must be issued by
commercial banks, savings and loan associations or mutual savings banks whose term
obligations are rated "A-1" or better by S&P and "Prime-1" by Moody's.
The collateral must be held by a third party and the bondholders must have a perfected
first security interest in the collateral.
6. Certificates of deposit, savings accounts, deposit accounts or money market
deposits which are fully insured by FDIC, including BIF and SAIF.
7. Investment agreements with a domestic or foreign bank or corporation, the long-
term debt or financial strength of which, or, in the case of a guaranteed corporation the long-term
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ATTACHMENT 4
debt, or, in the case of a monoline financial guarantee insurance company, financial strength, of
the guarantor is rated in at least the "double A" category by Moody's and S&P; provided, that,
by the terms of the investment agreement:
a. interest payments are to be made to the Trustee at all times and in the
amounts as necessary to pay debt service, or for the Reserve Account, applied as directed
in Section 5.06 hereof (or, if the investment agreement is for the construction fund,
construction draws) on the Bonds;
b. the invested funds are available for withdrawal without penalty or
premium, at any time upon not more than seven days' prior notice; the Issuer and the
Trustee hereby agree to give or cause to be given notice in accordance with the terms of
the investment agreement so as to receive funds thereunder with no penalty or premium
paid;
C. the investment agreement shall state that it is the unconditional and
general obligation of, and is not subordinated to any other obligation of, the provider
thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state
that the obligation of the provider to make payments thereunder ranks pari passu with the
obligations of the provider to its other depositors and its other unsecured and
unsubordinated creditors;
d. the Issuer or the Trustee receives the opinion of domestic counsel (which
opinion shall be addressed to the Issuer and Trustee) that such investment agreement is
legal, valid, binding and unenforceable upon the provider in accordance with its terms
and of foreign counsel (if applicable) in a form and substance acceptable by the Issuer;
e. the investment agreement shall provide that if during its term
(i) the provider's rating by either S&P or Moody's falls below "AA-"
or "AaY, respectively, the provider shall, at its option, within 10 days of receipt
of publication of such downgrade, either (a) collateralize the investment
agreement by delivering or transferring in accordance with the applicable state
and federal laws (other than by means of entries on the provider's books) to the
Issuer, the Trustee or a third party acting solely as agent therefor (the "Holder of
the Collateral") collateral free and clear of any third party liens or claims the
market value of which collateral is maintained at levels and upon such conditions
as would be acceptable to S&P and Moody's to maintain an "A" rating in an "A"
rated structured financing (with a market value approach); or (b) repay the
principal of and accrued but unpaid interest on the investment (including such
other amounts as are required to permit the Trustee to receive the initially
contemplated yield through the term of the Agreement), or (c) assign its
obligations thereunder to a financial counter-party, acceptable to the Issuer, and
rated in the double A category by both Moody's and S&P; and
(ii) the provider's rating by either S&P or Moody's is withdrawn or
suspended or falls below "A-" or "A3", respectively, the provider must, at the
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direction of the Issuer or the Trustee (who shall give such direction if so directed
by the Issuer), within 10 days of receipt of such direction, repay the principal of
and accrued but unpaid interest on the investment, in either case with no penalty
or premium to the Issuer or Trustee; and
f. the investment agreement shall state and an opinion of counsel shall be
rendered, in the event collateral is required to be pledged by the provider under the terms
of the investment agreement, at the time such collateral is delivered, that the Holder of
the Collateral has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof (in the case of bearer securities, this means
the Holder of the Collateral is in possession); or
g. the investment agreement must provide that if during its term
(i) the provider shall default in its payment obligations, the provider's
obligation under the investment agreement shall, at the direction of the Issuer or
the Trustee (who shall give such direction if so directed by the Issuer), be
accelerated and amounts invested and accrued but unpaid interest thereon shall be
repaid to the Issuer or Trustee, as appropriate; and
(ii) the provider shall become insolvent, not pay its debts as they
become due, be declared or petition to be declared bankrupt, etc. ("event of
insolvency"), the provider's obligations shall automatically be accelerated and the
amounts invested and accrued but unpaid interest thereon shall be repaid to the
Issuer or Trustee, as appropriate.
8. Commercial paper rated "Prime-1" by Moody's and "A-1+" or better by S&P.
9. Bonds or notes issued by any state or municipality which are rated by Moody's
and S&P in the highest long-term rating categories assigned by such agencies unless such
obligations are issued by the State, in which case such obligations are rated in one of the two
highest long-term rating categories of S&P and Moody's.
10. Federal funds or bankers acceptances with a maximum term of one- year of any
bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or
"AY or better by Moody's and "A-W' or better by S&P.
11. Repurchase agreements that provide for the transfer of securities from a dealer
bank or securities firm (selleriborrower) to the Trustee (buyer/lender), and the transfer of cash
from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or
securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a
specified date.
Repurchase Agreements must satisfy the following criteria:
a. Repos must be between the municipal entity and a dealer bank or
securities firm.
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(1) Primary dealers on the Federal Reserve reporting dealer list which
fall under the jurisdiction of the SIPC and which are rated A or
better by Standard & Poor's Ratings Group and Moody', or
(2) Banks rated "A" or above by Standard & Poor's Ratings Group
and Moody's Investor Services.
b. The written repo contract must include the following:
(1) Securities which are acceptable for transfer are:
(a) Direct U.S. governments.
(b) Federal agencies backed by the full faith and credit of the
U.S. Government (and FNMA & FHLMC)
(2) The term of the repo maybe up to 30 years
(3) The collateral must be delivered to the municipal entity, trustee (if
trustee is not supplying the collateral) or third party acting as agent
for the trustee (if the trustee is supplying the collateral)
before/simultaneous with payment (perfection by possession of
certificated securities).
(4) The trustee has perfected first priority security interest in the
collateral.
(5) Collateral is free and clear of third-party liens and in the case of
SIPC broker was not acquired pursuant to a repo or reverse repo.
(6) Failure to maintain the requisite collateral percentage, after a two
day restoration period, will require the trustee to liquidate
collateral.
(7) Valuation of Collateral
(a) The securities must be valued weekly, marked-to-market at
a current market price plus interest.
(b) The value of collateral must be equal to 104% of the
amount of cash transferred by the municipal entity to the
dealer bank or security firm under the repo plus accrued
interest. If the value of securities held as collateral slips
below 104% of the value of the cash transferred by
municipality, then additional cash and/or acceptable
securities must be transferred. If, however, the securities
used as collateral are FNMA or FHLMC, then the value of
collateral must equal 105%.
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C. Legal opinion which must be delivered to the municipal entity:
Repo meets guidelines under state law for legal investment of public
funds.
12. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by S&P. If,
however, the issue is only rated by S&P (i.e., there is no Moody's rating), then the pre-refunded
bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or
AAA rated pre-refunded municipals to satisfy this condition.
13. State of California Local Agency Investment Fund (LAIF)
"Principal Account" means the account by that name established in the Bond Fund
pursuant to Section 5.02.
"Project Fund" means the Project Fund established pursuant to Section 3.04 hereof.
"Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th)
calendar day of the month preceding such Interest Payment Date.
"Redemption Fund" means the fund by that name established pursuant to Section 5.07.
"Registration Books" means the records maintained by the Trustee pursuant to Section
2.05 for the registration and transfer of ownership of the Bonds.
"Representation Letter" means the letter of representations from the Authority to, or other
instrument or agreement of the Authority with, a Book-Entry Depository in which the Authority,
among other things, makes certain representations to such Depository with respect to the Bonds,
the payment thereof and delivery of notices with respect thereto.
"Reserve Account" means the account by that name in the Bond Fund established
pursuant to Section 5.02.
"Reserve Account Credit Facility" means any policy of insurance, a surety bond, a letter
of credit or other comparable credit facility, or a combination thereof, which, together with
money on deposit in the Reserve Account, if any, provide an aggregate amount equal to the
Reserve Requirement, so long as on the date of delivery of such Reserve Account Credit Facility,
the provider of any such policy of insurance, surety bond, letter of credit or other comparable
credit facility is rated in the highest rating category by S&P and Moody's and A.M. Best &
Company (but only if such credit facility is rated by A.M. Best & Company).
"Reserve Requirement" means, as of the date of calculation, an amount equal to the lesser
of (i) the maximum amount of annual Debt Service coming due and payable in the current or any
future Bond Year; (ii) 125% of average annual Debt Service on the Bonds; or (iii) ten percent
(10%) of initial outstanding principal amount of the Bonds.
"Revenues" means: (a) all amounts received by the Authority or the Trustee pursuant to
or with respect to the Lease Agreement, including, without limiting the generality of the
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foregoing, all of the Lease Payments (including both timely and delinquent payments, any late
charges, and whether paid from any source), but excluding any amounts payable under Section
4.8(d) of the Lease Agreement; and (b) all interest, profits or other income derived from the
investment of amounts in any fund or account established pursuant to this Indenture.
"S&P" means Standard & Poor's Rating Services, a division of the McGraw Hill
Companies, Inc., its successors and assigns.
"Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th
Floor, New York, New York 10041-0099 Atn. Call Notification Department, Fax (212) 855-
7232; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other securities depositories as the Authority may
designate in a Written Certificate of the Authority delivered to the Trustee.
"Serial Bonds" means the Bonds maturing on April 1 in each of the years _ through
inclusive.
"Sinking Account" means the account by that name established and held by the Trustee
pursuant to Section 5.02.
"State" means the State of California.
"Supplemental Indenture" means any indenture hereafter duly authorized and entered into
between the Authority and the Trustee, supplementing, modifying or amending this Indenture;
but only if and to the extent that such Supplemental Indenture is specifically authorized
hereunder.
"Tax Code" means the Internal Revenue Code of 1986, as amended.
"Tax Regulations" means temporary and permanent regulations promulgated under or
with respect to Sections 103 and 141 through 150, inclusive, of the Tax Code.
"Term Bonds" means the Bonds maturing on April 1, and April 1,
"Trustee" means Union Bank, N.A., a national banking association organized and
existing under the laws of the United States of America, or its successor, as Trustee hereunder as
provided in Section 8.01.
"Undertaking to Provide Continuing Disclosure" means, as applicable, that certain
Certificate of the Authority or the City, as applicable, by that name and dated as of the Closing
Date and referred to, in the case of the Authority, in Section 6.10 hereof, and in the case of the
City, in Section 5.12 of the Lease Agreement.
"Written Certificate", "Written Request" and "Written Requisition" of the Authority or
the City mean, respectively, a written certificate, request or requisition signed in the name of the
Authority or the City by its Authorized Representative. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a single instrument with
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any other instrument, opinion or representation, and the two or more so combined shall be read
and construed as a single instrument.
"2001 Bonds" means the $22,645,000 original principal amount of Encinitas Public
Financing Authority 2001 Lease Revenue Bonds, Series A.
"2001 Indenture" means the Indenture of Trust, dated as of April 1, 2001, among the
Authority, the City and the 2001 Trustee and relating to the 2001 Bonds.
"2001 Project Fund" means Project Fund established pursuant to section 3.04 of the 2001
Indenture.
"2001 Trustee" means Union Bank, N.A., as Trustee under the 2001 Indenture.
SECTION 1.02 Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of-reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to "Articles", "Sections" and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture; the words "herein", "hereof',
"hereby", "hereunder" and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
ARTICLE II
THE BONDS
SECTION 2.01 Authorization o Bonds. The Authority hereby authorizes the
issuance hereunder of the Bonds, which shall constitute special obligations of the Authority, for
the purpose of providing funds to the Authority to refinance the 2001 Bonds and the acquisition
of the Leased Premises by the City under the 2001 Lease Agreement. The Bonds are hereby
designated the "Encinitas Public Financing Authority 2010 Lease Revenue Refunding Bonds,
Series A." The aggregate principal amount of Bonds initially issued and Outstanding under this
Indenture shall equal Dollars
(S This Indenture constitutes a continuing agreement with the Trustee and the
Owners from time to time of the Bonds to secure the full payment of the principal of and interest
and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein
contained.
SECTION 2.02 Terms of the Bonds. The Bonds shall be issued in fully registered
form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds
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shall mature on April 1 in each of the years and in the amounts set forth below and shall bear
interest on each Interest Payment Date at the rates set forth below:
Maturity Date Principal Interest
(April 1 Amount Rate
Interest on the Bonds shall be payable semi-annually calculated based on a 360-day year
of twelve thirty day months on each Interest Payment Date to the person whose name appears on
the Registration Books as the Owner thereof as of the Record Date immediately preceding each
such Interest Payment Date, such interest to be paid by check of the Trustee mailed by first class
mail to the Owner at the address of such Owner as its appears on the Registration Books;
provided however, that payment of interest may be by wire transfer in immediately available
funds to an account in the United States of America to any Owner of Bonds in the aggregate
principal amount of $1,000,000 or more who shall furnish written wire instructions to the Trustee
at least five (5) days before the applicable Record Date. Principal of any Bond and any premium
upon redemption shall be paid by check of the Trustee upon presentation and surrender thereof at
the Office of the Trustee. Principal of and interest and premium (if any) on the Bonds shall be
payable in lawful money of the United States of America.
Each Bond shall be dated as of the Closing Date, and shall bear interest from the Interest
Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated
after a Record Date and on or before the following Interest Payment Date, in which event it shall
bear interest from such Interest Payment Date, or (b) unless it is authenticated on or before
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[September 15, 2010], in which event it shall bear interest from the Closing Date; provided,
however, that if, as of the date of authentication of any Bond, interest thereon is in default, such
Bond shall bear interest from the Interest Payment Date to which interest has previously been
paid or made available for payment thereon.
SECTION 2.03 Transfer o Bonds. Any Bond may, in accordance with its terms,
be transferred on the Registration Books by the person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied
by delivery of a written instrument of transfer, duly executed in a form approved by the Trustee.
Transfer of any Bond shall not be permitted by the Trustee during the period established by the
Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption
pursuant to Article IV. Whenever any Bonds or Bonds shall be surrendered for transfer, the
Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds
for a like aggregate principal amount and of like maturity. The Trustee may require the Bond
Owner requesting such transfer to pay any tax or other governmental charge required to be paid
with respect to such transfer.
SECTION 2.04 Exchange of Bonds. Any Bond may be exchanged at the Office of
the Trustee for a like aggregate principal amount of Bonds of other authorized denominations
and of like maturity. Exchange of any Bond shall not be permitted during the period established
by the Trustee for selection of Bonds for redemption or if such Bond has been selected for
redemption pursuant to Article IV. The Trustee shall require the Bond Owner requesting such
exchange to pay any tax or other governmental charge required to be paid with respect to such
exchange.
SECTION 2.05 Registration Books. The Trustee will keep or cause to be kept, at
the Office of the Trustee, sufficient records for the registration and transfer of ownership of the
Bonds, which shall at all reasonable times, upon reasonable notice, be open to inspection during
regular business hours by the Authority, the City and the Owners; and, upon presentation for
such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or
transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as
hereinbefore provided.
SECTION 2.06 Form and Execution of Bonds. The Bonds shall be signed in the
name and on behalf of the Authority with the manual or facsimile signature of its Chairperson
and attested with the manual or facsimile signature of its Secretary or any assistant duly
appointed by the Authority, under the printed seal of the Authority, and shall be delivered to the
Trustee for authentication by it. In case any officer of the Authority who shall have signed any
of the Bonds shall cease to be such officer before the Bonds so signed shall have been
authenticated or delivered by the Trustee or issued by the Authority, such Bonds may
nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and
issue, shall be as binding upon the Authority as though the individual who signed the same had
continued to be such officer of the Authority. Also, any Bond may be signed on behalf of the
Authority by any individual who on the actual date of the execution of such Bond shall be the
proper officer although on the nominal date of such Bond such individual shall not have been
such officer.
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Only such of the Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or
obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the
Trustee shall be conclusive evidence that the Bonds so authenticated have been duly
authenticated and delivered hereunder and are entitled to the benefits of this Indenture.
SECTION 2.07 Temporary Bonds. The Bonds may be issued in temporary form
exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by the
Authority, shall be in fully registered form without coupons and may contain such reference to
any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be
executed by the Authority and authenticated by the Trustee upon the same conditions and in
substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds
it will execute and deliver definitive Bonds as promptly thereafter as practicable, and thereupon
the temporary Bonds may be surrendered, for cancellation, at the Office of the Trustee and the
Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate
principal amount of definitive Bonds of authorized denominations. Until so exchanged, the
temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds
authenticated and delivered hereunder.
SECTION 2.08 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall
become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and
the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so
mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and
destroyed. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or
theft may be submitted to the Trustee and, if such evidence be satisfactory to it and indemnity
satisfactory to it shall be given, the Authority, at the expense of the Owner of such lost,
destroyed or stolen Bond, shall execute, and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen
(or if any such Bond shall have matured or shall have been called for redemption, instead of
issuing a substitute Bond, the Trustee may pay the same without surrender thereof). The Trustee
may require payment by the Owner of a sum not exceeding the actual cost of preparing each new
Bond issued under this Section 2.08 and of the expenses which may be incurred by the City, the
Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section
2.08 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original
additional contractual obligation on the part of the Authority whether or not the Bond so alleged
to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the
benefits of this Indenture with all other Bonds secured by this Indenture.
SECTION 2.09 Cancellation of Bonds. All Bonds properly surrendered to the
Trustee for payment upon maturity or for redemption shall upon payment therefor or redemption
thereof be cancelled immediately as more particularly provided in Section 11.05 hereof.
SECTION 2.10 CUSIP Numbers. "CUSIP" identification numbers shall be
imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by
the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of
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any purchaser to accept delivery of and pay for the Bonds. In addition, failure on the part of the
Authority to use such CUSIP numbers in any notice to Owners shall not constitute an Event of
Default or any violation of the Authority's contract with such Owners and shall not impair the
effectiveness of any such notice.
SECTION 2.11 Book-Entry Bonds.
(a) The Bonds shall be initially issued in the form of a single, separate fully
registered Bond (which may be typewritten) in the full aggregate principal amount for each
maturity of the Bonds, and upon initial issuance, the ownership of such Bonds shall be registered
in the Bond register in the name of Cede & Co., as nominee of DTC, the initial Book-Entry
Depository. Except as provided in the immediately preceding sentence or in subsection (e) of
this Section, all of the Bonds shall be registered in the Bond register in the name of Cede & Co.,
or such other nominee of DTC or any successor Book-Entry Depository or the nominee thereof,
as shall be specified pursuant to the applicable Representation Letter.
(b) With respect to Bonds registered in the Bond register in the name of the Book-
Entry Depository, or its nominee, the Authority shall have no responsibility or obligation to any
Participant or to any person on behalf of which such a Participant holds an interest in the Bonds.
Without limiting the immediately preceding sentence, the Authority shall have no responsibility
or obligation with respect to the accuracy of the records of the Book-Entry Depository, the
nominee of the Book-Entry Depository or any Participant with respect to any ownership interest
in the Bonds, the delivery to any Participant or any other Person, other than a Holder as shown
in the Bond register, of any notice with respect to the Bonds, or the payment to any Participant
or any other person, other than an Owner as shown in the Bond register, of any amount with
respect to principal of or interest on the Bonds. The Authority may treat and consider the person
in whose name each Bond is registered in the Bond register as the Owner and absolute owner of
such Bond for the purpose of payment of principal and interest on such Bond and for all other
purposes whatsoever.
(c) The Trustee shall pay all principal of and interest on the Bonds only to or upon
the order of the respective Owners, as shown in the Bond register on the applicable Record
Date, or their respective attorneys duly authorized in writing, and all such payments shall be
valid and effective to satisfy and discharge fully the obligations with respect to the payment of
principal of and interest on the Bonds under this Indenture and the Bonds to the extent of the
sums so paid. Upon delivery by the Book-Entry Depository to the Authority of written notice to
the effect that the Book-Entry Depository has determined to substitute a new nominee in place of
the incumbent nominee, and subject to the provisions herein with respect to Record Dates, the
word nominee in this Indenture shall refer to such new nominee of the Book-Entry Depository.
(d) In order to qualify the Bonds for the Book-Entry Depository's book-entry system,
the Executive Director or the Treasurer of the Authority is hereby authorized to execute and
deliver on behalf of the Authority to the Book-Entry Depository a Representation Letter
representing such matters as shall be necessary to so qualify the Bonds. The execution and
delivery of the Representation Letter shall not in any way limit the provisions of subsection (b)
of this Section or in any other way impose upon the Authority any obligation whatsoever with
respect to persons having interests in the Bonds other than the Owners as shown in the Bond
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register. In addition to the execution and delivery of the Representation Letter, the officers of the
Authority, and their authorized representatives, each are hereby authorized to take any other
actions, not inconsistent with this Indenture, to qualify the Bonds for each Book-Entry
Depository's book-entry program.
(e) In the event (i) the incumbent Book-Entry Depository determines not to continue
to act as Book-Entry Depository for the Bonds, or (ii) the Authority determines that the
incumbent Book-Entry Depository shall no longer so act, and delivers a written certificate to the
incumbent Book-Entry Depository to that effect, then the Authority will discontinue the book-
entry system for the Bonds with the incumbent Book-Entry Depository. If the Authority
determines to replace the incumbent Book-Entry Depository with another qualified Book-Entry
Depository, the Authority shall prepare or direct the preparation of and execute, and the Trustee
shall authenticate and deliver, a new single, separate fully registered bond (which may be
typewritten) for the aggregate outstanding principal amount for each maturity of the Bonds held
by the incumbent Book-Entry Depository, registered in the name of such successor or substitute
qualified Book-Entry Depository or its nominee, or make such other arrangement acceptable to
the Authority and the successor Book-Entry Depository as are not inconsistent with the terms of
this Indenture. If the Authority fails to identify another qualified successor Book-Entry
Depository to replace the incumbent Book-Entry Depository, then the Bonds shall no longer be
restricted to being registered in the Bond register in the name of the Book-Entry Depository or its
nominee, but shall be registered in whatever name or names the Book-Entry Depository or its
nominee. shall designate. In such event the Authority shall prepare or direct the preparation of
and execute, and the Trustee shall authenticate and deliver to the Owners thereof, such Bonds as
are necessary to carry out the transfers and exchanges provided in this Indenture. All such
Bonds shall be in fully registered form in denominations authorized hereunder.
(f) Notwithstanding any other provision of this Indenture to the contrary, so long as
any Bond is registered in the name of the Book-Entry Depository or its nominee, all notices and
payments with respect to principal of and interest on such Bond shall be made and given,
respectively, as provided in the Representation Letter or as otherwise instructed by the Book-
Entry Depository.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01 Issuance of the Bonds. At any time after the execution of this
Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written
Request of the Authority, deliver Bonds in the aggregate principal amount of
Dollars
SECTION 3.02 Application of Proceeds at Closing. The proceeds received from
the sale of the Bonds (being $ in par amount of Bonds and less
$ in purchaser's discount less $ in original issue discount)
shall be deposited in trust with the Trustee, who shall forthwith deposit such proceeds on the
Closing Date as follows:
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(i) the Trustee shall transfer the amount of $ to the
Escrow Agent for deposit in the Escrow Account representing the prepayment
amount for the 2001 Bonds on , 2010;
(ii) the Trustee shall deposit the amount of $
Costs of Issuance Fund;
in the
(iii) from the Prior Trustee, the amount of $ from
the 2001 Project Fund established under the 2001 Indenture shall be transferred to
the Trustee for deposit in the Project Fund; and
(iv) the Trustee shall deposit the amount of $ to the
Reserve Account.
For record keeping purposes, the Trustee may establish such accounts as may be
necessary to reflect such transfer of proceeds.
SECTION 3.03 Establishment and Application o Costs of Issuance Fund. The
Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs of
Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the
Trustee to pay the Costs of Issuance upon submission of Written Requisitions of the Authority
stating the person to whom payment is to be made, the amount to be paid, the purpose for which
the obligation was incurred and that such payment is a proper charge against said fund. On
2010, or upon the earlier Written Request of the Authority, all amounts
remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Project Fund.
SECTION 3.04 Project Fund. The Trustee shall establish, maintain and hold in
trust a separate fund to be known as the "Project Fund". The Trustee shall disburse moneys in
the Project Fund from time to time upon receipt by the Trustee of a Written Requisition of the
Authority or the City which: (a) states with respect to each disbursement to be made (1) the
requisition number, (ii) the name and address of the person, firm or corporation to whom
payment will be made, (iii) the amount to be disbursed, (iv) that each obligation mentioned
therein is a proper charge against the Project Fund and has not previously been disbursed by the
Trustee from amounts in the Project Fund, (v) that all conditions precedent set forth in the Lease
Agreement with respect to such disbursement have been satisfied, and (vi) that the amount of
such disbursement is to purchase additional property or to improve the Leased Premises and
(b) specifies in reasonable detail the nature of the obligation. Upon the filing with the Trustee of
a Written Certificate of the Authority stating that the construction of any Facilities or the
acquisition of any additional property has been completed or that all Written Requisitions
intended to be filed by the Authority have been filed, the Trustee shall withdraw all amounts then
on deposit in the Project Fund and transfer such amounts to the Bond Fund. Any funds deposited
into the Bond Fund shall cause a corresponding proportionate credit to Lease Payments due from
the City.
Notwithstanding the foregoing provisions of this Section 3.04, upon the occurrence and
continuation of an Event of Default under and as defined in Section 7.01(a) or (b), the Trustee
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shall immediately withdraw all amounts then on deposit in the Project Fund and apply such
amounts in accordance with the provisions of Section 7.03.
SECTION 3.05 Validity o Bonds. The validity of the authorization and issuance
of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken
by the Authority or the Trustee with respect to or in connection with the Lease Agreement. The
recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of
the State shall be conclusive evidence of their validity and of compliance with the provisions of
law in their issuance.
ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01 Terms of Redemption.
(a) Sinking Account Redemption. The Term Bonds are subject to mandatory
redemption, in part by lot, from Sinking Account payments set forth in the following schedule on
April 1, with respect to Term Bonds maturing April 1, , and on April 1, with
respect to Term Bonds maturing April 1, , and on April 1 in each year thereafter to and
including April 1, _ and April 1, , respectively, at a redemption price equal to the
principal amount thereof to be redeemed (without premium), together with interest accrued
thereon to the date fixed for redemption; provided, however, that if some but not all of the Term
Bonds have been redeemed pursuant to subsections (b) or (c) below, the total amount of Sinking
Account payments to be made subsequent to such redemption shall be reduced in an amount
equal to the principal amount of the Term Bonds so redeemed pursuant to this subsection (a) by
reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable)
in integral multiples of $5,000, as shall be designated pursuant to written notice filed by the
Authority with the Trustee.
Term Bonds Maturing April 1,
Mandatory
Sinking Fund
Redemption Date
(April 1)
Principal
Amount
to Be Redeemed
Term Bonds Maturing April 1, 2031
Mandatory Principal
Sinking Fund Amount
Redemption Date to Be Redeemed
(April 1)
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In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the
purchase of Term Bonds at public or private sale, as and when and at such prices (including
brokerage and other charges, but excluding accrued interest, which is payable from the Interest
Account) as may be directed by the Authority prior to the selection of Bonds for redemption,
except that the purchase price (exclusive of accrued interest) may not exceed the redemption
price then applicable to the Term Bonds, as set forth in a Written Request of the Authority.
(b) Optional Redemption. The Bonds maturing on or before April 1, shall not
be subject to redemption prior to their respective stated maturities. The Bonds maturing on or
after April 1, , shall be subject to redemption at the option of the Authority as a whole or in
part, on any date on or after April 1, , from any available source of funds, a redemption
price equal to the principal amount of the Bonds to be redeemed together with accrued interest
thereon to the date fixed for redemption plus a premium, as set forth below:
Redemption Period Redemption Price
(c) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The
Bonds shall also be subject to redemption as a whole or in part on any date, from Net Proceeds
required to be used for such purpose as provided in Section 5.08, at a redemption price equal to
the principal amount thereof plus interest accrued thereon to the date fixed for redemption,
without premium.
SECTION 4.02 Selection of Bonds for Redemption. Except for Sinking Account
Redemption pursuant to Section 4.01(a), whenever provision is made in this Indenture for the
redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from
all Bonds or such given portion thereof not previously called for redemption from such
maturities as shall be set forth in a Written Request of the Authority filed with the Trustee, or in
the absence of such designation of maturities by the Authority, then on a pro rata basis among
maturities, and in any case, by lot within a maturity in any manner which the Trustee in its sole
discretion shall deem appropriate and fair. For purposes of such selection, the Trustee shall treat
each Bond as consisting of separate $5,000 portions and each such portion shall be subject to
redemption as if such portion were a separate Bond.
SECTION 4.03 Notice of Redemption. Notice of redemption shall be mailed by
first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before
any redemption date, to the respective Owners of any Bonds designated for redemption at their
addresses appearing on the Registration Books, and to the Securities Depositories and to one or
more of the Information Services. Each notice of redemption shall state the date of the notice,
the redemption date, the place or places of redemption, whether less than all of the Bonds (or all
Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less than all of the
Bonds of a maturity are to be redeemed, Bond numbers of the Bonds to be redeemed, the
maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in
part only, the respective portions of the principal amount thereof to be redeemed. Each such
notice shall also state that on the redemption date there will become due and payable on each of
said Bonds the redemption price thereof, and that from and after such redemption date interest
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ATTACHMENT 4
thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the
failure to receive any notice nor any defect therein shall affect the proceedings for such
redemption or the cessation of accrual of interest from and after the redemption date. Notice of
redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on
behalf of the Authority.
SECTION 4.04 Partial Redemption of Bonds. Upon surrender of any Bonds
redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver
to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized
denominations equal in aggregate principal amount to the unredeemed portion of the Bonds
surrendered.
SECTION 4.05 E ect of Redemption. Notice of redemption having been duly
given as aforesaid, and moneys for payment of the redemption price of, together with interest
accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for
redemption being held by the Trustee, on the redemption date designated in such notice, the
Bonds (or portions thereof) so called for redemption shall become due and payable, interest on
the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall
cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds
shall have no rights in respect thereof except to receive payment of the redemption price thereof.
All Bonds redeemed pursuant to the provisions of this Article shall be cancelled by the
Trustee upon surrender thereof and destroyed.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF
PRINCIPAL AND INTEREST
SECTION 5.01 Pledge and Assignment; Bond Fund.
(a) Subject only to the provisions of this Indenture permitting the application thereof
for the purposes and on the terms and conditions set forth herein, all of the Revenues and any
other amounts (including proceeds of the sale of the Bonds) held in any fund or account
established pursuant to this Indenture are hereby pledged to secure the payment of the principal
of and interest on the Bonds in accordance with their terms and the provisions of this Indenture.
Said pledge shall constitute a lien on and security interest in such assets and shall attach, be
perfected and be valid and binding from and after the Closing Date, without any physical
delivery thereof or further act.
(b) The Authority hereby transfers in trust, grants a security interest in and assigns to
the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues
and all of the rights of the Authority in the Lease Agreement (other than the rights of the
Authority under Sections 4.8, 7.3 and 8.3 thereof). The Trustee shall be entitled to and shall
collect and receive all of the Revenues, and any Revenues collected or received by the Authority
shall be deemed to be held, and to have been collected or received, by the Authority as the agent
of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall
be entitled to and shall, subject to the provisions of Article VIII, take all steps, actions and
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ATTACHMENT 4
proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce,
either jointly with the Authority or separately, all of the rights of the Authority and all of the
obligations of the City under the Lease Agreement.
SECTION 5.02 Allocation of Revenues. On or before each date on which principal
of or interest on the Bonds becomes due and payable, the Trustee shall transfer from the Bond
Fund and deposit into the following respective accounts (each of which the Trustee shall
establish and maintain within the Bond Fund), the following amounts in the following order of
priority, the requirements of each such account (including the making up of any deficiencies in
any such account resulting from lack of Revenues sufficient to make any earlier required deposit)
at the time of deposit to be satisfied before any transfer is made to any account subsequent in
priority:
(a) The Trustee shall deposit in the Interest Account an amount required to
cause the aggregate amount on deposit in the Interest Account to be at least equal to the
amount of interest becoming due and payable on such date on all Bonds then
Outstanding.
(b) The Trustee shall deposit in the Principal Account an amount required to
cause the aggregate amount on deposit in the Principal Account to equal the principal
amount of the Bonds coming due and payable on such date.
(c) The Trustee shall deposit in the Sinking Account an amount equal to the
aggregate principal amount of the Term Bonds required to be redeemed on such date, if
any, pursuant to Section 4.01(a).
(d) The Trustee shall deposit in the Reserve Account an amount, if any,
required to cause the amount on deposit in the Reserve Account to be equal to the
Reserve Requirement.
SECTION 5.03 Application of Interest Account. All amounts in the Interest
Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on
the Bonds as it shall become due and payable (including accrued interest on any Bonds
purchased or redeemed prior to maturity pursuant to this Indenture).
SECTION 5.04 Application o Principal Account. All amounts in the Principal
Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the
Bonds at their respective maturity dates.
SECTION 5.05 Application of Sinking Account. All moneys on deposit in the
Sinking Account shall be used and withdrawn by the Trustee for the sole purpose of redeeming
or purchasing (in lieu of redemption) Term Bonds pursuant to Section 4.01(a).
SECTION 5.06 implication of Reserve Account.
(a) Generally. All amounts in the Reserve Account shall be used and withdrawn by
the Trustee solely for the purpose of (i) paying principal of or interest on the Bonds, including
the principal amount of any Term Bonds subject to mandatory Sinking Account redemption
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ATTACHMENT 4
pursuant to Section 4.01(a), when due and payable to the extent that moneys deposited in the
Interest Account, Principal Account or Sinking Account are not sufficient for such purpose, and
(ii) making the final payments of principal of and interest on the Bonds. On the date on which
all Bonds shall be retired hereunder or provision made therefor pursuant to Article X, all moneys
then on deposit in the Reserve Account shall be withdrawn by the Trustee and paid to the City as
a refund of overpaid Additional Lease Payments.
If, on any date, moneys on deposit in the Reserve Account, together with amounts then
on deposit in the Bond Fund, are sufficient to pay all Outstanding Bonds, including all principal
thereof and interest thereon, at the Written Request of the Authority the Trustee shall transfer all
amounts then on deposit in the Reserve Account, together with such amounts in the Bond Fund,
to the Redemption Fund to be applied to the redemption of the Bonds in accordance with the
provisions of Section 4.01(b). Any amounts remaining in the Reserve Account upon payment in
full of all Outstanding Bonds, shall be withdrawn by the Trustee and paid to the City as a refund
of overpaid Lease Payments. Any amounts on deposit in the Reserve Account on or before each
Interest Payment Date in excess of the Reserve Requirement shall be transferred to the Bond
Fund. Nothing in this paragraph is intended or shall be construed to authorize or require the
Trustee to draw amounts under the Reserve Account Credit Facility for the uses described in this
paragraph.
(b) Reserve Account Credit Facility. The Reserve Requirement may be satisfied by
crediting to the Reserve Account moneys and/or a Reserve Account Credit Facility which in the
aggregate make funds available in the Reserve Account in an amount equal to the Reserve
Requirement. Upon the deposit with the Trustee of a Reserve Account Credit Facility, the
Trustee shall transfer moneys then on hand in the Reserve Account in excess of the Reserve
Requirement (after giving effect to the Reserve Account Credit Facility) to the Authority to be
applied for any lawful purpose. In the event any such Reserve Account Credit Facility is so
acquired, the Trustee shall draw on it in accordance with its terms when and if moneys are
needed pursuant to the provisions of subsection (a);
The Authority shall notify the Rating Agencies upon the deposit with the Trustee of a
Reserve Account Credit Facility. Such Reserve Account Credit Facility shall have a term
commensurate with the final maturity of the Bonds.
Notwithstanding any other provisions of this Indenture, any amounts invested in
Permitted Investments in the Reserve Account shall (a) be valued at fair market value and
marked to market twice per year and (b) not have a maturity outstanding beyond five years
unless such investment is redeemable at par for payment of debt service on the Bonds.
SECTION 5.07 Application of Redemption Fund. When required the Trustee shall
establish and maintain the Redemption Fund, amounts in which shall be used and withdrawn by
the Trustee solely for the purpose of paying the principal of on the Bonds to be redeemed
pursuant to Sections 4.01(b) or (c); provided, however, that at any time prior to giving notice of
redemption of any such Bonds, the Trustee may apply such amounts to the purchase of Bonds at
public or private sale, as and when and at such prices (including brokerage and other charges, but
excluding accrued interest, which is payable from the Interest Account) as shall be directed
pursuant to a Written Request of the Authority received prior to the selection of Bonds for
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ATTACHMENT 4
redemption, except that the purchase price (exclusive of accrued interest) may not exceed the
redemption price then applicable to the Bonds.
SECTION 5.08 Insurance and Condemnation Fund.
(a) Establishment of Fund. Upon the receipt of any proceeds of insurance or eminent
domain with respect to any portion of the Leased Premises, the Trustee shall establish and
maintain a separate Insurance and Condemnation Fund, to be held and applied as hereinafter set
forth in this Section 5.08.
(b) Application of Insurance Proceeds. Any proceeds of insurance against accident to
or destruction of the Facilities collected by the City in the event of any such accident or
destruction shall be applied in accordance with Section 6.2(a) of the Lease Agreement. The City
shall cause any such proceeds to be paid to the Trustee for deposit in the Insurance and
Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its
determination, within forty-five (45) days following the date of such deposit, to replace, repair,
restore, modify or improve the Facilities, then such proceeds shall be promptly transferred by the
Trustee to the Redemption Fund and applied to the redemption of Bonds pursuant to Section
4.01(c); provided, however, that such redemption will occur only if the fair rental value of the
remaining portion of the Leased Premises is sufficient to allow the City to continue to make
Lease Payments in amounts sufficient to pay debt service on the Bonds that remain Outstanding
after such redemption. Notwithstanding the foregoing sentence, however, in the event of damage
or destruction of the Facilities in full, the proceeds of such insurance shall be used by the City to
rebuild or replace the Facilities if such proceeds are not sufficient, together with other available
funds then held by the Trustee, to redeem all of the Outstanding Bonds. All proceeds deposited
in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be
applied to the prompt replacement, repair, restoration, modification or improvement of the
damaged or destroyed portions of the Facilities by the City, upon receipt of Written Requisitions
of the City as agent for the Authority (i) stating with respect to each payment to be made (A) the
requisition number, (B) the name and address of the person to whom payment is due, (C) the
amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a
proper charge against the Insurance and Condemnation Fund, has not been the basis of any
previous withdrawal; (ii) specifying in reasonable detail the nature of the obligation; and (iii)
accompanied by a bill or a statement of account for such obligation. The "Trustee may
conclusively rely on any such Written Requisitions. Any balance of the proceeds remaining after
such work has been completed as certified by the City as agent for the Authority shall be paid to
the City.
(c) Application of Eminent Domain Proceeds. If all or any part of the Leased
Premises shall be taken by eminent domain proceedings (or sold to a government threatening to
exercise the power of eminent domain) the proceeds therefrom shall be applied in accordance
with Section 6.2(b) of the Lease Agreement. The City shall cause any such proceeds to be paid
to the Trustee for deposit in the Insurance and Condemnation Fund, to be applied and disbursed
by the Trustee as follows:
(i) If the City has not given written notice to the Trustee, within forty-five
(45) days following the date on which such proceeds are deposited with the Trustee, of its
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ATTACHMENT
determination that such proceeds are needed for the replacement of the Leased Pre
or such portion thereof, the Trustee shall transfer such proceeds to the Redemption
to be applied towards the redemption of the Bonds pursuant to Section 4.01(c).
(ii) If the City has given written notice to the Trustee, within forty-five (4 )
days following the date on which such proceeds are deposited with the Trustee, of i s
determination that such proceeds are needed for replacement of the Leased Premises or
such portion thereof, the Trustee shall pay to the City, or to its order, from said procee s
such amounts as the City may expend for such replacement, upon the filing of Written
Requisitions of the City as agent for the Authority in the form and containing the
provisions set forth in subsection (b) of this Section 5.08 and upon which the Trustee may
conclusively rely.
SECTION 5.09 Investments. All moneys in any of the funds or accounts
established with the Trustee pursuant to this Indenture shall. be invested by the Trustee solely in
Permitted Investments which mature not later than the date such moneys are estimated by the
Authority to be required. Such investments shall be directed by the Authority pursuant to a
Written Request of the Authority filed with the Trustee at least two (2) Business Days in advance
of the making of such investments (which Written Request shall certify that the investmen s
constitute Permitted Investments). In the absence of any such directions from the Authority, the
Trustee shall invest any such moneys in Permitted Investments described in clause (4) oft the
definition thereof. Permitted Investments purchased as an investment of moneys in any fu rd
shall be deemed to be part of such fund or account.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the Bond Fund, except that interest or gain
derived from the investment of the amount in the Reserve Account shall be retained therein to
the extent required to maintain the Reserve Requirement. For purposes of acquiring a y
investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee, or
an affiliate, may act as principal or agent in the acquisition or disposition of any investment a d
may impose its customary charges therefor. The Trustee shall incur no liability for losses arisi g
from any investments made pursuant to this Section. 5.09. Permitted Investments that are
registered securities shall be registered in the name of the Trustee.
The Authority covenants that all investments of amounts deposited in any fund or
account created-by or pursuant to this Indenture, or otherwise containing proceeds of the Bonds,
shall be acquired and disposed of at the Fair Market Value thereof.
SECTION 5.10 Valuation and Disposition of Investments. For the purpose of
determining the amount in any fund or account, all Permitted Investments credited to such fund
or account shall be valued at the Fair Market Value thereof; provided, however, that investments
in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable
provisions of the Tax Code and investments in the Reserve Account shall be valued at their
present value (within the meaning of Section 148 of the Tax Code), consisting generally oft the
cost thereof. The Trustee shall have no duty in connection with the determination of Fair Market
Value other than to follow the investment directions of the Authority.
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ATTACHMENT
ARTICLE VI
PARTICULAR COVENANTS
SECTION 6.01 Punctual Payment. The Authority shall punctually pay or cause
be paid the principal of and interest and premium (if any) on all the Bonds in strict conformi
with the terms of the Bonds and of this Indenture, according to the true intent and meanie
thereof, but only out of Revenues and other assets pledged for such payment as provided in &
Indenture.
SECTION 6.02 Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right
of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and su h
issuance shall not be deemed to constitute an extension of maturity of the Bonds.
SECTION 6.03 Against Encumbrances. The Authority shall not create, or 1
the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and
assets pledged or assigned under this Indenture while any of the Bonds are Outstanding,
the pledge and assignment created by this Indenture. Subject to this limitation, the Aut
expressly reserves the right to enter into one or more other indentures for any of its cor
purposes, and reserves the right to issue other obligations for such purposes.
SECTION 6.04 Power to Issue Bonds and Make Pledge and Assi rtg ment. TI
Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indentu
and to pledge and assign the Revenues and other assets purported to be pledged and assigne
respectively, under this Indenture in the manner and to the extent provided in this Indenture. Tl
Bonds and the provisions of this Indenture are and will be the legal, valid and binding speci
obligations of the Authority in accordance with their terms, and the Authority and the Trust
shall at all times, subject to the provisions of Article VIII and to the extent permitted by lal
defend, preserve and protect said pledge and assignment of Revenues and other assets and all tl
rights of the Bond Owners under this Indenture against all claims and demands of all perso
whomsoever.
SECTION 6.05 Accounting Records and Financial Statements. The Trustee shall
at all times keep, or cause to be kept, proper books of record and account, prepared in accordance
with corporate trust industry standards, in which complete and accurate entries shall. be made of
all transactions made by it relating to the proceeds of Bonds, the Revenues, the Lease Agreement
and all funds and accounts established pursuant to this Indenture. Such books of record a d
account shall be available for inspection by the Authority, the City, during business hours, up n
reasonable notice, and under reasonable circumstances. The Trustee shall deliver a month y
account of the funds and accounts hereunder to the Authority, provided that the Trustee shall n t
28
ATTACHMENT 4
be obligated to deliver any accounting of any fund or account that (a) has a balance of zero and
(b) has not had any activity since the last reporting date.
SECTION 6.06 Additional Obligations. The Authority may issue additional bonds,
notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in
whole or in part pursuant to Section 9.01(b)(v) hereof, for the purpose of financing any
construction of a new city hall or for any other municipal purpose, so long as no Event of Default
hereunder has occurred and is continuing and provided that the conditions of Section 8.3(e) of
the Lease Agreement have been satisfied.
SECTION 6.07 Tax Covenants.
(a) Private Activity Bond Limitation. The Authority shall assure that the proceeds of
the Bonds are not so used as to cause the Bonds to satisfy the private business tests of Section
141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax. Code.
(b) Federal Guarantee Prohibition. The Authority shall not take any action or permit
or suffer any action to be taken if the result of the same would be to cause any of the Bonds to be
"federally guaranteed" within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the
Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action
had been reasonably expected to have been taken, or had been deliberately and intentionally
taken, on the Closing Date would have caused the Bonds to be "arbitrage bonds" within the
meaning of Section 148 of the Tax Code.
(d) Maintenance of Tax-Exemption. The Authority shall take all actions necessary to
assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds
to the same extent as such interest is permitted to be excluded from gross income under the Tax
Code as in effect on the Closing Date.
(e) Rebate of Excess Investment Earnings. The Authority shall calculate or cause to
be calculated all amounts of excess investment earnings with respect to the Bonds which are
required to be rebated to the United States of America pursuant to Section 148(f) of the Tax
Code, at the times and in the manner required pursuant to the Tax Code. The Authority shall pay
or cause to be paid when due an amount equal to excess investment earnings to the United States
of America in such amounts, at such times and in such manner as may be required pursuant to
the Tax Code, such payments to be made from amounts provided by the City for such purpose
pursuant to Section 5.11 of the Lease Agreement. The Authority shall keep or cause to be kept,
and retain or cause to be retained for a period of six (6) years following the retirement of the
Bonds, records of the determinations made pursuant to this subsection (e). The Trustee shall
have no duty to monitor the compliance by the Authority with any of the covenants contained in
this subsection (e).
SECTION 6.08 Lease Agreement. Subject to the provisions of Article VIII hereof,
the Trustee shall promptly collect all amounts due from the City pursuant to the Lease
Agreement. Subject to the provisions of Article VIII, the Trustee shall enforce, and take all
steps, actions and proceedings which the Trustee determines to be reasonably necessary for the
29
ATTAC
enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement
all of the obligations of the City under the Lease Agreement.
SECTION 6.09 Waiver of Laws. The Authority shall not at any time insist upon
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay
extension law now or at any time hereafter in force that may affect the covenants and agreemei
contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or la'
is hereby expressly waived by the Authority to the extent permitted by law.
SECTION 6.10 Further Assurances. The Authority will make, execute and del
any and all such further indentures, instruments and assurances as may be reasonably neces:
or proper to carry out the intention or to facilitate the performance of this Indenture and for
better assuring and confirming the rights and benefits provided in this Indenture to the B
Owners.
4
SECTION 6.11 Leased Premises. If an event of abatement occurs pursuant to
Section 6.3 of the Lease Agreement, the City shall use its best efforts to the extent penmissi le
under the laws of the State of California to make all lease payments in excess of the amount of
rental interruption insurance, if necessary, in order to ensure the reconstruction, repair,
restoration, modification or improvement of the Leased Premises.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01 Events o fefault. The following events shall be Events of
hereunder:
(a) Default in the due and punctual payment of the principal of any
when and as the same shall become due and payable, whether at maturity as
expressed, by proceedings for redemption, by acceleration, or otherwise.
(b) Default in the due and punctual payment of any installment of interest
any Bonds when and as the same shall become due and payable.
(c) Default by the Authority in the observance of any of the other covenants,
agreements or conditions on its part in this Indenture or in the Bonds contained, ifs such
default shall have continued for a period of thirty (30) days after written notice thereof,
specifying such default and requiring the same to be remedied, shall have been given to
the Authority by the Trustee; provided, however, that if in the reasonable opinion of he
Authority the default stated in the notice can be corrected, but not within such thirty ( 0)
day period, such default shall not constitute an Event of Default hereunder if he
Authority shall commence to cure such default within such sixty (60) day period and
thereafter diligently and in good faith cure such failure in a reasonable period of time.
(d) The occurrence and continuation of an event of default under and
defined in the Lease Agreement.
as
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SECTION 7.02 No Acceleration Upon Event of Default. If any Event of Default
shall occur there shall not be any right on the part of the Trustee or the Bondholders to declare
the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and
payable immediately.
SECTION 7.03 Application of Revenues and Other Funds After Default.
Notwithstanding anything to the contrary contained herein, if an Event of Default shall occur and
be continuing, all Revenues and any other funds then held or thereafter received by the Trustee
under any of the provisions of this Indenture shall be applied by the Trustee as follows and in the
following order:
(a) To the payment of any expenses necessary in the opinion of the Trustee to
protect the interests of the Owners of the Bonds and payment of reasonable fees, charges
and expenses of the Trustee (including reasonable fees and disbursements of its counsel)
incurred in and about the performance of its powers and duties under this Indenture;
(b) To the payment of the principal of and interest then due on the Bonds
(upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of
the payment if only partially paid, or surrender thereof if fully paid) in accordance with
the provisions of this Indenture, as follows:
First. To the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installments, and, if the
amount available shall not be sufficient to pay in full any installment or
installments maturing on the same date, then to the payment thereof ratably,
according to the amounts due thereon, to the persons entitled thereto, without any
discrimination or preference; and
Second. To the payment to the persons entitled thereto of the unpaid
principal of any Bonds which shall have become due, whether at maturity or by
acceleration or redemption, with interest on the overdue principal at the rate borne
by the respective Bonds (to the extent permitted by law), and, if the amount
available shall not be sufficient to pay in full all the Bonds, together with such
interest, then to the payment thereof ratably, according to the amounts of principal
due on such date to the persons entitled thereto, without any discrimination or
preference.
SECTION 7.04 Trustee to Represent Bond Owners. The Trustee is hereby
irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding
the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and
lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting
on their behalf such rights and remedies as may be available to such Owners under the provisions
of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and
continuance of an Event of Default or other occasion giving rise to a right in the Trustee to
represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the
Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon
being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its
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rights or the rights of such Owners by such appropriate action, suit, mandamus or other
proceedings as it shall deem most effectual to protect and enforce any such right, at law or in
equity, either for the specific performance of any covenant or agreement contained herein, or in
aid of the execution of any power herein granted, or for the enforcement of any other appropriate
legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds, this
Indenture or any other law. Upon instituting such proceeding, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver of the Revenues and other assets pledged under
this Indenture, pending such proceedings. All rights of action under this Indenture or the Bonds
or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit
and protection of all the Owners of such Bonds, subject to the provisions of this Indenture.
Notwithstanding any other provision of this Indenture in determining whether the rights
of the Bondholders will be adversely affected by any action taken pursuant to the terms and
provisions of this Indenture, the Trustee shall consider the effect on the Bondholders as if there
were no Insurance Policy.
SECTION 7.05 Bond Owners' Direction of Proceedings. Anything in this
Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal
amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent
instruments in writing executed and delivered to the Trustee, and upon indemnification of the
Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings
taken by the Trustee hereunder, provided that such direction shall not be otherwise than in
accordance with law and the provisions of this Indenture, and that the Trustee shall have the right
to decline to follow any such direction which in the opinion of the Trustee would expose it to
liability.
SECTION 7.06 Limitation on Bond Owners' Right to Sue. Notwithstanding any
other provision hereof, no Owner of any Bonds shall have the right to institute any suit, action or
proceeding at law or in equity, for the protection or enforcement of any right or remedy under
this Indenture, the Lease Agreement or any other applicable law with respect to such Bonds,
unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an
Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then
Outstanding shall have made written request upon the Trustee to exercise the powers
hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such
Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have
failed to comply with such request for a period of sixty (60) days after such written request shall
have been received by, and said tender of indemnity shall have been made to, the Trustee; and
(e) no direction inconsistent with such written request shall have been given to the Trustee
during such sixty (60) day period by the Owners of a majority in aggregate principal amount of
the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder or under law; it being understood and intended that no one or more Owners of
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Bonds shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce
any right under the Bonds, this Indenture, the Lease Agreement or other applicable law with
respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in
equity to enforce any such right shall be instituted, had and maintained in the manner herein
provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to
the provisions of this Indenture.
SECTION 7.07 Absolute Obli attiion of Authority. Nothing in Section 7.06 or in
any other provision of this Indenture or in the Bonds contained shall affect or impair the
obligation of the Authority, which is absolute and unconditional, to pay the principal of and
interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their
respective dates of maturity, or upon call for redemption, as herein provided, but only out of the
Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners,
which is also absolute and unconditional, to enforce such payment by virtue of the contract
embodied in the Bonds.
SECTION 7.08 Termination of Proceedings. In case any proceedings taken by the
Trustee or any one or more Bond Owners on account of any Event of Default shall have been
discontinued or abandoned for any reason or shall have been determined adversely to the Trustee
or the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners,
subject to any determination in such proceedings, shall be restored to their former positions and
rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the
Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had
been taken.
SECTION 7.09 Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other
remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be
cumulative and in addition to any other remedy given hereunder or now or hereafter existing at
law or in equity or otherwise.
SECTION 7.10 No Waiver of DeLault. No delay or omission of the Trustee or of
any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event
of Default shall impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by this
Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and
as often as may be deemed expedient.
ARTICLE VIII
THE TRUSTEE
SECTION 8.01 Duties Immunities and Liabilities o Trustee.
(a) The Trustee shall, prior to an Event of Default, and after the curing of all Events
of Default which may have occurred, perform such duties and only such duties as are expressly
and specifically set forth in this Indenture and no implied duties or covenants shall be read into
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this Indenture against the Trustee. The Trustee shall, during the existence of any Event of
Default (which has not been cured), exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) The Authority may remove the Trustee at any time unless an Event of Default
shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any
time requested to do so by the Owners of not less than a majority in aggregate principal amount
of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the
Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01, or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or its property shall be appointed, or any public officer shall take control or charge of the
Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
in each case by giving written notice of such removal to the Trustee and the City and thereupon
shall appoint a successor Trustee by an instrument in writing. Any such removal shall be made
upon at least thirty (30) days' prior written notice to the Trustee. Upon giving such written
notice of removal, the Authority shall promptly appoint a successor Trustee by an instrument in
writing.
(c) The Trustee may at any time resign by giving written notice of such resignation to
the Authority, to the City, and by giving the Bond Owners notice of such resignation by mail at
the addresses shown on the Registration Books. Upon receiving such notice of resignation, with
the prior written consent of the Authority shall promptly appoint a successor Trustee by an
instrument in writing.
(d) Any removal or resignation of the Trustee and appointment of a successor Trustee
shall become effective upon acceptance of appointment by the successor Trustee; provided,
however, that no removal resignation or termination of the Trustee shall take effect until a
successor shall be appointed. If no successor Trustee shall have been appointed and have
accepted appointment within forty-five (45) days of giving notice of removal or notice of
resignation as aforesaid, the Authority shall, and the Trustee may, petition any court of
competent jurisdiction for the appointment of a successor Trustee, and such court may
thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any
successor Trustee appointed under this Indenture, shall signify its acceptance of such
appointment by executing and delivering to the Authority and to its predecessor Trustee a written
acceptance thereof, and thereupon such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts,
duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee
herein; but, nevertheless at the Written Request of the Authority or the request of the successor
Trustee, such predecessor Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be required for
more fully and certainly vesting in and confirming to such successor Trustee all the right, title
and interest of such predecessor Trustee in and to any property held by it under this Indenture
and shall pay over, transfer, assign and deliver to the successor Trustee any money or other
property subject to the trusts and conditions herein set forth. Upon request of the successor
Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably
required for more fully and certainly vesting in and confirming to such successor Trustee all such
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moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance
appointment by a successor Trustee as provided in this subsection, the Authority shall mail
cause the successor Trustee to mail a notice of the succession of such Trustee to the tru
hereunder to the Bond Owners at the addresses shown on the Registration Books. If
Authority fails to mail such notice within fifteen (15) days after acceptance of appointment
the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expel
of the Authority.
(e) Any Trustee appointed under this Indenture shall be a corporation or association
organized and doing business under the laws of any state or the United States of America or the
District of Columbia, authorized under such laws to exercise corporate trust powers, which shall
have (or, in the case of a corporation included in a bank holding company system, the related
bank holding company shall have) a combined capital and surplus of at least Seventy-Five
Million Dollars ($75,000,000), and subject to supervision or examination by federal or State
agency, so long as any Bonds are Outstanding. If such corporation publishes a report of
condition at least annually pursuant to law or to the requirements of any supervising or
examining agency above referred to then for the purpose of this subsection (e), the combin d
capital and surplus of such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall
resign immediately in the manner and with the effect specified in this Section.
SECTION 8.02 Merger or Consolidation. Any bank or trust company into whi
the Trustee may be merged or converted or with which it may be consolidated or any bank
trust company resulting from any merger, conversion or consolidation to which it shall be a pai
or any bank or trust company to which the Trustee may sell or transfer all or substantially all
its corporate trust business, provided such bank or trust company shall be eligible unc
subsection (e) of Section 8.01 shall be the successor to such Trustee, without the execution
filing of any paper or any further act, anything herein to the contrary notwithstanding.
SECTION 8.03 Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall not be taken
statements of the Authority, and the Trustee shall not assume responsibility for the correctness
the same, or make any representations as to the validity or sufficiency of this Indenture, t
Bonds or the Lease Agreement, nor shall the Trustee incur any responsibility in respect there,
other than as expressly stated herein in connection with the respective duties or obligatic
herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however,
responsible for its representations contained in its certificate of authentication on the Bonds. T
Trustee shall not be liable in connection with the performance of its duties hereunder, except
its own negligence. The Trustee may become the Owner of Bonds with the same rights it woe
have if it were not Trustee, and, to the extent permitted by law, may act as depository for a
permit any of its officers or directors to act as a member of, or in any other capacity with respi
to, any committee formed to protect the rights of Bond Owners, whether or not such commib
shall represent the Owners of a majority in principal amount of the Bonds then Outstanding.
f
or
as
of
Id
ee
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(b) The Trustee shall not be liable for any error of judgment made in good faith by a
responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts.
(c) The Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in good faith in accordance with the direction of the Owners of not less than a
majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time,
method and place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this Indenture.
(d) The Trustee shall not. be liable for any action taken by it in good faith and
believed by it to be authorized or within the discretion or rights or powers conferred upon it by
this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder, or any other event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder unless and until it shall have actual knowledge
thereof, or shall have received written notice thereof, at its Office. Except as otherwise expressly
provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or
observance by the Authority or the City of any of the terms, conditions, covenants or agreements
herein, under the Lease Agreement or of any of the documents executed in connection with the
Bonds, or as to the existence of an Event of Default or an event which would, with the giving of
notice, the passage of time, or both, constitute an Event of Default. The Trustee shall not be
responsible for the validity, effectiveness or priority of any collateral given to or held by it.
Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or
inquire as to the performance or observance by the City and the Authority of the terms,
conditions, covenants or agreements set forth in the Lease Agreement, other than the covenants
of the City to make Additional Lease Payments to the Trustee when due and to file with the
Trustee, when due, such reports and certifications as the City is required to file with the Trustee
thereunder.
(f) No provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it is not assured to its satisfaction that the
repayment of such funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(g) The Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.
(h) The Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of Owners pursuant to this Indenture,
unless such Owners shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with such request or
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direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be
construed to impose a duty to exercise such power, right or remedy.
(i) Whether or not therein expressly so provided, every provision of this Indenture
and the Lease Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of Section 8.01(a), this Section 8.03
and Section 8.04 hereof.
0) The Trustee shall not be concerned with or accountable to anyone for the
subsequent use or application of any moneys which shall be released or withdrawn in accordance
with the provisions hereof.
(k) The Trustee makes no representation or warranty, expressed or implied as to the
title, value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose for the use
contemplated by the Authority or the City of the Leased Premises. In no event shall the Trustee
be liable for incidental, indirect, special or consequential damages in connection with or arising
from the Lease Agreement or this Indenture for the existence, furnishing or use of the Leased
Premises.
(1) The Trustee may establish such funds and accounts hereunder as it deems
necessary or appropriate to perform its obligations hereunder.
SECTION 8.04 Right to Rely on Documents. The Trustee shall be protected in
acting upon any notice, resolution, request, requisition, consent, order, certificate, report,
opinion, bonds or other paper or document believed by them to be genuine and to have been
signed or presented by the proper party or parties. The Trustee may consult with counsel, who
may be counsel of or to the Authority, with regard to legal questions, and the opinion of such
counsel shall be full and complete authorization and protection in respect of any action taken or
suffered by it hereunder in good faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books as
the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any
notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established by a Written
Certificate, Written Request or Written Requisition of the Authority or the City, and such
Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee
for any action taken or suffered in good faith under the provisions of this Indenture in reliance
upon such Written Certificate, Written Request or Written Requisition, but in its discretion the
Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional
evidence as to it may deem reasonable.
SECTION 8.05 Preservation and Inspection of Documents. All documents
received by the Trustee under the provisions of this Indenture shall be retained in their respective
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possession and shall be subject at all reasonable times to the inspection of the Authority, the City
and any Bond Owner, and their agents and representatives duly authorized in writing, at
reasonable hours and under reasonable conditions.
SECTION 8.06 Compensation and Indemnification. The Authority shall pay to the
Trustee (solely from Miscellaneous Rent) from time to time the compensation for all services
rendered under this Indenture and also all reasonable expenses and disbursements, incurred in
and about the performance of its powers and duties under this Indenture.
The Authority shall indemnify, defend and hold harmless the Trustee and its officers,
directors, agents and employees, against any loss, liability or expense incurred without
negligence or willful misconduct on its part, arising out of or in connection with the acceptance
or administration of this trust, including costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of its powers hereunder. As
security for the performance of the obligations of the Authority under this Section 8.06 and the
obligation of the City to pay Miscellaneous Rent to the Trustee, the Trustee shall have a lien
prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of or interest on particular Bonds.
The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall
survive the discharge of the Bonds and this Indenture.
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
SECTION 9.01 Amendments Permitted.
(a) This Indenture and the rights and obligations of the Authority and of the Owners
of the Bonds and of the Trustee may be modified or amended from time to time and at any time
by an indenture or indentures supplemental thereto, which the Authority and the Trustee may
enter into when the written consents of the Owners of a majority in aggregate principal amount
of all Bonds then Outstanding, shall have been filed with the Trustee. No such modification or
amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal
thereof or extend the time of payment, or change the method of computing the rate of interest
thereon, or extend the time of payment of interest thereon, without the consent of t11e Owner of
each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the
Owners of which is required to effect any such modification or amendment, or permit the
creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on
a parity with the lien created by this Indenture except as permitted herein, or deprive; the Owners
of the Bonds of the lien created by this Indenture on such Revenues and other assets (except as
expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then
Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the
particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall
approve the substance thereof.
(b) This Indenture and the rights and obligations of the Authority, of the Trustee and
the Owners of the Bonds may also be modified or amended from time to time and at any time by
a Supplemental Indenture, which the Authority and the Trustee may enter into without the
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consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the
provisions of such Supplemental Indenture shall not materially adversely affect the interests of
the Owners of the Bonds, including, without limitation, for any one or more of the following
purposes:
(i) to add to the covenants and agreements of the Authority in this Indenture
contained other covenants and agreements thereafter to be observed, to pledge or assign
additional security for the Bonds (or any portion thereof), or to surrender any right or
power herein reserved to or conferred upon the Authority;
(ii) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained
in this Indenture, or in regard to matters or questions arising under this Indenture, as the
Authority may deem necessary or desirable, provided that such modification or
amendment does not materially adversely affect the interests of the Bond Owners, in the
opinion of Bond Counsel filed with the Trustee;
(iii) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any
similar federal statute hereafter in effect, and to add such other terms, conditions and
provisions as may be permitted by said act or similar federal statute;
(iv) to modify, amend or supplement this Indenture in such manner as to cause
interest on the Bonds to remain excludable from gross income under the Tax Code; or
(v) to facilitate the issuance of additional bonds of the Authority secured by
Lease Payments of the City pursuant to Section 8.3(e) of the Lease Agreement.
(c) The Trustee may in its discretion, but shall not be obligated to, enter into any such
Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which
materially adversely affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
(d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there
shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such
Supplemental Indenture has been adopted in compliance with the requirements of this Indenture
and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect
the exclusion from gross income for purposes of federal income taxes of interest on the Bonds.
SECTION 9.02 Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture pursuant to this Article IX, this Indenture shall be deemed to be
modified and amended in accordance therewith, and the respective rights, duties and obligations
under this Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
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SECTION 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds
delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if
the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved
by the Authority and the Trustee as to any modification or amendment provided for in such
Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding
at the time of such execution and presentation of his Bonds for the purpose at the Office of the
Trustee or at such additional offices as the Trustee may select and designate for that purpose, a
suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide,
new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any
modification or amendment contained in such Supplemental Indenture, shall be prepared and
executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of
any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any
Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in
equal aggregate principal amount of the same series and maturity.
SECTION 9.04 Amendment of Particular Bonds. The provisions of this Article IX
shall not prevent, any Bond Owner from accepting any amendment as to the particular Bonds
held by him.
ARTICLE X
DEFEASANCE
SECTION 10.01 Discharge of Indenture. Any or all of the Outstanding Bonds may
be paid by the Authority in any of the following ways, provided that the Authority also pays or
causes to be paid any other sums payable hereunder by the Authority:
(a) by paying or causing to be paid the principal of and interest and premium
(if any) on such Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, at or before maturity, money or
securities in the necessary amount (as provided in Section 10.03) to pay or redeem such
Bonds; or
(c) by delivering to the Trustee, for cancellation by it, all of such Bonds.
If the Authority shall also pay or cause to be paid all other sums payable hereunder by the
Authority, then and in that case, at the election of the Authority (evidenced by a Written
Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to
discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds
shall not have been surrendered for payment, this Indenture and the pledge of Revenues and
other assets made under this Indenture with respect to such Bonds and all covenants, agreements
and other obligations of the Authority under this Indenture with respect to such Bonds shall
cease, terminate, become void and be completely discharged and satisfied. In such event, upon
the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all
such instruments as may be necessary or desirable to evidence such discharge and satisfaction,
and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or securities or
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other property held by it pursuant to this Indenture which are not required for the payment or
redemption of any of such Bonds not theretofore surrendered for such payment or redemption.
SECTION 10.02 Discharge of Liability on Bonds. Upon the deposit with the
Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as
provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to
the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be
redeemed prior to maturity, notice of such redemption shall have been given as provided in
Article IV or provision satisfactory to the Trustee shall have been made for the giving of such
notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be
completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of
such money or securities deposited with the Trustee as aforesaid for their payment, subject,
however, to the provisions of Section 10.04.
The Authority may at any time surrender to the Trustee for cancellation by it any Bonds
previously issued and delivered, which the Authority may have acquired in any manner
whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid
and retired.
SECTION 10.03 Deposit o Money or Securities with Trustee. Whenever in this
Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee
money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held may include money or securities held by the Trustee in the
funds and accounts established pursuant to this Indenture and shall be:
(a) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in
the case of Bonds which are to be redeemed prior to maturity and in respect of which
notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice, the amount
to be deposited or held shall be the principal amount of such Bonds and all unpaid
interest thereon to the redemption date; or
(b) non-callable Federal Securities, the principal of and interest on which
when due will, in the written opinion of an Independent Accountant filed with the City,
the Authority and the Trustee, provide money sufficient to pay the principal of and
interest and premium (if any) on the Bonds to be paid or redeemed, as such principal,
interest and premium become due, provided that in the case of Bonds which are to be
redeemed prior to the maturity thereof, notice of such redemption shall have been given
as provided in Article IV or provision satisfactory to the Trustee shall have been made for
the giving of such notice;
provided, in each case, that (i) the Trustee shall have been irrevocably instructed (b, the terms of
this Indenture or by Written Request of the Authority) to apply such money to the payment of
such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority
shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds
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have been discharged in accordance with this Indenture (which opinion may rely upon and
assume the accuracy of the Independent Accountant's opinion referred to above).
SECTION 10.04 Unclaimed Funds. Notwithstanding any provisions of this
Indenture, and subject to applicable provisions of State law, any moneys held by the Trustee in
trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for
two (2) years after the principal of such Bonds has become due and payable (whether at maturity
or upon call for redemption or by acceleration as provided in this Indenture), if such moneys
were so held at such date, or two (2) years after the date of deposit of such moneys if deposited
after said date when such Bonds became due and payable, shall be repaid to the Authority free
from the trusts created by this Indenture upon receipt of a Written Request of the Authority, and
all liability of the Trustee with respect to such moneys shall thereupon cease; provided/ however,
that before the repayment of such moneys to the Authority as aforesaid, the Trustee may (at the
cost of the City) first mail to the Owners of Bonds which have not yet been paid, at tl~e addresses
shown on the Registration Books, a notice, in such form as may be deemed appropriate by the
Trustee with respect to the Bonds so payable and not presented and with respect to the provisions
relating to the repayment to the Authority of the moneys held for the payment thereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Liability o Authority Limited to Revenues. Notwithstanding
anything in this Indenture or in the Bonds contained, the Authority shall not be required to
advance any moneys derived from any source other than the Revenues and other assets pledged
under this Indenture for any of the purposes in this Indenture mentioned, whether for the
payment of the principal of or interest on the Bonds or for any other purpose of this Indenture.
Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes
hereof any funds of the Authority which may be made available to it for such purposes.
SECTION 11.02 Limitation of Ris,,hts to Parties and Bond Owners. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any
person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or
equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition
or provision therein or herein contained; and all such covenants, conditions and provisions are
and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City
and the Owners of the Bonds.
SECTION 11.03 Funds and Accounts. Any fund or account required by this
Indenture to be established and maintained by the Trustee may be established and maintained in
the accounting records of the Trustee, either as a fund or an account, and may, for the purposes
of such records, any audits thereof and any reports or statements with respect thereto, be treated
either as a fund or as an account; but all such records with respect to all such funds and accounts
shall at all times be maintained in accordance with corporate trust industry standards to the
extent practicable, and with due regard for the requirements of Section 6.05 and for the
protection of the security of the Bonds and the rights of every Owner thereof.
42
ATTACHMENT 4
SECTION 11.04 Waiver of Notice; Requirement of Mailed Notice. Whenever in
this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may
be waived in writing by the person entitled to receive such notice and in any such case the giving
or receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. Whenever in this Indenture any notice shall be required to be given
by mail, such requirement shall be satisfied by the deposit of such notice in the United States
mail, postage prepaid, by first class mail.
SECTION 11.05 Destruction o Bonds. Whenever in this Indenture provision is
made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the
Trustee may, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by
law, and deliver a certificate of such destruction to the Authority upon its request.
SECTION 11.06 Severability of Invalid Provisions. If any one or more of the
provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid,
illegal or unenforceable in any respect, then such provision or provisions shall be deemed
severable from the remaining provisions contained in this Indenture and such invalidity,
illegality or unenforceability shall not affect any other provision of this Indenture, and this
Indenture shall be construed as if such invalid or illegal or unenforceable provision had never
been contained herein. The Authority hereby declares that it would have entered into this
Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and
authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or
more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal,
invalid or unenforceable.
SECTION 11.07 Notices. All written notices to be given under this Indenture shall
be given by first class mail or personal delivery to the party entitled thereto at its address set
forth below, or at such address as the party may provide to the other party in writing from time to
time. Notice shall be effective either (a) upon transmission by facsimile transmission or other
form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid,
or (c) otherwise, upon actual receipt. The Authority, the City or the Trustee may, by written
notice to the other parties, from time to time modify the address or number to which
communications are to be given hereunder.
If to the Authority: Encinitas Public Financing Authority
505 South Vulcan Avenue
Encinitas, CA 92024-3633
Attention: Executive Director
If to the City: City of Encinitas
505 South Vulcan Avenue
Encinitas, CA 92024-3633
Attention: City Manager
43
ATTACHMENT 4
If to the Trustee: Union Bank, N.A.
120 S. San Pedro Street, Suite 400
Los Angeles, CA 90012
Fax: (213) 972-5694
Attn: Corporate Trust Department
SECTION 11.08 Evidence of Rights of Bond Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bond Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable by delivery,
shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee and the Authority if made in the manner provided in this Section 11.07.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of
any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying
that the person signing such request, consent or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution duly sworn to before such
notary public or other officer.
The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall bind
every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor
or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the
Authority in accordance therewith or reliance thereon.
SECTION 11.09 Disqualified Bonds. In determining whether the Owners of the
requisite aggregate principal amount of Bonds have concurred in any demand, request, direction,
consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or
held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or
by any person directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Authority or the City or any other obligor on the Bonds, shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds
so owned which have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authority or
the City or any other obligor on the Bonds. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 11.10 Money Held for Particular Bonds. The money held by the Trustee
for the payment of the interest or principal due on any date with respect to particular Bonds (or
portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and
pending such payment, be set aside on its books and held in trust by it for the Owners of the
44
ATTACHMENT 4
Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without
any liability for interest thereon.
SECTION 11.11 Waiver of Personal Liability. No member, officer, agent or
employee of the Authority shall be individually or personally liable for the payment of the
principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof; but nothing herein contained shall relieve any
such member, officer, agent or employee from the performance of any official duty provided by
law or by this Indenture.
SECTION 11.12 Benefit of Parties. Nothing in this Indenture expressed or implied
is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other
than the Authority, the Trustee, and the registered Owners of the Bonds, any right, remedy or
claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, and
all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf
of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee and the
registered Owners of the Bonds.
SECTION 11.13 Successor Is Deemed Included in All References to Predecessor.
Whenever in this Indenture either the Authority, the Trustee is named or referred to, such
reference shall be deemed to include the successors or assigns thereof, and all the covenants and
agreements in this Indenture contained by or on behalf of the Authority, the Trustee shall bind
and inure to the benefit of the respective successors and assigns thereof whether so expressed or
not.
SECTION 11.14 Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original; and all such counterparts, or as many of them as the Authority and the
Trustee shall preserve undestroyed, shall together constitute but one and the same instrument.
SECTION 11.15 Governinz Law. This Indenture shall be governed by and
construed in accordance with the laws of the State.
45
ATTACHMENT 4
IN WITNESS WHEREOF, the ENCINITAS PUBLIC FINANCING AUTHORITY has
caused this Indenture to be signed in its name by its Chairperson and attested to by its Secretary,
and Union Bank, N.A., in token of its acceptance of the trusts created hereunder, has caused this
Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the
day and year first above written.
ENCINITAS PUBLIC FINANCING AUTHORITY
By
Chairperson
Attest:
By
Secretary
UNION BANK, N.A.,
as Trustee
By
Authorized Officer
46
ATTACHMENT 4
EXHIBIT A
FORM OF BOND
No. R-
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REVENUE REFUNDING BONDS, SERIES A
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP:
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
The ENCINITAS PUBLIC FINANCING AUTHORITY, a joint powers authority duly
organized and existing under and by virtue of the laws of the State of California (the
"Authority"), for value received, hereby promises to pay to the Registered Owner specified
above or registered assigns (the "Registered Owner"), on the Maturity Date specified above
(subject to any right of prior redemption hereinafter provided for), the Principal Amount
specified above, in lawful money of the United States of America, and to pay interest thereon in
like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the
date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest
Payment Date and after the close of business on the fifteenth day of the month preceding such
interest payment date, in which event it shall bear interest from such Interest Payment Date, or
(ii) this Bond is authenticated on or before [September 15, 20101 in which event it shall bear
interest from the Dated Date; provided, however, that if at the time of authentication of this
Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment
Date to which interest has previously been paid or made available for payment on this Bond, at
the Interest Rate per annum specified above, payable semiannually on each April 1 and
October 1, commencing [October 1, 20101 (collectively, the "Interest Payment Dates"),
calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof
and premium, if any, upon early redemption hereof are payable upon presentation and surrender
hereof at the corporate trust office (the "Office") of Union Bank, N.A., as trustee (the "Trustee"),
in Los Angeles, California. Interest hereon is payable by check of the Trustee mailed to the
Registered Owner hereof at the Registered Owner's address as it appears on the registration
books of the Trustee as of the close of business on the fifteenth day of the month preceding each
Interest Payment Date (a "Record Date"), or, upon written request filed with the Trustee (at least
five days prior) to such Record Date by a Registered Owner of at least $1,000,000 in aggregate
principal amount of Bonds, by wire transfer in immediately available funds to an account in the
United States designated by such Registered Owner in such written request.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the
"Encinitas Public Financing Authority 2010 Lease Revenue Refunding Bonds, Series A" (the
"Bonds"), in an aggregate principal amount of Dollars
A-1
ATTACHMENT 4
all of like tenor and date (except for such variation, if any, as may be required
to designate varying numbers, maturities, interest rates or redemption provisions) and all issued
pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting
Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the
Government Code of the State of California (the "Bond Law"), and pursuant to an Indenture of
Trust, dated as of , 2010, by and between the Authority and the Trustee (the
"Indenture") and a resolution of the governing body of the Authority adopted on
, 2010, authorizing the issuance of the Bonds. Reference is hereby made to the
Indenture (copies of which are on file at the office of the Authority) and all supplements thereto
for a description of the terms on which the Bonds are issued, the provisions with regard to the
nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the
rights, duties and immunities of the Trustee and the rights and obligations of the Authority
thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance
hereof, assents and agrees.
The Bonds have been issued by the Authority to aid in refinancing the leasing by the
Authority of certain public facilities to be leased back to the City pursuant to the hereinafter
described Lease Agreement, by and between the Authority and the City, and causing the
redemption in full of the outstanding Encinitas Public Financing Authority 2001 Lease Revenue
Bonds, Series A.
This Bond and the interest and premium, if any, hereon and all other Bonds and the
interest and premium, if any, thereon (to the extent set forth in the Indenture) are special
obligations of the Authority, and are payable from, and are secured by a charge and lien on the
Revenues as defined in the Indenture, consisting primarily of lease payments payable by the City
for the use and possession of certain land and improvements (the "Leased Premises") pursuant to
a Lease Agreement dated as of , 2010, by and between the Authority as lessor and the
City as lessee (the "Lease Agreement"). As and to the extent set forth in the Indenture, all of the
Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the
provisions of the Indenture, to the payment of the principal of and interest and premium (if any)
on the Bonds.
The rights and obligations of the Authority and the owners of the Bonds may be modified
or amended at any time in the manner, to the extent and upon the terms provided in the
Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds,
or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of
payment, or change the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without the consent of the owner of each Bond so affected.
The Bonds maturing on or before April 1, , are not subject to redemption prior to
their respective stated maturities. The Bonds maturing on or after April 1, , are subject to
redemption at the option of the Authority as a whole or in part, on any date on or after April 1,
from any available source of funds, at the following respective redemption prices
(expressed as a percentage of the principal amount of the Bonds to be redeemed) together with
accrued interest thereon to the date fixed for redemption.
A-2
ATTACHMENT 4
Redemption Period
Redemption Price
The Bonds maturing on April 1, and April 1, 2031, are also subject to mandatory
redemption, in part by lot, from Sinking Account payments on April 1 in each year commencing
April 1, , with respect to the Bonds maturing April 1, , and April 1, with respect
to the Bonds maturing April 1, 2031, in the amounts as set forth in the following schedule, at a
redemption price equal to one hundred percent (100%) of the principal amount thereof to be
redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption; provided, however, that if some but not all of such Bonds have been redeemed
pursuant to the foregoing or following redemption provisions, the total amount of Sinking
Account payments to be made with respect to such Bonds on April 1 in each year subsequent to
such redemption shall be reduced in an amount equal to the principal amount of the Bonds so
redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly
as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice
filed by the Authority with the Trustee.
Term Bonds Maturing April 1,
Mandatory
Sinking Fund
Redemption Date
(April 1)
Principal
Amount
to Be Redeemed
Term Bonds Maturing April 1, 2031
Mandatory
Sinking Fund
Redemption Date
(April 1)
Principal
Amount
to Be Redeemed
The Bonds are also subject to redemption as a whole or in part, on any date, from any Net
Proceeds (as such term is defined in the Indenture) of hazard or title insurance proceeds not used
to repair or replace any portion of the Leased Premises or condemnation proceeds received with
respect to the Leased Premises and elected by the City to be used for such purpose pursuant to
A-3
ATTACHMENT 4
the Lease Agreement, at a redemption price equal to the principal amount thereof plus interest
accrued thereon to the date fixed for redemption, without premium.
As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first
class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption date to
the respective owners of any Bonds designated for redemption at their addresses appearing on
the registration books of the Trustee, but neither failure to receive such notice nor any defect in
the notice so mailed shall affect the sufficiency of the proceedings for redemption or the
cessation of accrual of interest thereon from and after the date fixed for redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds
may be declared due and payable upon the conditions, in the manner and with the effect provided
in the Indenture, but such declaration and its consequences may be rescinded and annulled as
further provided in the Indenture.
This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Office of the Trustee, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of
authorized denomination or denominations, for the same aggregate principal amount and of the
same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged
at the Office of the Trustee for Bonds of the same tenor, aggregate principal amount, interest rate
and maturity, of other authorized denominations.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute
owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any
notice to the contrary.
This Bond is not a debt of the City of Encinitas (the "City"), the San Dieguito Water
District (the "Water District") as a member of the Authority, the County of San Diego, the State
of California, or any of its political subdivisions, and neither the City, said Water District, said
County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall
this Bond be payable out of any funds or properties of the Authority other than the Revenues as
such term is defined in the Indenture.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
BOND SET FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS
SHALL, FOR ALL PURPOSES, HAVE THE SAME EFFECT AS IF SET FORTH IN THIS
PLACE.
It is hereby certified, recited and declared by the Authority that all of the things,
conditions and acts required to exist, to have happened or to have been performed precedent to
and in the issuance of this Bond do exist, have happened or have been performed in due and
regular time, form and manner as required by the Bond Law and the laws of the State of
A-4
ATTACHMENT 4
California and that the amount of this Bond, together with all other indebtedness of the
Authority, does not exceed any limit prescribed by the Bond Law or any laws of the State of
California, and is not in excess of the amount of Bonds permitted to be issued under the
Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have been
signed by the Trustee.
IN WITNESS WHEREOF, the Encinitas Public Financing Authority has caused this
Bond to be executed in its name and on its behalf with the facsimile signature of its Chairperson
and attested to by the facsimile signature of its Secretary, all as of the Dated Date specified
above.
ENCINITAS PUBLIC FINANCING AUTHORITY
By
Chairperson
(S E A L)
Attest:
Secretary
A-5
ATTACHMENT 4
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Bonds described in the within-mentioned Indenture.
UNION BANK, N.A.,
as Trustee
By
Authorized Signatory
A-6
ATTACHMENT 4
(FORM OF ASSIGNMENT)
For value received the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Bond and do(es) hereby irrevocably constitute and appoint
attorney, to transfer the same on the books of
the Trustee, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature guarantee shall be made by a Note:
guarantor institution participating in the
Securities Transfer Agents Medallion
Program or in such other guarantee
program acceptable to the Trustee.
The signature(s) on this Assignment
must correspond with the name(s) as
written on the face of the within Bond
in every particular, without alteration
or enlargement or any change
whatsoever.
A-7
ATTACHMENT 4
EXHIBIT B
DESCRIPTION OF PROJECT
B-1
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.01
Section 1.02
Definitions 3
Interpretation 14
ARTICLE II
THE BONDS
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Section 2.11
Authorization of Bonds 14
Terms of the Bonds 14
Transfer of Bonds 16
Exchange of Bonds 16
Registration Books 16
Form and Execution of Bonds 16
Temporary Bonds 17
Bonds Mutilated, Lost, Destroyed or Stolen 17
Cancellation of Bonds 17
CUSIP Numbers 17
Book-Entry Bonds 18
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01 Issuance of the Bonds 19
Section 3.02 Application of Proceeds at Closing 19
Section 3.03 Establishment and Application of Costs of Issuance Fund 20
Section 3.04 Project Fund 20
Section 3.05 Validity of Bonds 21
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Terms of Redemption 21
Section 4.02 Selection of Bonds for Redemption 22
Section 4.03 Notice of Redemption 22
Section 4.04 Partial Redemption of Bonds 23
Section 4.05 Effect of Redemption 23
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01 Pledge and Assignment; Bond Fund 23
Section 5.02 Allocation of Revenues 24
Section 5.03 Application of Interest Account 24
-i-
TABLE OF CONTENTS
(continued)
Page
Section 5.04
Application of Principal Account
24
Section 5.05
Application of Sinking Account
24
Section 5.06
Application of Reserve Account
24
Section 5.07
Application of Redemption Fund
25
Section 5.08
Insurance and Condemnation Fund
26
Section 5.09
Investments
27
Section 5.10
Valuation and Disposition of Investments
27
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01
Punctual Payment
28
Section 6.02
Extension of Payment of Bonds
28
Section 6.03
Against Encumbrances
28
Section 6.04
Power to Issue Bonds and Make Pledge and Assignment
28
Section 6.05
Accounting Records and Financial Statements
28
Section 6.06
Additional Obligations
29
Section 6.07
Tax Covenants
29
Section 6.08
Lease Agreement
29
Section 6.09
Waiver of Laws
30
Section 6.10
Further Assurances
30
Section 6.11
Leased Premises
30
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01
Events of Default
30
Section 7.02
No Acceleration Upon Event of Default
31
Section 7.03
Application of Revenues and Other Funds After Default
31
Section 7.04
Trustee to Represent Bond Owners
31
Section 7.05
Bond Owners' Direction of Proceedings
32
Section 7.06
Limitation on Bond Owners' Right to Sue
32
Section 7.07
Absolute Obligation of Authority
33
Section 7.08
Termination of Proceedings
33
Section 7.09
Remedies Not Exclusive
33
Section 7.10
No Waiver of Default
33
ARTICLE VIII
THE TRUSTEE
Section 8.01 Duties, Immunities and Liabilities of Trustee 33
Section 8.02 Merger or Consolidation 35
Section 8.03 Liability of Trustee 35
Section 8.04 Right to Rely on Documents 37
-ii-
TABLE OF CONTENTS
(continued)
Page
Section 8.05 Preservation and Inspection of Documents 37
Section 8.06 Compensation and Indemnification 38
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
Section 9.01 Amendments Permitted 38
Section 9.02 Effect of Supplemental Indenture 39
Section 9.03 Endorsement of Bonds; Preparation of New Bonds 40
Section 9.04 Amendment of Particular Bonds 40
ARTICLE X
DEFEASANCE
Section 10.01 Discharge of Indenture 40
Section 10.02 Discharge of Liability on Bonds 41
Section 10.03 Deposit of Money or Securities with Trustee 41
Section 10.04 Unclaimed Funds 42
ARTICLE XI
MISCELLANEOUS
Section 11.01
Liability of Authority Limited to Revenues
42
Section 11.02
Limitation of Rights to Parties and Bond Owners
42
Section 11.03
Funds and Accounts
42
Section 11.04
Waiver of Notice; Requirement of Mailed Notice
43
Section 11.05
Destruction of Bonds
43
Section 11.06
Severability of Invalid Provisions
43
Section 11.07
Notices
43
Section 11.08
Evidence of Rights of Bond Owners
44
Section 11.09
Disqualified Bonds
44
Section 11.10
Money Held for Particular Bonds
44
Section 11.11
Waiver of Personal Liability
45
Section 11.12
Benefit of Parties
45
Section 11.13
Successor Is Deemed Included in All References to Predecessor
45
Section 11.14
Execution in Several Counterparts
45
Section 11.15
Governing Law
45
EXHIBIT A - FORM OF BOND A-1
EXHIBIT B - DESCRIPTION OF PROJECT .............................................................................B-1
-iii-
ATTACHMENT 5
Draft of 5/3/10
PRELIMINARY OFFICIAL STATEMENT DATED , 2010
NEW ISSUE - BOOK ENTRY ONLY
RATINGS:
(See "RATINGS" herein.
In the opinion of Best Best & Krieger LLP, Bond Counsel to the Authority, based
upon an analysis of existing laws, regulations, rulings and court decisions, and assuming,
among other matters, the accuracy of certain representations and compliance with certain
covenants, interest on the Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of
California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds
is not a specific preference item for purposes of the federal individual or corporate alternative
minimum taxes. Bond Counsel expresses no opinion regarding any other tax consequences
related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds.
See "TAX MATTERS" herein.
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REVENUE REFUNDING BONDS
SERIES A
(PARK PROJECT)
Dated: Date of Delivery
Due: April 1, as shown on inside cover
The 2010 Lease Revenue Refunding Bonds, Series A (Park Project) (the
"Bonds") of the Encinitas Public Financing Authority (the "Authority") will be issued as fully
registered bonds in book-entry form only, initially registered in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"), New York, New York. Purchasers will not
receive certificates representing their interest in the Bonds. Individual purchases will be in
principal amounts of $5,000 or in any integral multiple of $5,000. Interest payable on the Bonds
will be payable on October 1 and April 1 of each year, commencing October 1, 2010, and
principal payable on the Bonds will be paid by Union Bank, N.A., Los Angeles, California, as
trustee for the Bonds (the "Trustee"), to DTC for subsequent disbursement to DTC Participants
who will remit such payments to the beneficial owners of the Bonds.
The Bonds are being issued by the Authority for the purpose of (i) refinancing the
Authority's 2001 Lease Revenue Bonds, Series A (the "Prior Bonds"), (ii) paying the costs of
issuing the Bonds, and (iii) funding a reserve fund for the Bonds, all as further described herein.
The Bonds are limited obligations of the Authority payable primarily from and
secured by certain revenues (the "Revenues") consisting of certain Lease Payments with
respect to the Leased Premises (as described herein) by the City of Encinitas (the "City")
pursuant to an Amended and Restated Lease Agreement, dated as of 1, 2010 (the
"Lease Agreement") between the City and the Authority. The Lease Payments are structured to
produce Revenues sufficient to pay principal of and interest on the Bonds when due. The City
has covenanted in the Lease Agreement to make all Lease Payments provided for therein, to
Preliminary, subject to change.
298138_1.DOC
ATTACHMENT 5
Draft of 5/3/10
include all such payments in its annual budgets, and to make the necessary annual
appropriations for such rental payments. The City's obligations to make Lease Payments is
subject to abatement in the event of damage to, destruction or condemnation of, or title defects
relating to, the Leased Premises described herein. See "SECURITY FOR THE BONDS" and
"RISK FACTORS" herein.
The City has the right to incur other obligations payable from its general
revenues without the consent of the Owners of the Bonds. The Revenues are to be received by
the Authority and deposited pursuant to an Indenture of Trust, dated as of _ 1, 2010
(the "Indenture") between the City and the Trustee.
The Bonds are subject to redemption prior to maturity as described herein.
See "THE BONDS Redemption" herein.
This cover page contains information for general reference only. It is not a
summary of the security or terms of this issue. Investors must read the entire Official
Statement, including the section entitled "RISK FACTORS," for a discussion of special
factors which should be considered, in addition to the other matters set forth herein, in
considering the investment quality of the Bonds. Capitalized terms used on this cover
page and not otherwise defined shall have the meanings set forth herein.
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE
SOLELY FROM REVENUES AND OTHER FUNDS HELD UNDER THE INDENTURE. THE
BONDS ARE NOT A DEBT, OBLIGATION OR LIABILITY OF THE CITY, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE
AUTHORITY), NOR DO THEY CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OR
THE TAXING POWER OF ANY OF THE FOREGOING (INCLUDING THE AUTHOFITY AND
THE CITY). THE AUTHORITY DOES NOT HAVE ANY TAXING POWER. THE BONDS DO
NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE CITY'S
OBLIGATION TO MAKE LEASE PAYMENTS IS AN OBLIGATION PAYABLE FROM THE
CITY'S GENERAL FUND OR ANY OTHER SOURCE OF FUNDS LEGALLY AVAILABLE TO
THE CITY TO MAKE LEASE PAYMENTS. THE OBLIGATION OF THE CITY TO MAKE
LEASE PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY WITHIN THE
MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION OR
ANY OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY
FORM OF TAXATION, OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM
OF TAXATION.
The Bonds are offered, when, as and if issued and received by the Underwriter,
subject to the approval of legality by Best Best & Krieger LLP, Riverside, California, Bond
Counsel. Certain legal matters will be passed upon for the Authority and the City by the City
Attorney and Nossaman LLP, Disclosure Counsel. It is expected that the Bonds, in book-entry
form, will be available through the facilities of DTC in New York, New York for delivery on or
about 2010.
Dated:
298138_1. DOC
ATTACHMENT 5
Draft of 5/3/10
MATURITY SCHEDULE*
$ Serial Bonds
Maturity Date Principal Interest Price or
(April 1Amount Rate Yield
$ % Term Bonds Due April 1, 20, Price or Yield
CUSIP®
% (CUSIP°: )
Preliminary, subject to change.
A registered trademark of the American Bankers Association. CUSIP data herein is provided
by Standard & Poor's, CUSIP Services Bureau, a division of The McGraw-Hill
Companies, Inc.
298138_1. DOC
ATTACHMENT 5
Draft of 5/3/10
No dealer, broker, salesperson or other person has been authorized by the
Encinitas Public Financing Authority, the City of Encinitas or the Underwriter to give any
information or to make any representations other than those contained herein and, if given or
made, such other information or representations must not be relied upon as having been
authorized by the Authority, the City or the Underwriter. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the
Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an
offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers
of the Bonds. Statements contained in this Official Statement which involve estimates,
forecasts or matters of opinion, whether or not expressly so described herein, are intended
solely as such and are not to be construed as representations of fact.
The information set forth herein has been obtained from the Authority, the City
and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or
completeness.
The Underwriter has provided the following sentence for inclusion in this Official
Statement. The Underwriter has reviewed the information in this Official Statement in
accordance with, and as part of, its responsibilities under federal securities laws, as applied to
the facts and circumstances of this transaction, but the Underwriter does not guarantee the
accuracy or completeness of such information.
The information and expressions of opinions herein are subject to change
without notice and neither delivery of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no changes in the affairs
of the Authority or the City since the date hereof. All summaries of the Indenture or other
documents are made subject to the provisions of such documents, respectively, and do not
purport to be complete statements of any or all of such provisions.
This Official Statement is submitted in connection with the sale of the Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE
UNDERWRITER MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS
TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES
LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE INSIDE COVER PAGE
HEREOF. THE PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY
THE UNDERWRITER.
298138_1. DOC
ATTACHMENT 5
Draft of 5/3/10
CITY OF ENCINITAS/ ENCINITAS PUBLIC FINANCING AUTHORITY
AUTHORITY BOARD OF DIRECTORS
Dan Dalager, Board President
Maggie Houlihan, Vice President
James Bond, Member
Jerome Stocks, Member
Teresa Barth, Member
CITY COUNCIL
Dan Dalager, Mayor
Maggie Houlihan, Deputy Mayor
Jerome Stocks, Council Member
James Bond, Council Member
Teresa Barth, Council Member
AUTHORITY/CITY STAFF
P.E. Cotton, Executive Director/City Manager
Jennifer Smith, Finance Director
Jay Lembach, Treasurer/Finance Manager
Deborah Cervone, Secretary/City Clerk
Glenn Sabine, Authority Counsel/City Attorney
SPECIAL SERVICES
Bond Counsel Financial Advisor
Best Best & Krieger LLP Northcross, Hill & Ach
Riverside, California San Rafael, California
Trustee
Union Bank, N.A.
Los Angeles, California
Disclosure Counsel
Nossaman LLP
Irvine, California
2981381.130C
ATTACHMENT 5
Draft: of 5/3/10
TABLE OF CONTENTS
Page
INTRODUCTION
.............1
General
.............1
The Authority and the City
.............2
Security for the Bonds
.............2
Abatement
3
Redemption
.............3
Continuing Disclosure
.............3
Forward-Looking Statements
.............3
Summary of Terms
.............3
THE AUTHORITY
.............4
THE CITY
.............4
THE REFUNDING PLAN
.............4
THE LEASED PREMISES
.............5
The Leased Premises
.............5
Environmental Compliance
.............5
Substitution of Leased Premises
..............6
THE BONDS
..............7
Description of the Bonds
.............7
Redemption
.............7
Book-Entry System
..............9
SECURITY FOR THE BONDS
............10
General
............10
Limited Obligations
............10
Lease Payments
............11
Additional Bonds
............11
Appropriation; Use of Leased Premises
............12
Abatement
............12
Action on Default
............13
Miscellaneous Rent
............13
Insurance
............13
Reserve Account
............14
ESTIMATED SOURCES AND USES OF FUNDS
............15
DEBT SERVICE SCHEDULE
............16
RISK FACTORS
............16
No Tax Pledge
............16
Appropriation
............17
No Limit on Additional General Fund Obligations
............17
Abatement and Eminent Domain
............17
Sufficiency of Lease Payments
............18
Limitation on Enforcement of Remedies; No Acceleration
............18
Seismic, Topographic and Climatic Conditions
............18
Hazardous Substances
............19
California Housing Market
............20
Public Debt Burden on Leased Premises
............20
Risk of Uninsured Loss
............20
Impact of State Budget
............21
Bankruptcy and Foreclosure
............22
ATTACHMENT S
Draft of 5/3/10
Federal Tax-Exempt Status of the Bonds
23
Secondary Market Risk
23
Substitution and Removal of Leased Premises
23
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.
23
Article XIIIA of the State Constitution
23
Article XIIIB of the State Constitution
24
Proposition 218
25
Unitary Property
25
Proposition 62
26
Proposition 1 A
26
Future Initiatives
27
TAX MATTERS
27
CERTAIN LEGAL MATTERS
29
LITIGATION
29
FINANCIAL ADVISOR
29
PROFESSIONAL FEES
29
FINANCIAL STATEMENTS
30
[RATINGS
30
UNDERWRITING
30
MISCELLANEOUS
31
APPENDIX A-- CITY FINANCIAL, ECONOMIC AND DEMOGRAPHIC
INFORMATION A-1
APPENDIX B CITY'S AUDITED FINANCIAL STATEMENTS FOR
FISCAL YEAR 2008/09 B-1
APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS .....................................C-1
APPENDIX D FORM OF OPINION OF BOND COUNSEL D-1
APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT E-1
APPENDIX F BOOK ENTRY PROVISIONS F-1
ATTACHMENT 5
Draft of 5/3/10
OFFICIAL STATEMENT
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REVENUE REFUNDING BONDS
SERIES A
(PARK PROJECT)
INTRODUCTION
General
This Official Statement, including the cover page and appendices, is provided to
furnish information in connection with the sale by the Encinitas Public Financing Authority (the
"Authority") of $ . aggregate principal amount of 2010 Lease Revenue Refunding
Bonds, Series A (Park Project) (the "Bonds"). The Bonds are being issued pursuant to the
Constitution and laws of the State of California (the "State"), including Articles 1 through 4
(commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code
of the State of California (the "JPA Law"). The Bonds are issued pursuant to an Indenture of
Trust, dated as of 1, 2010 (the "Indenture"), between the Authority and Union Bank,
N.A. (the "Trustee").
Proceeds of the Bonds will be used to (i) refinance the Authority's 2001 Lease
Revenue Bonds, Series A (the "Prior Bonds"), (ii) pay the costs of issuing the Bonds, and (iii)
fund a reserve fund for the Bonds. See "THE REFUNDING PLAN," "THE LEASED
PREMISES" and "ESTIMATED SOURCES AND USES OF FUNDS" herein.
The Bonds are limited obligations of the Authority payable, on a parity basis,
primarily from and secured by certain revenues (the "Revenues") consisting of certain Lease
Payments to be paid by the City pursuant to an Amended and Restated Lease Agreement (the
"Lease Agreement"), dated as of 1, 2010, between the City and the Authority, for
certain real property and the improvements thereon (the "Leased Premises"). See "THE
LEASED PREMISES" herein. The City is also required to pay any taxes, assessment charges,
utility charges, maintenance and repair costs of the Leased Premises. The Lease Payments
are structured to produce Revenues sufficient to pay principal of and interest on the Bonds
when due. The City has covenanted in the Lease Agreement to make all Lease Payments
provided for therein, to include all such payments in its annual budgets, and to make the
necessary annual appropriations for such rental payments. The City's obligations to make
Lease Payments is subject to abatement in the event of damage to, destruction or
condemnation of, or title defects relating to, the Leased Premises, as described herein. (See
"SECURITY FOR THE BONDS" herein). The Revenues are to be received by the Authority and
deposited pursuant to the Indenture.
Terms used in this Official Statement and not otherwise defined shall have the
meaning given to them in APPENDIX C attached hereto.
Preliminary, subject to change.
ATTACHMENT 5
Draft of 5/3/10
The Authority and the City
The City is located in the northern coastal area of San Diego County (the
"County") overlooking the Pacific Ocean. The City encompasses approximately 21.4 square
miles and is located 30 miles north of the City of San Diego and immediately north of the City of
Solana Beach. The California Department of Finance has estimated that the City presently has
a population of approximately . For other selected information concerning the City,
see "THE CITY" herein and "APPENDIX A - CITY FINANCIAL, ECONOMIC AND
DEMOGRAPHIC INFORMATION" and "APPENDIX B - AUDITED FINANCIAL STATEMENTS
FOR FISCAL YEAR 2008/09" attached hereto.
The Authority was established pursuant to a Joint Exercise of Powers Agreement
dated November 6, 1991, between the City, the Encinitas Fire Protection District, the Encinitas
Sanitary District (both of which have since been absorbed into the City), the Cardiff Sanitation
District and the San Dieguito Water District (the "Members"). The Authority was created for the
purpose of providing financing for public capital improvements for the Members, including by
issuing its obligations and making loans to the Members. See "THE CITY" herein
Security for the Bonds
The Bonds are payable solely from, and are secured by, the Revenues (as
defined under "SECURITY FOR THE BONDS" herein), which primarily consist of the Lease
Payments. The Lease Payments are payable for the use of the Leased Premises, together with
the capital improvements located thereon, leased to the City pursuant to the Lease Agreement,
from any legally available funds of the City. The City has covenanted in the Lease Agreement
to include the Lease Payments in its annual budgets. The City has further covenanted to make
the necessary annual appropriations for all such Lease Payments, and said covenants have
been deemed to be duties imposed by law. Any legislative enactment or State constitutional
amendment having the effect of reducing the property tax rate would necessarily reduce the
amount of general revenues available to the City to pay the Lease Payments. Likewise,
broadened property tax exemptions could have a similar effect. See "RISK FACTORS" and
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS"
herein for discussion of certain other matters which may affect the collection of Revenues. The
Authority does not have any power to levy and collect taxes.
The City has the right to incur other obligations payable from its general
revenues without the consent of the Owners of the Bonds. In addition, the Indenture allows the
Authority to issue certain additional obligations secured by the Revenues, and the Lease
Agreement allows the City to incur other obligations secured by excess value of the Leased
Premises. See "SECURITY FOR THE BONDS" herein. See "SECURITY FOR THE BONDS"
herein.
THE BONDS ARE NOT A DEBT OF THE CITY, THE STATE OR ANY OF
THEIR POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY). THE BONDS ARE
SPECIAL OBLIGATIONS OF THE AUTHORITY AND ARE NOT OBLIGATIONS OF THE CITY.
NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE
STATE OR ANY OTHER POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE
PAYMENT OF THE BONDS. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION
OR RESTRICTION.
2
ATTACHMENT 5
Draft of 5/3/10
Abatement
Except to the extent of amounts on deposit in the Bond Fund and the Reserve
Account, or otherwise available from an insurance or eminent domain award, the Lease
Payments due under the Lease Agreement and, correspondingly, the amount available to pay
the principal of and interest on the Bonds, will be subject to abatement during any period in
which, by reason of damage or destruction or eminent domain, there is substantial interference
with the use and possession by the City of the Leased Premises. See "RISK FACTORS
Abatement and Eminent Domain" herein. Amounts on deposit in the Bond Fund and the
Reserve Account constitute a special fund for payment of Lease Payments, and shall be
available for such Lease Payments in the event there is substantial interference with the use
and possession of the Leased Premises.
Redemption
The Bonds are subject to redemption as described herein.
Continuing Disclosure
The City has covenanted for the benefit of owners of the Bonds, on behalf of
itself and the Authority, to provide certain financial information and operating data relating to the
City and the Authority by not later than January 1 of each year, commencing with the report for
the 2009/10 Fiscal Year (the "Annual Report") and to provide notices of the occurrence of
certain enumerated events. The Annual Report and notices of material events will be filed by
the City with the Municipal Securities Rulemaking Board (the "MSRB") These covenants have
been made in order to assist the Underwriter in complying with Securities Exchange
Commission Rule 15c2-12(b)(5) (the "Rule"). The specific nature of the information to be
contained in the Annual Report or the notices of material events by the City is summarized in
"APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE." The City and the
Authority have complied in all material respects with previous undertakings with respect to the
Rule during the past five years.
Forward-Looking Statements
This Official Statement (including the appendices hereto) contains certain
forward-looking statements (collectively, the "Forward-Looking Statements"). All statements
other than statements of historical facts included in this Official Statement, are Forward-Looking
Statements. Although the Authority and the City believe that the expectations reflected in such
Forward-Looking Statements are reasonable, 'no one can be given assurance that such
statements will prove to be correct. Important factors which could cause actual results to differ
materially from expectations of the Authority or the City (collectively, the "Cautionary
Statements") are disclosed in this Official Statement. All Forward-Looking Statements
attributable to the Authority or the City are expressly qualified in their entirety by the Cautionary
Statements.
Summary of Terms
Brief descriptions of the Bonds, the Indenture, the Lease Agreement, the
Authority, the City and the Leased Premises are included in this Official Statement. Such
descriptions do not purport to be comprehensive or definitive. All references herein to the
Indenture, the JPA Law and the Constitution and the laws of the State, as well as the
3
ATTACHMENT 5
Draft of 5/3/10
proceedings of the City with respect to the Leased Premises and the Bonds, are qualified in
their entirety by reference to such documents. References herein to the Bonds are qualified in
their entirety by reference to the form thereof included in the Indenture.
Copies of the documents described herein will be available at the office of the
City Financial Services Manager, 505 South Vulcan Avenue, Encinitas, California 92024.
THE AUTHORITY
The Encinitas Public Financing Authority was established pursuant to a Joint
Exercise of Powers Agreement dated November 6, 1991, by and among the City, the Cardiff
Sanitation District, the Encinitas Fire Protection District, the Encinitas Sanitary District and the
Water District in accordance with the provisions of the JPA Law. The Authority was created for
the purpose of providing financing for public capital improvements for the Cify and the Water
District through the acquisition by the Authority of such public capital improvements and/or the
purchase by the Authority of local obligations within the meaning of the JPA Law. Under the
JPA Law, the Authority has the power to issue bonds to pay the costs of any public capital
improvement. The Cardiff Sanitation District, the Encinitas Fire Protection District and the
Encinitas Sanitary District have since been absorbed by the City as separate accounting
divisions, the current members of the Authority and the City and the Water District.
THE CITY
The City was incorporated in October, 1986. The City is located in the northern
coastal area of San Diego County (the "County") overlooking the Pacific Ocean. The City
encompasses approximately 21.4 square miles and is located 30 miles north of the City of San
Diego and immediately north of the City of Solana Beach. Topography of the surrounding area
varies from broad coastal plains to fertile inland valleys backed up by mountain ranges to the
east. The climate is equable in the coastal and valley regions. The community has long, dry
summers and mild temperatures, with mean temperatures of 70 degrees and an average
annual rainfall of 10.36 inches.
The City is the [eighth] largest in population in the County. Most of the land in
the City is zoned residential. The City is a general law city and operates under a council-
manager form of government. The City maintains a website at www.cityofencinitas.org.
However, the information presented there is not part of this Official Statement, is not
incorporated by reference herein and should not be relied upon in making an investment
decision with respect to the Bonds.
For other selected information concerning the City, see "THE CITY" herein and
"APPENDIX A - CITY FINANCIAL, ECONOMIC AND DEMOGRAPHIC INFORMATION" and
"APPENDIX B - AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR 2008/09" attached
hereto.
THE REFUNDING PLAN
The Authority is selling the Bonds, in part, to provide moneys (together with other
available funds of the Authority) necessary to refund and defease the Prior Bonds in whole. A
portion of the proceeds of the Bonds, along with certain remaining funds from the Prior Bonds,
4
ATTACHMENT 5
Draft of 5/3/10
will be transferred to Union Bank, N.A., the trustee for the Prior Bonds (the "Prior Trustee").
Proceeds deposited with the Prior Trustee will be used [to purchase direct obligations of the
United States ("Federal Securities")]. Principal of [the Federal Securities] will be used by the
Prior Trustee to pay the redemption price of the Prior Bonds, plus accrued interest, on
, 2010. See "ESTIMATED SOURCES AND USES OF FUNDS" herein. Upon deposit
of such proceeds and other moneys with the Prior Trustee, the Prior Bonds will no longer be
deemed outstanding.
The moneys and securities held by the Prior Trustee are pledged to the payment
of the Prior Bonds, and are not available to pay principal of or interest on the Bonds.
THE LEASED PREMISES
The Leased Premises
The Leased Premises consist of approximately 44 acres of land, purchased by
the City in 2001 for development for recreational purposes. The Leased Premises are zoned R-
3 residential development, although the City has obtained a use permit for the park
development. The City Council has approved a master plan for development of the park
facilities, and has received approval of the master plan from the California Coastal Commission.
The proposed improvements generally consist of athletic facilities, skate park, dog park,
aquatics center and related infrastructure.
The City has previously expended approximately $2.4 million on environmental
review, design and site preparation costs associated with the Leased Premises. The City is
currently planning on constructing the improvements in phases. Phase I generally consists of
required infrastructure and the construction of playing fields, and is expected to cost between
$12-16 million. Certain proceeds relating to the Prior Bonds will be transferred to the Project
Fund established under the Indenture and will be used to fund improvements. In addition, the
City has approximately $9 million budgeted to fund Phase I. The remaining source of funds for
the improvements will be development fees. other available funds, and possibly other
borrowings by the City. Construction of the first phase is currently anticipated to commence in
Spring 2011. The City has determined the fair rental value of the Leased Premises to be at
least $
Environmental Compliance
The project is subject to the California Environmental Quality Act ("CEO X).
Under CEQA, a project which may have a significant effect on the environment and which is to
be carried out or approved by a public agency must comply with a comprehensive
environmental review process, including the preparation of an Environmental Impact Report
("EIR"). Contents of an EIR include a detailed statement of the project's significant
environmental effects; any such effects which cannot be avoided if the project is implemented;
mitigation measures proposed to minimize such effects; alternatives to the proposed project;
any significant irreversible environmental changes which would result from the project; the
project's growth-inducing impacts; and a brief statement setting forth the agency's reasons for
determining that certain effects are not significant and hence do not require discussion in an
EIR. If the agency determines that the project itself will not have a significant effect on the
environment, it may adopt a negative declaration to that effect and need not prepare an EIR.
5
ATTACHMENT 5
Draft of 5/3/10
The City has completed an EIR for development of the Leased Premises, and
has prevailed in litigation brought with respect to the EIR. The City has completed most of the
remediation associated with development of the Leased Premises, and does not anticipate any
further environmental impediments to development.
Substitution of Leased Premises
Pursuant to the Lease Agreement, the City has the option at any time to
substitute other land, facilities or improvements (the "Substitute Leased Premises") for the
Leased Premises or any portion thereof (the "Former Leased Premises") or to release a portion
of the Leased Premises (the "Released Leased Premises") from the lien of the Lease
Agreement, provided that the City shall satisfy all of the following requirements:
(a) The City shall provide written notification of such substitution or
release to the Trustee and the Authority;
(b) The City shall take all actions and shall execute all documents
required to subject the Substitute Leased Premises to the terms and provisions of the Lease
Agreement, including the filing with the Authority and the Trustee an amended Exhibit A to the
Lease Agreement which adds thereto a description of the Substitute Leased Premises and
deletes therefrom the description of the Former Leased Premises or the Released Leased
Premises, as applicable;
(c) (i) In the case of a substitution, the City shall determine and
certify to the Authority and the Trustee that the fair rental value of the Substitute Leased
Premises is at least equal to the fair rental value of the Former Leased Premises and that the
Substitute Leased Premises is essential to the governmental functions of the City;
(ii) In the case of a release, the City shall determine and
certify to the Authority and the Trustee that the fair rental value of the remaining Leased
Premises after removal of the Released Leased Premises is at least equal to the then
remaining Lease Payments;
(d) In the case of a substitution, the City shall certify in writing to the
Authority and the Trustee that the Substitute Leased Premises serve the public purposes of the
City and constitute property which the City is permitted to lease under the laws of the State;
(e) In the case of a substitution, the City shall certify in writing to the
Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at
least extends to the date on which the final Lease Payment becomes due and payable;
(f) In the case of a substitution, the City shall obtain a CLTA policy of
title insurance with respect to any real property portion of the Substitute Leased Premises;
(g) In the case of a substitution, the substitution of the Substitute
Leased Premises shall not cause the City to violate any of its covenants, representations and
warranties made in the Lease Agreement; and
(h) The City shall obtain and cause to be filed with the Trustee and
the Authority an opinion of Bond Counsel stating that such substitution or release is permitted
6
ATTACHMENT 5
Draft of 5/3/10
and does not cause interest on the Bonds to become includable in the gross income of the
Bond Owners for federal income tax purposes.
From and after the date on which all of the foregoing conditions precedent to
such substitution or release are satisfied, the Lease Agreement shall cease with respect to the
Former Leased Premises or Released Leased Premises, as applicable, and shall be continued
with respect to the Substitute Leased Premises and the remaining Leased Premises. The City
shall not be entitled to any reduction, diminution, extension or other modification of the Lease
Payments whatsoever as a result of such substitution or release.
In addition, the Lease Agreement may be amended to allow the City to pay
additional rental payments for the purpose of securing additional obligations of the Authority, to
the extent of excess value of the Leased Premises. See "SECURITY FOR THE BONDS"
herein.
THE BONDS
Description of the Bonds
The Bonds will be issued only in the form of fully registered Bonds without
coupons, in denominations of $5,000 or any integral multiple thereof. The Bonds will be dated
the date of delivery to the Underwriter, will mature on April 1 in the years and in the respective
principal amounts, and will bear interest at the respective rates per annum, all as set forth on
the inside front cover hereof. Interest on the Bonds will be paid on April 1 and October 1 of
each year, commencing October 1, 2010, by check mailed on the Interest Payment Date to the
registered owners of the Bonds as of the applicable Record Date (the fifteenth day of the month
preceding each Interest Payment Date); provided however, that payment of interest may be by
wire transfer in immediately available funds to an account in the United States of America to
any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish
written wire instructions to the Trustee at least five (5) days before the applicable Record Date.
The principal of each Bond will be payable upon the surrender of such Bond, at
maturity or upon redemption prior to maturity, at the principal corporate trust office of the
Trustee in Los Angeles, California.
Redemption*
Optional Redemption. The Bonds maturing on or before April 1, 2008 shall not
be subject to redemption prior to their respective stated maturities. The Bonds maturing on or
after April 1, 2009, shall be subject to redemption at the option of the Authority as a whole or in
part, on any date on or after April 1, 2008, from any available source of funds, at the following
respective redemption prices (expressed as percentages of the principal amount of the Bonds
to be redeemed), together with accrued interest thereon to the date fixed for redemption.
Redemption Period Redemption Price
April 1, 20 through March 31, 20
April 1, 20 through March 31, 20
Preliminary, subject to change.
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April 1, 20 and thereafter
Special Mandatory Redemption From Insurance or Condemnation
Proceeds. The Bonds shall also be subject to redemption as a whole or in part on any date,
from Net Proceeds required to be used for such purpose as provided in the Indenture, at a
redemption price equal to the principal amount thereof plus interest accrued thereon to the date
fixed for redemption, without premium.
Mandatory Sinking Fund Redemption. The Term Bonds are subject to
mandatory redemption, in part by lot, from Sinking Account payments set forth in the following
schedules on April 1, with respect to Term Bonds maturing April 1, , and on April
1, with respect to Term Bonds maturing April 1, , and on April 1 in each year
thereafter to and including April 1, and April 1, , respectively, at a redemption price
equal to the principal amount thereof to be redeemed (without premium), together with interest
accrued thereon to the date fixed for redemption; provided, however, that if some but not all of
the Term Bonds have been redeemed pursuant to optional or special mandatory redemption,
the total amount of Sinking Account payments to be made subsequent to such redemption shall
be reduced in an amount equal to the principal amount of the Term Bonds so redeemed
pursuant by reducing each such future Sinking Account payment on a pro rata basis (as nearly
as practicable) in integral multiples of $5,000, as shall be designated pursuant to written notice
filed by the Authority with the Trustee.
20 Term Bonds
Mandatory Sinking Fund
Redemption Date
(April 1)
20 Term Bonds
Mandatory Sinking Fund
Redemption Date
(April 1)
Mandatory Sinking Fund
Redemption Amount
Mandatory Sinking Fund
Redemption Amount
In lieu of such redemption, the Trustee may apply amounts in the Sinking
Account to the purchase of Term Bonds at public or private sale, as and when and at such
prices (including brokerage and other charges, but excluding accrued interest, which is payable
from the Interest Account) as may be directed by the Authority prior to the selection of Bonds
for redemption, except that the purchase price (exclusive of accrued interest) may riot exceed
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the redemption price then applicable to the Term Bonds, as set forth in a Written Request of the
Authority.
Selection of Bonds for Redemption. Except for Sinking Account Redemption,
whenever provision is made for the redemption of less than all of the Bonds, the Trustee shall
select the Bonds to be redeemed from all Bonds or such given portion thereof not previously
called for redemption from such maturities as shall be set forth in a Written Request of the
Authority filed with the Trustee, or in the absence of such designation of maturities by the
Authority, then on a pro rata basis among maturities, and in any case, by lot within a maturity in
any manner which the Trustee in its sole discretion shall deem appropriate and fair.
Notice of Redemption. Notice of redemption shall be mailed by first class mail,
postage prepaid, not less than thirty (30) nor more than sixty (60) days before any redemption
date, to the respective Owners of any Bonds designated for redemption at their addresses
appearing on the Registration Books. Each notice of redemption shall state the date of the
notice, the redemption date, the place or places of redemption, whether less than all of the
Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less
than all of the Bonds of a maturity are to be redeemed, Bond numbers of the Bonds to be
redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to
be redeemed in part only, the respective portions of the principal amount thereof to be
redeemed. Each such notice shall also state that on the redemption date there will become
due and payable on each of said Bonds the redemption price thereof, and that from and after
such redemption date interest thereon shall cease to accrue, and shall require that such Bonds
be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect
the proceedings for such redemption or the cessation of accrual of interest from and after the
redemption date. See "Book-Entry System" below.
Effect of Redemption. Notice of redemption having been duly given, and
moneys for payment of the redemption price of, together with interest accrued to the date fixed
for redemption on, the Bonds (or portions thereof) so called for redemption being held by the
Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so
called for redemption shall become due and payable, interest on the Bonds so called for
redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to
any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights
in respect thereof except to receive payment of the redemption price thereof.
Book-Entry System
So long as Cede & Co. is the registered owner of the Bonds, transfer or
exchange of Certificates may only be through the facilities of DTC. See APPENDIX F with
respect to DTC procedures for transfer and exchange of ownership interests in the Bonds.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered
bonds registered in the name of Cede & Co., (DTC's partnership nominee). One fully-
registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal
amount of such maturity, and will be deposited with DTC. See "APPENDIX F - BOOK ENTRY
PROVISIONS" herein.
The Authority, the City and the Trustee cannot and do not give any assurances
that DTC, DTC Participants or others will distribute payments of principal, interest or premium
with respect to the Bonds paid to DTC or its nominee as the registered owner, or will distribute
any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a
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timely basis or will serve and act in the manner described in this Official Statement. The
Authority, the City and the Trustee are not responsible or liable for the failure of DTC or any
DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to
the Bonds or an error or delay relating thereto.
SECURITY FOR THE BONDS
General
The Indenture provides that, subject to certain rights of the Trustee, the Bonds
are secured by a first lien on and pledge of all Revenues and a pledge of all of the moneys held
in the Interest Account and the Principal Account, including all amounts derived from the
investment of such moneys. "Revenues," as defined in the Indenture, generally means (a) all
amounts received by the Authority or the Trustee pursuant to or with respect to the Lease
Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments
(including both timely and delinquent payments, any late charges, and whether paid from any
source), but excluding any amounts payable under Section 4.8(d) of the Lease Agreement; and
(b) all interest, profits or other income derived from the investment of amounts in any fund or
account established pursuant to the Indenture. The principal payable with respect to the Lease
Payments is $
The City is obligated to pay Lease Payments under the Lease Agreement from
any legally available moneys, including its General Fund. Under California law, the obligation of
the City to make Lease Payments is contingent upon the availability of the Leased Premises for
use and occupancy by the City. See "Abatement" below. See "THE LEASED PREMISES"
herein.
Under the Indenture, the Authority is authorized under certain conditions to issue
additional obligations secured by the Revenues. See "Additional Bonds" below. Under the
Lease Agreement, the City is allowed to incur other obligations secured by excess value of the
Leased Premises.
The Revenues and other funds pledged under the Indenture are the sole
security for the Bonds, and the Authority has no other source of funds, other than the
Lease Payments, to pay debt service on the Bonds.
See APPENDIX C hereto for a summary of the terms of the Indenture and the
Lease Agreement.
Limited Obligations
The Bonds are not a debt of the City, the State or any of its political subdivisions,
and neither the City, the State nor any of its political subdivisions, other than the Authority, is
liable therefor. The principal of, premium, if any, and interest on the Bonds are payable solely
from the Revenues. The City's obligations under the Lease Agreement are unsecured
obligations payable from any legally available funds of the City. The Bonds do not constitute an
indebtedness within the meaning of any constitutional or statutory debt limit or restriction.
Preliminary, subject to change.
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Lease Payments
The City has covenanted under the Lease Agreement to make Lease Payments
for the use and possession of the Leased Premises. So long as the Leased Premises is
available for the City's use, the City has covenanted to take such action each year as may be
necessary to include all Lease Payments in its annual budget and annually to appropriate an
amount necessary to make such Lease Payments (see "Abatement" below). The amounts
payable to the Trustee as Lease Payments are to be used to make the payments of principal
and interest on the Bonds. The obligation of the City to make Lease Payments (other than to
the extent that funds to make Lease Payments are available in the Bond Fund or Reserve
Account or otherwise available from an insurance or eminent domain award) may be abated in
whole or in part if the City does not have use and possession of the Leased Premises.
Lease Payments are required to be made by the City under the Lease
Agreement at least fifteen (15) days prior to each Interest Payment Date (individually, a "Lease
Payment Date"), for use and possession of the Leased Premises to the next occurring Lease
Payment Date. The amount of such Lease Payment shall be credited with amounts on deposit
in the Bond Fund on such Lease Payment Date. Lease Payments due on each Lease Payment
Date shall also be reduced by the amount of earnings received by the Trustee as of such Lease
Payment Date from the investment of certain funds held by the Trustee. Lease Payments are
required to be deposited in the Bond Fund maintained by the Trustee. Pursuant to the
Indenture, on each Interest Payment Date the Trustee will withdraw from the Bond Fund
amounts to make principal and interest payments on the Bonds.
The Lease Payments are structured to produce Revenues sufficient to pay
principal of and interest on the Bonds when due. While the Lease Payments are subject to
optional prepayment, Revenues resulting from such action will be used to redeem a
corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to
pay the scheduled principal and interest payments on the Bonds.
Additional Bonds
The Authority is authorized, without the consent of the Bondholders, in the
Indenture to issue additional obligations secured by a pledge of the Revenues on a parity to the
pledge securing the outstanding Bonds, provided the Lease Agreement is amended to obligate
the City to pay additional amounts of rental thereunder for the use and occupancy of the
Leased Premises, provided that (A) no Event of Default has occurred and is continuing under
the Lease Agreement, (B) such additional amounts of rental do not cause the total rental
payments made by the City thereunder to exceed the fair rental value of the Leased Premises,
as set forth in a certificate of a City Representative filed with the Trustee and the Authority, (C)
the City shall have obtained and filed with the Trustee and the Authority a Written Certificate of
an Authorized Representative of the City showing that the fair rental value of the Leased
Premises is not less than the sum of the aggregate unpaid principal components of the Lease
Payments and the aggregate principal components of such additional amounts of rental, (D)
such additional amounts of rental are pledged or assigned for the payment of any bonds, notes,
leases or other obligations the proceeds of which shall be applied to finance the construction or
acquisition of land, facilities or other improvements which are authorized pursuant to the laws of
the State, and (E) such additional rental is not at variable rates.
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Appropriation; Use of Leased Premises
The City has covenanted to take such action as may be necessary to include all
Lease Payments due under the Lease Agreement in each of its proposed annual budgets and
its final adopted annual budgets and to make the necessary appropriations for such Lease
Payments and Additional Payments, except to the extent such payments are abated (see
"Abatement" below). The foregoing covenant on the part of the City shall be deemed to be and
shall be construed to be a duty imposed by law and it shall be the duty of each and every public
official of the City to take such action and do such things as are required by law in the
performance of the official duty of such officials to enable the City to carry out and perform its
covenants and agreements in the Lease Agreement.
The obligation of the City to pay Lease Payments shall constitute a current
expense of the City and shall not in any way be construed to be a debt of the City, or the State,
or any political subdivision thereof, in contravention of any applicable constitutional or statutory
limitation or requirements concerning the creation of indebtedness by the City, the State, or any
political subdivision thereof, nor shall such obligations constitute a pledge of general revenues,
funds or moneys of the City beyond the Fiscal Year for which the City has appropriated funds to
pay Lease Payments or an obligation of the City for which the City is obligated to levy or pledge
any form of taxation or for which the City has levied or pledged any form of taxation.
Abatement
Except to the extent that proceeds of the type described in the following
paragraph are available, the amount of Lease Payments and Additional Payments shall be
abated during any period in which there is substantial interference with the use or possession of
all or a portion of the Leased Premises by the City by condemnation, damage, destruction or
title defect. The amount of such abatement shall be such that the resulting Lease Payments,
exclusive of the amounts described in the following paragraph, do not exceed the fair rental
value for the use and possession of the portion of the Leased Premises for which no substantial
interference has occurred. Such abatement shall continue for the period of the substantial
interference with the use or possession of the Leased Premises. Except as provided in the
Lease Agreement, in the event of any such interference with use or possession, the Lease
Agreement shall continue in full force and effect and the City waives any right to terminate the
Lease Agreement by virtue of any such interference. See "Insurance" below for a discussion of
rental interruption insurance to be provided by, or on behalf of, the City.
Notwithstanding a substantial interference with the use or possession of all or a
portion of the Leased Premises, the City shall remain obligated to make Lease Payments (i) in
an amount not to exceed the fair rental value during each Fiscal Year for the portion of the
Leased Premises not damaged, destroyed, interfered with or taken; (ii) to the extent that
moneys derived from any source as a result of any delay in the reconstruction, replacement or
repair of the Leased Premises, or any portion thereof, are available to pay the amount which
would otherwise be abated; or (iii) to the extent that moneys are available in the Bond Fund or
the Reserve Account to pay the amount which would otherwise be abated, in which event the
Lease Payments shall be payable from such amounts as an obligation of the City payable from
a special fund.
Notwithstanding these efforts, the moneys legally available to the Trustee
following the occurrence of an event which gives rise to an abatement of Lease Payments,
including moneys from the Reserve Account or proceeds of rental interruption insurance, if any,
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may not be sufficient to pay principal of and interest on the Bonds in the amounts and at the
rates set forth thereon. In such event, all Bondowners would forfeit interest attributable to
abated Lease Payments payable during the period of abatement and, to the extent Bonds
mature or are to be subject to mandatory redemption during a period of abatement, the
Bondowners would forfeit principal attributable to such abated Lease Payments. The failure to
make such payments of principal and interest would not under such circumstances
constitute a default under the Indenture, the Lease Agreement or the Bonds.
Action on Default
Should the City default under the Lease Agreement, the Trustee, as assignee of
the Authority under the Lease Agreement may exercise any and all remedies available pursuant
to law. However, the Trustee may not accelerate the Lease Payments or otherwise declare any
Lease Payments not then in default to be immediately due and payable or terminate the Lease
or cause the leasehold interest of the Authority or the subleasehold interest of the City in the
Leased Premises to be sold, assigned or otherwise alienated. The City expressly agrees that in
the event of any default it will remain liable for the payment of all Lease Payments and the
performance of all conditions contained in the Lease Agreement and will reimburse the
Authority for any deficiency arising out of the re-leasing of the Leased Premises or, in the event
the Authority is unable to re-lease the Leased Premises, then for the full amount of all Lease
Payments to the end of the term of the Lease Agreement. See "RISK FACTORS" herein.
For a description of the events of default and permitted remedies of the Trustee
(as assignee of the Authority) contained in the Lease Agreement and the Indenture, see
"APPENDIX C" hereto.
Miscellaneous Rent
For the right to the use and occupancy of the Leased Premises, the Lease
Agreement requires the City to pay, in addition to the Lease Payments, the reasonable
expenses of the Authority, and any reimbursement of amounts advanced and owing in
connection with the Lease Agreement and the Indenture or in connection with the issuance of
the Bonds.
Insurance
The Lease Agreement contain the insurance covenants described below. No
assurance can be given that insurance proceeds will be available or, if available, adequate in an
amount sufficient to avoid an interruption of Lease Payments. Under such a situation, an
abatement of Lease Payments is likely to occur. See "Abatement" above.
The Lease Agreement requires the City to obtain a standard comprehensive
general liability insurance policy or policies in protection of the Authority and the City, including
their respective members, officers, agents, employees and assigns. Said policy or policies must
provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of
each person and $3,000,000 for personal injury or deaths of two or more persons in each
accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not
to exceed $25,000) for damage to property resulting from each accident or event. Such public
liability and property damage insurance may, however, be in the form of a single limit policy in
the amount of $3,000,000 (subject to a deductible clause of not to exceed $25,000) covering all
such risks.
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The Lease Agreement also requires the City to maintain, or cause to be
maintained, casualty insurance insuring the facilities on the Leased Premises against loss or
damage by fire and lightning, with extended coverage and vandalism and malicious mischief
insurance and all other risks in an amount equal to the lesser of 100% of the replacement cost
of the facilities or the aggregate unpaid principal components of the Lease Payments allocable
to the facilities. Such insurance may be subject to such deductibles as the City deems prudent.
The Lease Agreement further requires the City to cause to be maintained,
throughout the term of the Lease Agreement, rental interruption or use and occupancy
insurance to cover loss, total or partial, of the use of the Leased Premises as a result of any of
the hazards covered by the insurance in an amount at least equal to the maximum Leased
Payments allocable to the facilities coming due and payable during any future 24 month period.
The Lease Agreement allows the City to maintain any such insurance as part of
or in conjunction with any other insurance coverage carried by the City or, in whole or in part, in
the form of self-insurance by the City or through participation by the City in a joint powers
agency or other program providing pooled insurance.
The Lease Agreement also requires the City to obtain an CLTA policy of title
insurance insuring the City's leasehold estate, subject only to Permitted Encumbrances, in an
amount at least equal to the aggregate principal amount of the Bonds.
See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Lease
Agreement - Insurance."
Insurance proceeds are required to be applied to the repair of the Leased
Premises; or if the proceeds are insufficient to repair or replace the Leased Premises, the City
may prepay the related Lease Payments and thereby cause the redemption of outstanding
Bonds. The Lease Agreement permits the City to satisfy certain of its insurance requirements
through a self-insurance program.
Reserve Account
Pursuant to the Indenture, the Trustee has established a Reserve Account for
the Bonds, and deposited proceeds in an amount equal to the Reserve Requirement. See
"ESTIMATED SOURCES AND USED OF FUNDS" herein. All amounts in the Reserve Account
shall be used and withdrawn by the Trustee solely for the purpose of (i) paying principal of or
interest on the Bonds, including the principal amount of any Term Bonds subject to mandatory
Sinking Account redemption, when due and payable to the extent that moneys deposited in the
Interest Account, Principal Account or Sinking Account are not sufficient for such purpose, and
(ii) making the final payments of principal of and interest on the Bonds. On the date on which
all Bonds shall be retired or provision made therefor pursuant to the Indenture, all moneys then
on deposit in the Reserve Account shall be withdrawn by the Trustee and paid to the City as a
refund of overpaid Additional Lease Payments.
If, on any date, moneys on deposit in the Reserve Account, together with
amounts then on deposit in the Bond Fund, are sufficient to pay all Outstanding Bonds,
including all principal thereof and interest thereon, at the Written Request of the Authority the
Trustee shall transfer all amounts then on deposit in the Reserve Account, together with such
amounts in the Bond Fund, to the Redemption Fund to be applied to the redemption of the
Bonds. Any amounts on deposit in the Reserve Account on or before each Interest Payment
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Date in excess of the Reserve Requirement shall be transferred to the Bond Fund. See
APPENDIX C hereto for a discussion of the conditions under which the Authority may substitute
a credit instrument for cash on deposit in the Reserve Account.
ESTIMATED SOURCES AND USES OF FUNDS
The sources and uses of funds are estimated as follows:
Sources of Funds:
Principal Amount of Bonds
Net Original Issue [Discount] [Premium]
Amounts Relating to Prior Bonds
TOTAL SOURCES
Uses of Funds:
Transfer to Project Fund''
Deposit to Reserve Account
Transfer to the Escrow Agent(')
Costs of Issuance (3)
TOTAL USES
(1) Reflects certain remaining proceeds of the Prior Bonds to be used to fund improvements
to the Leased Premises (see "THE LEASED PREMISES" above).
(2) See "THE REFUNDING PLAN" above.
(3) Includes fees and expenses of Bond Counsel and Disclosure Counsel, the Financial
Advisor, Trustee and the rating agencies, Underwriter's discount, printing costs of the
Official Statement and other costs of issuing the Bonds.
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DEBT SERVICE SCHEDULE
The following table sets forth the amount of debt service with respect to the
Bonds for each twelve-month Fiscal Year of the Agency ending on April 1:
Year Total Debt
(April l Principal Interest Service
TOTALS
RISK FACTORS
The following factors, along with other information in this Official Statement,
should be considered by potential investors in evaluating the risks in the purchase of the Bonds.
However, the following does not purport to be an exhaustive listing of risk factors and other
considerations which may be relevant to an investment in the Bonds. Additionally, there can be
no assurance that other risk factors will not become evident at any future time.
No Tax Pledge
The obligation of the City to pay the Lease Payments does not constitute an
obligation of the City for which the City has levied or pledged any form of taxation. The
obligation of the City to pay Lease Payments does not constitute a debt or indebtedness of the
City, the City, the State of California or any of its political subdivisions, within the meaning of
any constitutional or statutory debt limit or restriction.
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Appropriation
Although the Lease Agreement does not create a pledge, lien or encumbrance
upon the funds of the City, the City is obligated under the Lease Agreement, so long as the
Leased Premises is available for its use and possession, to pay Lease Payments from any
source of legally available funds (subject to certain exceptions) and has covenanted in the
Lease Agreement that, for so long as the Leased Premises is available for its use, it will make
the necessary annual appropriations within its budget for all Lease Payments. However, the
City is currently liable on other obligations payable from general revenues which may have a
priority over the Lease Payments (for example, tax revenue anticipation notes periodically issed
by the City), and the Lease Agreement does not prohibit the City from incurring additional
obligations payable from general revenues. See "APPENDIX A CITY FINANCIAL,
ECONOMIC AND DEMOGRAPHIC INFORMATION" herein and the financial statements
included in APPENDIX B hereto. In the event the City's revenue sources are less than its total
obligations, the City could choose to fund other municipal services before making Lease
Payments and other payments due under the Lease Agreement, except from amounts on
deposit in the Bond Fund. The City's ability to collect, budget and appropriate various revenues
is subject to current and future State laws and constitutional provisions, and it is possible that
the interpretation and application of these provisions could result in an inability of the City to pay
Lease Payments when due. (see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES AND APPROPRIATIONS" below).
No Limit on Additional General Fund Obligations
The City has the ability to enter into other obligations which may constitute
additional charges against its general revenues. To the extent that such additional obligations
are incurred by the City, the funds available to make Lease Payments may be decreased. See
also "SECURITY FOR THE BONDS - Additional Bonds" herein.
Abatement and Eminent Domain
Lease Payments are to be paid by the City in each rental period for and in
consideration of the right to use and occupy the Leased Premises during each such period.
The obligation of the City to make Lease Payments (other than to the extent that funds to make
Lease Payments are available in the Bond Fund and the Reserve Account created under the
Indenture) may be abated in whole or in part if the City does not have use and possession of
the Leased Premises.
The amount of Lease Payments due under the Lease Agreement will be
adjusted or abated during any period in which by reason of damage or destruction or eminent
domain there is interference with the use and occupancy by the City of the Leased Premises.
Such adjustment or abatement will end with the substantial completion or replacement, repair or
reconstruction of the Leased Premises. The Reserve Account will be funded by Bond proceeds
in the amount set forth in "ESTIMATED SOURCES AND USES OF FUNDS" herein and will be
available, along with amounts on deposit in the Bond Fund, in the event amounts received by
the Trustee are insufficient to pay principal and interest on the Bonds as such amounts become
due. If damage or destruction or eminent domain proceedings with respect to the Leased
Premises result in abatement of Lease Payments and the resulting Lease Payments, together
with moneys in the above-described amounts, are insufficient to make all payments of principal
and interest due on the Bonds during the period that the Leased Premises is being replaced,
repaired or reconstructed, then such payments of principal and interest may not be made and
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no remedy is available to the Trustee or the Owners of the Bonds, under the Lease Agreement
or Indenture, for nonpayment under such circumstances.
Sufficiency of Lease Payments
The Lease Payments are structured to produce Revenues sufficient to pay
principal of, and interest on, the Bonds when due. While the Lease Payments are subject to
optional prepayment, Revenues resulting from such actions will be sufficient to redeem a
corresponding amount of the Bonds, so that the remaining Lease Payments will be sufficient to
pay remaining debt service on the Bonds. The Authority has no other source of funds available
to pay principal of and interest on the Bonds. The City's obligation to make Lease Payments is
not conditioned on its receipt of reimbursement from the Members pursuant to the JPA
Agreement.
Limitation on Enforcement of Remedies; No Acceleration
The enforcement of any remedies provided in the Lease Agreement and
Indenture could prove both expensive and time consuming. Although the Lease Agreement
provides that the Trustee may take possession of the Leased Premises and lease it if there is a
default by the City, and the Lease Agreement provides that the Trustee may have such rights of
access to the Leased Premises as may be necessary to exercise any remedies, portions of
such Leased Premises may not be easily subject to reletting and could be of little value to
others. Furthermore, it is not certain whether a court would permit the exercise of the remedies
of repossession and leasing with respect thereto.
IN THE EVENT OF A DEFAULT UNDER THE LEASE AGREEMENT, THERE IS
NO AVAILABLE REMEDY OF ACCELERATION OF THE TOTAL LEASE PAYMENTS DUE
OVER THE TERM OF THE LEASE AGREEMENT. THE CITY WILL ONLY BE LIABLE FOR
LEASE PAYMENTS ON AN ANNUAL BASIS AS THEY COME DUE, AND THE TRUSTEE
WOULD BE REQUIRED TO SEEK SEPARATE JUDGMENTS FOR THE LEASE PAYMENTS
AS THEY COME DUE. IN ADDITION, ANY SUCH SUIT FOR MONEY DAMAGES COULD BE
SUBJECT TO LIMITATIONS ON LEGAL REMEDIES AGAINST PUBLIC AGENCIES IN
CALIFORNIA, INCLUDING A LIMITATION ON ENFORCEMENT OF JUDGMENTS AGAINST
FUNDS NEEDED TO SERVE THE PUBLIC WELFARE AND INTEREST AND A LIMITATION
ON ENFORCEMENT OF JUDGMENTS AGAINST FUNDS OF A FISCAL YEAR OTHER THAN
THE FISCAL YEAR IN WHICH THE LEASE PAYMENTS WERE DUE.
Seismic, Topographic and Climatic Conditions
The value of the Leased Premises, and the financial stability of the City, can be
adversely affected by a variety of factors, particularly those which may affect infrastructure and
other public improvements and private improvements and the continued habitability and
enjoyment of such improvements. Such additional factors include, without limitation, geologic
conditions (such as earthquakes), topographic conditions (such as earth movements and
floods) and climatic conditions (such as droughts and tornadoes). The Leased Premises is not
within a designated 100-year flood plain, although it is subject to runoff during large storm
events.
The area encompassed by the City, like that in much, of California, may be
subject to unpredictable seismic activity. The City is located within an alluvial plain and
liquefaction area. There are no special study zones within the City. Although the City believes
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that no active or inactive fault lines pass through the City, if there were to be an occurrence of
severe seismic activity in the City, there could be an abatement or adverse impact on the City's
ability to pay the Lease Payments. While the City is not obligated to maintain earthquake
insurance with respect to the Leased Premises, many of the improvements to the Leased
premises will not constitute structures (see "THE PROJECT" herein).
Building codes require that some of these factors be taken into account, to a
limited extent, in the design of improvements, including improvements of the Leased Premises.
Some of these factors may also be taken into account, to a limited extent, in the design of other
infrastructure and public improvements neither designed nor subject to design approval by the
City. Design criteria in any of these circumstances are established upon the basis of a variety
of considerations and may change, leaving previously-designed improvements unaffected by
more stringent subsequently established criteria. In general, design criteria reflect a balance at
the time of protection and the future costs of lack of protection, based in part upon a present
perception of the probability that the condition will occur and the seriousness of the condition
should it occur. Conditions may occur and may result in damage to improvements of varying
seriousness, such that the damage may entail significant repair or replacement costs and that
repair or replacement may never occur either because of the cost or because repair or
replacement will not facilitate habitability or other use, or because other considerations preclude
such repair or replacement. Under any of these circumstances, the actual value of the Leased
Premises, as well as public and private improvements within the City in general, may well
depreciate or disappear, notwithstanding the establishment of design criteria for any such
condition. See "Abatement and Eminent Domain" above.
The City is exposed to a variety of wildfire hazard conditions ranging from very
low levels of risk along the coastal portions of the City, to more severe hazards in the inland
areas. The Project is located on the western, or coastal, side of Interstate 5, and is not
considered at significant risk. Currently, fire hazard severity is a function of fuel conditions,
historic climate, wind conditions, and topography. Population density or the number of
structures in a particular region are not currently used to determine the fire hazard severity for a
particular region. The fact that an area is in a low to moderate hazard area does not mean it
cannot experience a damaging fire; it means only that the probability is reduced, generally
because the number of days a year that the area has "fire weather" is less.
Hazardous Substances
An environmental condition that may result in the reduction in the assessed
value of parcels would be the discovery of any hazardous substance that would limit the
beneficial use of a property within the City, or the value of the Leased Premises. In general, the
owners and operators of a property may be required by law to remedy conditions of the
property relating to releases or threatened releases of hazardous substances. The Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes
referred to as "CERCLA" or the "Superfund Act" is the most well known and widely applicable of
these laws, but California laws with regard to hazardous substances are also stringent and
similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous
substance condition of property whether or not the owner or operator has anything to do with
creating or handling the hazardous substance. The effect, therefore, should the Leased
Premises or any substantial amount of property within the City be affected by a hazardous
substance, would be to reduce the marketability and value of the property by the costs of, and
any liability incurred by, remedying the condition, since the purchaser, upon becoming an
owner, will become obligated to remedy the condition just as is the seller. Such reduction could
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adversely impact the property tax revenues received by the City and deposited in the General
Fund, which could significantly and adversely affect the operations and finances of the City.
The City and the Authority do not believe that the use of any of such substances has adversely
affected the value of the Leased Premises.
California Housing Market
The housing market in southern California and the City, like that in the country
generally, has deteriorated significantly over during the past few years. In general, factors
indicative of or contributing to the weakening new home market reported by those homebuilders
include: (i) generally lower demand for new homes, (ii) significant increases in cancellation
rates, (iii) speculators exiting the new home market, (iv) increases in the supply of new and
existing homes available to be purchased, (v) increases in competition for new home orders,
(vi) the greater difficulty faced by prospective home buyers in selling their existing homes in the
more competitive environment, (vii) higher incentives required to stimulate new home orders
and maintain homes under contract and (vii) reduced availability of mortgage loans. The
weakening housing market conditions could adversely affect the value of property in the City.
Based on information from MDA DataQuick, existing home sales in the City increased from 472
in 2008 to 532 in 2009, although the existing median home sale price declined from $660,000 in
2008 to $575,000 in 2009 (although year-to-date they have increased to $585,000).
foreclosures have increased from 35 in 2007, to 75 in 2008 and 94 in 2009.
Any material decline in home values in the City could result in further property
owner unwillingness or inability to pay mortgage payments, as well as ad valorem taxes, when
due. Under such circumstances, bankruptcies are likely to increase. Bankruptcy by
homeowners would delay the commencement and completion of foreclosure proceedings to
collect delinquent property taxes. See "RISK FACTORS - Bankruptcy and Foreclosure" below.
All of these factors could result in the City receiving less property tax revenue in future years,
which is a significant source of revenue for the City. See APPENDIX A hereto.
Public Debt Burden on Leased Premises
The ability of land owners within the City to pay property tax installments as they
come due could be affected by the existence of other taxes and assessments, imposed upon
the land. In addition, other public agencies whose boundaries overlap those of the City could,
without consent of the City, and in certain cases without the consent of the owners of the land
within the City, impose additional taxes or assessment liens on the property within the City to
finance public improvements to be located inside of or outside of the City. See APPENDIX A
hereto for a statement of direct and overlapping debt on property within the City.
Risk of Uninsured Loss
The City covenants under the Lease Agreement to cause to be maintained
certain insurance policies on the Leased Premises. These insurance policies do not cover all
types of risk. For instance, the City does not covenant to maintain earthquake insurance. The
City may self-insure in certain circumstances. Moreover, the insurance maintained by the City
may provide for deductible amounts. The Leased Premises could be damaged or destroyed
due to earthquake or other casualty for which the Leased Premises are uninsured. Under
these circumstances, an abatement of Lease Payments could occur and could continue
indefinitely. There can be no assurance that the providers of the City's liability and rental
interruption insurance will in all events be able or willing to make payments under the respective
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policies for such loss should a claim be made under such policies. Further, there can be no
assurances that amounts received as proceeds from insurance or from condemnation of the
Leased Premises will be sufficient to prepay the Lease Payments which secure the Bonds.
Impact of State Budget
The State is facing significant financial stress, which could result in future
reductions or deferrals in amounts payable to the County. In the proposed State budget for
Fiscal Year 2010/11, released by Governor Schwarzenegger on January 8, 2010, the State
projected a current fiscal year budget shortfall of approximately $6.6 billion and a projected
Fiscal Year 2010/11 budget shortfall of approximately $12.3 billion. In the past fiscal year the
State deferred certain payments owed to vendors and local governments, including the City.
Although the State ultimately made the required payments to the City, the State continues to
face financial stress, and there can be no assurances that such financial stress will not result in
further deferrals of amounts owed to the City, or reductions in amounts that the City receives
from the State.
There can be no assurances that, as a result of the current State financial stress,
it will not significantly reduce or delay revenues to local governments (including the City) or shift
financial responsibility for programs to local governments as part of its efforts to address the
State financial difficulties. For example, in Fiscal Years 2008/09 and 2009/10 the State either
deferred payments or issued IOU's which could not immediately be cashed. No prediction can
be made by the City as to what measures the State will adopt to respond to the current or
potential future financial difficulties. The City cannot predict the final outcome of future State
budget negotiations, the impact that such budgets will have on the City's finances and
operations or what actions will be taken in the future by the State Legislature and Governor to
deal with changing State revenues and expenditures. Current and future State budgets will be
affected by national and State economic conditions and other factors, including the current
economic downturn, over which the City has no control. There can be no assurances that State
actions to respond to State financial difficulties will not adversely affect the financial condition of
the City.
Information concerning the State's budget has been obtained frorn publicly
available information which the City believes to be reliable; however, the City takes no
responsibility as to the accuracy or completeness thereof and has not independently verified
such information. Information about the State budget is regularly available at various state-
maintained Web sites. Text of the state budget may be found at the State Department of
Finance Web site, www.govbud.dof.ca.gov under the heading "California Budget." An impartial
analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The
information referred to is prepared by the respective State agency maintaining each website
and not by the City, and the City takes no responsibility for the continued accuracy of the
internet addresses or for the accuracy, completeness or timeliness of information posted there,
and such information is not incorporated herein by these references.
Two measures intended to address the existing cumulative budget deficit and to
implement structural reform were both approved at the March 2, 2004 statewide primary
election. The California Economic Recovery Bond Act (Proposition 57) authorized the issuance
of up to $15 billion of economic recovery bonds to finance the State general fund deficit as of
June 30, 2004 and other general fund obligations undertaken prior to June 30, 2004. The first
two series of economic recovery bonds were issued in May 2004, and provided approximately
$8.339 billion of net proceeds to the State's general fund. A third series of economic recovery
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bonds in the principal amount of $2.974 billion was issued in June 2004. The economic
recovery bonds are general obligations of the State and are secured by a pledge of revenues
from an increase in the State's share of the sales and use tax of one-quarter cent, starting July
1, 2004. Such tax proceeds will revert to their prior allocation when the bonds are repaid. The
portion of sales and use tax that otherwise would have been allocated to local governments,
including the City, would be decreased by a commensurate amount. Commencing in Fiscal
Year 2004/05, local government's share of local property tax revenues were restored by an
amount equal to the one-quarter cent reduction in the local sales and use tax, creating a
revenue neutral effect on local agencies. The Balanced Budget Amendment (Proposition 58)
requires the State to adopt and maintain a balanced budget and establish a reserve, and
restricts future long-term deficit-related borrowing.
It should be noted that certain features and consequences of the Proposition 57
redirection could impact the availability of revenues to pay Lease Payments. First, there may
be a timing issue associated with the "backfill" of redirected sales and use taxes with property
tax revenue. This timing issue would not only impact the City's cash flow, but would cause the
City to lose investment earnings on the sales and use taxes it otherwise would have received
on a monthly basis. Second, it is possible that the fees charged by the County for property tax
administration, which are subtracted from property tax revenue collected by the County before it
is allocated to the City, could increase as a result of the various tasks required of the County by
the redirection. Third, the redirection of sales and use taxes by the State reflects the
vulnerability of local government to the State budget process. If, in the future, the State elects
to further reallocate sales and use taxes or property tax revenue, or any other source of
revenue used by the City to make Lease Payments, the City may not know the exact amount of
revenue available to pay Lease Payments.
See "CONSTITUTION AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS - Proposition 1A" below for a discussion of actions the State took in the
current fiscal year to shift certain property tax revenues from local governments (including the
City).
Bankruptcy and Foreclosure
The enforceability of the rights and remedies of the Owners and the obligations
of the Authority and the City may become subject to the following: the federal bankruptcy code
and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or
affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual
equitable principles which may limit the specific enforcement under state law of certain
remedies; the exercise by the United States of America of the powers delegated to it by the
Federal Constitution; and the reasonable and necessary exercise, in certain exceptional
situations, of the police power inherent in the sovereignty of the State of California and its
governmental bodies in the interest of serving a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercising of powers by the federal or state government, if
initiated, could subject the Owners to judicial discretion and interpretation of their rights in
bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of
their rights. Additionally, failure by major property owners to pay property taxes when due, will
have an adverse impact on revenues of the City available to pay Lease Payments, and would
increase the likelihood of a delay or default in payment of the principal of and interest on the
Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds
(including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of
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the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally.
Federal Tax-Exempt Status of the Bonds
Tax-Exempt Status of Interest on the Bonds. The Internal Revenue Code of
1986, as amended (the "Code") imposes a number of requirements that must be satisfied for
interest on state and local obligations, such as the Bonds, to be excludable from gross income
for federal income tax purposes. These requirements include limitations on the use of Bond
proceeds, limitations on the investment earnings on Bonds proceeds prior to expenditure, a
requirement that certain investment earnings on the Bond proceeds be paid periodically to the
United States and a requirement that the issuers file an information report with the Internal
Revenue Service (the "IRS"). The Authority and the City have covenanted in certain of the
documents referred to herein that they will comply with such requirements. Failure to comply
with the requirements stated in the Code and related regulations, rulings and policies may result
in the treatment of interest on the Bonds as taxable, retroactively to the date of issuance of
such Bonds.
Audit. As a part of a larger reorganization of the IRS, the IRS commenced
operation of its Tax Exempt and Government Entities Division (the "TE/GE Division"), as the
successor to its Employee Plans and Exempt Organizations division. The TE/GE Division has a
subdivision that is specifically devoted to tax-exempt bond compliance. Public statements by
IRS officials indicate that the number of tax-exempt bond examinations is expected to increase
significantly under the TE/GE Division. There is no assurance that an IRS examination of the
Bonds, if one is undertaken, will not adversely affect the tax-exempt status or market value of
such Bonds.
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or
sale of the Bonds, and from time to time there may be no market for them, depending upon
prevailing market conditions, the financial condition or market position of firms who may make
the secondary market and the financial condition of the City.
Substitution and Removal of Leased Premises
The Authority and the City may, under the terms of the Lease Agreement,
substitute alternate real property for any portion of the Leased Premises or release a portion of
the Leased Premises from the Lease Agreement, upon compliance with all of the conditions set
forth in the Lease Agreement. After a substitution or release, the portion of the Leased
Premises for which the substitution or release has been effected shall be released from the
leasehold encumbrance of the Lease Agreement. See "THE LEASED PREMISES -
Substitution of Leased Premises" herein.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
Article XIIIA of the State Constitution
Article XIIIA of the State Constitution, known as Proposition 13, except under
certain circumstances limits the maximum ad valorem tax on real property to 1 % of "full cash
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value," and provides that such tax shall be collected by the counties and apportioned according
to State statutes.
Section 2 of Article XIIIA defines "full cash value" to mean the county assessor's
valuation of real property as shown on the 1975/76 Fiscal Year tax bill, or, thereafter, the
appraised value of real property when purchased, newly constructed, or a change in ownership
has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to
exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data
for the taxing jurisdiction, or may be reduced in the event of declining property value caused by
substantial damage, destruction or other factors. Legislation implementing Article XIIIA
provides that, notwithstanding any other law, local agencies may not levy any ad valorem
property tax except to pay debt service on indebtedness approved by the voters as described
above. Such legislation further provides that each county will levy the maximum tax permitted
by Article XIIIA, which is $1.00 per $100 of assessed market value.
Since its adoption, Article XIIIA has been amended a number of times. These
amendments have created a number of exceptions to the requirements that property be
reassessed when it is purchased, newly constructed or undergoes a change in ownership.
These amendments have resulted in marginal reductions in the property tax revenues of the
City. Both the State Supreme Court and the United States Supreme Court have upheld the
validity of Article XIIIA.
Article XIIIB of the State Constitution
In addition to the limits Article XIIIA imposes on property taxes that may be
collected by local governments, certain other revenues of the State and most local governments
are subject to an annual "appropriations limit" imposed by Article XIIIB which effectively limits
the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by
the voters in July 1979, was modified substantially by Proposition 111 in 1990. The
appropriations limit of each government entity applies to "proceeds of taxes," which consist of
tax revenues, State subventions and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed "the cost
reasonably borne by such entity in providing the regulation, product or service." "Proceeds of
taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No
limit is imposed on the appropriation of funds which are not "proceeds of taxes," such as
reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not
limit appropriation of local revenues to pay debt services on bonds existing or authorizing by
January 1, 1979, or subsequently authorized by the voters, appropriations required to comply
with mandates of courts or the federal government, appropriations for qualified capital outlay
projects, and appropriation by the State of revenues derived from any increase in gasoline
taxes and motor vehicle weight fees above January 1, 1990 levels. The appropriations limit
may also be exceeded in case of emergency; however, the appropriations limit for the next
three years following such emergency appropriation must be reduced to the extent by which it
was exceeded, unless the emergency arises from civil disturbance or natural disaster declared
by the Governor, and the expenditure is approved by two-thirds of the legislative body of the
local government.
The State and each local government entity has its own appropriations limit.
Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population
of the jurisdiction, and any transfer to or from another government entity of financial
responsibility for providing services.
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Proposition 111 requires that each agency's actual appropriations be tested
against its limit every two years. If the aggregate "proceeds of taxes" for the preceding two-
year period exceeds the aggregate limit, the excess must be returned to the agency's taxpayers
through tax rate or fee reductions over the following two years.
For Fiscal Year 2008/09 the City's appropriations limit was approximately $82.6
million, and its actual appropriations in Fiscal Year 2008/09 subject to this limit were
approximately $50.4 million. For Fiscal Year 2009/10 the City's appropriations limit is
approximately $86.9 million, and its budgeted expenditures subject to this limit are
approximately $49.5 million. The City is subject to and is operating in conformity with Article
XIIIB.
Proposition 218
On November 5, 1996, California voters approved Proposition 218, which added
Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and
other limitations on the imposition of new or increased taxes, assessments and property-related
fees and charges. The voter approval requirements of Proposition 218 reduce the City
Council's flexibility to deal with fiscal problems by raising revenue, and no assurances can be
given that the City will be able to raise taxes in the future to meet increased expenditure
requirements. City management is not aware of any challenge or claim that any current fee, tax
or assessment is not in compliance with Proposition 218.
Proposition 218 also extends the initiative power to reducing or repealing any
local taxes, assessments, fees and charges. This extension of the initiative power is not limited
to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could
result in retroactive repeal or reduction in any existing taxes, assessments, fees or charges.
The assessments subject to the provisions of Proposition 218 include
maintenance assessments imposed in City service areas and special districts. The annual
amount of revenues that are received by the City and deposited into the City's General Fund
which may be considered to be property related fees and charges under Article XIIID is not
material to the ability to pay the Lease Payments.
The City is unable to predict whether and to what extent Proposition 218 may be
further interpreted and applied by the courts. Proposition 218 could substantially restrict the
City's ability to raise future revenues and could subject certain existing sources of revenue to
reduction or repeal, and increase the City's costs to hold elections, calculate fees and
assessments, notify the public and defend its fees and assessments in court. Further,
Proposition 218 provides for broad initiative powers to reduce or repeal assessments, fees and
charges. No assurance can be given that the voters of the City will not, in the future, approve
initiatives that repeal, reduce or prohibit the future imposition or increase of local taxes,
assessments, fees or charges.
Unitary Property
AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from
most utility property assessed by the State Board of Equalization ("Unitary Property"),
commencing with the 1988/89 fiscal year, are allocated as follows: (i) each jurisdiction will
receive up to 102% of its prior year State-assessed revenue; and (ii) if county-wide revenues
generated from Unitary Property are less than the previous year's revenues or greater than
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102% of the previous year's revenues, each jurisdiction will share the burden of the shortfall or
benefit of the excess revenues by a specified formula. This provision applies to all Unitary
Property except railroads, whose valuation will continue to be allocated to individual tax rate
areas.
The provisions of AB 454 do not constitute an elimination of the assessment of
any State-assessed property nor a revision of the methods of assessing utilities by the State
Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property
to be shared by all jurisdictions in a county.
Proposition 62
On September 28, 1995, the California Supreme Court, in the case of Santa
Clara County Local Transportation Authority v. Guardino, upheld the constitutionality of
Proposition 62. In this case, the court held that a Citywide sales tax of one-half of one percent
was a special tax that, under Section 53722 of the Government Code, required a two-thirds
voter approval. Because the tax received an affirmative vote of only 54.1%, this special tax was
found to be invalid. The decision did not address the question of whether or not it should be
applied retroactively.
Following the California Supreme Court's decision upholding Proposition 62,
several actions were filed challenging taxes imposed by public agencies since the adoption of
Proposition 62, which was passed in November 1986. On June 4, 2001, the California
Supreme Court released its decision in one of these cases, Howard Jarvis Taxpayers
Association v. City of La Habra, et al. ("La Habra"). In this case, the court held that public
agency's continued imposition and collection of a tax is an ongoing violation, upon which the
statute of limitations period begins anew with each collection. The court also held that, unless
another statute or constitutional rule provided differently, the statute of limitations for challenges
to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to
Proposition 62 may only be made for those taxes received within three years of the date the
action is brought.
The City does not believe that it collects (or has collected) any taxes that would
be subject to challenge under Proposition 62.
Proposition 1 A
In connection with the shift of $2.6 billion of local agency revenues to school
funding, the Legislature and the Governor agreed to place Proposition 1A, entitled "Protection
of Local Government Revenues," on the ballot ("Proposition 1 A" The initiative was approved
by the voters on November 2, 2004. Proposition 1 A amended the California Constitution to (i)
prohibit the shift of property tax revenues from cities, counties and special districts, except to
address a "severe state financial hardship" (approved by a two-thirds vote of both houses of the
Legislature), and only then if (a) such amounts were agreed to be repaid with interest within
three years, (b) the State had repaid any other borrowed amounts, including the current amount
owed to repay the vehicle license fee shift, and (c) such borrowing could not occur more often
than twice in ten years; (ii) protect the property tax backfill of sales tax revenues diverted to pay
the economic recovery bonds, and the reinstatement of the sales tax revenues once such
bonds are repaid; and (iii) protect local agency vehicle license fee revenue (or a comparable
amount of backfill payments from the State).
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Through the adoption of the Fiscal Year 2009-2010 State budget, the State
Legislature determined to exercise its rights under Proposition 1A and the City had
approximately 8% of its real property tax revenues (approximately $2.9 million), received in
Fiscal Year 2008/09, shifted to schools and other services. As part of the State budget
package, local governments were given the opportunity to receive the monies being borrowed
by the State upfront through a securitization financing offered by California Communities, a joint
powers authority sponsored by the League of California Cities and California State Association
of Counties. California Communities issued bonds securitizing the future payments by the
State and remitted the proceeds of the bonds to the local governments which opted to
participate in the securitization. The State is responsible for repaying the bondholders.
Proceeds were to be mailed or wired to participating agencies on January 15, 2010 (50% of
proceeds) and May 3, 2010 (50% of proceeds). The City participated in the Proposition 1A
Securitization Program, and has received both installments.
Future Initiatives
Article XIIIA, Article XIIIB, Proposition 62 and Proposition 218 were each
adopted as measures that qualified for the ballot through California's initiative process. From
time to time other initiative measures could be adopted, further affecting the City's revenues.
TAX MATTERS
In the opinion of Best Best & Krieger LLP, bond counsel to the Authority ("Bond
Counsel"), based upon an analysis of existing laws, regulations, rulings, and court decisions,
and assuming, among other matters, the accuracy of certain representations and compliance
with certain covenants, interest on the Bonds is excluded from gross income for federal income
tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is
exempt from State of California personal income taxes. Bond Counsel is of the further opinion
that interest on the Bonds is not a specific preference item for purposes of the federal individual
or corporate alternative minimum taxes. A complete copy of the proposed form of opinion of
Bond Counsel is set forth in APPENDIX D hereto.
To the extent the issue price of any maturity of the Bonds is less than the
amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and
payable at least annually over the term of such Bonds), the difference constitutes "original issue
discount," the accrual of which, to the extent properly allocable to each beneficial owner thereof,
is treated as interest on the Bonds which is excluded from gross income for federal income tax
purposes and State of California personal income taxes. For this purpose, the issue price of a
particular maturity of the Bonds is the first price at which a substantial amount of such maturity
of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or wholesalers). The
original issue discount with respect to any maturity of the Bonds accrues daily over the term to
maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with
straight-line interpolations between compounding dates). The accruing original issue discount
is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition
(including sale, redemption, or payment on maturity) of such Bonds. Beneficial owners of the
Bonds should consult their own tax advisors with respect to the tax consequences of ownership
of Bonds with original issue discount, including the treatment of beneficial owners who do not
purchase such Bonds in the original offering to the public at the first price at which a substantial
amount of such Bonds is sold to the public.
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Bonds purchased, whether at original issuance or otherwise, for an amount
higher than their principal amount payable at maturity (or, in some cases, at their earlier call
date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is
allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the
interest on which is excluded from gross income for federal income tax purposes. However, the
amount of tax-exempt interest received, and a beneficial owner's basis in a Premium Bond, will
be reduced by the amount of amortizable bond premium properly allocable to such beneficial
owner. Beneficial owners of Premium Bonds should consult their own tax advisors with respect
to the proper treatment of amortizable bond premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to
the exclusion from gross income for federal income tax purposes of interest on obligations such
as the Bonds. The Authority has made certain representations and covenanted to comply with
certain restrictions, conditions and requirements designed to ensure that interest on the Bonds
will not be included in federal gross income. Inaccuracy of these representations or failure to
comply with these covenants may result in interest on the Bonds being included in gross
income for federal income tax purposes, possibly from the date of original issuance of the
Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and
compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform
any person) whether any actions taken (or not taken) or events occurring (or not occurring), or
any other matters coming to Bond Counsel's attention after the date of issuance of the Bonds
may adversely affect the value of, or the tax status of interest on, the Bonds.
Certain requirements and procedures contained or referred to in the Agreement,
the Tax Certificate, and other relevant documents may be changed and certain actions
(including, without limitation, defeasance of the Bonds) may be taken or omitted under the
circumstances and subject to the terms and conditions set forth in such documents. Bond
Counsel expresses no opinion as to any Bond or the interest thereon if any such change occurs
or action is taken or omitted upon the advice or approval of bond counsel other than Best Best
& Krieger LLP.
Although Bond Counsel is of the opinion that interest on the Bonds is excluded
from gross income for federal income tax purposes and is exempt from State of California
personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on,
the Bonds may otherwise affect a beneficial owner's federal, state or local tax liability. The
nature and extent of these other tax consequences depend upon the particular tax status of the
beneficial owner or the beneficial owner's other items of income or deduction. Bond Counsel
expresses no opinion regarding any such other tax consequences.
Future legislation, if enacted into law, or clarification of the Code may cause
interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or
otherwise prevent beneficial owners from realizing the full current benefit of the tax status of
such interest. The introduction or enactment of any such future legislation or clarification of the
Code may also affect the market price for, or marketability of, the Bonds. Prospective
purchasers of the Bonds should consult their own tax advisers regarding any pending or
proposed federal tax legislation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain
matters not directly addressed by such authorities, and represents Bond Counsel's judgment as
to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the
Internal Revenue Service ("IRS") or the courts. Furthermore, Bond Counsel cannot give and
28
ATTACHMENT 5
Draft of 5/3/10
has not given any opinion or assurance about the future activities of the Authority, or about the
effect of future changes in the Code, the applicable regulations, the interpretation thereof or the
enforcement thereof by the IRS. The Authority has covenanted, however, to comply with the
requirements of the Code.
Bond Counsel's engagement with respect to the Bonds ends with the issuance of
the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the
Authority or the beneficial owners regarding the tax-exempt status of the Bonds in the event of
an audit examination by the IRS. Under current procedures, parties other than the Authority or
its appointed counsel, including the beneficial owners, would have little, if any, right to
participate in the audit examination process. Moreover, because achieving judicial review in
connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent
review of IRS positions with which the Authority legitimately disagrees may not be practicable.
Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course
or result of such audit, or an audit of bonds presenting similar tax issues may affect the market
price for, or the marketability of, the Bonds, and may cause the Authority or the beneficial
owners to incur significant expense.
CERTAIN LEGAL MATTERS
Best Best & Krieger LLP, Riverside, California, Bond Counsel, will render an
opinion with respect to the validity and enforceability of the Indenture and the Lease
Agreement, and as to the validity of the Bonds. Certain matters will be passed upon for the
Authority and the City by the City Attorney, and by Nossaman LLP, Disclosure Counsel.
LITIGATION
There is no action, suit or proceeding pending or, to the knowledge of City or
Authority officials, threatened, restraining or enjoining the execution or delivery of the Bonds,
the Lease Agreement, or the Indenture, or in any way contesting or affecting the validity of the
foregoing or any proceedings of the Authority or the City taken with respect to any of the
foregoing.
FINANCIAL ADVISOR
The Authority has retained Northcross Hill & Ach LLC, San Rafael, California, as
Financial Advisor (the "Financial Advisor") for the sale of the Bonds. The Financial Advisor is
not obligated to undertake, and has not undertaken to make, an independent verification or to
assume any responsibility for the accuracy, completeness or fairness of the information
contained in this Official Statement. The Financial Advisor is an independent advisory firm and
is not engaged in the business of underwriting, trading, or distributing municipal or other public
securities.
PROFESSIONAL FEES
In connection with the execution of the Bonds, fees payable to Best Best &
Krieger LLP, as Bond Counsel, Northcross Hill & Ach LLC, as Financial Advisor, Nossaman
LLP, as Disclosure Counsel, and Union Bank, N.A., as Trustee, are contingent upon the
execution and delivery of the Bonds.
29
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FINANCIAL STATEMENTS
The general purpose financial statements of the City for the Fiscal Year ending
June 30, 2009, pertinent sections of which are included in APPENDIX B to this Official
Statement, have been audited by Macias Gini & O'Connell LLP, independent certified public
accountants, as stated in their report appearing in APPENDIX B. The City has not requested,
and the auditor has not provided, any consent to the inclusion of its report herein or any update
or review of its report in connection with its inclusion in this Official Statement. See APPENDIX
B hereto.
(RATINGS
Standard & Poor's Credit Market Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), Fitch Ratings ("Fitch") and Moody's Investors Service ("Moody's")
have assigned their municipal bond ratings of " 11 19
and respectively, to the
Bonds. The ratings reflect only the views of such organizations, and an explanation of the
significance of such ratings may be obtained from Moody's, Fitch and S&P.
There is no assurance that any rating will continue for any given period of time
for the Bonds or that it will not be revised downward or withdrawn entirely by such rating
agency, if, in the judgment of such rating agency, circumstances so warrant. The Authority
undertakes no responsibility to oppose any downward revision or withdrawal of any rating
obtained. Any such downward revision or withdrawal of such rating may have an adverse effect
on the market price of the Bonds.]
UNDERWRITING
The Authority has agreed to sell the Bonds to (the
"Underwriter"), and the Underwriter has agreed, subject to certain conditions, to purchase the
Bonds. The purchase price of the Bonds is $ (the principal amount of the Bonds,
less an Underwriter's discount of $ , and [less net original issue discount] [plus net
original issue premium] of $ The obligations of the Underwriter are subject to
certain conditions precedent, and it will be obligated to purchase all such Bonds if any such
Bonds are purchased. The public offering prices of the Bonds may be changed from time to
time by the Underwriter.
The Underwriter reserves the right to join with dealers and other underwriters in
offering the Bonds to the public. The Underwriter may offer and sell the Bonds to certain
dealers (including dealers depositing Bonds into investment trusts) at prices lower than the
public offering prices, and such dealers may reallow any such discounts on sales to other
dealers.
30
ATTACHMENT 5
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MISCELLANEOUS
References are made herein to certain documents and reports which are brief
summaries and do not purport to be complete or definitive. Prospective purchasers of the
Bonds are advised to refer to such documents and reports for full and complete statements of
their contents. Any statements in this Official Statement involving matters of opinion, whether
or not expressly so stated, are intended as such and not as representations of fact. This
Official Statement is not to be construed as a contract or agreement between the Authority and
the purchasers or Owners of any of the Bonds. The execution of this Official Statement and its
use in connection with the offering of the Bonds for sale have been authorized by the Authority
and the City.
ENCINITAS PUBLIC FINANCING AUTHORITY
By:
President
CITY OF ENCINITAS
By:
City Manager
31
ATTACHMENT 5
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APPENDIX A
CITY FINANCIAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
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298138_1. DOC
ATTACHMENT 5
Draft of 5/3/10
APPENDIX B
CITY'S AUDITED FINANCIAL
STATEMENTS FOR FISCAL YEAR 2008/09
ATTACHMENT 5
Draft of 5/3/10
APPENDIX C
SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS
ATTACHMENT 5
Draft of 5/3/10
APPENDIX D
FORM OF OPINION OF BOND COUNSEL
ATTACHMENT 5
Draft of 5/3/10
APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
ATTACHMENT 5
Draft of 5/3/10
APPENDIX F
BOOK ENTRY PROVISIONS
The information concerning DTC set forth herein has been supplied by DTC, and the
Authority assumes no responsibility for the accuracy thereof.
Unless a successor securities depository is designated pursuant to the Indenture, DTC
will act as Securities Depository for the Bonds. The Bonds will be issued as fully-registered
securities, registered in the name of Cede & Co., DTC's partnership nominee, or such other
name as may be requested by an authorized representative of DTC. One fully-registered Bond
will be issued for each maturity of the Bonds, each in the aggregate principal amount of such
maturity, and will be deposited with DTC.
DTC and Its Participants. DTC, the world's largest depository, is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S.
equity issues, corporate and municipal debt issues, and money market instruments from over
85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also
facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfer and
pledges between Direct Participants' accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and
Members of the National Securities Clearing Corporation, Federal Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC,
GSCC, MBSCC, and EMCC, also subsidiaries of DTCC) as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers
and dealers, banks and trust companies and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly, ("Indirect
Participants"). DTC has Standard & Poor's highest rating of "AAA." The DTC Rules applicable
to its Participants are on file with the Securities Exchange Commission. More information about
DTC can be found at www.dtcc.com.
Purchase of Ownership Interests. Purchases of the Bonds under the DTC system
must be made by or through Direct Participants, which will receive a credit for the Bonds on
DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners
are, however, expected to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
ATTACHMENT 5
Draft of 5/3/10
representing their ownership interests in the Bonds, except in the event that use of the book-
entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as
may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and
their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such
securities are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Notices and Other Communications. Conveyance of notices and other
communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. THE AUTHORITY AND THE TRUSTEE WILL NOT HAVE ANY
RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS
FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue
are being redeemed, DTC's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Voting Rights. Neither DTC nor Cede & Co. will consent or vote with respect to the
Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under
its usual procedures, DTC mails an Omnibus Proxy to an issuer as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Bonds are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Redemption Proceeds. Payments of principal and interest with respect to the Bonds
will be made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit Direct Participants' accounts on interest
payment dates in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the interest payment date.
Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such Participant and not of
DTC nor its nominee, the Trustee, or the Authority, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption proceeds, principal
and interest to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC is the responsibility of the Trustee, disbursement of such payments to
Direct Participants will be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect Participants.
THE TRUSTEE AND THE AUTHORITY SHALL NOT HAVE ANY RESPONSIBILITY OR
OBLIGATION TO ANY DTC PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER
PERSON CLAIMING A BENEFICIAL OWNERSHIP INTEREST IN THE BONDS UNDER OR
THROUGH DTC OR ANY DTC PARTICIPANT, OR ANY OTHER PERSON WHICH IS NOT
SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING AN OWNER OF
ATTACHMENT 5
Draft of 5/3/10
BONDS, WITH RESPECT TO THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC
OR ANY DTC PARTICIPANT; THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY
AMOUNT IN RESPECT OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, OR INTEREST
WITH RESPECT TO THE BONDS; ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO
BE GIVEN TO OWNER OF THE BONDS UNDER THE INDENTURE; THE SELECTION BY
DTC OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE
PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; ANY CONSENT
OR OTHER ACTION TAKEN BY DTC AS OWNER OF THE BONDS; OR ANY OTHER
PROCEDURES OR OBLIGATIONS OF DTC UNDER THE BOOK-ENTRY SYSTEM.
SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS
NOMINEE OF DTC, REFERENCES HEREIN TO THE REGISTERED OWNERS OF THE
BONDS SHALL MEAN CEDE & CO., AS AFORESAID, AND SHALL NOT MEAN THE
BENEFICIAL OWNERS OF THE BONDS (EXCEPT FOR THE MATTERS UNDER THE
CAPTION "TAX MATTERS" HEREIN)
The foregoing description of the procedures and record keeping with respect to
beneficial ownership interests in the Bonds, payment of principal and interest with respect to the
Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial owner
interest in such Bonds and other related transactions by and between DTC, the DTC
Participants and the Beneficial Owner is based solely on information provided by DTC.
Accordingly, no representations can be made concerning these matters, and neither the DTC
Participants nor the Beneficial Owners should rely on the foregoing information with respect to
such matters, but should instead confirm the same with DTC or the DTC Participants, as the
case may be.
Discontinuance of Book-Entry System. DTC may discontinue providing its services
as securities depository with respect to the Bonds at any time by giving reasonable notice to the
Authority or the Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Bonds are required to be printed and delivered as described in the
Indenture.
The Authority may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, Bonds will be printed and
delivered as described in the Indenture and payment of interest to each Owner who owns of
record $1,000,000 or more in aggregate principal amount of Bonds may be made to such
Owner by wire transfer to such wire address within the United States that such Owner may
request in writing for all Interest Payment Dates following the 15th day after the Trustee's receipt
of such request.
ATTACHMENT 5
Draft of 5/3/10
APPENDIX A
CITY FINANCIAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
The information herein is subject to change without notice, and neither delivery
of this Official Statement nor any sale thereafter of the Bonds shall under any circumstances
imply that there has not been any change in the affairs of the City or in any other information
contained herein since the date of the Official Statement. The Bonds are payable solely from
the sources described herein (see "SECURITY FOR THE BONDS'). The taxing power of the
City of Encinitas, the County of San Diego, the State of California or any political subdivision
thereof is not pledged to the payment of the Bonds. See the information under the caption
"THE BONDS."
General
The City was incorporated in October 1986. The City's incorporation involved a
reorganization consisting primarily of the incorporation of the City of Encinitas; the detachment
of territory from the Cardiff Sanitation District and annexation of the same territory to the Solana
Beach Sanitation District; and the establishment of the Encinitas Fire Protection District, the
San Dieguito Water District (the "Water District") and the Encinitas Sanitary District as
subsidiary districts of the City. Currently, all of the subsidiary districts, excluding the Water
District, have been absorbed by the City as separate accounting divisions.
The City is located in the northern coastal area of San Diego County (the "County")
overlooking the Pacific Ocean. The City encompasses approximately 21.4 square miles and is
located approximately 25 miles north of the City of San Diego and immediately north of the City
of Solana Beach. Topography of the surrounding area varies from broad coastal plains to
fertile inland valleys backed up by mountain ranges to the east. The climate is equable in the
coastal and valley regions.
The City maintains a website at www.cityofencinitas.org. However, the
information presented there is not part of this Official Statement, is not incorporated by
reference herein and should not be relied upon in making an investment decision with
respect to the Bonds.
City Government
The City is a general law city and operates under a council-manager form of
government. The City Council consists of five members elected at large, who also serve as the
Board of Directors of the three subsidiary districts of the City. Council members serve four-year
terms, with elections every two years for either two or three seats. The Mayor is selected by a
majority vote of the City Council and serves a one year term. The City Manager is appointed by
the City Council and serves as the City Council's administrative head of the City. All other city
employees are appointed by and are responsible to the City Manager, except the City Attorney
and the City Clerk, who are appointed by the City Council.
The City supplies portions of its residents with water and sewer service through its
subsidiary districts. The northern portion of the City is provided with sewer service by the
independent Leucadia County Wastewater District. The eastern half of the City receives
potable water from the Olivenhain Municipal Water District. Power is supplied by San Diego
A-1
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Draft of 5/3/10
Electric and Gas, and telephone service by Pacific Bell. The City has its own parks and
community services departments, but contracts for police service from the County. The current
contract with the County for law enforcement services expires June 30, 2012.
Population
The population of the City has remained stable with a moderate rate of growth since its
incorporation in 1986. The 2009 population is estimated at approximately 64,145, an increase
of 10.7% from 2000. In the same period, population growth for San Diego County was 12.8%
and for the State of California, the population growth was 13.0%. Population growth in the City
is shown on the following chart.
TABLE A-1
CITY OF ENCINITAS
ANNUAL POPULATION ESTIMATES
(As of January 1)
City of Percent
Year Encinitas Change
1999
56,500
2000
57,955
2.57%
2001
59,128
2.02
2002
59,981
1.44
2003
61,421
2.40
2004
62,480
1.72
2005
62,650
0.27
2006
62,825
0.28
2007
63,127
0.48
2008
63,615
0.77
2009
64,145
0.83
Source: State Department of Finance, Demographic Research Unit.
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ATTACHMENTS
Draft of 5/3/10
Employees and Labor Relations
The City currently employs 241 full-time equivalent employees, including 49 fire safety
personnel. The following table presents the number of full-time City employees for the Fiscal
Years 2004/05 through 2009/10.
TABLE A-2
CITY OF ENCINITAS
FULL-TIME CITY EMPLOYEES
(Fiscal Years 2004/05 through 2009/2010)
Fiscal Number of
Year Full-Time Employees
2004/05
234
2005/06
236
2006/07
237
2007/08
241
2008/09
241
2009/10(')
241
Source: City of Encinitas Finance Department.
(1) Budgeted.
Approximately 67% of regular City employees are represented by various associations,
and labor relations have been generally amicable. There has not been any recent major
strikes, work stoppages, or other similar incidents. The following table provides a list of
employee organizations in the City and the number of employees they represent as of January
1, 2010.
TABLE A-3
CITY OF ENCINITAS
EMPLOYEE ORGANIZATIONS
(As of January 1, 2010)
Organization
Service Employees International Union (Local 2028)
Encinitas Firefighters Assoc.
Fire Chief Officers Assoc.
Source: City of Encinitas.
Accounting Policies and Financial Reporting
Employees Expiration of
Represented
Contract
114
December 2011
45
December 2012
3
June 2010
The City's accounting records are organized and operated on a "fund" basis, which is
the basic fiscal and accounting unit in governmental accounting. The operations of the different
funds are accounted for with separate sets of self-balancing accounts showing assets,
liabilities, fund balance or equity, and revenues and expenses. The basis of accounting for all
funds is more fully explained in the "Notes to the City of Encinitas General Purpose Financial
Statements" contained in APPENDIX B hereto.
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The City, all its funds and the Encinitas Public Financing Authority are audited annually
by a certified public accounting firm. The firm of Macias Gini & O'Connell, LLP, Newport Beach,
California, is the City's current auditor. The audited financial statements of the City for Fiscal
Year 2008/09 are attached hereto as APPENDIX B. The auditor has not been requested to
review such audited financial statements prior to inclusion in this Official Statement. Audited
financial statements for prior fiscal years are available upon request from the Finance
Department of the City or on its website at www.cityofencinitas.org.
The City General Fund finances the legally authorized activities of the City not provided
for in other restricted funds. General fund revenues are derived from such sources as taxes;
licenses and permits, fines, forfeits and penalties; use of money and property; aid from other
governmental agencies; charges for current services; and other revenue. General Fund
expenditures and encumbrances are classified by the functions of general government,
planning and building, public safety, public works, engineering and parks and recreation.
Amounts on deposit in the Bond Fund held by the Trustee are pledged to payment of Lease
Payments and are not available for other uses by the City.
Budgetary Process and Current Budget
The City develops a two-year operating budget for planning purposes and appropriates
funds annually for operations and to fund the capital improvement program prior to the start of
each fiscal year. The Council conducts a public hearing (workshop) prior to adopting the
budget. Supplemental appropriations, where required during the fiscal year, are also approved
by the Council. The authority for budgetary control is at the department level. A department
head may transfer appropriations within the department. Expenditures may exceed
appropriations to the extent that departmental revenues are sufficient to offset the excess.
Expenditures in excess of departmental revenues must be approved by the Council. The
Council, by the affirmative vote of three members, may amend the budget to add or delete
appropriations, transfer between appropriations within a fund or change appropriations transfers
between funds. An item of Required Supplementary Information, pursuant to GASB 34, is a
Budgetary Comparison Schedule of the Original Adopted Budget and the Final Budget for the
General Fund and all major Special Revenue Funds with explanations of the major changes.
That schedule is included in the financial report in APPENDIX B for Fiscal Year 2008/09.
The proposed Fiscal Year 2010/11 budget is balanced, and reflects an approximately
3.6% reduction in revenues and 7.1% reduction in expenses over the adjusted Fiscal year
2009/10 budget. The City Council in expected to begin considering the proposed budget by the
end of April.
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Draft of 5/3/10
The following table summarizes the Fiscal Year 2009/10 City Budget as adjusted.
TABLE A-4
CITY OF ENCINITAS
GENERAL FUND BUDGET
(Fiscal Year 2009/10)
2009/10
Mid-Year
Final Adjusted
ITEM
Budget
Adjustments
2009/10 Budget
Revenues:
Taxes
$44,916,898
($425,916)
$44,490,982
Licenses and Permits
195,400
28,685
224,085
Intergovernmental
301,200
202,448
503,648
Charges for services
4,699,380
(139,266)
4,560,114
Fines and Penalties
780,150
(114,000)
666,150
Use of money and property
854,020
(90,000)
764,020
Other
908,896
0
908,896
Total Revenues
52,665,944
(538,049)
52,117,895
Expenditures
Current:
General Government
11,112,302
0
11,112,302
Planning and building
3,255,627
285,650
3,541,277
Public Safety
22,962,111
(389,088)
22,573,023
Public Works
2,516,058
0
2,516,058
Engineering Services
3,894,215
0
3,894,215
Parks and recreation
5,823,384
(149,854)
5,673,530
Total Expenditures
49,563,697
(253,292)
49,310,405
Excess (Deficiency) of Rev. Over Exp.
2 247
2 4 7 7
2 7 4
Source: City of Encinitas
Historic General Fund Revenues
Taxes received by the City include property taxes, sales taxes, franchise fees, property
transfer taxes and transient occupancy taxes. Of such taxes, Property Taxes and Sales Taxes
constitute the major sources of revenues. See "CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND APPROPRIATIONS - Proposition 62" and - Proposition 218"
herein for a discussion of certain general taxes imposed by the City that may be affected by
initiatives approved by the California voters. See also "RISK FACTORS - Impact of State
Budget."
A significant revenue source of the City is State of California payments and other
payments in-lieu of taxes. The City receives a portion of Department of Motor Vehicles fees
collected statewide. Payment of State assistance depends on the adoption by the State of its
budget, including the appropriations therein providing for local assistance. These revenues are
shown in the accompanying financial statements as "intergovernmental revenues."
The State 2004/05 budget included a permanent reduction of vehicle license rate from
2% to 0.65%. Backfill dollars for this reduction have been eliminated and replaced with a like
amount of property taxes (property taxes in-lieu of VLF).
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ATTACHMENT 5
Draft of 5/3/10
The following table illustrates the property tax revenues, sales tax revenues and other
revenue sources of the City's General Fund for Fiscal Years 2000/01 through 2009/10.
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ATTACHMENT 5
Draft of 5/3/10
State Legislative Shift of Property Tax Allocation
Beginning in 1992/93, the State has required that local agencies remit a portion of
property taxes received to augment school funding. This payment continues in future fiscal
years, but is partially offset by a restricted increase in sales tax made permanent by voters in
November 1993. See "RISK FACTORS - Impact of State Budget" herein for a discussion of
circumstances which may adversely impact certain of the City's tax receipts.
Through the adoption of the Fiscal Year 2009-2010 State budget, the State Legislature
determined to exercise its rights under Proposition 1A and the City had approximately 8% of its
real property tax revenues (approximately $2.9 million), received in Fiscal Year 2008/09, shifted
to schools and other services. As part of the State budget package, local governments were
given the opportunity to receive the monies being borrowed by the State upfront through a
securitization financing offered by California Communities, a joint powers authority sponsored
by the League of California Cities and California State Association of Counties. California
Communities issued bonds securitizing the future payments by the State and remitted the
proceeds of the bonds to the local governments which opted to participate in the securitization.
The State is responsible for repaying the bondholders. Proceeds were to be mailed or wired to
participating agencies on January 15, 2010 (50% of proceeds) and May 3, 2010 (50% of
proceeds). The City participated in the Proposition 1A Securitization Program, and has
received both installments.
Other Taxes and Fees
Franchise Fees. The City levies a franchise fee on its cable television, trash collection
and utility franchises.
Transient Occupancy Taxes. The City levies a 10%, voter-approved transient
occupancy tax on hotel and motel bills, and short-term residential vacation rentals.
Property Transfer Taxes. A documentary stamp tax is assessed for recordation of real
property transfers.
A-8
ATTACHMENT 5
Draft of 5/3/10
General Fund Reserves
The following chart illustrates the general fund reserves of the City for Fiscal Years
2000/01 through 2009/10.
TABLE A-6
CITY OF ENCINITAS
GENERAL FUND RESERVES
(As of June 30)
Fiscal Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010(')
Source: City of Encinitas.
(1) Budgeted.
City Investment Policy
Endinq Fund Balance Percent Chanae
$38,708,172
6.1%
35,236,028
(9.0)
35,097,578
(0.4)
35,454,696
(1.9)
40,035,360
16.2
40,959,317
2.3
51,685,689
26.2
51,127,133
(1.1)
47,535,284
(7.1)
46,731,938
(1.7)
The City may invest public funds until such time as the funds are needed to pay the
obligations of the City. The City maintains an Investment Policy which sets forth guidelines of
the City Treasurer's investment of such funds. The Treasurer is a trustee and therefore a
fiduciary subject to the prudent investor standards, and the primary objective shall be to
safeguard the principal of the funds under its control. The secondary objective shall be to meet
liquidity needs, and the third objective shall be to achieve a market rate of return.
The City matches its investments with anticipated cash flow requirements. Pursuant to
the California Government Code, maximum maturities shall not exceed five (5) years, without
specific approval of the City Council. The City's investment policy limits the investment of the
City's funds by specifying term, diversification and credit quality. The requirements of the City's
policy regarding these investments are either the same as or more restrictive than the
requirements of State law. The City has elected not to permit other types of investments which
are permitted by State law.
A-9
ATTACHMENT 5
Draft of 5/3/10
The City's investment portfolio had a market value as of March 31, 2010 of
$91,685,406.95. The following table presents a breakdown of the City's investment portfolio by
type of security as of that date.
Market
% of Total
Investments
Value
Market Value
Cash
$ 724,263.79
0.80%
Banking Facilities
30,098,870.32
32.83
LAI F
25,508,112.03
27.82
Managed Pool Accounts
4,974,435.17
5.42
Money Market Funds
389,495.64
0.43
U.S. Treasury Bills
9,996,100.00
10.90
Federal Agency Coupon Securities
2,015,940.00
2.20
Federal Agency Callable Securities
11,950,620.00
13.03
Variable Rate Agency Coupon Securities
6,027,570.00
6.57
TOTALS $91,685,406.95 100.00%
Source: City Finance Department.
As of March 31, 2010, the average life of the City's investment portfolio was 218 days,
compared to 71 days as of March 31, 2009.
Risk Management
The City is self-insured for liability claims and losses up to $150,000 per occurrence,
and is covered for covered losses between $150,000 and $2,000,000 by the San Diego Pooled
Insurance Program Authority ("SANDPIPA") reserve pool. The members share the risk of
claims in excess of reserves. Excess liability insurance coverage is provided for losses
between $2,000,000 and $35,000,000 via third-party insurers, and losses in excess of
$35,000,000 are not covered and are the responsibility of the City. The City is self-insured for
workers compensation claims and losses up to $350,000 per occurrence. The City is covered
for claims between $350,000 and $5,000,000 as a member of the California Joint Powers
Insurance Authority LACWX. CSAC, EIA also provides excess workers compensation and
commercial coverage between $5,000,000 and $45,000,000 through reinsurance
arrangements. The City has stated that settled claims have not exceeded commercial
coverage in any of the past four fiscal years.
The claims liability of $1,207,928 (for both workers compensation and liability) reported
in Long-Term Debt as of June 30, 2009 is based on the requirements of GASB Statement No.
30, which requires that a liability for claims be reported if information prior to the issuance of the
financial statements indicates that it is probable that a liability has been incurred at the date of
the financial statements and the amount of the loss can be reasonably estimated. The City has
designated in the General Fund net assets of $2,862,894 for estimated self-insurance.
Retirement Program
The City and the Water District have entered into a total of four (4) separate defined
benefit pension plans covering miscellaneous and safety employees. As of June 30, 2003, the
Water Miscellaneous Plan, the City Fire Safety Plan and the City Lifeguard Plan were placed
into cost sharing pools. The City's Miscellaneous plan provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plan members and
A-10
ATTACHMENT 5
Draft of 5/3/10
beneficiaries. The Plans are part of the Public Agency portion of the California Public
Employees Retirement System ("PERS"), a multiple-employer public employee retirement
system that acts as a common investment and administrative agent for participating public
entities within the State of California. A menu of benefit provisions as well as other
requirements are established by State statutes within the Public Employees' Retirement Law.
The City selects optional benefit provisions from the benefit menu by contract with PERS and
adopts those benefits through local ordinance. PERS issues a separate comprehensive annual
financial report. Copies.of the PERS annual financial report may be obtained from the PERS
Executive Office, 4000 P Street, Sacramento, CA 95814.
Participants in the City are required to contribute 8% (9% for safety employees) of their
annual covered salary. The City pays 3.3% while employees meet the other 4.7% of the PERS
contribution for miscellaneous employees. The City is required to contribute at an actuarially
determined rate. The rate for Fiscal Year 2000/01 was 7% for non-safety employees, 9% for
police employees and 9% for fire employees, of annual covered payroll. The contribution
requirements of plan members and the City are established and may be amended by PERS.
The system is funded by a combination of employer and employee contributions. The
City pays employer and a portion of employee costs for all full-time and regular part-time
employees. The City's share of the cost of the Miscellaneous and Safety plans was $2,864,467
for Fiscal Year 2006/07, $2,891,341 for Fiscal Year 2007/08, $3,021,544 for Fiscal Year
2008/09, and is budgeted to be $3,128,000 for Fiscal Year 2009/10. As of June 30, 2008 (the
most recent information available from PERS), the City's Miscellaneous Plan reflected an
unfunded liability of approximately $11.2 million.
Post Retirement Health Benefits
During the year ended June 30, 2009, the City implemented GASB Statement No. 45
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions, which changed the accounting and financial reporting used by local government
employers for other post-employment benefits ("OPEB"). Previously, the costs of such benefits
were generally recognized on a "pay-as-you-go" basis.
The City provides postretirement health care benefits through the PERS healthcare
program ("PEMHCA") to eligible employees who retire directly from the City. The City pays the
cost for lifetime retiree and dependent medical benefits (average premium for PERS health
plans available in the County) for former Encinitas Fire Protection District employees hired
before March 16, 1995. Other retirees receive the PEMHCA minimum benefit. There currently
are 35 former Fire Protection District and 39 former City employees currently receiving benefits.
The City has elected to join the California Employers' Retiree Benefit Trust (the "Trust")
in accordance with GASB No.43, which provides a means to fund the Annual Required
Contribution (ARC) OPEB obligations. The City makes an annual contribution to the Trust, pays
benefits either directly to retirees or through PEMHCA during the year, and then seeks
reimbursement for these pay-as-you-go expenses from the Trust. The contributions of the City
to the Trust are established by City Council action. The contribution requirements are
established via an actuarial valuation of the City's Retiree Healthcare Plan as of June 30, 2007,
performed in conformance with the GASB 43 and GASB 45 requirements. The required
contribution is measured on an accrual basis rather than on a pay-as-you-go. The City
contributed $857,000 at June 30, 2009. The actuarial cost method used for determine the
benefit obligations is the entry age cost method. The valuation is determined using a discount
A-11
ATTACHMENT 5
Draft of 5/3/10
rate of 7.75%. The actuary used the following assumptions: medical premiums would increase
by 10% to 11 % depending on type of plan; assumed the average retirement for City employees
to be 60 years of age. The unfunded actuarial accrued liability is being amortized over a closed
thirty year period. The City will fund the full annual required contribution during each fiscal year
and will deposit the funds with the California Employer's Retiree Benefit Trust Fund.
The annual OPEB cost is referred to as the Annual Required Contribution (ARC). The
ARC represents a level of funding that, if paid on an on-going basis, is projected to cover
normal costs each year and to amortize any unfunded actuarial liability over a maximum of 30
years. For fiscal year 2008-2009, the City's annual OPEB contribution to the trust of $857,000
was equal to the ARC. The ARC equaled the City's contributions which resulted in a zero
OPEB obligation at the end of the year.
As of June 30, 2007 (the most recent information available from PERS), the City's
OPEB unfunded liability was approximately $10 million.
Outstanding Lease Debt
The City has executed a number of capital lease and other obligations payable from the
City General Fund (see APPENDIX B hereto). See "DEBT SERVICE SCHEDULE" above for
the annual debt service requirements of the Bonds. The following table shows the City's debt
service requirements to maturity for prior certificates of participation and capital lease
obligations payable from the City General Fund (including payment on the Prior Bonds).
TABLE A-7
CITY OF ENCINITAS
CURRENT OUTSTANDING DEBT SERVICE REQUIREMENTS TO MATURITY
(GENERAL FUND)
Fiscal Year
General Fund
Ending June 30
Payments
2010
$4,278,232
2011
4,226,871
2012
4,159,197
2013
3,927,144
2014
3,827,201
2015 & Beyond
57,638,111
TOTAL $78,056,756
Source: City Finance Department.
City Financial Data
The following tables provide a three-year history of the City's Comparative Balance
Sheets, and summarize General Fund revenues, expenditures, transfers, and ending fund
balances for the City for Fiscal Years 2006/07 through 2008/09. See also "Budgetary Process
and Current Budget" above for estimated revenues and expenses for the current Fiscal Year.
TABLE A-8
CITY OF ENCINITAS
A-12
ATTACHMENTS
Draft of 5/3/10
GENERAL FUND COMPARATIVE BALANCE SHEET
(As of June 30)
2006/07
2007/08
2008/09
Assets:
Cash and investments
$40,285,331
$48,960,926
$46,070,220
Receivables
3,464,798
3,702,931
3,427,700
Due from other funds
701,675
696,036
511,951
Other assets
3,325,189
2,992,670
2,660,151
Sales tax receivable
837,848
828,239
760,710
Cash and investments with fiscal agent
10,242,397
1,326,660
626,348
Total Assets
$58,857,238
$58,507,462
$54,057,080
Liabilities and Fund Equity:
Liabilities:
Accounts payable & accrued liabilities
$3,181,432
$3,285,193
$2,387,429
Deferred revenue
1,163,395
817,151
1,534,931
Deposits and other liabilities
2,826,722
3,277,985
2,599,436
Total Liabilities
$7,171,549
$7,380,329
$6,521,796
Fund Equity:
Reserved $15,196,796 $6,210,167 $5,255,137
Unreserved
Designated 29,514,308 35,790,162 38,413,388
Undesignated 6,974,585 9,126.804 3.866.759
Total Fund Equity $51,685,689 $51,127,133 $47,535,284
Total Liabilities and Fund Equity $58,857,238 $58,507,462 $54,047,080
A-13
ATTACHMENT 5
Draft of 5/3/10
TABLE A-9
CITY OF ENCINITAS
STATEMENT OF GENERAL FUND REVENUES, EXPENDITURES AND BALANCES
(Fiscal Year Ending June 30)
Revenues:
Taxes and assessments
Intergovernmental
Charges for service
Fines, forfeitures and penalties
Use of money and property
Other
Total Revenues
Expenditures:
Current:
General government
Public safety
Public works
Planning and building
Engineering services
Parks and recreation
Total Expenditures
Excess (Deficiency) of Rev. Over Exp.
Other Financial Sources (Uses):
Proceeds of debt
Bond discounts
Transfers In
Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances, Beginning
Fund Balances, Ending
2006/07
2007/08
2008/09
$43,813,376
$45,283,528
$45,544,779
782,139
1,393,590
1,465,883
6,973,457
7,189,773
5,888,231
949,606
884,446
746,023
3,092,149
2,890,895
1,593,369
515,038
570.856
535,285
56,125,765
58,213,088
55,773,570
9,558,367
11,858,720
12,970„108
20,537,807
20,758,533
21,533,344
1,178,304
2,083,459
2,511,731
3,826,565
4,020,288
3,589,360
3,078,645
3,972,242
3,986,859
5,318,816
5,585.446
5.811.778
43,498,504
48,278,688
50,403,180
12,627,261
9,934,400
5,370,390
20,000,000
2,100,000
0
(300,000)
0
0
441,529
1,192,243
466,283
(22,042,418)
113,785.1991
(9,428.522)
(1,900,889)
(10,492,956)
(8,962,239)
10,726,372
(558,556)
(3,591,849)
40.959.317
51685,689
51.127.133
$47 535.2$4
Source: City Audited Financial Statements.
A-14
ATTACHMENT 5
Draft of 5/3/10
Direct and Overlapping Debt
Contained within the City are numerous overlapping local agencies providing public
services. These local agencies have outstanding obligations issued in the form of general
obligation, lease, revenue and special assessment bonds. The following is a listing of direct
and overlapping bonded debt on property in the City together with lease obligation debt of
agencies in the area, as of April 1, 2010.
DIRECT AND OVERLAPPING DEBT
CITY OF ENCINITAS
2009-10 Assessed Valuation: $11,338,887,373
OVERLAPPING TAX AND ASSESSMENT DEBT:
%Applicable
Debt 411/10
Metropolitan Water District
0.627%
$ 1,656,659
Cardiff School District
100.
8,31198
Encinitas Union School District
67.981
10,607,651
San Dieguito Union High School District Community Facilities
1.920-100.
15,249,877
Districts
City of Encinitas Community Facilities District No. 1
100.
37,830,000
City of Encinitas 1915 Act Bonds
100.
510,000
Olivenhain Municipal Water District, Assessment District No.
25.142
4,231,399
96-1
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
$78,400,784
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations
3.257%
$13,731,838
San Diego County Pension Obligations
3.257
27,798,975
San Diego County Superintendent of Schools Obligations
3.257
690,077
Mira Costa Community College District Certificates of
14.675
539,306
Participation
Encinitas Union School District Certificates of Participation
67.981
421,482
City of Encinitas Certificates of Participation
100.
44,440,000(')
TOTAL DIRECT AND OVERLAPPING GENERAL FUND
$87,621,678
DEBT
COMBINED TOTAL DEBT
$166,022,462(2)
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation
bonds and non-bonded capital lease obligations.
Ratios to 2009-10 Assessed Valuation:
Combined Direct Debt ($44,440,000) .............0.39%
Total Overlapping Tax and Assessment Debt 0.69%
Combined Total Debt ..................................1.46%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/09: $0
Source: California Municipal Statistics, Inc.
A-15
ATTACHMENT 5
Draft of 5/3/10
GENERAL DEMOGRAPHIC INFORMATION
Assessed Valuations
In California, property which is subject to ad valorem taxes is classified as "secured" or
"unsecured." Secured and unsecured property are entered on separate parts of the
assessment roll maintained by the county assessor. The secured classification includes
property on which any property tax levied by the County becomes a lien on that property
sufficient, in the opinion of the County assessor, to secure payment of the taxes. Every tax
which becomes a lien on secured property has priority over other liens (except certain federal
claims) on the secured property, regardless of the time of the creation of other liens. A tax
levied on unsecured property does not become a lien against the taxes on unsecured property,
but may become a lien on certain other property owned by the taxpayer. While the County of
San Diego has adopted a Teeter Plan relating to property tax disbursements, the City has
elected not to participate.
Property taxes on the secured roll are due in two installments, on November 1 and
March 1. If unpaid, such taxes become delinquent on December 10 and April 10, respectively,
and a 10% penalty attaches to any delinquent payment. If such taxes remain unpaid as of
June 30 of the fiscal year in which the taxes are levied, the property securing the taxes may
only be redeemed by a payment of the delinquent taxes and the delinquency penalty, plus costs
and a redemption penalty of 1-1/2% per month from the original June 30th date to the time of
redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted properties
are thereafter subject to sale by the county tax collector as provided by law.
Property taxes on the unsecured roll are due as of the January 1 lien date and become
delinquent if unpaid by August 31. A 10% penalty attaches to delinquent taxes on property on
the unsecured roll, and an additional penalty of 1-1/2% per month begins to accrue on
November 1. The taxing authority has four ways of collecting unsecured personal property
taxes: (1) a civil action against the taxpayer; (2) filing of a certificate in the office of the county
clerk specifying certain facts in order to obtain a judgment lien on certain property of the
taxpayer; (3) filing a certificate of delinquency for record in the county recorder's office in order
to obtain a lien on certain property of the taxpayer; and (4) secure and sale of personal
property, improvements or possessory interests belonging or assessed to the assessee.
A-16
ATTACHMENT 5
Draft of 5/3/10
The following table shows the assessed valuation of the City from Fiscal Year 1996/97
through Fiscal Year 2009/10.
TABLE A-10
CITY OF ENCINITAS
SCHEDULE OF ASSESSED PROPERTY
(As of June 30)
Year
Secured
Util i1)
Unsecured
Total
1997
$4,145,250,236
$2,028,780
$77,026,252
$4,224,305,268
1998
4,282,179,976
2,235,497
81,601,812
4,366,017,285
1999
4,598,429,761
3,248,989
107,869,719
4,709,548,469
2000
5,029,321,477
3,539,663
120,050,833
5,152,911,973
2001
5,555,651,747
3,615,230
124,132,927
5,683,399,904
2002
6,094,943,187
3,687,679
121,710,903
6,220,341,7139
2003
6,671,155,770
3,321,931
122,276,356
6,796,754,057
2004
7,380,752,536
2,870,543
129,666,206
7,513,289,285
2005
8,166,719,411
2,732,083
130,170,382
8,299,621,876
2006
9,012,953,568
2,785,704
137,229,829
9,152,959,101
2007
9,874,321,949
2,609,179
142,971,280
10,019,902,408
2008
10,539,452,529
0
149,460,274
10,688,912,803
2009
11,097,895,097
0
160,815,739
11,258,710,836
2010
11,175,029,435
0
163,857,938
11,338,887,373
Source: California Municipal Statistics, Inc.
(1) Change in 2008 reflects legislative alteration of how certain rail property is allocated
A-17
ATTACHMENT 5
Draft of 5/3/10
The following table shows assessed valuation and parcel by Land Use in Fiscal Year
2009/10.
TABLE A-11
CITY OF ENCINITAS
ASSESSED VALUE BY LAND USE
Non-Residential:
Agricultural
Commercial
Vacant Commercial
Industrial
Vacant Industrial
Recreational/Open Space
Government/Social/Institutional
Miscellaneous
Subtotal Non-Residential
Residential:
Single Family Residence
Condominium/Townhouse
Mobile Home
Mobile Home Park
2-4 Residential Units
5+ Residential Units/Apartments
Miscellaneous Residential
Vacant Residential
Subtotal Residential
TOTAL
2009/10
Assessed
% of
No. of
% of
Valuation(')
Total
Parcels
Total
$ 50,811,328
0.45%
110
0.51%
1,041,209,209
9.32
640
2.97
96,923,65
0.87
70
0.32
36,254,548
0.32
19
0.09
353,090
0.00
3
0.01
4,400,999
0.04
10
0.05
14,745,882
0.13
13
0.06
8,127,278
0.07
22
0.10
1,252,825,987
11.21
887
4.11
7,560,328,093
67.65
14,618
67.74
1,054,803,165
9.44
3,508
16.26
28,753,734
0.26
255
1.18
20,244,807
0.18
11
0.05
797,018,750
7.13
1,460
6.77
325,876,555
2.92
119
0.55
8,983,469
0.08
56
0.26
126,194,875
1.13
665
3.08
9,922,203,448
88.79
20,692
95.89
$11,175,029,435
100.00%
21,579
100.00%
Source: California Municipal Statistics, Inc.
(1) Local Secured Assessed Valuation; excluding tax-exempt property.
A-18
ATTACHMENT 5
Draft of 5/3/10
Largest Taxpayers
A list of the principal property taxpayers in the City is set forth below:
TABLE A-12
CITY OF ENCINITAS
PRINCIPAL SECURED PROPERTY TAXPAYERS(')
(Fiscal Year 2009/10)
Property Owner
Assessed Valuation
% of Total(')
Collwood Pines Apartments LP
$ 70,979,046
0.64%
PK III Encinitas Marketplace LP
39,717,270
0.36
Encinitas Town Center Associates I LLC
33,832,180
0.30
Belmont Village Cardiff LP
33,546,200
030
North Coast Health Center LLC
32,011,781
029
WRI El Camino LP
31,813,910
0.28
Lofts at Moonlight Beach LLC
31,155,758
0.28
Urschel Laboratories Inc.
22,402,164
0.20
ASN Encinitas LLC
22,347,830
0.20
SDCC Properties LLC
21,848,400
0.20
KSL Encinitas Resort Corp.
21,536,280
0.19
Vons Companies Inc.
21,392,678
0.19
Keith B. & Sara S. Harrison
20,106,585
0.18
Quail Pointe Apartments LP
18,566,995
0.17
Pacific Station Property LLC
18,117,684
0.16
Encinitas Plaza LP
17,278,863
0.15
Sterling Family Trust
17,102,759
0.15
PLENC El Camino LLC
16,802,557
0.15
Home Depot USA Inc.
16,475,907
0.15
Hughes & Encinitas Ltd.
16,348.444
0.15
TOTALS
$523,383,291
4.69%
Source: California Municipal Statistics, Inc.
(1) 2009/10 Local Secured Assessed Valuation: $11,175,029,435
A-19
ATTACHMENT 5
Draft of 5/3/10
Employment
The following table lists the major employers in northern San Diego County (information
specific to the City is not available) as of June 30, 2009.
TABLE A-13
CITY OF ENCINITAS
LARGEST EMPLOYERS
(As of June 30, 2009)
Company
Marine Corp. Base, Camp Pendleton
General Atomics
Northrop Grumman
Poway Unified School District
Pomerado Hospital
Palomar College
Palomar Pomerado Health
Callaway Golf Co.
Sony Electronics Inc.
Oceanside Unified School District
Business Category Employees
Military
60,000
Defense/Technology
4,200
Manufacturing
4,165
Public School District
3,404
Hospital
3,200
Public College
3,070
Medical Center
3,000
Manufacturing
2,500
N/A
2,500
Public School District
2,300
Source: The Daily Transcript Source Book-2009.
Commercial Activity
A summary of retail sales occurring in the City from 2000 through the first quarter of
2009 are shown below.
TABLE A-14
CITY OF ENCINITAS
TAXABLE TRANSACTIONS
(000's Omitted)
Calendar
Total
Percentage
Year
Taxable Sales
Change
2000
$797,643
2001
834,410
4.61%
2002
902,474
8.16
2003
952,439
5.54
2004
1,012,199
6.27
2005
1,027,460
1.51
2006
1,023,800
(0.36)
2007
996,299
(2.69)
2008
955,823
(4.06)
2009('
204,490
N/A
Source: State Board of Equalization
(1) First Quarter only.
A-20
ATTACHMENT 5
Draft of 5/3/10
Building Activity
The following table summarizes the number of residential building permits issued in the
City from Fiscal Year 2005/06 through 2009/10.
TABLE A-15
CITY OF ENCINITAS
NEW BUILDING PERMITS
(As of June 30)
Fiscal Year
Single Family
June 30
Residential Permits
2002
373
2003
311
2004
186
2005
159
2006
145
2007
107
2008
98
2009
86
2010("
29
Source: City of Encinitas.
(1) Through March 31, 2010.
A-21
ATTACHMENT 6
OFFICIAL NOTICE OF SALE
[$20,000,000]
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REFUNDING REVENUE BONDS, SERIES A
(PARK PROJECT)
Date of Sale
, May , 2010
on the MumAuction website at website address
www.MuniAuction.com
Between 9:00 a.m. and 9:30 a.m. Pacific Standard Time
For further information, please contact:
Northcross Hill & Ach, LLC
One Post Street, Suite 2525
San Francisco, CA 94104
Phone: 415-506-3400
Fax: 415-506-3401
Attn: Mark Northcross or G. Craig Hill
Preliminary, subject to change
ATTACHMENT 6
OFFICIAL NOTICE OF SALE
[$20,000,0001
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REFUNDING REVENUE BONDS, SERIES A
(PARK PROJECT)
NOTICE IS HEREBY GIVEN that all-or-none bids will be received by the Encinitas Public Financing
Authority (the "Authority") for the purchase of [$20,000,0001 aggregate principal amount designated
"Encinitas Public Financing Authority 2010 Lease Refunding Revenue Bonds, Series A (Park Project)"
(the "Bonds"). All bids must be submitted on the MuniAuction website ("MuniAuctiort") at website
address www.MuniAuction.com between 9:00 a.m. and 9:30 a.m. (PST) on May
2010. To bid, bidders must have (1) completed the registration form on the MuniAuction website, and (2)
requested and received admission to the Authority's auction (as described under "Registration and
Admission to Bid via MuniAuction" below).
Bids for the purchase of the Bonds will be received and considered subject to the terms and conditions
described herein.
Right to Change Timing and Terms of Sale. The Authority reserves the right to amend this Official
Notice of Sale at any time prior to the date and time for receipt of bids by publishing the amendments on
the Amendments Page of MumAuction or via The Thomson Municipal News Service andlor Bloomberg
wire service.
Issue. [$20,000,00012010 Lease Refunding Revenue Bonds, Series A, bearing interest from the Date of
Delivery, which is anticipated to be on or about , 2010, in full book-entry only form in
denominations of $5,000 and any integral multiple thereof, maturing serially through April 1, . The
Bonds are subject to optional redemption prior to maturity. Prospective bidders should note that the terms
of sale permit adjustment of individual maturities. See "Terms of Sale" herein.
Interest Rate. Interest will be calculated on the basis of a 360-day year composed of twelve (12) 30-day
months. The Bonds shall bear interest from their date at a rate or rates to be determined at the sale thereof
Interest on the Bonds shall be payable semiannually on October I and April 1 of each year (the "Interest
Payment Dates") commencing October 1, 2010. Bidders may specify any number of separate interest
rates, and any rate may be repeated as often as desired; provided, however:
(1) An interest rate on any single maturity may not exceed six percent (6.00%) per
annum;
(ii) Each interest rate specified must be in a multiple of 1/20 or 1/8 of 1 percent;
(iii) the true interest cost to maturity on the Bonds shall not exceed
(iv) A zero rate of interest cannot be specified;
(v) Each Bond shall bear interest from its date to its stated maturity date at the
interest rate specified in the bid;
(vi) All Bonds of the same maturity shall bear the same rate of interest;
ATTACHMENT 6
(vi) The interest rate on any maturity shall not be less than the interest rate on any
prior maturity; and
(vii) No bid will be accepted which provides for the cancellation and surrender of any
interest payment or for the waiver of interest or other concession by the bidder as a substitute for
payment in full of the purchase price of the Bonds.
Bids which do not conform to the terms of this paragraph will be rejected
Payment. Principal of and interest on the Bonds will be payable through Union Bank of California,
Los Angeles, California, as Trustee (the "Trustee"), in lawful money through the facilities of The
Depository Trust Company, or its nominee.
Purpose of Issue. The proceeds of the sale of the Bonds will be used to (i) provide funds to acquire real
property in the City of Encinitas to be used for municipal purposes, (ii) fund a Reserve Account for the
Bonds, (iii) pay capitalized interest on the Bonds, and (iv) to pay certain costs of issuing the Bonds.
Denomination. The Bonds will be executed and delivered in fully registered form without coupons, in the
denominations of $5,000 each or any integral multiple thereof within a maturity, and numbered
consecutively upward in order of authentication.
Date of Bonds. The Bonds will be dated the Date of Delivery, which is anticipated to be on or about June
, 2010.
Maturities'. The Bonds will mature on the dates and in the amounts shown below subject to adjustments
as described under the caption "Adjustment of Principal Amounts."
Maturity Principal
April 1 Amount(2)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Maturity Principal
Amount Amount(2)
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Adjustment of Principal Amounts. The principal amounts set forth in this Official Notice of Sale
reflect certain estimates of the Authority and its financial advisor with respect to the likely interest rates
of the winning bid and the premium/discount contained in the winning bid.
The total principal amount of the Bonds and the principal amounts payable in each of the years set forth
above are subject to adjustment in $5,000 increments to reflect the actual interest rates and any
(1) Preliminary, subject to change. See also "Adjustment of Principal Amounts" herein.
(2) These maturities may be combined into one or two term bonds at the option of the successful bidder.
ATTACHMENT 6
premium/discount contained in the winning bid, and to maintain substantially level annual debt service
payments on the Bonds. The successful bidder will be notified of any adjustment in principal amounts
prior to the time the Bonds are awarded. A successful bidder may not withdraw its bid as a result of any
changes made within these limits.
Optional Redemption. Bonds maturing on or before April 1, are not subject to optional
redemption prior maturity. The Bonds maturing on April 1, and thereafter are subject to
redemption prior to their stated maturity at the option of the Authority, as a whole or in part on any date,
by such maturities as are selected by the Authority from any available source of funds on or after April 1,
at the following redemption prices (expressed as a percentage of the principal amount of the
Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption.
Redemption Periods Redemption Price
April 1, through March 31,
April 1, through March 31,
April 1, and thereafter
If the successful bidder (the "Purchaser") designates principal amounts of the Bonds to be combined into
one or more term bonds, each such term bond shall be subject to mandatory redemption prior to maturity
in part by lot from monies required to be deposited by the Authority in the Sinking Account established
for the Bonds at a redemption price equal to the principal amount thereof plus accrued interest to the date
fixed for redemption, without premium.
Book-Entry Only. The Bonds when issued will be registered in the name of CEDE & CO., as nominee of
The Depository Trust Company, New York, New York, and will be initially issued as one bond for each
of the maturities of the Bonds. Payments of principal and interest will be paid by the Trustee to DTC for
subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of
the Bonds.
Security. The Bonds are payable from Revenues received by the Authority, consisting principally of
Lease Payments made by the City pursuant to a Lease Agreement, dated as of May 1, 2010, between the
Authority and the City. The City has covenanted in the Lease Agreement to make all Lease Payments
provided for therein, to include all such payments in its annual budgets, and to make the necessary annual
appropriations for such rental payment. The City's obligations to make Lease Payments is subject to
abatement in the event of damage to, destruction or condemnation of, or title defects relating to, the Site
subject to the Lease Agreement. See the Preliminary Official Statementfor a description ofRevenues and
the security, for the Bonds.
THE BONDS ARE NOT A DEBT, OBLIGATION OR LIABILITY OF THE CITY, THE STATE OF
CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY),
NOR DO THEY CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OR THE TAXING
POWER OF ANY OF THE FOREGOING (INCLUDING THE AUTHORITY AND THE CITY). THE
AUTHORITY DOES NOT HAVE ANY TAXING POWER. THE BONDS DO NOT CONSTITUTE
AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR -STATUTORY
DEBT LIMITATION OR RESTRICTION. THE CITY'S OBLIGATION TO MAKE LEASE
PAYMENTS IS AN OBLIGATION PAYABLE FROM THE CITY'S GENERAL FUND OR ANY
OTHER SOURCE OF FUNDS LEGALLY AVAILABLE TO THE CITY TO MAKE LEASE
PAYMENTS. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS DOES NOT
CONSTITUTE A DEBT OF THE CITY WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMIT OR RESTRICTION OR ANY OBLIGATION FOR WHICH THE CITY IS
ATTACHMENT 6
OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION, OR FOR WHICH THE CITY
HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.
Reserve Fund. The Authority as agreed to establish and maintain so long as any Bonds are outstanding a
Reserve Account, in an amount equal to the Reserve Requirement, which is an amount equal to the least
of (i) 10% of the principal amount of the Bonds (less original issue discount if in excess of two percent of
the stated redemption amount at maturity) (ii) the maximum annual Debt Service, or (iii) one hundred
twenty-five percent (125%) of the average annual debt service on the Bonds.
Ratings. Standard & Poor's and Moody's Investors Service have assigned their municipal bond rating of
and respectively, to the Bonds notwithstanding the delivery of the insurance policy. The
ratings reflect only the views of the respective rating organization, and an explanation of the significance
of such ratings may be obtained from such organizations. There is no assurance that the ratings will
continue for any given period of time or that such ratings will not be revised downward or withdrawn
entirely by the rating agencies that issued them, if, in the judgment of such rating agencies, circumstances
so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the
market price of the Bonds.
Legal Opinion. The legal opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel,
approving the validity of the Bonds and stating that interest with respect to the Bonds is excludable from
gross income under Section 103 of the Code (as defined in the Official Statement) and such interest is
also exempt from personal income taxes of the State of California under present State income tax laws,
will be furnished to the Purchaser at the time of delivery of the Bonds at the expense of the Authority. A
copy of such opinion, certified by an officer of the Authority at the time of delivery by his facsimile
signature, will be printed on the back of or delivered with each Bond. No charge will be made to the
Purchaser for such opinion, printing or certification.
Delivery of Securities. Delivery of the Bonds will be made to the Purchaser at The Depository Trust
Company in New York, New York (or at any other mutually agreeable location) on or about
2010. Payment must be made in cash, Federal Reserve Bank funds, or other immediately available
funds.
CUSIP Numbers. It is anticipated that CUSIP identification numbers will be assigned to the Bonds. It
shall be the responsibility of the Purchaser to obtain CUSIP numbers. Neither the failure to print such
numbers on any Bond nor any error with respect thereto shall constitute cause for failure or refusal by the
Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this Official Notice
of Sale. The CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility
of and shall be paid for by the Purchaser.
California Debt and Investment Advisory Commission Fee. Bidders are advised that, pursuant to
Section 8856 of the California Government Code, it will be the responsibility of the Purchaser to pay the
statutory fee to the California Debt and Investment Advisory Commission.
No Litigation Certificate. At the time of delivery of the Bonds, the Purchaser will receive a certificate
of the Authority to the effect that there is no litigation pending or, to the best of such officer's knowledge,
threatened against the Authority affecting the validity of the Bonds.
Continuing Disclosure. In order to assist bidders in complying with Securities and Exchange
Commission Rule 15c2-12(b)(5), the Districts will undertake, pursuant to a Continuing Disclosure
Agreement, to provide annual reports and notices of certain events by not later than March 1 after the end
of their fiscal year (presently June 30) in each year, commencing with the report for the 2000/01 fiscal
4
ATTACHMENT 6
year. A description of this undertaking is set forth in the Preliminary Official Statement and will also be
set forth in the final Official Statement.
Purchaser's Closing Certificate. The Purchaser must deliver such certificates to the Authority as may be
required by Bond Counsel dated the date of execution and delivery of the Bonds, indicating (among other
matters): (i) receipt of the Bonds; (ii) the initial offering price at which not less than ten percent (10%) of
the Bonds were sold to the public (excluding bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters or wholesalers), (iii) the "yield" on the Bonds as calculated in
accordance with the Internal Revenue Code of 1986, as amended, and (iv) such other information as may
be required to assist the Authority in filing the required Internal Revenue Service Form 8038-G for the
Bonds.
Preliminary Official Statement and Final Official Statement. The Preliminary Official Statement,
dated , 2010 distributed in connection with the sale of the Bonds, as the same may be
supplemented on or prior to the bid date (the "Preliminary Official Statement"), has been deemed final by
the Authority for purposes of Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), but
is subject to revision, amendment and completion in a final Official Statement (the "Official Statement")
as provided in the Rule. Within seven (7) business days after the award of the bid, the Authority will
furnish to the Purchaser, at no charge, up to 150 copies of the Official Statement. Additional copies will
be available at the expense of the Purchaser. The Preliminary Official Statement may also be viewed on
MuniAuction. Any questions concerning MumAuction should be directed to MuniAuction, Inc. at (412)
391-7686.
TERMS OF SALE
Form of Bid. Bids may be submitted electronically only, through the MuniAuction website between
9:00 a.m. and 9:30 a.m., Pacific time on Tuesday, , 2010 (or at such other time and date
as may be specified on the MuniAuction website or via Bloomberg Financial Markets or Thomas
Municipal Services).
To bid via the MuniAuction website, bidders must have both (1) completed the registration form on Grant
Street Group's MuniAuction website and (2) requested and received admission to this particular auction,
as described below. The use of MuniAuction is at the bidder's risk and expense, and neither the
Authority, the Financial Advisor nor Bond Counsel has any liability with respect thereto.
Bidders will be notified prior to the scheduled bidding time of their eligibility to bid. Only NASD
registered broker-dealers and dealer banks with DTC clearing arrangements will be eligible to bid.
Bidders who have previously registered with MuniAuction may call MuniAuction at (412) 319-7686
for their ID Number or password.
Rules of MuniAuction. "Rules of MumAuction" can be viewed on MuniAuction and, as amended and
supplemented from time to time, are incorporated herein by reference. Bidders will be required to verify
that they have read the "Rules of MumAuction" prior to submitting bids. In the event of a conflict
between the Rules of MuniAuction and this Official Notice of Sale, the provisions of this Official Notice
of Sale are controlling.
Bidding Details. All bids must be unconditional and submitted on the MuniAuction website at
"http://www.MuniAuction.com". No facsimile, personal delivery bids or bids delivered by any other
method will be accepted. Bidders are permitted to submit bids for the Bonds only in the all-or-none
format. Bids submitted in the maturity-by-maturity format will not be entertained.
5
ATTACHMENT 6
Rank-Order - Bidders may change and submit bids as many times as they like during the auction, so long
as each submitted bid, when compared to the immediately preceding bid of the bidder, results in a lower
true interest cost. The last bid submitted before the end of the auction will be compared to all other final
bids to determine the winning bidder(s). During the bidding, no bidder will see any other bidder's bid,
but each bidder will be able to see the rank order of its bid (e.g., Leader, cover, 3`d, 4`" etc.). During the
auction, bidders will be able to see on the Auction Page whether any bid has been submitted for the
Certificates.
Two-Minute Rule - If a bid becomes a leading bid two (2) minutes prior to the scheduled end of the
auction, the time period for submission of bids will be automatically extended by two (2) minutes from
the time such new leading bid was received by MuniAuction (the "Two-Minute Rule"). The auction end
time will continue to be extended, indefinitely, until a single leading bid remains the leading bid for at
least two minutes.
Cancellation or Postponement of Sale: The Authority reserves the right, in its sole discretion, at any
time to cancel or postpone the public sale of the Bonds. In such event, the Authority will cause notice of
cancellation or postponement to be communicated through the Amendments Page of the MuniAuction
website and through Bloomberg Financial Markets or Thomson Municipal Services as promptly as
practicable. However, no failure to publish such notice or any defect or omission therein will affect the
cancellation or postponement of the public sale of the Bonds. In the event of postponement, any
alternative sale date will be announced through the Amendments Page of the MuniAuction website and
through Bloomberg Financial Markets or Thomson Municipal Services at least 24 hours prior to such
alternative sale date. On any such alternative sale date, any bidder may submit a bid for the purchase of
the Bonds in conformity in all respects with the provisions of this Official Notice of Sale, except of the
date of sale and except for the changes announced through the Amendments Page of the MuniAuction
website and through Bloomberg Financial Markets or Thomson Municipal Services at the time the sale
date and time are announced.
Verification. Bidders bidding through MuniAuction should verify the accuracy of their final bids and
compare them to the winning bids reported on the MumAuction Observation Page immediately after the
auction.
Determination of Best Bid: The Bonds will be awarded to the bidder whose proposal produces the
lowest true interest rate, determined as hereinafter described. The true interest rate specified in any bid
will be that rate which, when used in computing the present worth of all payments of principal and
interest to be paid on all Bonds from the date of original delivery thereof (assumed for computational
purposes to be June 1, 2010), to their respective maturity dates or mandatory sinking fund prepayment
dates, produces an amount equal to the purchase price specified in such bid. For purposes of computing
the true interest rate represented by any proposal, the purchase price specified in such proposal will be
equal to the par amount of the Bonds less any discount or plus any premium specified in such proposal,
and the true interest rate will be calculated by the use of a semiannual interval of compounding interest
based on the Interest Payment Dates for the Bonds.
Prices. Bidders must specify a purchase price of not less than ninety-eight and one-half percent (98.50%)
of the aggregate principal amount of the Bonds.
Right of Rejection. The Authority reserves the right, in its discretion, to reject any and all bids and to
waive any irregularity or informality in any bid.
6
ATTACHMENT 6
Prompt Award. The Authority will take action awarding the Bonds or rejecting all bids not later than 24
hours after the hour designated above for the opening of bids, unless such time of award is waived by the
Purchaser.
Delivery and Payment. It is estimated that delivery of the Bonds will be made to the Purchaser on or
about , 2010. Payment of the purchase price (less the amount of the bid check mentioned
below) must be made in fluids immediately available to the Authority.
Right of Cancellation. The Purchaser will have the right at its option to withdraw its bid if the Bonds are
not executed and tendered for delivery within sixty (60) days from the date of sale thereof, and in such
event, the Purchaser will be entitled to the return of the good faith deposit accompanying its bid.
Good Faith Deposit. A good faith deposit (the "Deposit") in the form of a certified or cashier's check or
a financial surety bond in the amount of Two Hundred Twenty Thousand Dollars ($200,000), payable to
the order of the Authority, is required for each bid to be considered. If a financial surety bond is used, it
must be from an insurance company licensed to issue such a bond in the State of California, and such
bond must be submitted to the Authority (in care of Northcross, Hill & Ach LLC) prior to the opening of
the bids. The financial surety bond must identify each bidder whose Deposit is guaranteed by such
financial surety bond. If the Bonds are awarded to a bidder utilizing a financial surety bond, then that
Purchaser is required to submit its Deposit to the Authority in the form of a cashier's check (meeting the
requirements set forth above) or by wire transfer not later than 3:30 p.m. Pacific Standard Time, on the
next business day following the award of the Bonds. If such Deposit is not received by that time, the
financial surety bond shall be drawn by the Authority to satisfy the Deposit requirement.
No interest on the Deposit will accrue to the Purchaser. The Deposit will be applied to the purchase
price of the Bonds. In the event the Purchaser fails to honor its accepted bid, the Deposit will be applied
by the Authority as described in the following paragraph.
If a check is utilized as the Deposit, the check must accompany each accepted bid and such check may be
cashed after the award of Bonds and applied to the purchase price or, if such bid is accepted but the
Purchaser fails to perform (unless such failure of performance is caused by any act or omission of the
Authority), then the Authority shall retain such deposit and it will be applied by the Authority in partial
satisfaction of whatever actual damages the Authority may suffer by reason of the Purchaser's failure to
perform hereunder in accordance with the terms of the sale. In such instances, should the Authority's
actual damages be determined to be less than said amount, thirty (30) days after any such determination
by a court having jurisdiction thereof becomes final, the balance of this amount shall be returned to the
Purchaser without interest. Should the Purchaser fail to perform hereunder, the Authority may also
recover all costs relating thereto, including attorney's fees. Checks accompanying unaccepted bids will be
returned promptly to each unsuccessful bidder via U.S. mail to the address indicated on such bidder's bid
form unless other arrangements have been made with Northcross, Hill & Ach LLC.
Certificate Regarding Reoffering. The Purchaser shall advise the Authority no later than one hour after
award of the bid of such information regarding the reoffering price or prices at which the Bonds are
reoffered to the general public as shall enable the Authority to comply with the Internal Revenue Code of
1986 and to make any adjustments in the principal amount of the Bonds as described under "Adjustments
of Principal Amounts."
Underwriting Group. Each bidder is requested to furnish the names of all joint managers participating
in the bid on the official Bid Form. The Purchaser will be required to submit a list of all syndicate
members in addition to the managers not later than 24 hours after receiving a verbal award.
7
ATTACHMENT 6
Additional Information Available. Requests for copies of the Official Statement pertaining to the
Bonds, the Official Notice of Sale and Bid Form, or for other information concerning the Authority or the
Bonds should be addressed to the Authority's financial advisor: Northcross, Hill & Ach, LLC, One Post
Street, Suite 2525, San Francisco, CA 94104, Phone (415) 506-3400, Fax (415) 506-3401.
ENCINITAS PUBLIC FINANCING AUTHORITY
By: /s/ Phil Cotton
Executive Director
ATTACHMENT 7
NOTICE OF INTENTION TO SELL
APPROXIMATELY $20,000,000
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REFUNDING REVENUE BONDS, SERIES A
(PARK PROJECT)
NOTICE IS HEREBY GIVEN that the Encinitas Public Financing Authority (the
"Authority") intends to offer for public sale on ,
at the hour of 9:30
a.m., California time, at the office of Northcross, Hill & Ach LLC, One Post Street., Suite 2525,
San Francisco, CA 94102, approximately [$20,000,000] principal amount of its bonds designated
"Encinitas Public Financing Authority 2010 Lease Refunding Revenue Bonds, Series A (Park
Project)" (the `Bonds"). The Authority reserves the right to postpone to a later date said public
sale date by announcing such postponement through MuniAuction Website, Bloomberg
Financial Markets or Thomas Municipal Services (the "News Servicer") as soon as practicable
following such postponement and prior to the time bids are to be received. If the sale is
postponed, bids will be received at the place set forth above on the date and at the; time as the
Authority shall determine. Notice of the new date for receipt of bids shall be given by the
Agency's Financial Advisor, Northcross, Hill & Ach, LLC through the News Services prior to
the new time bids are to be received.
NOTICE IS HEREBY FURTHER GIVEN that the Bonds will be offered for public
sale subject to the terms and conditions of the Official Notice of Sale for the Bonds, and copies
of the Official Notice of Sale and of a Preliminary Official Statement relating to the Bonds will
be furnished upon request made to the Authority's Financial Advisors, Northcross, Hill & Ach,
LLC, telephone number (415) 506-3400, telecopy number (415) 560-3401.
Dated: May , 2010
/s/ Phil Cotton
Executive Director, Encinitas Public Financing
Authority
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ATTACHMENT 8
ENCINITAS PUBLIC FINANCING AUTHORITY
2010 LEASE REVENUE REFUNDING BONDS
SERIES A
(PARK PROJECT)
PURCHASE CONTRACT
, 2010
Encinitas Public Financing Authority
505 South Vulcan Ave.
Encinitas, CA 92024-3633
City of Encinitas
505 South Vulcan Ave.
Encinitas, CA 92024-3633
Ladies and Gentlemen:
The undersigned (the "Underwriter") hereby offers to enter into this Purchase Contract
with you, the City of Encinitas (the "City") and the Encinitas Public Financing Authority (the
"Authority"), for the purchase by the Underwriter and the delivery by you of the Bonds specified
below. The Bonds are being issued by the Authority for the purpose of (i) refinancing the
Authority's 2001 Lease Revenue Bonds, Series A (the "Prior Bonds"), (ii) paying the costs of
issuing the Bonds, and (iii) funding a reserve fund for the Bonds. This offer is made subject to
acceptance by you prior to 11:59 p.m., Los Angeles time, on the date hereof. Upon such
acceptance, this Purchase Contract shall be in full force and effect in accordance with its terms
and shall be binding upon you and the Underwriter. All terms not defined herein shall have the
meanings set forth in the Indenture (defined below).
1. Purchase and Sale. Upon the terms and conditions and upon the basis of the
representations, warranties and agreements hereinafter set forth, the Underwriter agrees to
purchase from the Authority, and the Authority agrees to sell to the Underwriter, all (but not less
than all) of the $ aggregate principal amount of the Authority's 2010 Lease Revenue
Refunding Bonds, Series A (Park Project) (the "Bonds"), at the purchase price of $
(being the principal amount of the Bonds, less an Underwriter's discount in the amount of
$ , and [less net original issue discount] [plus net original issue premium] of
$ J
The Bonds will have the maturities and bear interest at the rates set forth on Exhibit A
hereto. The Bonds will be subject to redemption as set forth in the Official Statement herein
described. The Bonds will be dated as described in the Official Statement. The Bonds will be
issued in book-entry form only.
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2. Authorizing Instruments and Law. The Bonds shall be issued pursuant to the
provisions of a resolution (the "Resolution") adopted by the Authority authorizing the issuance of
the Bonds and the Marks-Roos Local Bond Pooling Act of 1985, constituting Section 6584 et
seq. of the California Government Code (the "JPA Act"). The Bonds are issued pursuant to an
Indenture of Trust, dated as of 1, 2010 (the "Indenture"), between the authority and
Union Bank, N.A. (the "Trustee"), and shall be as described in the Indenture.
The Bonds are limited obligations of the Authority payable, on a parity basis, primarily
from and secured by certain revenues (the "Revenues") consisting of certain Lease Payments to
be paid by the City pursuant to an Amended and Restated Lease Agreement (the "Lease
Agreement"), dated as of 1, 2010, between the City and the Authority, for certain real
property and the improvements thereon (the "Leased Premises").
3. Offering the Bonds. The Underwriter agrees to offer all the Bonds to the public
initially at the prices (or yields) set forth on the cover pages of the Official Statement of the
Authority pertaining to the Bonds, dated , 2010 (the Official Statement, together
with all appendices thereto, and with such changes therein and supplements thereto as are
consented to in writing by the Underwriter, are herein called the "Official Statement").
Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to
change the public offering prices (or yields) as it deems necessary in connection with the
marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower
than such initial public offering prices. "Public Offering" shall include an offering to a
representative number of institutional investors or registered investment companies, regardless of
the number of such investors to which the Bonds are sold.
4. Delivery of Official Statement on the Date Hereof. The Authority shall
deliver to the Underwriter two (2) copies of the Official Statement manually executed on behalf
of the Authority by the President, and on behalf of the City by an authorized representative. The
Authority shall also deliver a sufficient number of copies of the Official Statement to enable the
Underwriter to distribute a single copy of each Official Statement to any potential customer of
the Underwriter requesting an Official Statement during the time period beginning when the
Official Statement becomes available and ending on the End Date (defined below). The
Authority shall deliver these copies to the Underwriter within seven (7) business days after the
execution of this Purchase Contract and in sufficient time to accompany or precede any sales
confirmation that requests payment from any customer of the Underwriter. The Underwriter
shall inform the Authority in writing of the End Date, and covenants to file the Official Statement
with the Municipal Securities Rulemaking Board (the "MSRB") on a timely basis.
"End Date" as used herein is that date which is the earlier of:
(a) ninety (90) days after the end of the underwriting period, as defined in SEC
Rule 15c2-12 adopted by the Securities and Exchange Commission on June 28, 1989 ("Rule
15c2-12"); or
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(b) the time when the Official Statement becomes available from the MSRB, but
in no event less than twenty-five (25) days after the underwriting period (as defined in Rule
15c2-12) ends.
The Authority and the City have authorized the use of the Official Statement in
connection with the public offering of the Bonds. The Authority and the City also have
consented to the use by the Underwriter prior to the date hereof of the Preliminary Official
Statement dated , 2010, relating to the Bonds in connection with the public offering of
the Bonds (which, together with all appendices thereto, is herein called the "Preliminary Official
Statement"). Authorized officers of the City and the Authority have certified to the Underwriter
that such Preliminary Official Statement was deemed to be final as of its date for purposes of
Rule 15c2-12, with the exception of certain final pricing and related information referred to in
Rule 15c2-12. The Underwriter has distributed a copy of each Preliminary Official Statement to
potential customers on request.
5. The Closing. At 9:00 A.M., California time, on , 2010, or at such
other time or on such earlier or later business day as shall have been mutually agreed upon by the
Authority, the City and the Underwriter, the Authority will deliver (i) the Bonds in book-entry
form through the facilities of The Depository Trust Company ("DTC") in New York., New York,
and (ii) the closing documents hereinafter mentioned at the offices of Best Best & Krieger LLP,
Riverside, California, or another place to be mutually agreed upon by the Authority, the City and
the Underwriter. The Underwriter will accept such delivery from the Authority. The
Underwriter will pay the purchase price of the Bonds as set forth in Section 1 hereof by wire
transfer of immediately available funds. This payment and delivery, together with the delivery of
the aforementioned documents, is herein called the "Closing."
6. City Representations, Warranties and Covenants. The City represents,
warrants and covenants to the Underwriter that:
(a) The City is a political subdivision of the State of California (the "State"),
duly organized and validly existing pursuant to the Constitution and laws of the State, and has all
necessary power and authority to enter into and perform its duties under the Lease Agreement,
the Continuing Disclosure Agreement, dated as of the Closing (the "Continuing Disclosure
Agreement") between the City and the Trustee, the Escrow Deposit and Trust agreement, dated
as of 1, 2010 (the "Escrow Agreement"), between the City and the Trustee, as escrow
agent for the Prior Bonds, the Official Statement and this Purchase Contract (collectively, the
"City Documents").
(b) To the best knowledge of the City, neither the execution and delivery of
the City Documents, or the approval and execution of the Official Statement or this Purchase
Contract, and compliance with the provisions on the City's part contained therein, nor the
consummation of any other of the transactions herein and therein contemplated, nor the
fulfillment of the terms hereof and thereof, materially conflicts with or constitutes a material
breach of or default under nor materially contravenes any law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other
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ATTACHMENT 8
instrument to which the City is a party or is otherwise subject, nor does any such execution,
delivery, adoption or compliance result in the security interest or encumbrance of any nature
whatsoever upon any of the properties or assets of the City under the terms of any such law,
administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution,
agreement or other instrument, except as provided by the City Documents.
(c) The City Documents have been duly authorized, executed and delivered
by the City, and, assuming due authorization, execution and delivery by the other parties thereto,
constitute legal, valid and binding agreements of the City enforceable in accordance with their
respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or other laws affecting the enforcement of
creditors' rights generally and by the application of equitable principles if sought and by the
limitations on legal remedies imposed on actions against cities in the State of California.
(d) Except as may be required under blue sky or other securities laws of any
state, there is no consent, approval, authorization or other order of, or filing with, or certification
by, any regulatory agency having jurisdiction over the City required for the execution and
delivery of the Bonds or the consummation by the City of the other transactions contemplated by
the Official Statement and this Purchase Contract.
(e) To the best of the knowledge of the City, there is, and on the Closing (as
hereinafter defined) there will be, no action, suit, proceeding or investigation at law or in equity
before or by any court or governmental agency or body pending or threatened against the City to
restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the
Lease Agreement, or in any way contesting or affecting the validity of the City Documents or the
Bonds or the authority of the City to approve this Purchase Contract, or enter into the City
Documents or contesting the powers of the City to enter into or perform its obligations under any
of the foregoing or in any way contesting the powers of the City in connection with any action
contemplated by this Purchase Contract or to restrain or enjoin the execution, sale and delivery of
the Bonds or, except as described in the Preliminary Official Statement and the Official
Statement, the payment of Lease Payments, nor is there any basis for any such action, suit,
proceeding or investigation.
(0 The Preliminary Official Statement provided to the Underwriter has been
deemed final by the City, as required by Rule 15c2-12. As of the date thereof and at all times
subsequent thereto up to and including the End Date, the information relating to the City, the
Bonds, the Leased Premises and the City Documents contained in the Official Statement was and
will be materially complete for its intended purposes. The information relating to the City, the
Bonds, the Leased Premises and the City Documents contained in the Official Statement is true
and correct in all material respects and such information does not contain any untrue or
misleading statement of a material fact or omit to*state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading
in any material respect.
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(g) The City agrees to cooperate with the Underwriter in endeavoring to
qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions
of the United States as the Underwriter may request; provided, however, that the City will not be
required to execute a special or general consent to service of process in any jurisdiction in which
it is not now so subject or to qualify to do business as a foreign corporation in any jurisdiction
where it is not so qualified.
(h) By official action of the City prior to or concurrently with the execution
hereof, the City has duly approved the distribution of the Official Statement, and has duly
authorized and approved the execution and delivery of, and the performance by the City of the
obligations on its part contained in the City Documents and the consummation by it of all other
transactions contemplated by the Official Statement and this Purchase Contract.
(i) To the best knowledge of the City, it is not in breach of or default under
any material applicable law or administrative regulation of the State of California or the United
States or any material applicable judgment or decree or any loan agreement, indenture, bond,
note, resolution, agreement or other instrument to which the City is a party or is otherwise subject
and in connection with which the City is obligated to make payments from its own finds, and no
event has occurred and is continuing which, with the passage of time or the giving of notice, or
both, would constitute a default or an event of default under any such instrument the
consequence of which could be the materially and adversely affect the performance of the City
under the City Documents.
0) If between the date of this Purchase Contract and the End Date an event
occurs, of which the City has knowledge, which might or would cause the information relating to
the City, the Leased Premises, or the City's functions, duties and responsibilities contained in the
Official Statement, as then supplemented or amended, to contain an untrue statement of a
material fact or to omit to state a material fact required to be stated therein or necessary to make
such information therein, in the light of the circumstances under which it was presented, not
misleading in any material respect, the City will notify the Underwriter, and if, in the opinion of
the Underwriter, such event requires the preparation and publication of a supplement or
amendment to the Official Statement, the City will cooperate with the Underwriter in the
preparation of an amendment or supplement to the Official Statement in a form and in a manner
approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City.
(k) If the information relating to the Leased Premises, the City, its functions,
duties and responsibilities contained in the Official Statement is amended or supplemented
pursuant to the immediately preceding subparagraph, at the time of each supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to such
subparagraph) at all times subsequent thereto up to and including the date of the Closing, the
portions of the Official Statement so supplemented or amended (including any financial and
statistical data contained therein) will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make such information
therein, in the light of the circumstances under which it was presented, not misleading in any
material respect.
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(1) The City covenants that it will comply with all tax covenants relating to
it in the City Documents, the Tax Certificate of the City and this Purchase Contract.
(m) Substantially all the proceeds from the sale of the Bonds (after deducting
the expenses of issuance and sale of the Bonds paid for from such proceeds) will be used to
finance the Leased Premises, and to fund, in whole or in part, the Reserve Account, and the City
will not take or omit to take any action which action or omission will in any way cause the
proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the
Indenture and the Lease Agreement, as amended from time to time.
(n) The City will deliver all opinions, certificates, letters and other
instruments and documents reasonably required by the Underwriter and this Purchase; Contract.
(o) Any certificate of the City delivered to the Underwriter shall be deemed a
representation and warranty by the City to the Underwriter as to the statements made therein.
(p) As of the time of acceptance hereof and as of the Closing the City does
not and will not have outstanding any indebtedness which is secured by a lien on the City's
general fund except as disclosed in the Official Statement.
(q) Between the date of this Purchase Contract and the date of Closing, the
City will not, without the prior written consent of the Underwriter, and except as disclosed in the
Official Statement, offer or issue any certificates, notes or other obligations for borrowed money,
or incur any material liabilities, direct or contingent, secured by a lien on the City's general fund.
7. Authority Representations, Warranties and Covenants. The Authority
represents, warrants and covenants to the City and the Underwriter that:
(a) The Authority is a joint powers authority, duly organized and existing
under the Constitution (the "Constitution") and laws of the State, including the JPA Act, with
full right, power and authority to enter into, execute and deliver the Authority Documents
(defined below) and to perform its obligations hereunder.
(b) By all necessary official action, the Authority has duly authorized and
approved the execution and delivery of, and the performance by the Authority of the obligations
on its part contained in the Purchase Contract, the Bonds, the Indenture and the Least: Agreement
(collectively, the "Authority Documents") and has approved the use by the Underwriter of the
Preliminary Official Statement, and the Official Statement and, as of the date hereof, such
authorizations and approvals are in full force and effect and have not been amended, modified or
rescinded. When executed and delivered by the parties hereto, the Authority Documents will
constitute the legally valid and binding obligations of the Authority enforceable upon the
Authority in accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles
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relating to or affecting creditors rights generally. The Authority has complied, and will at the
Closing be in compliance in all respects, with the terms of the Authority Documents.
(c) The Bonds, when issued in accordance with the Indenture, will be legally
valid and binding special obligations of the Authority, entitled to the benefits of the Indenture
and enforceable in accordance with their terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
(d) As of the time of acceptance hereof and as of the time of the Closing,
except as otherwise disclosed in the Official Statement, the Authority is not and will not be in
breach of or in default under any applicable constitutional provision, law or administrative rule or
regulation of the State or the United States, or any applicable judgment or decree or any trust
agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to
which the Authority is a party or is otherwise subject, and no event has occurred and is
continuing which, with the passage of time or the giving of notice, or both, would constitute a
default or event of default under any such instrument which breach, default or event could have
an adverse effect on the Authority's ability to perform its obligations under the Authority
Documents; and, as of such times, except as disclosed in the Official Statement, the
authorization, execution and delivery of the Authority Documents and compliance by the
Authority with the provisions thereof do not and will not conflict with or constitute a breach of or
default under any applicable constitutional provision, law or administrative rule or regulation of
the State or the United States or any applicable judgment, decree, license, permit, trust
agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to
which the Authority (or any of its officers in their respective, capacities as such) is subject, or by
which it or any of its properties is bound, nor will any such authorization, execution, delivery or
compliance result in the creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of
any such law, regulation or instrument except as provided in the Authority Documents.
(e) As of the time of acceptance hereof and the Closing, except as disclosed
in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, government agency, public board or body, pending, or to the best
knowledge of the Authority threatened against the Authority:
(i) in any way questioning the corporate existence of the Authority or the
titles of the officers of the Authority to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the
issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or
to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or
affecting the validity of the Authority Documents or the consummation of the transactions on the
part of the Authority contemplated thereby, or contesting the exclusion of the interest on the
Bonds from federal or state taxation, as applicable, or contesting the powers of the Authority or
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its authority to enter into the Lease Agreement and to pledge the Revenues for repayment of the
Bonds;
(iii) which may result in any material adverse change relating to the
financial condition of the Authority; or
(iv) contesting the completeness or accuracy of the Preliminary Official
Statement or the Official Statement or any supplement or amendment thereto or asserting that the
Preliminary Official Statement or the Official Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of all the circumstances under which they were made, not
misleading.
(f) All authorizations, approvals, licenses, permits, consents and orders of or
filings with any governmental authority, legislative body, board, agency or commission having
jurisdiction in the matters which are required for the due authorization of, which would constitute
a condition precedent to or the absence of which would adversely affect the due performance by
the Authority of its obligations in connection with, the Authority Documents have been duly
obtained or made, except as may be required under the Blue Sky or securities laws of any state in
connection with the offering and sale of the Bonds.
(g) Any certificate signed by any authorized officer of the Authority and
delivered to the Underwriter shall be deemed to be a representation and warranty by the
Authority to the Underwriter as to the statements made therein.
(h) As of the time of acceptance hereof and as of the date of Closing, except
as otherwise disclosed in the Official Statement, the Authority has complied with the filing
requirements of the JPA Act.
(i) The Authority has not been notified of any listing or proposed listing by
the Internal Revenue Service to the effect that either the City, the Authority or the City is a bond
issuer whose arbitrage certifications may not be relied upon.
0) The Authority will undertake, or cause the City to undertake., pursuant to
the Indenture and the Continuing Disclosure Agreement, to provide or cause to be provided
annual financial reports and notices of certain events; a description of this undertaking is set forth
in the Preliminary Official Statement and will also be set forth as an appendix to the Official
Statement.
(k) The Authority will advise the Underwriter promptly of any proposal to
amend or supplement the Official Statement from the delivery of the Official Statement to the
End Date, and will not effect or consent to any such amendment or supplement without the
consent of the Underwriter, which consent will not be unreasonably withheld. The Authority will
advise the Underwriter promptly of the institution of any proceedings known to it by any
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governmental agency prohibiting or otherwise affecting the use of the Official Statement in
connection with the offering, sale or distribution of the Bonds.
(1) For a period beginning on the date hereof and continuing until the End
Date, (a) the Authority will not adopt any amendment of, or supplement to, the Official
Statement to which the Underwriter shall object in writing or which shall be disapproved by the
Underwriter's counsel and (b) if any event relating to or affecting the Authority shall occur as a
result of which it is necessary, in the opinion of Underwriter's Counsel, to amend or supplement
the Official Statement in order to make the Official Statement not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Bonds, the Authority will
forthwith cause the Authority to prepare and furnish to the Underwriter a reasonable number of
copies of an amendment of, or supplement to, the Official Statement (in form and substance
satisfactory to Underwriter's Counsel) which will amend or supplement the Official Statement so
that it will not contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances existing at the
time the Official Statement is delivered to a purchaser of the Bonds, not misleading.
8. Closing Conditions. The Underwriter has entered into this Purchase Contract in
reliance upon the representations, warranties and covenants herein and the performance by the
Authority and the City of their respective obligations hereunder, both as of the date hereof and as
of the date of the Closing. The Underwriter's obligations hereunder are and shall be subject to
the following additional conditions:
(a) Bring-Down Representation The representations, warranties and covenants
of the Authority and the City contained herein shall be true and correct at the date hereof and at
the time of the Closing, as if made on the date of the Closing.
(b) Executed Agreements and Performance Thereunder. At the time of the
Closing:
(i) the City Documents and the Authority Documents shall be in full
force and effect, and shall not have been amended, modified or supplemented except with the
written consent of the Underwriter;
(ii) there shall be in full force and effect such resolutions (the
"Authorizing Resolutions") as, in the opinion of Best Best & Krieger LLP (`Bond Counsel"),
shall be necessary in connection with the transactions on the part of the Authority and the City
contemplated by this Purchase Contract, the Official Statement, the City Documents and the
Authority Documents;
(iii) the Authority shall perform or have performed its obligations
required or specified in the Authority Documents to be performed at or prior to Closing;
(iv) the City shall perform or have performed its obligations required as
specified in the City Documents to be performed at or prior to Closing; and
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(v) the Official Statement shall not have been supplemented or amended,
except pursuant to Paragraph 60) or 7(k), or as otherwise may have been agreed to in writing by
the Underwriter.
(c) No Default. At the time of the Closing, no default shall have occurred or be
existing under the Authority Documents or the City Documents and neither the Authority nor the
City shall be in default in the payment of principal or interest on any of its bonded indebtedness
which default shall adversely impact the ability of the Authority to make payments on the Bonds
or the City to make payments pursuant to the Lease Agreement.
(d) Termination Events. The Underwriter shall have the right to terminate this
Purchase Contract, without liability therefor, by written notification to the Authority and the City
if at any time at or prior to the Closing:
(i) any event shall occur which causes any statement contained in the
Official Statement to be materially misleading or results in a failure of the Official Statement to
state a material fact necessary to make the statements in the Official Statement, in the light of the
circumstances under which they were made, not misleading; or
(ii) the marketability of the Bonds or the market price thereof, in the
opinion of the Underwriter, has been materially adversely affected by an amendment to the
Constitution of the United States or by any legislation in or by the Congress of the United States
or by the State, or the amendment of legislation pending as of the date of the Authority
Documents or the City Documents in the Congress of the United States, or the recommendation
to Congress or endorsement for passage (by press release, other form of notice or otherwise) of
legislation by the President of the United States, the Treasury Department of the United States,
the Internal Revenue Service or the President or ranking minority member of the Committee on
Finance of the United States Senate or the Committee on Ways and Means of the United States
House of Representatives, or the proposal for consideration of legislation by either such
Committee, or the presentment of legislation for consideration as an option by either such
Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United
States, or the favorable reporting for passage of legislation to either House of the Congress of the
United States by a Committee of such House to which such legislation has been referred for
consideration, or any decision of any Federal or state court or any ruling or regulation (final,
temporary or proposed) or official statement on behalf of the United States Treasury Department,
the Internal Revenue Service or other Federal or State authority materially adversely affecting the
Federal or State tax status of the Authority or the City, or the interest on bonds or notes or
obligations of the general character of the Bonds; or
(iii) any legislation, ordinance, rule or regulation shall be introduced in,
or be enacted by any governmental body, department or agency of the States or a decision by any
court of competent jurisdiction within the State or any court of the United States shall be
rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the
market price of the Bonds; or
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(iv) legislation shall be enacted by the Congress of the United States, or a
decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or
official statement by, or on behalf of, the Securities and Exchange Commission or any other
governmental agency having jurisdiction of the subject matter shall be issued or made to the
effect that the issuance, offering or sale of obligations of the general character of the Bonds, or
the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated
hereby or by the Official Statement, is in violation or would be in violation of, or that obligations
of the general character of the Bonds, or the Bonds, are not exempt from registration under, any
provision of the federal securities laws, including the Securities Act of 1933, as amended and as
then in effect, or that the Indenture needs to be qualified under the Trust Indenture Act of 1939,
as amended and as then in effect; or
(v) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities generally by any governmental authority or by any
national securities exchange which restrictions materially adversely affect the Underwriter's
ability to market the Bonds; or
(vi) a general banking moratorium shall have been established by federal
or State authorities; or
(vii) the United States has become engaged in hostilities which have
resulted in a declaration of war or a national emergency or there has occurred any other outbreak
of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of
such outbreak, calamity or crisis on the financial markets of the United States, being such as, in
the reasonable opinion of the Underwriter, would affect materially and adversely the ability of
the Underwriter to market the Bond (it being acknowledged by the Underwriter that as of the date
hereof no such event is occurring)s; or
(viii) the commencement of any action, suit or proceeding described in
Paragraphs 6(e) or 7(e) hereof which, in the judgment of the Underwriter, materially adversely
affects the market price of the Bonds; or
(ix) there shall be in force a general suspension of trading on the New
York Stock Exchange; or
(x) an event described in paragraph 0) of Section 6 or paragraph (1) of
Section 7 hereof shall have occurred which, in the reasonable professional judgment of the
Underwriter, requires the preparation and publication of a supplement or amendment to the
Official Statement; or
(xi) any rating or credit outlook of the Bonds or other obligations of the
City by a national rating agency shall have been withdrawn or downgraded.
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(e) Closing Documents. At or prior to the Closing, the Underwriter shall receive
with respect to the Bonds (unless the context otherwise indicates) the following documents:
(1) Bond Opinion. The approving opinion of Bond Counsel dated the
date of the Closing and substantially in the form included as APPENDIX D to the Official
Statement, together with a letter from such counsel, dated the date of the Closing and addressed
to the Underwriter to the effect that the foregoing opinion may be relied upon by the Underwriter
to the same extent as if such opinion was addressed to them.
(2) Supplemental Opinion. A supplemental opinion or opinions of Bond
Counsel addressed to the Underwriter, in substantially the form and to the following effect:
(a) The statements and information contained in the Official
Statement on the cover page and under the captions "INTRODUCTION," "THE
BONDS" (except for the information under the captions "The Book Entry
System"), "SECURITY FOR THE BONDS" and "TAX MATTERS," and in
APPENDICES C and D, are true and accurate in all material respects; and
(b) The Bonds are exempt from registration under the Securities
Act of 1933, as amended (the "1933 Act"), and the Indenture is exempt from
qualification as an indenture pursuant to the Trust Indenture Act of 1939, as
amended;
(c) upon issuance of the Bonds and the deposit of proceeds in
the escrow fund established under the Escrow Agreement, that the prior Bonds have
been defeased and are no longer outstanding.
(3) City Counsel Opinion. An opinion of the City Counsel, dated as of
the Closing and addressed to Bond Counsel and the Underwriter, in form and substance
acceptable to Bond Counsel and counsel for the Underwriter, to the following effect:
(i) the City is a political subdivision and municipal
corporation, duly organized and validly existing under the Constitution and the laws of the State
of California;
(ii) the preparation and distribution of the Preliminary Official
Statement and the Official Statement and this Purchase Contract have been duly approved by the
City;
(iii) the resolution of the City approving and authorizing the
execution and delivery of the Official Statement and the City Documents has been duly adopted
at a meeting of the governing body of the City which was called and held pursuant: to law and
with all public notice required by law and at which a quorum was present and acting; throughout
and such resolution is in full force and effect and has not been amended, modified or rescinded;
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(iv) there is no action, suit, proceeding or investigation at law
or in equity before or by any court, public board or body, pending or, to the best knowledge of
such counsel, threatened against or affecting the City, which would adversely impact the City's
ability to complete the transactions described in and contemplated by the Official Statement, to
restrain or enjoin the payments under the Lease Agreement, or in any way contesting or affecting
the validity of the City Documents, or the transactions described in the Official Statement
wherein an unfavorable decision, ruling or finding would adversely affect the validity and
enforceability of the City Documents;
(v) the execution and delivery of the City Documents and the
approval of the Official Statement, and compliance with the provisions thereof and hereof, under
the circumstances contemplated thereby, do not and will not in any material respect conflict with
or constitute on the part of the City a breach of or default under any agreement or other
instrument to which the City is a party or by which it is bound or any existing law, regulation,
court order or consent decree to which the City is subject;
(vi) the City Documents have been duly authorized, executed
and delivered by the City, and, assuming due authorization, execution and delivery by the other
parties thereto, constitute legal, valid and binding agreements of the City enforceable in
accordance with their respective terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other laws
affecting the enforcement of creditors' rights generally and by the application of equitable
principles if sought and by the limitations on legal remedies imposed on actions against cities in
the State of California;
(vii) no authorization, approval, consent, or other order of the
State of California or any other governmental authority or agency within the State of California is
required for the valid authorization, execution and delivery of the City Documents and the
approval of the Official Statement; and
(viii) nothing has come to his attention which would lead him
to believe that the information relating to the City or the Leased Premises contained in the
Official Statement contains an untrue statement or omits to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading.
(4) Authority Counsel Opinion An opinion of Counsel to the Authority,
dated the date of the Closing and addressed to Bond Counsel and the Underwriter, in form and
substance acceptable to counsel for the Underwriter substantially to the following effect:
(1) The Authority is a joint powers authority, duly created and
lawfully existing under the laws and the Constitution of the State;
(ii) The Authority has full legal power and lawful authority to
enter into the Authority Documents;
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(iii) The resolution ("Authority Resolution") of the Authority
approving and authorizing the execution and delivery of the Authority Documents has been duly
adopted at a meeting of the governing board of the Authority, which was called and held
pursuant to the law and with all public notice required by law and at which a quorum was present
and acting throughout and the Authority Resolution is in full force and effect and has not been
modified, amended or rescinded;
(iv) The Authority Documents have been duly authorized,
executed and delivered by the Authority and constitute the valid, legal and binding obligation of
the Authority enforceable in accordance with their respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of
creditors rights and by the application of equitable principles if equitable remedies are sought;
(v) The Official Statement has been duly authorized by the
governing body of the Authority and executed on its behalf by an authorized officer of the
Authority.
(vi) Except as otherwise disclosed in the Official Statement, to
the best of such counsel's knowledge, there is no litigation, action, suit, proceeding or
investigation at law or in equity before or by any court, governmental agency or body, pending or
threatened against the Authority, challenging the creation, organization or existence of the
Authority, or the validity of the Authority Documents or seeking to restrain or enjoin any of the
transactions referred to herein or contemplated hereby or contesting the authority of the Authority
to enter into or perform its obligations under the Authority Documents, or which, in any manner,
questions the right of the Authority to issue and sell the Bonds.
(5) Trustee Counsel Opinion. The opinion of counsel to the Trustee,
dated the date of the Closing, addressed to Bond Counsel and the Underwriter, in form and
substance acceptable to counsel for the Underwriter substantially to the following effect:
(i) The Trustee is a national banking association duly organized
and validly existing under the laws of the United States.
(ii) The Trustee has duly authorized the execution and delivery of
the Indenture.
(iii) The Indenture and the Continuing Disclosure Agreement
have been duly entered into and delivered by the Trustee and assuming due, valid and binding
authorization, execution and delivery by the other parties thereto, constitute the legal, valid and
binding obligations of the Trustee enforceable against the Trustee in accordance with their
respective terms, except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights generally, or by
general principles of equity.
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(iv) acceptance by the Trustee of the duties and obligations under
the Indenture and the Continuing Disclosure Agreement and compliance with provisions thereof
will not conflict with or constitute a breach of or default under any law or administrative
regulation to which the Trustee is subject.
(v) All approvals, consents and orders of any governmental
authority or agency having jurisdiction in the matter which would constitute a condition
precedent to the performance by the Trustee of its duties and obligations under the Indenture and
the Continuing Disclosure Agreement have been obtained and are in full force and effect.
(6) Disclosure Counsel Opinion. An opinion, dated the date of the
Closing addressed to the Authority and the Underwriter, of Nossaman LLP, disclosure counsel,
to the effect that based upon their participation in the preparation of the Official Statement as
Disclosure Counsel to the Authority and without having undertaken to determine independently
the accuracy or completeness of the contents in the Official Statement, such counsel has no
reason to believe that the Official Statement, as of its date and as of the Closing Date (except for
the financial statements and the other financial and statistical data included therein and the
information included therein relating to The Depository Trust Company and the book-entry
system (as such terms are defined in the Official Statement), and in the Appendices thereto as to
all of which no opinion or belief need be expressed) contained or contains any untrue statement
of a material fact or omitted or omits to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
(7) City Certificate. A certificate, dated the date of Closing, signed by a
duly authorized official of the City satisfactory in form and substance to the Underwriter, (a)
confirming as of such date the representations and warranties of the City contained in this
Purchase Contract; (b) certifying that the City has complied with all agreements, covenants and
conditions to be complied with by the City at or prior to the Closing under the City Documents;
(c) certifying that to the best of such official's knowledge, no event affecting the City has
occurred since the date of the Official Statement which either makes untrue or incorrect in any
material respect as of the Closing the statements or information contained in the Official
Statement or is not reflected in the Official Statement but should be reflected therein in order to
make the statements and information therein not misleading in any material respect; and (d)
certifying that the City has authorized and consented to the inclusion in the Official Statement of
the City's financial report and accountant's opinion for the year ended June 30, 2009, and no
further consent of any party is required for such inclusion.
(8) Authority Certificate. A certificate of the AyrtD.ority, dated the date of
the Closing, signed on behalf of the Authority by the President or othorduly`,uthorized officer of
the Authority to the effect that: ,
(i) The representations, warranties and covenants of the Authority
contained herein and in the Authority Documents are true and correct in all material respects on
and as of the date of the Closing as if made on the date of the Closing and the Authority has
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complied with all of the terms and conditions of the Authority Documents required to be
complied with by the Authority at or prior to the date of Closing; and
(ii) No event affecting the Authority has occurred since the date
of the Official Statement which has not been disclosed therein or in any supplement or
amendment thereto which event should be disclosed in the Official Statement in order to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.
(9) Trustee's Certificate. A Certificate of the Trustee, dated the date of
Closing, addressed to the Authority, the City and the Underwriter, in form and substance
acceptable to counsel for the Underwriter to the following effect:
(i) The Trustee is duly organized and existing as a national
banking association in good standing under the laws of the United States, having the full power
and authority to accept and perform its duties under the Indenture and the Continuing Disclosure
Agreement;
(ii) Subject to the provisions of the Indenture, the Trustee will
apply the proceeds from the Bonds to the purposes specified in the Indenture; and
(iii) The Trustee has duly authorized and executed the Indenture
and the Continuing Disclosure Agreement.
(10) Title Policy. A copy of a CLTA title insurance policy in an amount
equal to the principal amount of the Certificates, insuring the City's leasehold interest in the
Leased Premises, subject only to permitted encumbrances or such other encumbrances approved
in writing by the Underwriter.
(11) Transcripts. Two transcripts of all proceedings relating to the
authorization and issuance of the Bonds.
(12) Official Statement. The Official Statement and each supplement or
amendment, if any, thereto, executed on behalf of the City and the Authority by a duly authorized
officer of each.
(13) Documents. An original executed copy of each of the Authority
Documents and the City Documents.
(14) City Resolution. Two copies certified by the Clerk or Assistant
Clerk of the City, of each resolution of the City relating to the City Documents, the actions
contemplated thereby, provided that such resolutions may be contained in the transcripts
provided pursuant to Paragraph 8(e)(11) above.
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(15) Authority Resolution. Two copies certified by the Secretary or
Assistant Secretary of the Authority, of each resolution of the Authority relating to the Authority
Documents, the Bonds and the transactions contemplated thereby, provided that such resolutions
may be contained in the transcripts provided pursuant to Paragraph 8(e)(11) above.
(16) IRS Form 8038-G. Evidence that the federal tax information form
8038-G has been prepared for filing.
(17) Nonarbitrage Certificate. A tax and nonarbitrage certificate in form
satisfactory to Bond Counsel.
(18) Ratings. Evidence as of the Closing satisfactory to the Underwriter
that the Bonds have received, at a minimum, a rating of from Moody's Investors Service
("Moody's"), a rating of " " from Fitch Ratings ("Fitch") and a rating of from
Standard & Poor's Rating Group ("S&P"), and that such ratings have not been. revoked or
downgraded.
[(19) Verification Report. The verification report of
relating to the defeasance of the Prior Bonds, in form satisfactory to Bond
Counsel and the Underwriter.]
(20) CDIAC Statement. A copy of the Notice of Sale required to be
delivered to the California Debt and Investment Advisory Commission pursuant to Section
53583 of the Government Code and Section 8855(g) of the Government Code.
(21) Additional Documents. Such additional certificates, instruments
and other documents as the Underwriter may reasonably deem necessary.
If the Authority or the City shall be unable to satisfy the conditions contained in this
Purchase Contract, or if the obligations of the Underwriter shall be terminated for any reason
permitted by this Purchase Contract, this Purchase Contract may be terminated by the
Underwriter, and none of the Underwriter, the Authority or the City shall be under further
obligation hereunder.
9. [Reserved].
10. Expenses. The Underwriter shall be under no obligation to pay, and the
Authority shall pay or cause to be paid, the expenses incident to the performance of the
obligations of the Authority and the City hereunder including but not limited to:
(a) the costs of the preparation and printing, or other reproduction (for
distribution on or prior to the date hereof) of the City Documents and the Authority Documents
and the cost of preparing, printing, issuing and delivering the Bonds;
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(b) the fees and disbursements of any counsel, financial advisors, accountants or
other experts or consultants retained by the Authority or the City;
(c) the fees and disbursements of Bond Counsel and Disclosure Counsel;
(d) the cost of preparation and printing the Preliminary Official Statement and
any supplements and amendments thereto and the cost of preparation and printing of the Official
Statement, including a reasonable number of copies thereof for distribution by the Underwriter;
(e) charges of rating agencies for the rating of the Bonds;
(f) the cost of preparation and printing of Blue Sky and legal investment
memoranda, if any, to be used by it and the cost of printing of the Authority Documents and the
City Documents; and
(g) the expenses incurred by the Underwriter in connection with the public
offering and distribution of the Bonds, including any advertising expenses.
11. Notice. Any notice or other communication to be given to the Underwriter may
be given by delivering the same to , . Any notice or
other communication to be given to the Authority or the City pursuant to this Purchase Contract
may be given by delivering the same in writing to such entity, at the addresses set forth on the
cover page hereof.
12. Entire Agreement. This Purchase Contract, when accepted by the Authority
and the City, shall constitute the entire agreement among the Authority, the City and the
Underwriter and is made solely for the benefit of the Authority, the City and the Underwriter
(including the successors or assigns of any Underwriter). No other person shall acquire or have
any right hereunder by virtue hereof, except as provided herein. All the Authority's and the
City's representations, warranties and agreements in this Purchase Contract shall remain
operative and in full force and effect, regardless of any investigation made by or on behalf of the
Underwriter, until the earlier of (a) delivery of and payment for the Bonds hereunder, and (b) any
termination of this Purchase Contract.
13. Counterparts. This Purchase Contract may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute but one and the same instrument.
14. Severability. In case any one or more of the provisions contained herein shall
for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof.
15. State of California Law Governs. The validity, interpretation and performance
of the Authority Documents shall be governed by the laws of the State.
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16. No Assignment. The rights and obligations created by this Purchase Contract
shall not be subject to assignment by the Underwriter, the Authority or the City without the prior
written consent of the other parties hereto.
17. Definitions. Terms not otherwise defined herein shall have the same meaning
an when used in the Indenture.
[UNDERWRITER]
By:
Title:
Accepted as of the date first stated above:
ENCINITAS PUBLIC FINANCING AUTHORITY
By: _
Title:
CITY OF ENCINITAS
By: _
Title:
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EXHIBIT A
Maturity Date Principal Interest
(April 1 oft Amount Rate
Price or
Yield
A-1